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I agree that this plan design is permissible. The safe harbor rules do not impact and are not impacted by the normal retirement date. If the State has a requirement that the employer must maintain a retirement or acceptable alternative, this plan design is a retirement plan. While we are at it, why not add auto-enrollment and auto-escalation and no EACA withdrawals? You also could add in rollover in and keep those to NRD. Over time, the plan proportion of terminated vested participants very likely will accumulate to be greater than the proportion of active participants. The plan will have the burden of providing all of the required disclosure to these terminated participants (SH notice, SPD, SAR, QDIA notice, 404(a)(5) notice...). The accumulation of participants with account balances very likely will push the count of participants with account balances beyond the threshold for requiring an audit (keeping in mind that the deferrals and safe harbor are both 100% vested). There likely will still be payments other than retirement benefits for QDROs and death benefits. Autoportability is off the table since it now pretty much relies on the benefits being distributable. If the plan is going to hold the account balances until NRD, then it should at least allow for the contributions to be made as Roth contributions. I expect that our BenefitsLink colleagues who have read this far are cringing at the thought of such a plan.

Here is a thought: I expect a 204(h) notice was never issued to the MPPP participants since the plan sponsor didn't think they were freezing that plan. An amendment to reduce future pension accruals goes into effect the latest of (1) the effective date of the amendment, (2) the date the amendment is adopted, and (3) the date that is 45 days (or 15 days for plans <100) later than the date the 204(h) notice is provided. By that scenario, it can be argued that the amendment never took effect and by administrative practice that holds true. If 204(h) notices were issued then this argument has some holes in it. I would suggest some legal counsel input before going this route for a better comfort level. I assume the plan document has continued to have been updated as needed, but is not on a pre-approved platform otherwise this should have been discovered long before now.

Oh that's different. I don't recall if hardship is a protected benefit, you may or may not be able to amend that out, but if the Plan has in service at 59 1/2 and/or severance of employment already you'll need to preserve that for all current participants at least for funds currently in the plan and any earnings thereon or you'll have a prohibited 411 cutback. Accounting for pre and post amendment balances by source for all participants seems a nightmare and just asking for trouble. Oh and then telling folks that some of their is available when they terminate and the rest when they turn 65? That sounds like a fun conversation.

Make sure the owners know that the no pre-65 distribution rule also applies to them as well as any "executives" then might hire.

I am curious to hear how the sponsor will manage automatic enrollment. Automatic enrollment thrives on inertia/inaction. Is someone going to sit down with each person as they become eligible and have them fill out a zero election form? Seems like a lot of work, but maybe the trade off is worth it to them.

WDIK has the correct code cite. In addition, the instructions to Form W-4R state (emphasis added): Of course, this assumes that the distribution in question is an eligible rollover distribution. Is it? If this is a 401(k) hardship distribution, for example, that would not be an eligible rollover distribution and the 10% (not 20%) automatic withholding could be waived.

26 U.S. Code § 3405 - Special rules for pensions, annuities, and certain other deferred income (c)Eligible rollover distributions (1)In general In the case of any designated distribution which is an eligible rollover distribution— (A)subsections (a) and (b) shall not apply, and (B)the payor of such distribution shall withhold from such distribution an amount equal to 20 percent of such distribution. (2)Exception Paragraph (1)(B) shall not apply to any distribution if the distributee elects under section 401(a)(31)(A) to have such distribution paid directly to an eligible retirement plan. (3)Eligible rollover distribution For purposes of this subsection, the term “eligible rollover distribution” has the meaning given such term by section 402(f)(2)(A).

I always imagined if I had my own company I'd make the plan as legally unappealing as possible for the staff - pooled investments, no ISW or loans, QJSA requirements, no payout until 65+5....and then I'd do the triple-stack match nobody would want to sign up for

A plan can allow for no distribution prior to normal retirement age. Though I believe that's much more common in a DB plan with annuity only options. I don't see why you couldn't do it in a safe harbor 401(k) Plan, but I'm not sure you should do it.

I kind of view that stuff like extended service warranties - if you are selling me a quality product (or service) then why should I pay more for insurance that I'll very likely never need? Some insurance specialist was probably seeing all these fiduciary breach lawsuits concerning investments and thought hey, we can scare people into buying protection they'll never need and make some more money.

Consider using to pay final plan expenses to use up and not have to deal with allocating the excess which might push you into a 2025 filing if those have to be determined after a PPTD of 12/31/2024.

Generally, getting participants paid out (or annuity purchase) before your plan termination date is a good idea. It simplifies many things and reduces the paperwork. Suppose you do all this during 2024, and then a formal termination date at 12/31/24, you should also be prepared to file a 2025 PBGC premium filing, with all zeros, and the "final filing" check box. This process may not work well if you are allocating excess assets, so think creatively with this process.

If the plan is a church plan, no nondiscrimination requirements apply. If it is a governmental plan, the only testing is the universal availability rule, which requires that with very limited exceptions, if any employee can contribute, all must be allowed to contribute. For other plans, all of the tests applicable to a 401(a) plan, other than the ADP test, apply.

If BenefitsLink neighbors have seen no experience, I’ll assume what I intuit: a fiduciary warranty might be nice sales stuff, but does not cover a real risk.

Consider thinking through your question from another direction: What provision in the plan’s governing document (or ERISA-mandated) would empower the plan’s administrator to deny or delay a benefit the plan provides?

Let them know you'll be buying an annuity with a QJSA unless they can get you a finalized QDRO? They can't hold the Plan termination hostage by saying we don't have a QDRO 2 years on.

Both IRC 412(d)(2) and temp reg 11.412(c)-7 refer to an amendment which is adopted no later than 2-1/2 months after the close of the plan year. To me, that means adopted, not resolved to be adopted. That said, what is an amendment really? In our world of administrators and actuaries we tend to think of the amendment as being something very formal that is spit out of our document system when we click the amendment button and that says "Amendment" in bold letters at the top. However I have been told by more than one lawyer that there may be other things that could be considered to be an amendment. A board resolution that clearly specified the changes to be made might be enough.

I.e., if this change is being done so the owner(s) can pump in a lot of after-tax money, it likely won't work as intended.

I'm unsure whether 409A applies but have an example to provide. Somewhere around 2005, a relative of mine was retired and had life insurance and health insurance thru his/her employer. The ER decided to discontinue both and paid him/her a lump sum as a "going away gift." (As far as I can tell, the ER was under no legal obligation to pay anything.) My retired relative got a check, and it was fully taxable with a W-2. That meant he/she was responsible for FICA taxes as well as income taxes.

It never hurts to be reminded that just because you can do some thing does not mean it is the best thing to do. Are you receiving advice about the wisdom of using your 401(k) money for the purpose you intend?

Keep in mind that in-service withdrawals, including hardship withdrawals, are not required to be permitted in the plan document. You are going to have to look at the plan provisions to see what is or is not permissible for this employer's plan. Most likely, you will not find a restriction in the plan that in-service withdrawals are not available to participants with outstanding loans. Until recently, the hardship withdrawal rules required a participant to take a loan before taking a hardship withdrawal (assuming loans were available under the plan and the taking of the loan itself was not causing additional hardship). While no directly relevant to this situation, it does illustrate that taking an in-service type withdrawal while having a loan was and is permissible. The amount of a loan @Bill Presson notes is based on vested amount in the participant's accounts available at the time the loan is taken. There is a strategy with taking a loan first and then taking an in-service withdrawal. It maximizes the amount available when the loan is taken and the loan is a not distributable event, does not incur potential early withdrawal penalties, and does allow for the opportunity to repay the loan. The amount of the subsequent in-service withdrawal was less and hence the adverse consequences of an in-service withdrawal were less.

We aren't helping the poor person who asked the original question now but.... The no later provision is pretty common and when you get into the document and/or distribution policy it is pretty clear the sponsor gets to decide when the first election will be offered. Once the offer is made the employee then elects. You seem to understand the installment provision correctly. Your example of a $266,000 balance is correct. The reason it says greater is because until you get to the very large balances you must pay within 5 years. So if an balance is $1,350,000 you would get 5 installments of $270,000 and that would be paid instead of the $265,000. In the extreme if a person had for example a $10,000,000 balance you could pay $1,000,000 over 10 years. It meets the law and is greater than $265,000.

Maybe I have not had enough coffee yet, but this SPD seems somewhat different than what I typically see for ESOP distributions. It looks like this is from a pre-approved document, which I have found to be less-than-ideal for ESOPs. As noted above, the SPD appears to allow the employee an election to take a full distribution of his or her ESOP balance during the six-year period. As Paul I notes, typically if the employer wants to impose a mandatory six-year waiting period, it would be more clearly stated. Forcing an employee to elect a full distribution within six years also seems to contradict the typical deferral election and distribution consent rules for vested accounts over $5,000 (see p. 13). I'm also curious about the installment provisions. They apply only if an account balance is over $265,000, suggesting that anything under $265,000 is paid in a lump sum. But each installment payment is the greater of $265,000 or the otherwise-applicable installment (vested account balance over remaining installments), so a participant with a $266,000 balance would get a $265,000 installment in year 1 and a $1,000 installment in year 2. I would usually expect to see this stated as the lesser of. I'm not sure I follow the interaction with the permitted installment extensions, as the formula would always give you a maximum five-year installment (i.e., if the account was over $1,325,000 [$265,000 * 5] each installment would be the greater of $265,000 or the one-fifth installment, so the one-fifth installment would be paid, and the account would be empty within five years).

Interestingly, the cite says "the Participant may elect to begin distribution of his/her Vested Interest as follows: (1) from his/her ESOP Account no later than the end of the sixth Plan Year follow the Plan Year of the separation from service" If there is a 6-year delay, one would expect this to read no earlier than.

Also note if the account's vested balance is >$265,000 the payment will be in the form of installments. But ESOPMomma nailed it.

The SPD provided DOES STATE there is a 6-year delay for vested balances in excess of $5k for terminations due to reasons other than age 59½, death or disability.

Have personal experience (family member) with SSDI. Monthly income limits based on wages (exclusive of sick pay, paid time off, bonuses and perhaps other categories as well). Contribution to a 401(k) not reducing wages has no bearing. It is my understanding (not experience) that retirement plan distribution are considered unearned and if so would not count. But again, that's SSDI. SSI's definition of income much broader: “...any item an individual receives in cash or in-kind that can be used to meet his or her need for food or shelter {with some limited exceptions}.” Don't think contributions to a 401(k) affect SSI but pensions (presumably QP distributions) do. Having said that, can only agree with other commentators that subject individual should seek guidance from SS. Maybe employer can help by suggesting questions for him/her to ask.

Compensation limit is based on the number in effect for when the plan year begins. 415 limit is based on the number in effect for when the plan year ends.

No, LTPTEs do not need to get SH match. However the plan document needs to say that they won't get it. (proposed) 1.401(k)-5(e)(2)(i) The plan also does not lose its deemed top heavy exemption merely because it excludes LTPTEs from the safe harbor contribution. 416(g)(4)(H)

There really isn't a way to alter the one-time irrevocable election. An election that is revocable is subject to a dollar limit. Employers sometimes allow for irrevocable elections in order to allow employees to choose much higher contribution levels. However, the down side of this is that the IRS has strict guidelines for when an election will be considered irrevocable. If the employer were to make an exception for your son-in-law, it could potentially mean that every other employee who had made an irrevocable election would lose the tax benefits of doing so. Given that, the employer is unlikely to make such an exception. Your son-in-law's choices are likely to be either to deal with the reduction in take-home pay from this hospital, or to find a job with a different hospital. Given that you describe the position as "lucrative," can he really not afford to put aside 5% toward his retirement?

See my comments in all bold type. So most, if not all, plan administrators will ask a designated "Primary Beneficiary" (or anyone requesting a payout of a "benefit") to complete a "Benefit Claim Form". What is a "designated beneficiary? A spouse? A former spouse? A child? The format I am familiar with typically starts at the top by explaining the nature of the benefit including amounts and different options for payout(if applicable) from which the "beneficiary" may choose. What type of defined benefit plan? Is it under ERISA? Then what follows are a series of "declarations"; pre-printed on the "claim form" that the "beneficiary" confirms by checking a box next to each individual phrase/declaration. Finally, at the bottom of the claim form there is a signature and date line where the "beneficiary" (as I'm referring to them) is to sign and date the claim form. In print either directly above or below the signature line is language to the effect of : "By signing this form you confirm, under penalties of perjury the accuracy/correctness of your responses to the statements above". Now, say the person filling out the form "affirms" an obviously false statement, for example that they were still married to the deceased plan participant at the time of their death, when, in fact, they are divorced from the deceased. Are you setting forth a hypothetical or is that actually what happened your case. . Upon learning of the falsehood, which, potentionally, could affect a payout (or might not ala' Egelhof v. Egelhof) could the Plan Administrator deny/revoke/attempt to recover any "payout" or , in this particular instance, might the administrator, determine based on established caselaw such as Egelhof v. Egelhof for example, and say "No harm no foul" or would they be obligated to perform further due diligence and/or look to some outside legal authority, such as the courts, to make any final determination ? Were the Participant and the former spouse married at the time the Participant retired and elected a QJSA as required by law (unless waived by the former spouse). That election survived the divorce and the alleged misstatement is meaningless. If the Participant agreed, or the Court in the Judgment of Divorce ordered, that the former spouse be the Alternate Payee of the Participant survivor annuity benefits, and a QDRO was issued by the Court and approved by the Plan, then the alleged misstatement is meaningless. If the Participant agreed, or the Court in the Judgment of Divorce ordered, that the former spouse be the Alternate Payee of the Participant survivor annuity benefits, and no QDRO was ever issued, then Pension Protection Act of 2006 would permit a posthumous QDRO, and the alleged misstatement is meaningless. If the QDRO or the JAD or the Plan provides that upon the death of the Participant the Alternate Payee is to be treated as the beneficiary and as the surviving spouse of the Participant, then the alleged misstatement is meaningless. Egelhoff may or may not apply. The language of the Plan Documents may or may not apply. DSG

First, any claim for benefits made by anyone other than the known participant should be scrutinized and require sufficient documentation to establish to the Plan Administrator's satisfaction that such person is entitled to a benefit. If benefits have been claimed under misrepresentation then the PA/fiduciary should determine if any benefits have been paid in error and if so, whether to attempt to recoup. It is also noteworthy that the time limitations for doing so imposed by SECURE are specifically exempted in cases of fraud/misrepresentation. Facts and circumstances, including amounts in question and funded status of the plan, should be considered as well.

Depends on the terms of the NYS hospital's plan. If his goal is to contribute less, then it might be that he has to be treated as a new employee again under plan rules. However, just a termination and rehiring would not be sufficient as that could easily be abused to negate/change an "irrevocable" election. If he wants to do more I would expect that is very possible - usually these initial irrevocable elections are the mandatory piece required by the employer to be in the plan and then there is usually a voluntary piece that the employee can vary at their discretion. The advantage of that irrevocable mandatory 5% is that, if properly crafted/administered, it does not count toward the individual's annual 402(g) deferral limit. That is, it gets treated more like an employer contribution.

If the plan is going to attempt to argue that there was no intention to change to elapsed time when the restatement was made, then the plan likely will need additional documentation beyond the prior documents and administrative practices have always had an hours requirement. For example: Have all communications to participants about the plan amendment referred to the hours requirement? Look at the language in the SPD or Summary of Material Modifications, emails or memos to participants describing the restated document, and description of plan provisions on a plan website. Also look at any summary of plan features in required notices that may have been sent to participants such as Automatic Enrollment Notices, Safe Harbor Notices, QDIA Notices or 404(a)(5) disclosures. Is there written documentation any discussion of a change to elapsed time in Board meetings, Plan Committee meetings, exchanges of information with the recordkeeper, payroll or plan's legal counsel about changing the eligibility requirement? If there is none, then a total absence of any discussion of such a change also can be an important point supporting the position that no change was intended. Assuming that this information supports the position than there was not intention to change to elapsed time, the plan may consider providing the information to and engaging with the auditor. If you are new to the business and find this situation pretty intimidating, you should tell others who are involved with the plan who have experience with these situations, and those who can speak for the plan. The auditor will communicate directly with the plan administrator, and it is possible that the plan administrator also is feeling intimidated. Given the potential stakes, consider a recommendation to involve an ERISA counsel, ERPA or experienced plan consultant to provide input and guidance.

If Company B is unincorporated, then Bob is a 10% partner or joint venturer of an owner of Company A. That makes Bob a disqualified person under Code section 4975(e)(2)(I), and the transaction is a PT, I believe. (And, I think, as EBECatty said, even if it wasn't a PT on its face, Joe would have a hard time arguing to the IRS that this was not a self-dealing transaction, as his likely motivation to make the loan is his relationship with Bob.)

See 1.409A-2(a)(8), which deals with the deferral election timing of performance-based compensation, particularly the second half of the paragraph about making a deferral election once the compensation is "reasonably ascertainable." I think that's the piece you're looking for. The uncertainty of meeting the performance goal when the criteria are set is dealt with in 1.409A-1(e)(1), which defines performance-based compensation.

I would like to underscore Peter Gulia's comments. Employers and plan fiduciaries* should not be giving any advice about the law that is not specifically required by applicable law. For example, a plan is required to provide an explanation of rollover rules. A plan should not go beyond the mandate even with respect to related aspects of the rollovers, and certainly not with respect to other tax matters. *Unless the fiduciary is professional and engaged expressly to provide the advice. Even then, the appointing fiduciary would have to be prudent in the engagement, including determining if the fiduciary were competent to provide the service/advice.

An employer or a plan's administrator might prefer not to provide guidance on this question. Unless one has extraordinary expertise, an answer in either direction has a potential to harm one or more of an individual’s interests. Beyond knowing the law, an adviser would need to know everything about the individual’s other and surrounding circumstances. Under the part 416 rules of the Supplemental Security Income for the Aged, Blind, and Disabled program, the subpart L rules on “Resources and Exclusions” are at 20 C.F.R. §§ 416.1201 to 416.1266. These rules begin at 20 C.F.R. § 416.1201(a) https://www.ecfr.gov/current/title-20/part-416/section-416.1201#p-416.1201(a). Those rules are only a few of many that could relate to the SSI beneficiary’s situation. And one would research too the rulings and other nonrule guidance. And the guidance the Social Security Administration provides for SSA’s employees. For example: https://secure.ssa.gov/apps10/poms.nsf/lnx/0501120210. One also might consider that some SSI provisions might allow SSA to not count some elements of a beneficiary’s income or resources. In my experience, it’s impractical to advise an SSI beneficiary unless one volunteers an uncompensated engagement and can afford to put in substantial time and attention. This is not advice to anyone.

Maybe you could put a little more flesh on that skeleton?

Others have provided you with case law that supports your position. If the judge fails to honor MD law, your remedy might be to take an appeal. Since the ex-spouse is being recalcitrant, you might consider a motion to compel the ex-spouse to sign the QDRO. Both of these approaches seem more about MD civil law and procedure -- not seeing that benefits practitioners are qualified to help with that.

I think you would need to have division D in a separate plan and make sure both plans would pass 410(b) on their own. Others here will be able to verify.

In James v. James (Unreported), Nos. 0609, 2624, September Term, 2018 (2019) that you can find at - https://scholar.google.com/scholar_case?case=1652503325851670403&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:14880692104701005079:AAGBfm2qi1_JaXLJvydb4f3quYTnTlLkbA the CSA cited Potts v. Potts, 142 Md. App. 448, 790 A.2d 703 (2002) as follows: "When a QDRO is used subsequent to a judgment to allocate property under Md. Fam. Law Code Ann. § 8-205, it is considered collateral to the judgment. Id. at 460-61. "In light of the current practice of often presenting QDROs months, sometimes even years, after a marriage has ended . . . if one party drags his or her feet, the other party will be unable to appeal other issues contained in the judgment for absolute divorce." Potts, 142 Md. App. at 461. We also stated, "[w]e have found no case, statute, or rule in Maryland or elsewhere that requires a QDRO to be filed within a specific time frame after a judgment of absolute divorce has been entered." Id. at 461." (Emphasis supplied.) And read Rohrbeck v. Rohrbeck, 318 Md. 28, 566 A.2d 767 (1989), where the Court of Appeals recognized the use of appropriate pension orders as an enforcement tool (not unlike an attachment or a garnishment.) The Court held that, ". . . we therefore expressly recognize the ability of a party otherwise entitled to a QDRO to obtain one as an aid to enforcing a previously entered judgment." Id. at 43, 566 A.2d 767. So there is no statute of limitation with respect to the filing of QDRO to collect pension or retirement benefits, however there are many problems that can occur during the delay. See attached Memo. And if you are planning on using a QDRO to collect alimony or child support arrears you will have a statute of limitations with respect to each payment when it becomes due and payable. DSG CONSEQUENCES OF DELAY 04-15-24.pdf

What are the implications? Would you have longer term PT <1000 hours become eligible due to elapsed time? What are the requirements for a PS contribution? If there are people technically in, but who do not get a PS because they worked <1000 hours, and if the plan is not top heavy and can pass coverage (these could be otherwise excludable, so likely OK there), then might this be a non-event from an administrative perspective that can be fixed with a prospective amendment with the intended language? This could also, if properly worded, "kick out" those who never worked 1000 hours. If this doesn't work then I agree it's audit CAP which likely also requires some contributions for those unintended entrants.

Are there any HCEs in D? I'm not sure about QACA SHM, but in regular SHM you can't have an additional match where any HCE can, by design, get a higher rate of match than any NHCE. I also don't think you can restructure D out like that, but I'm not sure. If D was all NHCEs I think you'd be OK regardless.

I think your first statement was the answer to your question, LOL, as these situations often get treated like they are personal bank accounts rather than QPs, IMHO.

I think you should hire a TPA that knows what they're doing so you don't get bad advice and get in big trouble down the road.

I think they misunderstand the cure period. The end of the quarter after the missed payment is the time to have all payments caught up. Not just the missed payment. https://www.irs.gov/retirement-plans/issue-snapshot-plan-loan-cure-period

Indeed. And if it wasn't under audit, it would be VCP. IRS Notice 2023-43

In Plan Specs, change the basis for match to YTD minus prior contributions. Then post a match contribution as of year end. Relius will calculate the match for EEs who are under the calculated amount but will not reduce anyone who was over the calculated amount for the year.

As long as (a) document defines the compensation that way by source, and (b) the compensation definition isn't discriminatory (414(s) testing) Then this should be fine. Maybe a suggestion to make sure the SPD spells that out well enough so people aren't leaving match money on the table for only doing 6% of the base pay, but otherwise folks just need to think it through and maybe sign up for more than 6% so that they still clear 6% of their entire "match compensation" figure.