Leaderboard

The best course might to move the money to an institution that will retain it's tax qualified status. If they convert it to his SSN and a personal account it's going to trigger 1099-R reporting on the income under his SSN which can cause him tax problems at year end and possible backup withholding issues. Whether they can do it I don't know as I'm not knowledgeable about banking regulations but it sounds like they are going to do it whether your client wants it or not so the easiest solution might be to move the funds before that happens.

@Lou S. poses questions. It might be wise to interpret by changing the question marks to exclamation points.

It sounds as if you are in a stalemate with the employer where you expect the employer to make changes to accommodate you and the employer expects you to mange your situation within the constraints of the plan provisions. Please note that none of the discussion below is intended to be judgemental in any way either of you or the employer. Consider what will happen if the employer refuses to accommodate your situation. You will have to meticulously manage your affirmative elective deferral percentage of zero and if you don't, then you will face some punitive penalties attributable to your status as a sanctioned man. Your other alternative would be to find work with another employer that will accommodate your situation, and you have acknowledged that you have worked for other employers that have been accommodating. Your asked your employer to accept a waiver of your right to participate in the plan. This type of waiver is an optional plan provision available to employees who have not yet become eligible under the terms of the plan and would have to be available to all employees before they became available. Many employers do not want this provision in their plan, and without this plan language, you have no right to demand a waiver. You could achieve your goal if the employer was willing to accept a standing election from you of zero deferrals. The employer apparently wants employees to participate in the plan and does not want to set a precedent that other employees could point to as a reason to let them make standing elections. You have involved the DOL which is appropriate with respect to addressing eligibility issues, but you have not said anything about approaching the IRS which is heavily involved not only in the regulation of retirement plans but also with managing sanctions. Frankly, it is doubtful either agency will do anything more than be sympathetic and encourage the employer to be accommodating. Absent legislative or regulatory guidance allowing an employee to waive their right to participate if the plan does not allow this waiver, it also is doubtful that hiring an attorney will succeed in forcing the plan to accommodate you. The above being said, and assuming the employer wishes not to risk your leaving them, then it is worth exploring potentially another possibly palatable step to accomplish your goal of not being required to manage your zero deferral election with extreme care. You may wish to ask the employer to have a conversation about the following suggestion. Ask the employer if they would consider adding a plan provision that excluded from participation the classification of employees who are subject to the sanctions. This would not require them to name you explicitly in the plan document and other employees likely would not understand the exclusion (other than it does not apply to them). Good luck!

If it is your 401(k) including auto enroll and escalation, you should absolutely be able to opt out of those some how. Usually by overriding the auto amount with an affirmative 0% election. If it is a pure employer contribution they may not accept your waiver as is it is possible that could cause the Plan to fail discrimination with no recourse for them to be able to fix it and that would affect other employees. Have you spoken to an employment attorney who might be able to help you?That might be your best course of action.

Move the funds before the conversion to personal?Get a new investment vehicle?

Don’t try to fight the bank, just move the money. It’s not worth the risk.

Does the plan file a Form 5500-EZ? If yes, then it is even more important to preserve the plan's EIN. EFAST2 will be looking for continuity and likely at some point will send out a penalty letter if it doesn't get a filing that shows a final filing and assets going to zero for that EIN. You may want to try to contact a compliance officer at the bank (not at the branch, and who hopefully know a smidgen about retirement plans), and have a discussion about the bank making an unauthorized change to the plan's EIN. You may want to salt the conversation by saying "IRS" and "compliance" a few times. You actually may be doing them a favor. If this does not go well, then definitely follow Lou and David's advice!

Perhaps you could request an attorney recommendation from the body that has sanctioned you.

Don’t assume; read the pooled employer plan’s participation agreement and all documents that affect relations and allocations of responsibilities between the PEP’s administrator and the participating employer. One might be surprised by how many responsibilities a PEP’s documents can allocate to a participating employer.

@Paul I - the dates I put in there were based on conversations with IRS folks - nothing in writing. Obviously the date will be based on when most of the mass submitter have received the e-mail telling them they are OK.

I think the misunderstanding that many people have is that if the participant did not fill out a beneficiary form/designation, then the account is subject to the terms of a will, or if no will, then intestate rules. It isn't. 401(k) plans have default beneficiaries written into the governing plan documents, so that in the event a participant passes without a affirmative beneficiary designation, there is a default beneficiary. Typically that is something like spouse, children, estate, but it varies. Read the plan's document carefully. Even if the estate is where the benefits are to go - they go there because of the beneficiary rules in the plan document, not because of the application of a will or intestate laws. So If everyone else pre-deceases the participant (not what we have in this post) the estate is the named default beneficiary under the terms of the plan, and gets the $$ because of that.

Is it fair to assume that you have determined that the benefits you would have earned in the defined contribution plan somehow are more valuable that the benefits you earned in the cash balance plan? If not, what is your motivation for asking the question? Moving on, let's assume that you do not have any documentation of your choice and your employer is unable to find any documentation of your choice. You should expect that your employer will point to all of the benefit statements and plan disclosures that they have sent to you over the past couple of decades explaining your cash balance benefits to you as evidence that you chose the cash balance option roughly 20 years ago. If you are going to pursue this, you should start by follow the claims procedure in the SPD for the defined contribution plan. You should be prepared to provide information about the basis for your claim. If the claim is rejected, you can appeal. If you lose the appeal, you can take it to court. If you are going to go down that path, you are going to invest a lot of time and expense for something you admit you have no documented reason for making the claim. Do not be surprised if your efforts are unrewarded.

I look at this one step at a time. When uncle dies, plan assets go either per a beneficiary designation *or* if none, per the terms of the plan. I would guess that the spouse (aunt) is the bene under the terms of the plan - so those assets go to her - whether she exercise control over them or not. Uncles will is irrelevant. Only a valid beneficiary designation or the terms of the plan govern. So, when aunt died, assets go per her bene designation (if any) or per the terms of the plan - and uncle, uncle's estate, and uncles trust have no bearing on aunt's distribution of her interest in the plan. Aunt's representative (estate) or others would be entitled to those benefits - absent some fact not disclosed. The court has NO JURISDICTION over the plan assets until paid, and cannot direct those assets to be paid to the trust, and whether it is a pass-through is really irrelevant..

Is this a DB plan, or other plan subject to QJSA? If so, does the plan exempt distributions between $1,000-$7,000 from the QJSA requirements? If it does, then I agree with the other commenters that you can go ahead and distribute the single sum upon plan termination. If it does not, then you have to make the distribution in a form that preserves the QJSA rights. This probably means buying an annuity contract, or transferring the benefits to the PBGC's missing participants program. Optional forms of benefit with respect to distributions less than $7,000 are not a protected benefit under 411(d)(6), so the annuity options could be eliminated without disqualifying the plan. Once the annuity option is eliminated, you could distribute the single sum. However, if the plan is covered by the PBGC, you may not amend the plan to eliminate a form of benefit after termination, regardless of whether it would be ok under 411(d)(6).

Can't you just force them out to an IRA due to plan termination under Treas. Reg. §1.411(e) regardless of the existing threshold?

Data as of Wednesday, July 31, 2024 Moody's Daily Long-term Corporate Bond Yield Averages Utilities Industrial Corporate Aaa NA 5.04 5.04 Aa 5.46 5.14 5.30 A 5.57 5.34 5.46 Baa 5.77 5.77 5.77 Avg 5.60 5.32 5.46 Moody's Daily Treasury Yield Averages Short-Term (3-5 yrs) 3.22 Medium-Term (5-10 yrs) 3.45 Long-Term (10+ yrs) 4.11

The technically correct approach would probably be to amend past 5500s and file for each line of H&W coverage. The reality of what happens in practice (at least from my experience) is the employer gets comfortable with some form of argument that there was an umbrella mega wrap in place encompassing all of the ERISA H&W benefits the whole time--even if not perfectly documented. Then you get a proper set of wrap docs in place asap (amended and restated) and continue to file a single plan 501 going forward. That's typically the most reasonable approach given how burdensome and wasteful it would be to perform a big DFVCP project for all lines when virtually nobody files that way anymore anyway.

If they filed an extension on their business taxes it should automatically extend their 5500 deadline as well. https://www.napa-net.org/news-info/daily-news/case-week-form-5500-and-automatic-filing-extension

Triple-stacked match and encouraging participants to defer. Well, that’s something! The ADP test won’t apply due to the safe harbor match. But, if a cap is on the other matches, as indicated, then I think you have the potential for different ultimate match rates based on deferrals. A low paid spouse of the owner can get a higher percent of pay match than an employee making $345,000 but is a NHCE due to last year’s wages. So, regardless of the demographics, I think the caps on the two extra matches will suffer from a malady known as ACP testing. I could be wrong about that, of course, since I did not quote the applicable regulation and its requirements.

It's facts and circumstances. Document why it took longer then one year so you can address it with the IRS if they bring it up on audit but what actions are they likely to take? Unwind the termination and make you re-terminate? Where it might be an issue is where you drag out the term past some new required amendment dates but typically I've never seen the IRS challenge a term if it took "a little longer than a year" but if you terminated in 2023 and pay everyone out by the end of 2024 I can't see where the IRS would ever be likely to challenge unless there were other issues with the Plan. That's not to say they couldn't be sticklers, I just think you'd have to have an auditor having a very bad day try to impose that rule which is a guideline as I understand it an not in the code. If they did do that you could always kick it up to a supervisor.

Agreed! And even if you went to a VCP filing on this (which would be an absurd waste of time and money IMHO) I'm very dubious that the IRS would approve it.

What rule/mechanism can you cite for a retroactive opt-out? I honestly don't care about what the participant wants. This is a plan issue, you correct and move on. Do not make the situation worse by trying to do what they "want" instead of just doing what is right.

Has the health plan’s or welfare plan’s administrator yet done an analysis of whether the two distinct companies or businesses are one employer within the meaning of Internal Revenue Code § 414(b)-(c)-(m)-(n)-(o)?

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

If you have proof of mailing them timely, you did what you are supposed to do. It's a PITA, but as long as you did your part the IRS will remove the penalty. I have had plenty go missing after being received by the IRS, but I have never had any returned as refused (and I have mailed many thousands of extensions) Are you 100% sure that you mailed the extensions to the correct address for your method of delivery?