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I wonder if divying up the horse when time comes for a distribution is where the term "quarter horse" comes from.

You're fine. If your spouse had enrolled in the general purpose health FSA, that would have been disqualifying coverage that blocked HSA eligibility for both your spouse and you. However, in this case your spouse declined the health FSA. Mere eligibility for the health FSA is irrelevant here. That's why there's no issue. Only the ability to incur reimbursable claims pre-deductible would be disqualifying coverage--and you do not have that ability in this situation where your spouse declined the health FSA. More details: https://www.newfront.com/blog/hsa-interaction-health-fsa-2 Slide summary: 2024 Newfront Go All the Way with HSA Guide

Personally, I think that any 5500 filing made by 10 1/2 months after plan year end should be exempt from penalties without anyone having to file for an extension. There are no taxes paid with the form and the filing for an extension has no filing actions other than its due date. If a 5500 filing is received after the 10 1/2 months date, then the penalties can be computed using the existing 7 month due date. (This could avoid needing an act of Congress to implement the change.) Bottom line... no extension to file, no form to maintain, eliminate a deadline, save time and cost.

I will be so glad when these silly forms can be done electronically. What a PITA they've been just the last few years.

Yes, that is correct. Assuming that the participant is past his required beginning date, a Roth RMD was required for 2023 but never again until after the participant's death.

Not a lot of talk about this one but it also seems to destabalize the regulatory process. https://www.napa-net.org/news-info/daily-news/scotus-kicks-open-another-door-future-litigation

The conversion data had to have included a separate accounting for the Roth contributions (or you have to deal with an even bigger problem.) Ask the client for any plan reports from 4 or 5 plan years ago that show a participant's account balance by source (e.g., individual statements, registers, trial balances, vested balances...) If a Roth account existed as of the beginning of the 4 year ago, then it is reasonable to assume that Roth deferrals were made before then to create a balance in the account and it has been at least 5 years since the start of the plan year in which the first Roth contribution was made. Applying this method to the plan years since then will allow the plan to determine year in which the first Roth contribution was made. Yes, we can come up with some combination of circumstances where this is not perfect, but those circumstances likely will be very rare.

It's a sticky situation.

How about a 20-pound vat of glue for your portion?

And as we often say is this forum, just because you CAN do something doesn't mean you SHOULD.

401(a)(26) is good assuming prior structure was compliant. If no one benefits in 2024 then no 410(b) or 401(a)(4) concerns. If the plan was "soft" frozen (just participation) then you would need to include this person in your testing population as (s)he would not be a statutory exclusion.

The document should outline if there are exceptions to the last day rule for retirement, death, and disability.

Technically, there could be a penalty. If you file the wrong form, it can be treated as if no form was filed. The suggested course of action is to file the correct form ASAP to show the plan did file the correct form. If the filing past its due date, then follow the late-filing procedures. The 5500-SF instructions say: "Plans required to file an annual return/report that are not eligible to file the Form 5500-SF must file a Form 5500, Annual Return/Report of Employee Benefit Plan, with all required schedules and attachments (Form 5500), or Form 5500-EZ, Annual Return of A One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan." AND, elsewhere in the instructions: "Do not file a Form 5500-SF for an employee benefit plan that is any of the following: .... 9. A “one-participant plan.” It is worth noting that in the relatively recent past, there have been many instances where the 5500-SF and 5500-EZ filings have been mixed up. When the 5500-SF could be filed on EFAST2 and the 5500-EZ had to be filed on paper, some practitioners were filing one-person plans using the 5500-SF. Then, the box was added on the 5500-SF to indicate that the filing was for a one-person plan so the plan's data would not be made available to the public. When the 5500-EZ was able to be filed using EFAST2, it seemed to have created a brighter line between the two forms, and in the first year when electronic filing was available plans that had used the 5500-SF in the prior year were told to use the 5500-EZ in that first year. Adding to the overall confusion over the years is plans that do not file a 5500-EZ when the assets had been above $250,000 and then they dropped below this threshold. When things got mixed up, some plans received penalty notices and some did not. Among those receiving the notices, all were required to file the correct form. Some were able to argue successfully that filing the wrong form proved the intent of the plan was to file timely and the plan should not be penalized for having a late filing. Bottom line... file the correct form now and avoid anxiety of waiting to see if a letter from the IRS shows up in the mail.

If an ERISA-governed plan’s trustee even considers holding the shares of the limited-liability company that owns a horse, pays the expenses of keeping the horse, and collects prizes and fees of the horse’s work: The plan’s administrator might warn the participant that incremental expenses the plan would not have incurred but for the nonqualifying asset—for example, premiums for extra fidelity-bond insurance or fees for an independent qualified public accountant’s audits, and lawyers’ fees (see next paragraph) are charged to the individual account of the participant who directs investment in the nonqualifying asset. The participant must engage her lawyer at her personal expense. And at least for the initial sets of transactions—forming the company and its LLC operating agreement, the company’s purchase of the horse, and the plan trustee’s purchase of its member interest in the LLC, the participant’s individual account is charged the fees and expenses of the plan’s trustee’s and administrator’s lawyers. (Other individuals should not bear expenses made necessary because of one participant’s directed investment.) Likewise, the plan trustee’s extra fees and expenses for reading the LLC’s financial statements and otherwise monitoring the plan’s investment are charged to the directing participant’s individual account. The plan’s administrator might require that the participant’s account always hold enough daily-redeemable investments so the administrator perpetually can pay all incremental plan-administration expenses without invading any other account. In my experience, a person who thinks about using her retirement plan account to buy an unusual investment considers that way because she lacks money. But many of those also lack an account balance that’s enough to both buy the nonqualifying asset and reserve for the plan’s incremental expenses. This is not advice to anyone.

I recommend speaking with your CPA or financial planner.

The outcome of a VCP submission can sometimes depend on what evidence the employer can provide that they intended to do the right thing. Cuse's observation about 204(h) notices is a great example. You could request an anonymous pre-submission conference to get an idea of how open they would be to this correction. My guess is that they would be ok with it, since it is in the participant's favor and there is some evidence to back up the employer's position.

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.

Agree with Corey, check the specific language of the resolution and if it has all that is required then maybe that would suffice as the amendment. I would also suggest client gets its attorney's blessing for treating as such.

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.

You'd still need to worry about the universal availability test, but that's about it.

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.

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?

just get them to re-sign-up for the $X per paycheck as you claim it's not always obvious whether they'd be above or below 3% each time.

Definitely not my area of expertise but if the farm has been in the family for 200 years, wouldn't there have been some step-up in basis along the way as prior owners passed on and left their sharers or interest to future generations? It sounds like you need a good tax accountant who is well versed in family business transfer and sale and that's not really the focus of this board. On the bright side, long term capital gains tax rates are much lower than ordinary income taxes, at least at the federal level, state taxation may vary from state to state quite a bit.

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.

This seems like a procedural question. The employer should come up with something reasonable, document it, and apply it consistently.

I suggest you hire a tax accountant who is well-versed in 1031 exchanges to work with you. Your frustration is not surprising. These exchanges have many, many rules upon rules and each rule seems to have several exceptions. Someone who has expertise and experience will ask about all of the facts and details about the farm, the sale, the S-corp, your goals, your siblings' goals and more. With that information in hand, they can lay out a path forward and explain in detail to you and all other stakeholders before taking any steps. Typically retirement plans and IRAs are not involved in these exchanges because distributions from these vehicles are subject to ordinary income taxes (unless Roth amounts are involved on which ordinary income taxes were already paid). May you treasure the heritage of a 200+ year old family farm, and good luck to you and all of the siblings!

Not sure of all the relevant facts (and the relevant answers) but these are the items I'd look at as potentially affecting the outcome: Can the group of former employees continue to receive tax-free employer-based coverage or tax-free reimbursements (based on their status as "former employees") beyond the COBRA period? If so, is the arrangement currently subject to 409A or exempt by providing only non-taxable benefits? If exempt, would a taxable lump-sum cash payment now subject the arrangement to 409A in a way that would make acceleration impermissible? If already covered by 409A, would the arrangement be aggregated with any others or could the employer follow the standard plan termination and liquidation rules to avoid a 409A violation? Is there a basis for providing former employees receiving deferred compensation a 1099 and applying SECA (instead of a W-2 and FICA)?

Any choice between (taxable) cash and (non-taxable) qualified benefits needs to be run through the Section 125 cafeteria plan to avoid constructive receipt. In other words, to avoid all retirees being taxed on the opt-out cash option regardless of whether they enroll in the retiree plan. More details: https://www.newfront.com/blog/the-section-125-safe-harbor-from-constructive-receipt So the simple answer is to address this retiree opt-out credit election in the Section 125 cafeteria plan.

Yes, if the spouse's consent was not given nor witnessed, then the spouse is still the legal beneficiary. But that doesn't prevent the participant from taking funds from the plan. If the spouse is NOT the beneficiary, it's because they allowed it by signing away their right to death benefits. So too bad on them if the participant elects a withdrawal.

I'm not sure I even understand what the question is here is or it's application to QDROs but wouldn't this be a question for an attorney who practices in the state in question and has some knowledge of ERISA if a QDRO might be applicable?

Well, considering the 5330 progress or lack thereof...