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Florida Practitioner here. Unfortunately, this is very common. IRS has told me informally to attach the disaster relief announcement as an other attachment, but its still 50/50 on an IRS love letter. I set up template responses each season so that we can reply to them quickly.

My eyes were drawn to the idea that all 58 participants have an earmarked percentage of any specific investment in the pool.

We worked with a client in a very similar situation and their ERISA legal counsel. The assets of the plan were not participant-directed and there were no ties between the real estate and any of the plan fiduciaries. The appreciation on the property was included each year in the allocation of trust income to all participants. The facts including a current appraisal of the property were communicated to each participant to get their concurrence with allowing an in-kind distribution of the real estate. We understood the participants essentially did not want their retirement accounts tied up with an illiquid investment and they signed off on the transaction. This was all worked out with legal counsel guiding the process and drafting the related communications and agreements. Definitely, do not try this without active involvement of legal counsel at every step.

It sucks but it happens. Two fixes 1. Refund the money to the participant in 2025 and issue a 1099r. Do not change the w-2. 2. Adopt an early entry amendment under the EPCRS self correction program and document the issue and the fix. This would leave the money in the plan.

First, I think it is a 45 day advance notice, not a 15 day notice -unless you meet the special criteria. Secondly, I understand what you are suggesting, but I would keep everything prospective. If you can get the notice out by March 1st, accruals are frozen on April 15th. Would be really difficult to work 1000 hours in 3.5 months, so a 2025 accrual is very unlikely. I don't see any reason to make it part of your restatement effective date. Just do it as a separate event.

But what if the US based employer wants to include the Canadian employee? Does the Canadian employee have to have US income? If they don't have US income, how would they even be able to make an election to have salary deferrals?

My go to phrase: "We are a nondiscretionary, directed, ministerial service provider. Go find a fiduciary."

A couple of notes regarding option #2 (self-correcting via amendment): This option isn't available if the affected employee is an HCE (unlikely, but worth mentioning) If the plan is top heavy, make sure to also include the employee for safe harbor matching contributions. Otherwise the plan will lose its top heavy exemption. Those points aside, the amendment method is explicitly blessed by the IRS so you should have no issues on audit if you use it. See Rev. Proc. 2021-30 app. B 2.07(4)

For this particular case, @david rigby is correct to point out that the total value of all of the real estate exceeds the total value of the deceased owner's account and we all agree that transferring all of the real estate as part of the distribution to the deceased owner is not appropriate. It would be a step forward if the plan's participants, working with independent fiduciaries, could at least transfer one of the properties as part of the distribution. This would require having an independent appraisal of the fair market value of the property. The remaining property would remain in the trust until such time as the trustees and independent fiduciaries can arrange for the sale of the property to put the plan in the position of being fully liquid. This likely should be done sooner than later in the event the death of the owner puts the company on a path that leads to the termination of the plan. The key element for this piece to work is also to document that the sale of the real estate is an arms-length transaction price fair market value. This can be a challenge when dealing with real estate, and is yet another reason to engage legal counsel. It is worth noting that this scenario comes up with other non-traditional assets such as gold bullion, art work, certain private placements and limited partnerships, and other similar investments that can only be liquidated in a single transaction.

This COLA chart was designed with smaller business owners in mind. In addition to the indexed limits in Notice 2024-80, certain enhanced and additional limits are also shown for smaller businesses (under 26 employees) and larger employers (26 to 100 employees). The footnotes are important and provide additional clarification. Please let me know if you have any suggestions for next year's chart! A rollover chart is contained on page 2. Uploaded new file on February 26 to include the new bankruptcy exemption amount ($1,711,975) for IRAs (excluding most rollovers). Hope this helps. Enjoy, ``Gary COLA_RO_2025-ENHANCED.pdf

Iffy's not the word. But why not adopt a 4% SH at this point for last year?

Do we know for certain whether or not the participant understood the differences between traditional and Roth deferrals? Were those differences explained to the participant by the plan administrator? In writing Is the Plan administrator required to provide such explanations to the participant? Was the election for confusing? Ex: [ ] Roth [ ] Traditional I have more than a few times been confused about which box to check, the one before or the one after. Do you see 0% or 1% on the carton of mlk below? I would be stunned that any regular employee would have a clue about all to the differences between Roth and traditional deferrals.

Ok, not sorry!

I agree with every word of this except “sorry.”

Work we did on September 11, 2001 and soon after in managing some consequences from that day’s deaths, injuries, casualties, and other harms remains a deep reminder about what matters in every aspect of our lives and faiths.

CuseFan, how many times the clients told us that "oh by the way I have a SEP that I funded" after adopting the DB plan?

YES, YES, YES!!!

Mistake or not, the participant's actual election was executed, so I say have them fix it going forward and deal with it. Why is it always the collective "we" - plan sponsors, advisors, TPAs, RKs - that are asked to bend over backwards to accommodate a participant's mistake, poor judgment, or lack of attention? When is the participant held accountable for not doing what (s)he is supposed to and then months or years later comes looking for help on situation (s)he could have rectified almost immediately had (s)he paid the slightest attention? I'm sorry, but if I intended to make a PRE-TAX deferral from my pay and my income tax withholdings remained the same, I would have noticed and said something - if not after the first pay period, certainly within a few. Sorry for the rant, and I don't do this administration so I don't deal with these situations - but you all do - and don't you have enough work and have enough plan sponsor and advisor administrative "issues" to fix already? OK, I'm done. Also, it's 9/11, so let's remember those we lost that terrible day and from its aftermath.

In summary - SEP no if on 5305, yes if on another platform but limited to 6% of compensation (if PBGC-exempt) or 31% combined plan deduction limit applies. I see no legal basis for taking out the SEP contribution other than it being a withdrawal of a contribution which is already "in the books" and so you deal with the 31% limit and carry forward DB deduction to 2024. Depending on 2024 max, might need to do another carryforward in year two. All the related SEP coordination should have happened before DBP was adopted and, if it was and the client or advisor ignored, their problem not yours.

they can have both - if the documents allow - the model SEP doc does not. If they do have both - the combined limits for 404 and such apply. I would be cautious of removing money from the SEP. The standard correction for a non-deductible contribution is an excise tax and carryforward, not removal of the excess unless it also violates 415 etc.

Let's assume that no fraud is involved in the election process. Had the election been made on paper, there would be no basis for challenging the election other than the participant's misunderstanding. If the computer system was designed to confirm and reconfirm the election before formally accepting it on behalf of the plan, then there would be no basis challenging election. If the computer system is unforgiving, then it is more credible that the participant just clicked the wrong thing and made a mistake. Under a confirm and reconfirm process, the participant enters there election, the system displays a the election along with a short description of the election (e.g., "You elected to defer x% of your salary as a Roth deferral. Your Roth deferral will not reduce the withholding of income taxes from your paycheck. If your election is correct, please on the Accept button. If your election is not correct, click on the Cancel button." If the participant clicks on the Accept button, the election is recorded by the system with a date and time stamp, and becomes irrevocable. I have seen a handful of situations where a participant elects a Roth deferral and calls up HR/Benefits/Recordkeeper after receiving their paycheck to demand that their election be changed. In most of these situations, the participant did not understand that their net pay was going to go down by the amount of the Roth deferral and they experienced a form of sticker shock.

Isn't that only if it's using the IRS Model SEP, that it then has to be the exclusive plan for the year?

The challenge is for the plan’s administrator to discern whether what a computer recorded as a Roth “designation” [26 C.F.R. § 1.401(k)-1(f)(1)(i)] was in fact the participant’s designation. Just to pick a few examples, some administrators might be persuaded by evidence that the record was not the participant’s designation because: the participant was hospitalized and unconscious; the participant was mentally incapacitated; or an unauthorized impostor used the participant’s identity credentials when the computer received the ostensible designation. Some administrators might consider undoing a record if one is persuaded it resulted from a mistake of fact—that is, the participant sincerely believed, and reasonably believed, that what the computer recorded as a Roth designation really was a non-Roth designation. Yet, an administrator might be reluctant to ground an undo on a particular individual’s misreading of the plan’s (online) form or instruction for which mark makes a Roth or non-Roth designation unless the administrator prudently finds that many reasonable readers would similarly misread the form or instruction. A challenge is getting evidence that supports the administrator’s obedience, prudence, and impartiality in finding that what the computer recorded as a designation was not the participant’s designation. To honor the plan’s provision based on tax law’s condition that a designation is irrevocable, a fiduciary would look for facts to distinguish a falsity or real mistake from a participant merely changing one’s mind. Consider a fiduciary’s duties to make and keep records of its discretionary decision-making. This is not advice to anyone.

I think if the only exclusion is "HCEs" then they participate in their first year (assuming no immediate ownership). You could probably draft an additional exclusion along the lines of: "Any other employee reasonably expected to earn annualized compensation equal to or greater than the amount set forth in Code Section 414(q)(1)(B) in effect for the plan year." As long as that doesn't cause you to fail coverage testing, should be okay.

It would depend on how the exclusion in drafted in the Plan Document.