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Thanks all. I was leaning toward the fact that the employment is implied until outright, um, terminated. So we are going to forgo the RMD this year. We will check in with them in January to see if the relationship ended in late 2024. If it did, we will get the RMD done before 4/1.

The Labor department has not changed that rule. 29 C.F.R. § 2510.3-102(a)(2)(i) https://www.ecfr.gov/current/title-29/part-2510/section-2510.3-102#p-2510.3-102(a)(2)(i).

I had a client do this years ago. They paid the penalty, then contacted us a week or two later. IRS said no in that instance. Short version was something like: 1. you filed late 2. we issued a penalty 3. you had two options, pay the penalty or pay user fee for correction program 4. You paid the penalty. You cant correct via program because there is no longer anything to correct. We will not issue a refund because the penalty was legit. In my client's case there was only a small difference in penalty and DFVCP user fee (less than $1,000), so the client dropped it after the IRS said no.

Whether the employment relationship has terminated or not is based on all the relevant facts and circumstances. You don't say what type of plan. If DC, is he working enough hours and considered employed 12/31 (if necessary) to get an allocation? Are there other benefits that he could get if retired or is precluded from unless retired and, if so, how are they treated?

Not explicitly. However the regs do contain a general anti-abuse clause which the IRS could point to in the event of an audit. https://www.ecfr.gov/current/title-26/part-1/section-1.401(m)-1#p-1.401(m)-1(b)(3)

Does the plan currently permit a discretionary matching contribution, but the employer simply chooses not to make one? If so then the prior year's NHCE ACP is 0% since there were no matching contributions. If the plan does not currently permit matching contributions, then there is a special rule that deems the prior year NHCE ACP to be 3% in the first year that the plan permits matching contributions. 1.401(m)-2(c)(2) However, you said the plan is currently using the 3% safe harbor non-elective contribution, so the plan could be exempt from the ACP test, as long as the match satisfies the ACP safe harbor. Depending what you mean by a "small" match it very well might. Finally, you could just tell the client that if they want to add a match, there is required testing. If the test fails and can't be corrected until after the deadline, because they sent you the data late, then they will be subject to a penalty. It's their decision whether they want to figure out how to get you the data on time, or risk the penalty.

For a participant who has reached the participant’s applicable age, the Treasury’s rule sets the § 401(a)(9)(C) required beginning date as the April 1 that follows “[t]he calendar YEAR in which the employee retires from employment with the employer maintaining the plan.” 26 C.F.R. § 1.401(a)(9)-2(b)(1)(ii) (emphasis added) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-2#p-1.401(a)(9)-2(b)(1)(ii). If, by December 31, neither the employer nor the employee communicated to the other an end of the employment, it might be a good-faith interpretation to presume the employee had not THEN retired from employment. If so, the following April 1 would not be the required beginning date, even if before April 1 (but after the preceding December 31), the employer or the employee decided to end the employment. A rule interpreting a severance from employment, although for a different tax law condition, suggests that a mere expiration of a nonemployee’s work period might not be a severance “if the eligible employer anticipates a renewal[.]” And that’s so even if whether the worker is reengaged depends on whether the employer needs the worker’s services, whether the employer has money to pay for the services, or both. See 26 C.F.R. § 1.457-6(b)(2)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.457-6#p-1.457-6(b)(2)(i). This is not advice to anyone.

You and 401(k) provider are correct that new hires with lookback year pay below the HCE threshold are NHCEs initially and, if other eligibility criteria are met, if any, they should be eligible to enter that plan and defer until the first plan year in which they become HCE. Unless eligibility for the NQDC plan specifically excludes any employee eligible for the 401(k) plan, it is determined independent of that plan. Also, the determination of "highly compensated" for the NQDC is different and independent (I'll use HC). HC for that purpose is someone considered highly paid in the context of the employer, and someone could be HCE for 401(k) but not HC for NQDC, or vice versa but that is less likely. There is the 20% top-paid group election that can be made for 401(k) HCE. For NQ, there is no formal 20% rule but there has been IRS opinion (I think) that to be predominantly for the benefit of HCs a NQDC cannot cover more than 20% of employees. Your NQDC provider is correct in saying the employer must determine who is or is not in the top-hat group (select management and HC). If you use generic definitions, be sure that any management or compensation thresholds are not too low/too broad. In summary, new executives could be eligible for both the 401(k) and NQDC for their first (partial) year or two of employment. I hope this was helpful.

With regard to question 1, the rule is under treas. reg. 1.401(k)-3(e)(2) which says that if you are adding a 401(k) feature to a profit sharing plan for the first time, it can be safe harbor for the first year as long as the 401(k) feature is in effect for at least the last 3 months of the year. For a calendar-year plan, that means the 401(k) feature must be effective no later than October 1st. https://www.ecfr.gov/current/title-26/part-1/section-1.401(k)-3#p-1.401(k)-3(e)(2)

It sounds like they signed the Plan Doc ("the paperwork"). Dittoing Lou why is it coming up only now? If Plan was set up it is the TPA duty to follow up with the "action plan". If that happened, and and it is the the client who dropped the ball and never returned phone calls/messages, the TPA should have resigned at some point. It is the time for lawyers to get busy. Maybe it is the time to stop "sell now, and we will figure out how to deliver later" culture at the big TPA firms?

Agree to read the document. It will include the sources from which loans can be issued. I’ll be shocked if Rollover account isn’t one of them. I would also be shocked if someone with a Rollover account isn’t included as a participant even if they haven’t met the eligibility for other sources.