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Thank you everyone for the comments. The software company has decided to update their reports! They do understand the rule, turns out that was not the issue. Turns out the EFAST system/filing software will give a STOP error if the beginning of year total participant count is above 120, but is being filed on an SF, or if using a Form 6600 but there is no Sch H + audit report. Even though under the new rules and instructions there shouldn't be an error for that. So the filing system hasn't caught up with the updated rules. So if you have plans that under the old rule would have been required to have an audit, but under the new rule are not required to have one, just be aware you may not be able to file the Form 5500 as you'd like until the filing system is updated. The vast majority of plans will not fall into this category, they will either be squarely audit or non-audit, so I do think its better to have the reports correct, and then the small minority of plans that end up with a filing issue can decide on an individual basis how they want to file as they approach the filing deadline. By then hopefully the filing system has been updated to align with the new rule. It is errors P-230 and P-230SF if anyone is that technical and wants to look them up. If others have already encountered either of those specific errors and want to share how they are handling them, I'd be curious. I know we are early in the tax season so I know not many 2023 Form 5500 for regular year ends have been filed yet.

Have I missed something? What is the distributable event?

Just curious, if it's an asset sale, why is the plan being terminated *prior* to the transaction? As you point out, the company is on-going, and presumably can delay the termination until a time of their choosing, avoiding the short plan year and proration issues. That, IMHO gives them maximum flexibility going forward, and they can amend the plan as may be appropriate for those receiving the bonus (either count or not count).

In case anyone is interested in seeing the messages @justanotheradmin references, they are: Note that the Last Updated dates are respectively from 15 and 6 years before the 2023 form was made available to software developers. The P-230 tests a 5500 and should (but doesn't) check against Line 6a(1) for defined contribution plans as determined by the pension codes on Line 8a, and Line 5 for other plans. The P-230SF tests a 5500-SF and should (but doesn't) check against Line 5c(1) for defined contribution plans as determined by the pension codes on Line 9a, and Line 5a for other plans.

I believe 4.96% is correct. The 25-year average for the second segment as of September 2023 was 5.13% (Notice 2023-66). That gives us a 95-105% corridor of 4.87-5.39%. The actual 24-month average of 4.96% for January 2024 falls within that corridor, so it is not adjusted.

Short answer - a plan covering only working partners would file a Form 5500-EZ. I am not aware of any EFAST2 edits for the 5500-EZ that test the entry on line 5a(1) Total number of participants at the beginning of the plan year against the 120 threshold. The instructions to the Form 5500 say: Do Not File a Form 5500 for a Pension Benefit Plan That Is Any of the Following: ... 11. A “one-participant plan,” as defined below. However, certain one-participant plans are required to file the Form 5500-EZ, Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan. ...For more information on filing Form 5500-EZ, see the Instructions for Form 5500-EZ, or go to www.irs.gov. For this purpose, a “one-participant plan” is: a. a pension benefit plan that covers only an individual or an individual and their spouse who wholly own a trade or business, whether incorporated or unincorporated; or b. a pension benefit plan for a partnership that covers only the partners or the partners and the partners’ spouses (treating 2% shareholder of an S corporation, as defined in Code section 1372(b), as a partner). The instructions to the Form 5500-EZ say: Who Must File Form 5500-EZ You must file Form 5500-EZ for a retirement plan if the plan is a one-participant plan or a foreign plan that is required to file an annual return under section 6058(a). A one-participant plan means a retirement plan (that is, a defined benefit pension plan or a defined contribution profit-sharing or money purchase pension plan), other than an Employee Stock Ownership Plan (ESOP), which: 1. Covers only you (or you and your spouse) and you (or you and your spouse) own the entire business (which may be incorporated or unincorporated); or 2. Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC §1372(b), as a partner); and 3. Does not provide benefits for anyone except you (or you and your spouse) or one or more partners (or partners and their spouses).

Internal Revenue Code of 1986 § 401(k)(14)(C) now reads: Special rules relating to hardship withdrawals For purposes of paragraph [401(k)](2)(B)(i)(IV)— (C) Employee certification In determining whether a distribution is upon the hardship of an employee, the administrator of the plan may rely on a written certification by the employee that the distribution is— (i) on account of a financial need of a type which is deemed in regulations prescribed by the Secretary to be an immediate and heavy financial need, and (ii) not in excess of the amount required to satisfy such financial need, and that the employee has no alternative means reasonably available to satisfy such financial need. The Secretary may provide by regulations for exceptions to the rule of the preceding sentence in cases where the plan administrator has actual knowledge to the contrary of the employee’s certification, and for procedures for addressing cases of employee misrepresentation. Congress has not enacted anything to repeal or amend that statute. This self-certification change applies to plan years that began or begin after December 29, 2022.

@justanotheradmin thanks for the update. This makes a lot more sense.

Oh Lord are they giving us a new Form to file as well!?! 😏

The Joint Committee on Taxation’s narrative explanation of SECURE 2022 is a subpart in JCT’s General Explanation Of Tax Legislation Enacted In The 117th Congress, JCS-1-23 (Dec. 21, 2023). Although this is in JCT’s customary form for such a “blue book”, it is website-only. https://www.jct.gov/publications/2023/jcs-1-23/. If you want to extract the SECURE 2022 subpart, it is pages 295-530, which is pdf pages 307-542. In the subpart on SECURE 2022, the explanation notes at least 14 points for which the enacted statute might have an effect different than what the JCT staff assumes might have been Congress’s intent.

Not sure, but when you use prior year testing you assume 3% ADP for NHCEs, right? So wouldn't that be a reasonable level here? For CBP, owner and spouse are 40% (2/5), so you don't HAVE to include those NHCEs unless they should have been included under the terms of the plan. Is this a last year situation or a multiple year situation?

The predictable, automatic, without-thinking response would point to the transition rule which says they have up to the beginning of the plan year following the first full plan year following the year in which the acquisition took place. The reality is that the realm of retirement plans involved in mergers & acquisitions can be exceptionally complex and arcane depending upon many factors. Attached are two decent checklists that identify key points to consider and that will illustrate the breadth and depth of the issues that should have been considered both before and after each acquisition took place. I suggest reading through both of them and use each checklist for two or three of actual acquisitions the company has done. I expect this will be an eye-opening exercise into the topics and issues involved. At a very high level, here are some highlights: Consider each acquisition as a separate event both within and across plan years. Identifying the nature of the acquisition as a stock transaction or an asset transaction is paramount. Actions taken before the an acquisition is consummated significantly affect actions available after an acquisition is consummated. Changes made to either the seller's plan or the buyer's plan after the acquisition can result in an early termination of the transition rule mentioned above. Plans with different plans years have an added layer of complexities. An acquisition can have an unanticipated impact on determining who is or who is not a highly compensated employee, particularly when the top paid group rule was used by any plan in the controlled group, or when the acquisition is an asset transaction effective during the plan year. You should have substantial experience with 410(b) coverage testing and 401(a) nondiscrimination testing for plans within a controlled group when dealing mergers & acquisitions. May the common owner have the good fortune, either through due diligence or sheer luck, to find that all of the acquired companies and their plans are in compliance. Checklist-for-Plan-Merger-Acquisition-2017.pdf MA Retirement Plan Due Diligence.pdf

Pardon me for not answering your question (because I do not think it can be answered generically, among other reasons) and instead offering unsolicited advice. It sounds like what you need to do is explore and understand what your interest in the benefit is and how to secure it as best as possible beyond the mere award under the terms of your divorce document that you mention. That will first involve understanding what sort of 457 plan the former spouse has. In the course of understanding the plan and what you can do to secure your interest, you should encounter information about your right from the plan’s perspective to check on the benefit and your interest in the benefit. That effort should also answer your question about permissible, distribution timing and options, which, to me, is the least important feature of the plan for you at this point. You will probably need someone with expertise to guide you through all this. You will not have the convenience of procedures and disclosures that apply to division of qualified plan benefits (so called “QDRO” stuff). BTW, mention of “reckless behavior” and its details are irrelevant and not endearing.

The application of the shifting rules applicable to the eligibility computation periods for LTPTEs is the same as these rules have applied since the 1970s. (The original example and the comments below are for a calendar year plan year.) No new programming required. First example The first Eligibility Computation Period starts on the hire date and ends on the day before the anniversary of that hire date. In the first example above, an employee with a 12/31/2023 hire date has a first ECP from 12/31/2023 ending 12/30/2024. The shifting rule says the second ECP starts on the first day of the plan year that contains the first anniversary of the date of hire. Applying shifting rule to the first example, the first anniversary of the date of hire is 12/31/2024. The first day of the plan year that includes the first anniversary of the date of hire is 01/01/2024, so the second ECP is 01/01/2024 ending 12/31/2024. Second example Moving to the second example, the first ECP starts on the hire date and ends on the day before the anniversary of that hire date. An employee with a 01/01/2024 hire date has a first ECP from 01/01/2024 ending 12/31/2024. Applying shifting rule to the second example, the first anniversary of the date of hire is 01/01/2025. The first day of the plan year that includes the first anniversary of the date of hire is 01/01/2025, so the second ECP is 01/01/2025 ending 12/31/2025. The key to how this has worked all along is the consideration of the first anniversary of the date of hire to determine the start of the second ECP.

If the first eligibility computation period for counting to 500 hours begins with the first day on which the employee is credited with an hour of service and the plan provides that the second period is the calendar plan year that begins within the first period, your first example might show a generosity in counting two 12-month periods in as little as a year and a day. The Treasury department’s explanation of its proposed rule speaks, indirectly, to your first example. See page 82802. https://www.govinfo.gov/content/pkg/FR-2023-11-27/pdf/2023-25987.pdf You are right that software designers and programmers ought to be accurate, complete, and careful about how one expresses tax law rules in software.

While § 3121(a)’s definition is much more detailed, your shorthand covers the essence for many employees of many smaller-business employers to which the tax credit might apply. Also, one might refer to Form W-2 box 3. I.R.C. (26 U.S.C.) § 3121 https://uscode.house.gov/view.xhtml?req=(title:26%20section:3121%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section3121)&f=treesort&edition=prelim&num=0&jumpTo=true

Yes, the employee needs a top heavy minimum for 2024, because So whether or not the employee is Key for 2024 doesn't matter. The owner and spouse will need a top heavy minimum too. For the record though, the employee is non-Key for 2024. The 5% owner test (as well as the 1% owner test and the officer test) are made on the basis of the plan year containing the determination date; in other words, the prior plan year (most of the time). See 1.416-1 Q&A T-12

If it's two employers, it's which ever one he requests the 402(g) refund from. if that Plan had some of both, then it's whatever the Administrative procedures say. Though in this case the employee has to actively request a refund since neither plan is expected to know about the other (assuming no GC/ASG) there really isn't any reason not to give the employee the choice.