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Generally they must be used by the end of the plan year in which they occur or the end of the plan year following the year in whch they occur. They must be used up each year and cannot accumulate. The timing is specified in the legal plan document so I would check that for more information! Not using the forfeitures by the applicabl deadline is considered an operational failure.

So I’m assuming the check was written and cashed in 2025. Seems it would be a 2025 1099.

IRS published proposed regulations updating 1.401-7 in 2023: https://www.federalregister.gov/documents/2023/02/27/2023-03778/use-of-forfeitures-in-qualified-retirement-plans

I find that surprising. But in that case, the plan administrator should adopt some reasonable and non-discriminatory procedure. This may include allowing participants to elect to have the refund taken from pre-tax or Roth contributions or both.

Oh, yes - chat already scheduled! Actually, this is all in the loan instructions we provide, so maybe "reading comprehension" will be the first thing discussed...

What a perfect example of govt incompetence.

So they went from a proposed $40k §4980H assessment to having IRS checks in hand totaling over $130k? That's one of the crazier stories I've ever heard. Never heard of that happening in the 226J context. I guess there isn't anything to do but continue to inform the IRS of the error each time and request guidance on how to handle. Maybe next time they'll get $60k...

Ditto to the above. A request for full/partial waiver/abatement with a statement of reasonable cause (miscommunication between plan administrator and the CPA is probably some reasonable cause) is the way to address the IRS penalty. An experienced ERISA attorney should be able to put this together for well under $150K and probably reduce, if not eliminate, the penalty, particularly if this is the first late 5500/penalty.

I don't think DFVCP is available for 1 person. The IRS has their own program that mirrors it pretty closely though that you already linked. However if he's already gotten a penalty letter, talking to an ERISA Attorney ASAP about the best way to request abatement is probably the way to go.

Hire a professional to fix it for you. Way less than $150,000.

This is to share with you the happy news that today is the 25th anniversary of the first day on which the BenefitsLink Newsletter began daily publication. I didn't see this coming when I decided to go daily in 1999, at age 41. (The newletters had begun four years earlier, but they weren't being published every day.) The free information must be helping employee benefits practitioners to help their clients, which translates to the ability of employers to effectively run and fund programs that improve the lives of so many millions of working people (and retirees, and beneficiaries), even if most of them wouldn't know (or want to know) the difference between an ERISA and an eraser. What a noble endeavor, to be an employee benefits practitioner! Some lawyers and TPAs and other benefits practitioners have found work through our job board that's been running since 1996, which means they've gone to new workplaces and sometimes new cities, which means some of them have met people they wouldn't have met otherwise, which means some of them have fallen in love and then had children... which means there are people walking around on the planet now who wouldn't be here but for this "web site" thingie that started in 1995, and then the idea of sending "newsletters" by "email." None of that would have been possible without readers. The existence of "BenefitsLink babies" didn't occur to me until one day about 10 years ago, but I kept it quiet -- at that time, they were still teenagers! True to form, I and my business partner and wife Lois Baker (formerly an employee benefits lawyer, whom I met on CompuServe in 1990 while trading ERISA questions using dial-up modems) have failed to do any marketing of this happy day. But as I sat here at the keyboard today I had the idea that we would get so much joy by celebrating the occasion with readers. I hope this hasn't come across as a commercial but instead is the lifting of an E-flute of cyber-champagne -- here's to employee benefits practitioners everywhere! It's a wonderful community, and for 25 years now and still counting, we are so happy to be a part of it.

To the extent that a nondiscrimination rule might be among factors to consider in evaluating whether § 401(k) or § 403(b) better serves a church’s and its employees’ interests, a church has no owner, might have no employee with compensation reaching $155,000 [2024], and so might have no highly-compensated employee. While I often prefer § 403(b) over § 401(a)-(k), the distinction can affect the availability of some investment alternatives, and even some service providers. For example, some collective investment trusts do not admit any § 403(b), even if both tax law and securities law could allow a church’s § 403(b)(9) retirement income account. And some unregistered group variable annuity contracts are offered only to a § 401(a)-(k) plan, and are unavailable for a § 403(b). Likewise, some recordkeepers won’t offer a service to a plan that doesn’t fit neatly into one of the provider’s established service models. On some of my charity engagements with churches, what was better from a tax law or plan-design perspective was the opposite of what was better from an investment or service perspective. For these and other reasons, one carefully considers all the surrounding facts and circumstances.

Church sponsoring a plan should use 403(b). A church sponsoring a 401(k) must apply non-discrimination rules ADP, ACP and top-heavy testing) and pre-ERISA coverage rules; church sponsored 403(b) plans are not so required. See the article by Barry Salkin, the Wagner Law Group in Lexis Practice Advisor for the "Special Rules that Apply to 403(b) Church Plans" on pages 11, 12 and 13. The Exemption from Auto Enrollment in SECURE 2.0 simply says "church plans." While this exemption may also include 401(k) plans sponsored by a church (must be 501(c)(3)), the rules currently available are unclear on whether this includes 401(k) plans.

Looks very straightforward to me. You use the K-1 for ABC LLP. You don't include comp from unrelated businesses.

As ever, RTFD—Read The Fabulous Document. To state provisions that meet ERISA § 205, an ERISA-governed plan typically calls for a notary to witness a spouse’s consent, and (sometimes) officiate an acknowledgment of a participant’s qualified election. Many ERISA-governed plans do not otherwise call for a notarial act. For example, a beneficiary designation that does not deprive the participant’s spouse. But some plans provide that some claims, directions, or instructions require a participant to make and acknowledge the writing before a notary, even when that’s unnecessary to meet an ERISA command or an Internal Revenue Code tax-qualification condition. For a governmental plan, a non-ERISA church plan, or a plan that covers no employee, check not only “the” plan document but also applicable State law. This is not advice to anyone.

“[Internal Revenue Code § 414A](a) shall not apply to . . . any church plan (within the meaning of [I.R.C. §] 414(e)). I.R.C. (26 U.S.C.) § 414A(c)(3) https://uscode.house.gov/view.xhtml?req=(title:26%20section:414A%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section414A)&f=treesort&edition=prelim&num=0&jumpTo=true. And here’s the referred-to definition: I.R.C. (26 U.S.C.) § 414(e) https://uscode.house.gov/view.xhtml?req=(title:26%20section:414%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section414)&f=treesort&edition=prelim&num=0&jumpTo=true. Is the plan sponsor the church itself? Or if something else, does the church sufficiently control the something else? Also, consider whether § 401(k) or § 403(b) better serves the church’s and its employees’ and ministers’ needs. Which of those is the better fit turns on carefully considering all the surrounding facts and circumstances.

Because the critical aspect of my response has been emphasized, I wanted to reiterate the reassuring part. I doubt that it is your fault that the plan has rejected submissions. The plan will not give your ex spouse the entire retirement benefit simply because of firing before the plan accepts your court order as a qualified domestic relations order. However, if certain things happen, or fail to happen, after the firing and before the order is determined to be qualified, you could lose your entire interest in the benefit. It is too complicated to walk through the possible scenarios and touch on all of the procedural requirements to be able to say that you are completely safe. It appears that the plan has been engaged, has been notified of the domestic relations proceeding, has received communication about the award of an interest to you, and will continue to be engaged in processing what you hope will eventually be a QDRO. This probably protects you as long as the as qualification processing is being pursued diligently. The devil is in the details and there are many devilish details that we do not know. Next to incompetence, delay is your biggest concern.

I’m never surprised if a DRO is kicked back once. I’m always surprised if the drafting party causes one to get kicked back twice.

Exactly. To @penpen, just in case you are not aware, your reference is probably to a draft DRO. Since it becomes a QDRO only when the plan administrator approves it, it's OK (even recommended) to start with a draft. AS @QDROphile implies, the "twice" could imply that the drafting party(ies) are not familiar with the procedures and/or not sufficiently familiar with QDROs. But, ultimately the goal is to get it right, so don't give up and get the third draft completed!

If proper procedures were followed in court and with the plan, the pension is preserved and suspended for a reasonable time until resolution of qualification of the domestic relations order. However, having domestic relations order “sent back twice” does not bode well for following proper procedures or knowing WFT needs to be done.