Leaderboard

Exactly. "Sorry, you should not have been allowed to participate and contribute. Here are you deferrals and attributable income back, any employer contributions we've made for you will be forfeited." I'd be shocked if your (pre-approved) plan document did not support that course of action.

I've only done it on takeover plans when both the administration firm and actuary and actuarial firm are changing. I believe that is another exception that gets automatic approval I think it's in the same rev proc as the BOY change auto approval but it's been a while since I looked it up. Otherwise I believe you need to submit to the IRS for a change in funding method to switch the val date to EOY which is often cost and time prohibitive. I believe automatic approvals are in Rec Proc. 2017-56 and other changes that require submission are in Rev Porc 2017-57.

It might be too hard even to think about a question like this. The expense for even a short bit of a professional’s time to consider even a partially reasoned course of action might be horribly disproportionate to the probability-discounted risk exposure. This is not advice to anyone.

I agree.

A SIMPLE IRA has to be the exclusive plan for the employer (which equals both entities), so I don’t see any of these examples working.

All good questions. Target date funds are a popular choice for a plan's QDIA primarily because average investment performance over a longer time period is better than the performance of safe or capital preservation investments. The target date concept appeals to those who are approaching retirement and don't want to incur investment losses. This masks the underlying operation of a target date fund, and many are surprised to learn that different target date fund offerings yield widely ranging investment performance for the same target dates. The fiduciary should do her homework to understand the mechanics of any target date fund offerings. One big difference can be whether a target date portfolio for an age group is designed with an assumption that a participant will retire at normal retirement and take their account out of the plan (a "to retirement" investment strategy), or is the target date portfolio for an age group is designed with an assumption that the participant will continue to keep their account balance in the plan through out their retirement years (a "through retirement" investment strategy). The latter will have a lower percentage of safe or capital preservation investments since the expectation is the assets will remain invested over a longer period of time. Simplistically, one the investment mix of one target date provider for 55 year old participants may look like the investment mix of another target date provider's investment mix for 65 year old participants. Note that the fiduciary typically is presented a choice of target date fund providers with input from the plan's financial adviser. Recordkeepers easily can administer different target date fund families for different clients. Recordkeepers can even administer a plan that has different target date funds from different fund families for different age groups. None of this even touches lifestyle funds, asset allocation funds, and other similar products to package diversified portfolios. This topic is wide and deep.

As long as the allocation is nondiscriminatory and done in accordance with or not contradictory to any specific plan provisions for such you can do whichever way you want.

From ERISApedias text book (which I highly recommend--I found this in no time using their AI feature!). Corrective Distributions After April 15. If excess deferrals (and income) for a taxable year are not distributed by April 15, the taxation and distribution rules change drastically. First, distribution of the excess deferrals is not permitted after April 15 unless a normal distributable event under Code 401(k)(2)(B) (i.e., age 59-1/2, hardship, termination of employment, or disability) occurs. Second, for tax purposes, undistributed excess deferrals are treated as if they were proper elective deferrals when contributed. This means that they are taxable income to the participant when they are distributed. The effect of these rules is that uncorrected excess deferrals are taxed twice: first in the year of deferral and then when distributed. Excess deferrals that are not distributed by April 15 also are treated as employer contributions for purposes of Code section 415 when they are contributed to the plan. [Treas. Reg. section 1.402(g)-1(e)(8)(iii)] Example: Suppose that Roberta (from the prior example) did not receive a distribution of her excess deferrals before April 15, 2018. The excess deferrals would remain nonexcludable in 2017, and would be part of Roberta’s taxable income in that year. The $2,500 excess that was already taxed may not be distributed from the plan to Roberta until she experiences a normal distributable event under Code section 401(k)(2)(B). In 2022, Roberta attains age 59½ and can take a distribution of elective deferrals from the plan. If she removes the $2,500 at that time, it is taxable income in 2022. (The exemption from including the distribution of excess deferrals in income that existed if the distribution is taken by the following April 15 evaporated when the distribution was not timely made.) As a result, Roberta is effectively taxed twice on this amount – once in 2017 and once in 2022.

I seem to remember that if a participant has 402g excess from 2 unrelated employers, once the April 15 deadline is missed the money cannot be returned. That's the double taxation of being taxed in the year it was made, then taxed again when it it ultimately distributed once a distributable event occurs. I am not aware if that rule was recently changed. I am not clear if the medical K plan and the hospital 403b plan represent unrelated employers from the original post.