Leaderboard

Great ask the advisor for an IRS citation or letter stating he will pay any IRS penalties if the IRS takes a position different from his.

No If they deferred $27K and the limit was $23K, $4K recharaterized as catch-up and not in the ADP test, $23K is in the ADP test. If they fail the ADP, up to an additional $3,500 will be recharetreized as cacth-up reducing the refund they otherwise would receive and be retained by the plan because they had not used their full catch-up. If they need a refund larger than the recharaterization amount, they will need refunds. Unless you are over an applicable limit, plan or statutory, the amount goes in the test.

While recognizing Lou S.’s observation’s put-up-or-shut-up wisdom, consider this too: Unless the adviser is admitted to law practice, recognize that a promise might be legally unenforceable. While the details vary, a State’s law of contracts might not enforce a promise that calls the promisor to commit a crime—the unlawful practice of law. Likewise, an insurance or investment adviser’s errors-and-omissions insurance won’t respond to a claim that the insured gave faulty legal advice. One or more exclusions would remove that from the potential scope of the e&o coverage. This is not advice to anyone.

Follow up: How do you guys feel about a participant whose vested account balance is $0 (0% in profit sharing only) on a recordkeeping platform where the forfeiture has not been processed. Terms of the plan say this participant is "Deemed to have received a distribution which triggers the forfeiture." I say they are not counted. Exhibit A in my legal brief is that if this was a pooled/trustee directed plan we wouldn't even ask the question, so using a recordkeeper should not change the answer.

5500 Instructions for Line 6g. Enter in line 6g(1) the total number of participants included on line 5 (total participants at the beginning of the plan year) who have account balances at the beginning of the plan year. Enter in line 6g(2) the total number of participants included on line 6f (total participants at the end of the plan year) who have account balances at the end of the plan year. For example, for a Code section 401(k) plan, the number entered on line 6g(2) should be the number of participants counted on line 6f who have made a contribution, or for whom a contribution has been made, to the plan for this plan year or any prior plan year. Defined benefit plans do not complete line 6g. A Safe Harbor Nonelective receivable is a "contribution that has been made to the plan for this plan year or any prior plan year." The rub here is that it doesn't specify WHEN you determine if the the contribution has been made. Is it implied that it is as of 12/31/2024? I think that is one reasonable interpretation personally. Note that they could have specified but did not. Worth noting that a safe harbor nonelective contribution is not due to be funded until the last day of the next plan year. So the funding theoretically might not even be done by the time the 5500 is filed, let alone by the last day of the plan year. Let's say the Plan indicates that the Safe Harbor is discretionary for the HCE's and that decision is made on December 15, 2025 (calendar year plan). What would I enter for participants with account balances as of the last day of the Plan Year for 12/31/2024 when I file my 5500 tomorrow, even if I wanted to count "receivable only" people as participants? My logic here assumes that the participants with account balances reported at the end of the year and the beginning of the year are the same. So really the counts of participants with balances is the count as the ball drops in Times Square (if you are on the East Coast). And I also use logic and ask myslef, is _____________actually counting receivable only participants when they are doing a cash basis 5500?? (Fill in the blank with any number of large plan providers out there.). I mean the answer is just for sure no. I've never asked ________ but I'm reasonably confident of the answer, which I guarantee is more based on systems limitations than a divine understanding of the 5500 instructions.

Looks like it. 18 complaints over the last 3 years. Again, I am well aware of these prospecting companies. I don't like them but I understand them. It is the representing that they work for the current provider that has me worried.

The 204(h) notice applies to all DB plans, plus DC plans that are subject to IRC 412, such as money purchase plans (but not profit sharing plans). The notice has to be given 15 days in advance for small plans, but 45 days in advance for large plans. There are some exceptions in cases of mergers and acquisitions - the rules are in 54.4980F-1. https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980F-1

For non-PBGC DBPs, if the plan is not already frozen then you need to provide 15-day advance notice (ERISA 204(h) notice) of an amendment that results in a reduction in the rate of future accruals.

were dollars withheld from pay as pre-tax deferrals? but they should have been withheld as Roth deferrals? Were they withheld as Roth deferrals , but just deposited as pre-tax? If the payroll is correct- but deposits were wrong, just as the recoredkeeper for a correction. If payroll was wrong- are you going to adjust payroll records? or are you leaving as is? If leaving as is - the participant should be offerred the option for an in-plan Roth conversion, which will convert the pre-tax deferrals into Roth deferrals, and the recordkeeper typically issues a Form 1099-R showing it as taxable to the participant.

Great question. For the most part, the DB plans I saw had no alternative procedure or standard. In some documents, the definition reads as follows: "Total and Permanent Disability means a physical and mental condition of a Participant resulting from bodily injury, disease, or mental disorder which renders such Participant incapable of continuing any gainful occupation and which condition constitutes total disability under the federal Social Security Act". Careful reading reveals that this definition does not explicitly require the participant to apply for (and receive) SS disability; it's possible a plan's administrative committee might interpret it that way in the examples you provide, especially leaning on the word "constitute". However, I never saw it happen.

Might I propose that you articulate your query forthwith, and rest assured that an appropriate interlocutor shall furnish you with a cogent and satisfactory response—ideally accompanied by a brief exposition of the real-world conundrum you seek to resolve.

SECURE 2.0 section 312 says the plan administrator may rely on an employee's self-certification. We have several plans where the plan administrator continues to review and approve all hardships, and does not rely on employee self-certification. We have one plan that does not permit any hardship withdrawals. Some plan administrators have been very conservative and enforce a strict interpretation of each of the safe harbor reasons. An administrator in this camp likely would not approve a hardship for housing that did not involve a purchase of a principal residence. Others have been more lenient, basing their approval or disapproval by focusing on the immediate and heavy financial need that cannot be met from other financial resources available to the participant. An administrator in this camp likely would approve a hardship where an employee who lacked other financial resources was required to put down a deposit and pay one month's rent up front to be able to rent a principal residence (a fairly common requirement among landlords). Anecdotally, plans that allow self-certification are experiencing an increase in hardship withdrawals. It would be interesting to hear of others experience.

Has anyone ever heard of this company? A client of mine just told me they called her (with a heavy accent) and said they represented my firm and were doing an independent review of the plan. We all know about cold calling based on public DOL data (nothing to do about that) and even scare tactics using the Judy Diamond "score", but saying they represent me is a a new low.