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"A loan will be considered to bear a reasonable rate of interest if [the] loan provides the plan with a return commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances.” - I always hated this regulation. There is really no other similar circumstance in the marketplace...

Under IRC section 401(a)(17), compensation is limited for qualified plans. For a calendar year 2024 plan, that limit is $345,000. For 2025 it will be $350,000.

Hi Sorry if this was discussed before. Not a 401k person. I want to make sure I understand this correctly. Client is 75 years old. Because not between ages 60-63, cannot have enhanced catch up, correct?

Correct.

If these payments are not dividends under the Internal Revenue Code, then they’re not covered by Section 404(k), which governs deduction of dividends for shares owned by an ESOP sponsored by a C corp. Accordingly, the payments would not be deductible if they’re not dividends. In this case, another issue is whether they should have been paid to the ESOP, which is the shareholder (not the participants) and, correspondingly, was there an impermissible in-service distribution not authorized under the terms of the ESOP plan? The pass through payment for dividends plan provision likely would not apply. The plan sponsor should consult with an ERISA-ESOP attorney about a correction process.

A failure to deposit deferrals timely is not a qualification failure that can be corrected under VCP. There's nothing in 401(a) that says that you need to make timely deposits. It's not a qualification error unless it rises to the level of being a misuse of plan assets or embezzlement. The fact that the amount of money involved is $2,500 would indicate it is not that. You cannot get excise taxes waived under VCP. And, the IRS cannot generally waive excise taxes anyway. So, what I would do is file the late Forms 5300 with the excise tax amounts, which should not be very large if the principal amount is $2,500, since the excise tax is based on the interest, not the principal, of the late payment. File the Forms with a letter explaining why the forms are late and requesting waiver of late filing penalties. If you are assessed penalties, they are (a) interest on the unpaid tax balance at IRS rates, (b) a late filing penalty of 5% of the unpaid tax for each month up to a maximum of 25% of the unpaid tax. This can be waived if the IRS gives you the waiver for reasonable cause, and (c) a penalty for late payment of the tax, which is 1/2 of 1% of the unpaid tax per month, up to a maximum of 25% of the unpaid tax. This is also waivable for reasonable cause. There is also some chance that the IRS would assess the second level excise tax of 100% of the amount involved (i.e., the interest on the late payments). So, you can see form this that the penalties for late filing of the Form 5330 are not gigantic. Just do it, hope for the waiver, but know that it's not going to be ridiculous even if the waiver isn't granted. This is, of course, just my thoughts as an accommodation for those on BenefitsLink and should not be construed as legal advice.

Probably not a CG. But remember, even though there is no family attribution from siblings, there could be, for example, certain options to purchase some or all of the other 21%, that would count as "ownership" for these purposes. Most CG determinations frankly don't seem to take into account such intricacies, which is why we always advise clients to seek legal/tax counsel before making the determination. Or at least do a deeper dive into the rules. P.S. I just read another post of yours where Cuse makes the exact same point with regard to options.

The plan can simply commence her benefit payments in the normal form if she is beyond NRD - they could do this by mailing her a check that she won't cash. If they delay until RMD, there should be an actuarial increase, or a retro payment to make up for the time from NRD to RMD. So, she could get a big check at RMD. There would be a tax penalty on the participant for not receiving RMDs. If it turns out she is vested, she could face a large tax bill for not receiving RMDs. Problem is, she is not permitted to waive her benefit. She doesn't think she is vested, but the fund office does so DOL/IRS require them to find her and pay the distribution. She can try to prove to them that she isn't vested, or she can just accept the money. The fund may start sending her checks, but it is up to her to cash them. Fund is required to pay, she isn't required to accept until RMD. At that point, the tax man could become a problem for her. Why does she think she isn't vested?

Unfortunately this raises questions about past practices, like whether full appraisals were done every year. Assuming yes, about which I have to be skeptical, then I think the only option would be to carve out these illiquid assets and leave them as pooled and the rest self-directed. If the owner keeps them you have a BRF issue as noted.

BRF

Controlled group attribution falls under Section 1563. For that an adult child’s interest is attributed to the parent only if the parent owns MORE than 50%. Same issue in reverse. So they need to be careful that the dad never add any ownership.