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Schedule SB is used to designate a contribution for a particular year for 430 (minimum funding) purposes. There is no indication on the SB for which year a contribution is designated for 404 (deduction) purposes. There is no requirement that the 430 and 404 years be the same for any given contribution; if the timing permits, you could count a contribution towards 2023 for minimum funding but 2024 for the deduction. If the timing of the contributions was such that they couldn't be counted as a 2024 deduction (for example, if they were made before the end of the 2023 tax year), and the amount of the contributions exceeds the 404(o) deductible limit, the sponsor may want to consider making a IRC 4972(c)(7) election to avoid the excise tax. The non-deductible amount would have to be carried forward and deducted in the next tax year.

No Top Heavy is required when there are no contributions to KEY employees. No confusion..... you're doing good.

Yes, it is too late to make a deferral election (including a Roth deferral election) for 2023. A deferral election has to be in place before the compensation is paid to the participant. The contribution that was made to the plan needs to be allocated according to the plan's allocation formula for employer contributions.

I think I'm overthinking this, but now I just wanted to be sure. If the Plan is Top Heavy, but no Key Employee received a contribution (they also did not make any deferrals for the year) the Top Heavy is not required correct? Since the highest contribution percentage for a Key Employee is 0%. I just wanted to make sure I was not confusing myself. Just one of those days.

I guess if you want to pick nits you could say the TH minimum of the highest allocation rate of any key employee is "required" but if the key employee highest allocation rate is 0% than the required TH minimum contribution is also 0%. Though the plan TH vesting requirements would still kick in for a TH plan, even if no contribution was required.

“[M]anaging beneficiary designations is important, can be complicated, should have clearly documented procedures[,] and should have clearly assigned operational responsibilities between the [employer that serves as the plan’s administrator] and its service providers[.]” As Bird alludes to, many employers imagine, often mistakenly, that a service provider will provide every service needed to administer the plan. But wishing won’t make it so. A plan’s administrator must read every service agreement and prudently evaluate whether the administrator can fulfill every needed task using only contracted services and the administrator’s internal capabilities. Further, a plan’s sponsor might consider an opportunity to narrow what the plan’s administrator needs to do: Even if a plan’s sponsor is constrained by its use of IRS-preapproved documents, provisions about beneficiary designations, including default beneficiary designations, are—except for required provisions for a surviving spouse—within “administrative” provisions a user may change and add to without defeating reliance on the IRS’s opinion letter. A plan sponsor that uses that opportunity regularly can avoid situations like a plan having different default-beneficiary provisions for different times (perhaps for no more reason than changing which service provider’s IRS-preapproved documents the plan sponsor uses). And custom beneficiary-designation provisions (independent of a service provider's IRS-preapproved documents) can get rid of, or make easier, some of the complexities and difficulties Paul I mentions.

It's unlikely that any portion of the contribution could be returned to the sponsor. If the plan document says that employer contributions will be allocated pro rata, then that's what should happen. If the contribution couldn't be allocated (maybe everyone was already at their 415 limit, for example) then EPCRS says to keep the contribution in an unallocated account and use it for future employer contributions before any additional employer money may be actually paid into the plan.

We do a lot of work in both worlds and the administration of beneficiary designations is too often an afterthought during a transition in either world. There are valid reasons why it is very important to include a discussion of beneficiary designations during any transition. Here are some of the "whys": Beneficiary designations are primary documents which often require multiple wet signatures including one each for the participant, the spouse and a notary public. The original document often is the basis for determining death benefits which requires keeping and tracking paper documents or maintaining a document management system that captures sufficient data to document the designations validity. Larger companies are more likely to have an in-house document management system where they track beneficiary designations along with elections needed across a wide variety of other HR applications. Smaller companies are more likely to keep paper forms with a physical file folder for each employee. In these cases, "[beneficiary designations] are maintained by the employer." Some recordkeepers will collect and retain beneficiary designations and they may charge a separate fee for this service. Others will collect beneficiary designations but then transmit them to the employer to maintain. The details of the scope of service most likely are found in the details of the recordkeepers service agreement. Plan documents and Summary Plan Descriptions include language that specify how a participant must make a beneficiary election to be valid. If so, and a participant does not follow the specified procedure, then the beneficiary designation can be declared invalid. It is important that beneficiary designation procedures used within the company or contracted for with recordkeeper are consistent with the plan documentation. Each plan a recordkeeper services may have its own definition of who is the beneficiary, and each definition can present its own data tracking and administration challenges. This thread about default beneficiaries is an example. Other common complexities arise when the plan defines a spouse other than the person who is married to the participant at the time of the participant's death (for example, the plan uses the one-year rule). Other complexities arise if the beneficiary designation remains in effect after a divorce or a QDRO. Beneficiary designations that include designating primary and contingent beneficiaries add more complexity, and plan provisions that specify the division of a death benefit per stirpes versus per capita can make it even more complicated. (Be honest folks, how many of us can explain the difference between per stirpes and per capita without looking it up.) Bottom line, managing beneficiary designations is important, can be complicated, should have clearly documented procedures and should have clearly assigned operational responsibilities between the company and its service providers - no matter what the size of the plan. We all should not wait until a participant dies to discuss who does what.

Right?

They can start another PS plan for 2024 with new comparability, and merge them next year.

And a pox on all the M&A attorneys that still don't bring in the TPA to get these things done timely.

I think a lot of plan administrators don't understand the difference between deemed and offset, as it is somewhat subtle. The issue is that the IRS wants you to be taxable, following a grace period, if you miss a payment and don't cure, but they don't want plans to violate the general prohibition on in-service distribution. So the regulations create useful fiction of a "deemed distribution," which means that you get a 1099-R for the amount that you defaulted on, even if you have not had a distributable event, such as a termination of employment. Believe it or not, the IRS regs say that that "deemed" distributed loan lives on, ghost-like, in the plan, continuing to earn ghost interest and, potentially, blocking a future loan from the plan, after the date of the default, until you have a distributable event, at which time the outstanding amount of the loan (but not the ghost interest, thankfully) is "offset" against your account, and thus finally gone. Note that you actually can repay a deemed loan before it is distributed, and thus resurrect that portion of your account, in which case you would have tax-paid "basis" in your account for the amount you repaid, but I digress. Anyway, if the loan default occurs before the distributable event, e.g. separation from service, occurs, and certainly if it occurs in a taxable year before the distributable event occurs, things are relatively simple: You have a deemed distribution in one year, and a 1099-R reflecting that, with its own code, L, in Box 12, and then in a later year you get your distribution, which does not include the previously deemed amount, and you don't pay tax on it again. It's also pretty simple if the event of default is, as it often is, the distributable event itself, e.g. separation from service. Assume that the plan documents and administration are consistent that if you separate from service and don't repay the loan within some fairly short grace period, it defaults. In that case, you would actually have a taxable distribution of your loan (surprise! you already got the money when you took the nontaxable loan out, so the distribution now is "air," but at least you no longer have the obligation to keep paying your account back). Because in this case the loan was not previously "deemed," so that you did not pay tax on it, it's not unfair that the offset is treated as a taxable distribution on your Form 1099-R, just unpleasant. And note that in this case, because IRS treats it as an "actual" distribution, it doesn't get a code L on the 1099-R. In your case, although a review of the plan and loan policy documents, and promissory note, would be required to say this with total assurance, it seems pretty clear that what caused your loan to default was probably your separation from service, because the plan probably follows the permissible rule that it defaults the loan when you separate and it can no longer withhold repayments from payroll. (Note that not all plans do that; some permit terminated participants to keep paying by check until the loan is paid off.) I mean, you never really missed a payment, right? So why else could they be defaulting your loan. The new law states that a loan offset occurring after 2018 qualifies for the more liberal rollover timing (i.e., you would have until your filing deadline in 2019 for your 2018 1040 to roll cash up to the amount of the loan into an IRA) if the loan default is on account of "the failure to meet the repayment terms of the loan from such plan because of the severance from employment of the participant." Sounds to me like you will meet that requirement, assuming that the plan gave you at least 30 days following employment to pay the loan off without calling it a default and your termination date was after December 1, so that the 30 days would put you in 2018. However, if your employer treats the loan offset (seemingly, incorrectly) as a "deemed distribution" and codes it as such on the 1099-R, you could have problems with the IRS Service Center where you file your return, assuming you do roll it over. You might also have problems with the IRA custodian that you deposit the loan offset rollover with, although I doubt it. There's helpful discussion of the reporting issues and difference between the two types of distributions in the 2018 IRS Form 1099-R instructions. Just Google the .pdf of those and then search in the .pdf for "plan loan offset" and also "Code L." These are discussed in several places.