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Is a partial termination a distributable event? I say NO. Many years ago, I did research (and posted it somewhere herein, sorry don't remember the date or which forum, possibly using my non de plume Pax) on the phrase "partial termination". As best I recall, the phrase appears exactly twice in the entire Internal Revenue Code. I'm not going to do that research again, but only the cite in IRC 411 is relevant to pension plans; its only impact is to award 100% vesting to certain "affected" participants. Nothing else. My conclusion is that the use of the word "termination" was not perfect, and was a compromise in the text, in order to get the desired result of 100% vesting. Don't overthink it.

@david rigby Don't know why you wouldn't remember .... you've only been around these forums for 27 years (basically since their inception) .... and contributed more than 9000 posts/comments. 😲 Thank you!! Anyway, just for fun -- here are the two threads I found that seem to fit your description. From 2000: ... and a more extensive discussion in 2002:

My personal opinion is the tasks listed in your last 2 paragraphs are the minimal requirements for the plan fiduciaries and for plan reporting. There are certain participant behaviors within the SDBA that can be detrimental to the participant's accounts. For example, most mutual funds offer varying share classes of the same fund and each share class has a different fee structure. A participant may be able to invest in a share class of a fund available in the plan's mutual fund menu that has the lowest fees, but the participant invests in the same fund in the SDBA in a class with higher fees. A fiduciary may discern that this is happening by comparing the assets held in the SDBAs against the funds in the investment menu. If this reveals that participants are paying the higher fees, the fiduciary may want to provide at least some notice or educational material to participants pointing out how to evaluate fund expenses. Another example is when participants trade in funds that have fees for short-term trading. Typically, funds that have these fees apply them when shares held less than 30 days. Participants who behave like day traders can rack up fees solely based on their trading frequency. There should be reporting about these fees that could alert the fiduciary that trading frequency is an issue and, again, the fiduciary may wish to provide some education. While a plan fiduciary may not be held accountable for a participant's mishandling of their assets, some may argue that a fiduciary knowing these behaviors are occurring creates an obligation for the fiduciary to act. As a reaction to this notion, some plans ask participants to take a test about the fundamentals of investing before they are allowed to have an SDBA.

Not to my knowledge. I believe in the old days, once you reached the old $100,000 threshold you were required to continue even if assets dipped below $100,000 in a future year. But I don't think filing a form that was not required locks you into having to file in the future. I believe that was changed when they raised the threshold to $250,000. The exception being the final year return which is required regardless of assets. If the client gets a letter from the IRS requesting the form, they should simply respond Form not required assets under $250,000.

For an individual-account retirement plan with participant-directed investment that gets Ascensus’ recordkeeping services, the plan’s sponsor (which also is the plan’s administrator and trustee) is considering adding a Schwab Personal Choice brokerage window, restricted to mutual-funds-only. Unlike other employee populations in which only a relatively few participants use a brokerage window, almost all participants would use the mutual-funds window. The employer pays Ascensus’ fees for all still-employed participants, and likewise would pay Ascensus’ incremental fees for pulling the brokerage accounts into the recordkeeping. The counts of participants, all of whom have a plan account balance, are such that the plan every year will require an independent qualified public accountant’s audit of the plan’s financial statements. An Ascensus-aligned trust company is the plan trustee’s custodian. The plan does not use Ascensus or a TPA to test coverage, nondiscrimination, or top-heavy measures. BenefitsLink neighbors, what difficulties should I advise this plan sponsor to consider in its decision-making about whether to add the brokerage window?

@Peter Gulia If it understand correctly, plan fiduciaries are considering removing funds from the plan's investment menu and implementing a brokerage window because some of the participants want to continue to own those funds. Removing a fund from a plan's investment menu typically is a result two situations. One situation is when very few participants choose to invest in a fund and the fiduciaries wish to replace the fund with a one that will be attractive to more of the participants. This may be a very good reason to put in the SDBA to allow these few participants to continue to invest in their favorite fund. The other situation is when a fund in removed for noncompliance with the plan's investment policy statement. This has the potential to draw a complaint from a participant that continues to hold the fund in the SDBA and then experiences extensive losses in their account. (I have seen this happen with mutual funds that focus on an industry sector.) This touches on the topic of what is the responsibility of the fiduciaries to inform participants if the fiduciaries have knowledge that something is amiss. Hopefully the fiduciaries at least would communicate to employees the reasons why funds are removed from the plan's investment menu and could counter the complaint with that communication.

Any chance the document was SIGNED prior to 12/29/22? Assuming not, then assuming plan and fiscal year are calendar, I agree with your effective date - that is, applies the first plan year that begins at least 12 months after the close of the first taxable year with respect to which employer normally employs more than 10 employees. If any of these employees are part time, then you get into a pro-rated calculation depending upon hours worked - for example, an employee who works 6 hours counts as 3/4 of an employee, 2 hours counts as 1/4 employee. As I recall, IRS came up with this calculation methodology from the COBRA regs. Great fun.

As Rigby said in my mind. All the rules talk about is vesting. Anyone terminated and made 100% vested via these rules would still have to follow the normal rules for when they get paid.

I agree. These are the minimum requirements, and a plan fiduciary may reason that more is required to discharge their duties and protect plan participants. Agreed. @Peter Gulia, FAB 2012-02R removed some of the brokerage window guidance from the original FAB 2012-02 that got a lot of pushback from the industry. The original FAB would have made compliance all but impossible when brokerage windows were offered. Generally speaking, I think you always have a responsibility to monitor investments and fees, and I dont think that brokerage windows are any different. If adding brokerage windows ends up with higher fees and poor investment performance compared to the Ascensus platform only, are they still appropriate for the plan, or could they be appropriate with changes? What level of monitoring is needed in order to determine if they are or become an issue? Those are issues a responsible plan fiduciary should consider. Im not against brokerage windows, but I believe they add complexity to the plan and for the plan fiduciaries. Since they have hired you, it appears they already understand this and might be better situated than most for this type of plan design. Many plans just add brokerage windows and move on. To me, it is just a matter of time until the DOL drops the hammer on plans that offer brokerage windows using the "set it and forget it" approach.

Paul I, thank you for the further helpful information.

If the plan’s small-balance (for example, <= $7,000) provision does not apply and the participant has not yet reached her normal retirement age, how would the plan provide an involuntary distribution?

RatherBeGolfing and Paul I, thank you for helping me. Schwab offers recordkeepers two formats for Personal Choice accounts; one of those is mutual-funds-only. In my experience with others, a recordkeeper calls a plan’s administrator to specify which version is selected. I’m guessing Ascensus lets its customer specify mutual-funds-only. RBG, thank you for your note about the plan’s administrator not seeing transactions within a brokerage account. Paul I, thank you for your suggestion that a plan or its administrator might forbid or limit an agent using a participant’s power to direct investment. The plan’s administrator uses an accounting firm to test coverage and nondiscrimination, and a different accounting firm to audit Form 5500 reports and financial statements. That auditor firm has a distinct work group who do only employee-benefit-plan audits and lots of them, including many that require information from Ascensus. Also, the employer uses, beyond its internal accountants, three accounting firms for the employer’s financial statements and allocations, and a separate accounting firm for tax accounting. Some of these services involve checking another’s work. For ERISA disclosures and related advice, the plan’s administrator uses Fiduciary Guidance Counsel. My information for the decision-makers to consider will include EBSA lawyers’ and officials’ distaste for brokerage windows. Do you think a plan’s fiduciary must monitor what happens inside participants’ brokerage accounts? And if so, why? (I ask because I respect your views.) Or is the plan fiduciary’s duty only to find that Schwab is a reputable broker-dealer, that Schwab and Ascensus deliver information needed for the plan’s auditing, and that participants can get information to direct one’s own investments? Am I right in guessing that a Form 5500 report shows the beginning-of-year and end-of-year balances held in the participant-directed brokerage accounts, but need not show details on which mutual funds the plan’s trust holds, except for those that are a 5% concentration (or involve a nonexempt prohibited transaction)?

To me it is a) taxable and b) a fringe, so the stretch is NOT calling it a taxable fringe in my view. If your base defintion of pay is W-2 (which is always my preferences since there is oodles of guidance on goes in Box 1 of W2) then this is a very easy call in my opinion.

@RatherBeGolfing raises some of the operational issues that the client must understand fully and be able to set the expectations of participants on how the SDBAs will work inside the plan. Ascensus and Schwab each have a lot of experience with SDBAs inside plans and they also have links to share data electronically. While that sounds wonderful, there remain complications for recordkeeping the plan. One of the bigger challenges stems from allowing multiple contribution sources to be invested in the SDBAs. There is potential for a contribution source to be pre-tax or Roth. Each source may have differing in-service withdrawal provisions, differing vesting, differing loan availability and other variances in features. When recordkeeping a plan that uses a menu of mutual funds, each transaction be it a contribution, distribution, exchange, dividend, new loan, loan repayment... can be labeled with a plan account (deferral, NEC, match, rollover, ...) and the mutual fund in which the transaction occurs. When there is what @RatherBeGolfing termed "shadow posting", the recordkeeping treats the SDBA as if it is a single investment. The identity of the mutual fund is lost. When recordkeeping with a menu of mutual funds, the price per share of each fund is known after market close and before market open. Depending upon the frequency in which the market value of the SDBA is sent to the recordkeeping system, the "price" of the SDBA investment may not be known within the menu of mutual fund's time frame. The plan should not allow participants to grant trading privileges to brokers or financial advisers that are not approved by the Plan Sponsor. Allowing participants to choose advisers of their choice is a recipe for chaos, and could lead to questions over who is controlling the investment of plan assets. The plan audit should not be dramatically impacted by the SDBAs. Schwab and the trustee both should be issuing reports that include all of the detail needed by an auditor with experience auditing SDBAs. The Plan Sponsor should vet the auditor to confirm that the auditor does have this experience of the cost of the audit could skyrocket. I share @RatherBeGolfing's concern about who is providing compliance services although my concern is driven more by the competence of who is providing the services rather than by having SDBAs as an investment option. Note that the proposed arrangement for the SDBAs is relatively simple compared to some of the plans I have recordkept. For example, this arrangement: uses only one brokerage firm and participants do not get to open an account at the brokerage of their choice' restricts investments to mutual funds and participants cannot invest in stocks, bonds, CDs, ETFs, ETNs, gold, annuities...; does not allow trading in options; does not allow investing in assets that do not have a readily determinable value such as real estate, LPs, private placements, art... The advice to the client is to know the details, prepare written policy (including dos and don'ts), and communicate clearly to participants. Some plans go so far as to have a participant sign a representation that the participant understands the policy.

What they can or cannot do and how much can be allocated to each member depends upon how the LLC is taxed. Is the LLC taxed as a partnership, S-corp, or C-corp? Since you mention guaranteed payments and did not mention W-2s, I would guess taxation as a partnership. On the other hand, distinguishing between compensation and profits suggests that taxation as a corporation is a possibility. Guessing and not knowing could be the reason there have been different answers.

The instructions for schedule SB line 15: Personally, I usually find it simpler to certify an AFTAP (even if it's not needed) than to create an attachment to the SB.

Well, I am an actuary, and I'm also grateful for the question. Discussion above about communication is the central issue and answer. This works both ways; when there is turnover, the best action is to proactively introduce the new staff member (such as assistant, banker, investment advisor, auditor, attorney, analyst, actuary) to all the other teams who have an interest in the project/client. In addition, make sure there is clear understanding of who needs what information, who provides the information, and when it is needed. There are many examples of other professionals who have a specific responsibility, but the actuary has the expertise to help, even without credit. Example 1, in the case of a DB plan sponsor with GAAP financial reporting, there is a need to develop a market-based discount rate; the actuary will have significant ability to help with this (probably having done so many times), even though not the final decision. This will be of use to both plan sponsor and auditor. Example 2, the attorney may draft a new plan document or various documents related to merger or acquisition; the actuary will appreciate being asked to review any such documents in advance; if related to M&A, the actuary will opine on all types of employee benefit plans but also contributing w/r/t administrative procedures outside the attorney's knowledge base. Example 3, when a company-to-be-acquired has nonvested or partially vested participants in one or more qualified plans, the actuary can provide help with evaluating the cost of awarding 100% vesting immediately prior to the transaction, information that could be useful to both the company and any other negotiators. Example 4, the actuary knows to ask about other possible plans when there is a Top-Heavy concern or a 415-limit concern; I've seen many prior cases where a DC plan vendor was not aware of the DB plan existence, and when so informed, that DC vendor did not understand the concept of "required aggregation group".

You can also log directly into EFAST and either import the .xml from your system or create the 5500 online. Unless you have a large plan or a lot of Schedules, it is very easy to use. You can then get the online signatures from your client, again directly from EFAST.

I am not an actuary but I do share several clients and have close working relationships with actuaries. One of the challenges is most companies who have a Defined Benefit Plan or a Cash Balance Plan also have a 401(k) Plan. One strength in all of the relationships is we work together with the actuaries to service the client. A big part of our role is educating the client about the differences between their DB/CB plan and their 401(k) plan. Clients struggle with the notion that a participant with an accrued benefit in a DB/CB plan does not have assets in the trust that essentially are earmarked for an individual participant and the participant cannot direct how the assets underlying the accrued benefits are funded. Clients also struggle with the concept of funding requirements ranging between a minimum and maximum funding level. They also struggle with the concept of a maximum deductible contribution. When working with the actuaries, we welcome their participation in discussions with the clients where we collectively explain the differences between types of plans. One task that we perform for the actuaries is collecting the data they need to do their magic. This includes collecting and validating census data, and confirming that the data the actuary needs to apply the service and compensation data is accurate. We gather and report to the actuaries asset information. We pay special attention to details that the actuary needs such as dates of deposits of contributions and dates of distributions. We will facilitate gathering participant elections concurrently for all plans. While we could say this work that we do is the actuary's job, not ours, we have found that having the client work with a single contact avoids a lot of confusion on the part of the client, payroll and their accountants. Yes, we do get paid for our efforts. To summarize at a higher level, we look at what it takes collectively for us and the actuaries to service the client's plans, we do the tasks that are well within our skill to do, and we defer to the actuaries on those services for which we are not qualified to do.

You can get there. I suggest you start here https://www.efast.dol.gov/iFileLanding/Landing.html Be sure to read everything. There are a lot of steps which means there are lots of opportunities to get something not quite right. Unless there is a business reason for being in a rush, waiting for your reporting system to be available likely would be a better use of your time.

In lawyers’ and law firms’ lingo, the label “of counsel” has no one settled meaning. It can relate to any of many kinds of relationships. It can, in context, refer to a current partner, a retired partner, an employee, or a nonemployee contractor. Does the of-counsel lawyer provide any service? Even having a lunch conversation with a client’s inside counsel or executive to help keep the client content with the relationship might be a valuable service. Don’t reflexively assume this person is retired. Suggest the plan’s administrator decide whether the participant is or isn’t retired (in the sense Internal Revenue Code § 401(a)(9) uses that word). If the law firm feels unready to interpret § 401(a)(9) and how it applies regarding the facts, you can suggest that the firm might get another lawyer’s advice.

@metsfan026 your suggested approach of using a discretionary match is the simplest approach in terms of implementing and communicating to employees, and as you noted, assuming it passes necessary testing. There are many paths to getting to (or very close to) the desired result, and the more steps needed for a path to work, there is an increasing risk of introducing operational issues when defining eligibility for who gets the additional match or contribution, when they get it and how much they get. Part of the conversation should involve an assessment of the risks. For example, a match and a profit sharing contribution are tested separately for coverage (unless using ABT which has its own issues like the nondiscriminatory classification test). A starting point is to know (or have a very good estimate) of the number of HCEs that are in the new group. If there are none, use discretionary match approach and appreciate the simplicity. If there are very few HCEs in the group, consider the impact of excluding them from getting the one-time bump in the match rate. There may be ways to keep things calm with a bonus unrelated to the plan. If there are a lot of HCEs in the group, then get as complete a census as possible to be able to model the alternative paths. At this point, you need to let the client know of the potential complexity of the paths forward and that you will charge a fee for these services. Start with the discretionary match. If that isn't workable, try the profit-sharing formula (although if the match didn't work, this approach will likely have similar compliance issues). If neither the match or profit-sharing approaches aren't workable, likely it will be do to coverage, so consider the cost of adding in additional NHCEs who were in the new group but not deferring into the calculations. The worst case scenario is implementing an approach without considering the potential compliance risks and finding out after the fact that the plan fails a compliance test. The cost of correction will almost certainly exceed the cost of making an informed decision beforehand.