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Just to add to what Paul said - you will never get an in-kind transfer from one RK to another. All the shares are held in omnibus accounts.

If the custodian of the current brokerage account also handles IRAs, and as @Peter Gulia said if the document allows (if it doesn't you can amend), then you may be able to do in-kind distribution by simple transfer of the account from plan to IRA. Even so, a market value of the distribution and rollover will need to be determined and reported on a 1099R.

Terminology comes and goes. Two things are are most important. One is that the terminology is used broadly enough that there is a shared understanding of what is meant by it. The other is that the terminology does not conflict with its shared understanding within government agencies that oversee the industry. How many people today would understand what was meant by a Keogh plan or an H.R. 10 plan? How many know that today's hot Roth trend is named after William Roth, the Senator from Delaware that came up the Roth IRA in 1989 that in 2001 morphed into the Roth 401(k)? How many know that the concept of 401k deferrals was used in plans in the 1950s, frowned upon by the IRS, but then validated when section 401(k) was added in 1978? Interestingly, in the late 1970s people started out calling the 401(k) plan as salary reduction plans, and that terminology was not well received by employees. Today, solo-k generically is recognized as a one-person plan as does the IRS https://www.irs.gov/retirement-plans/one-participant-401k-plans. Some pre-approved plan document providers have products that basically are pared down adoption agreements of their 401(k) documents. These products use the term "owners only plan". Given the many ways that one-person plans get into regulatory trouble, maybe we should refer to owners only plans as "OOPs"!

Onboarding a plan requires attention to extremely granular detail that is customized to the plan provisions, the deconversion processes of the existing service providers including potentially the recordkeeper, TPA and investment firms, the client's internal administrative support including payroll, HR systems, and funding procedures, and to the you as the new service provider including everything needed to provide continuity of the rights and privileges of all of the plan participants. Coordinating all of this commonly takes 10-12 weeks, and starts with working out a detailed work plan in the first few weeks with all of the parties involved. The time for asking your questions is at the beginning of the conversion process and the people you need to ask are the client and the existing service providers.

Peter lays out the basis for arguing that the plans were closed out in 2025, and makes it clear that this is solely the plan's fiduciaries' (read client's) decision. I expect most practitioners would say don't sweat the $0.50 for Plan 1 and writing off the $0.50 with no adjustment to the 1099R, most would say it is really pushing it where the amount is $3,500 that was not closed out until 31 days after the end of the plan year. From the perspective of a service provider, I would explain to the client that it is their decision to make and their fiduciary responsibility and accountability for the consequences of their decision (unless you are a 3(16) provider). I would let the client know I disagree with the Advisor and I only would be willing to prepare a final filing for 2026 along with a 1099R for the residual payment. If the client chooses to follow the Advisor's "promise", then the Advisor can help the client find someone who is willing to close out everything for 2025. The plans are closing so there is no future work for you on those plans. If your relationship with the client is ongoing, keep in mind that if the client chooses to follow the Advisor's advice over yours, that says something about the relative value of your relationship to the client. This is also true about any relationship you may have with the Advisor.

Bigger picture questions: Why in this day and age would a plan have a 10% deferral limit? Was this an HCE? If not, could plan be amended retroactively to allow for that extra 2% deferral?

That's correct. The combined deduction limit doesn't apply if the DB plan is covered by PBGC. IRC 404(a)(7)(C)(iv)

As someone who's primary job is to process conversions (money only, not addressing plan provisions or payroll), I can tell you that an in-kind transfer is much more difficult than a liquidation and wire. To speak to the comments above, if the money is insurance company separate accounts or omnibus accounts, an in-kind transfer is not possible. You would really only be able to move from one custodian to another where the funds are invested at the plan level. Arranging for an in-kind transfer as of a specific date takes a lot of coordination and agreement between the custodians, recordkeepers and the funds themselves and all must agree to the same schedule, and there will be lots of paperwork involved. Do you have a copy of the conversion records that Guideline originally sent over? You may want to look at those records to see for yourself if they had the information necessary. For example, did the records include the full name, Social Security Number and amount by source and fund by participant that was transferred? Also, did Guideline provide a report by participant with a beginning balance for the year, contributions, distributions, earnings, fees, loan data, and transfer out, etc.? Did they provide any census data? Did you map over the funds, or did they invest as per new enrollment allocations (or QDIA)? Mapping adds another layer of complexity, especially if fund data was not provided at the participant level. There are some recordkeepers who use their own identifiers and don't provide Social Security Numbers, which can make the conversion process difficult. Also, receiving the data for the current year doesn't always happen. I often have to make several requests to get current year data or end up getting several files with pieces of data and have to try to rebuild the year with what data I did receive (which I prefer NOT to do). If you ever do a conversion again, I would ask for sample copies of the records that are going to be sent over and ask to be cc:d in any communications between the recordkeepers so you can see what information is and is not being provided and when. Ultimately, if you are the Plan Fiduciary, all responsibility lands on you, so being very involved it the conversion process would be advisable.

On Santo Gold’s hypo, isn’t the account balance after the first loan is made still $50,000—that is, $25,000 participant loan receivable + $25,000 other investments? But wouldn’t ERISA § 408(b)(1) and Internal Revenue Code § 72(p)(2)(A) limit the amount for a second loan? Consider 29 C.F.R. § 2550.408b-1(f)(2)(i) https://www.ecfr.gov/current/title-29/section-2550.408b-1. Consider 26 C.F.R. § 1.72(p)-1/Q&A-20 https://www.ecfr.gov/current/title-26/section-1.72(p)-1. Even before applying the tax Code limits, ERISA § 408(b)(1) limits the outstanding balance of all loans to the participant to more than half the participant’s vested account (measured after the origination of each loan). On Santo Gold’s hypo, if the participant when applying for a second loan has not yet repaid anything on the first loan, isn’t the second loan $0?

The time to negotiate provisions about a recordkeeper’s conversion-out is before the plan’s responsible plan fiduciary makes a service agreement with the recordkeeper the plan later might want to leave. The time to negotiate provisions about a recordkeeper’s conversion-in is before the plan’s responsible plan fiduciary makes the service agreement with the recordkeeper that would, if engaged, process the conversion-in. For many plans, either observation is impractical because a plan might lack bargaining power. Beyond whatever service obligations a plan might get, a transition from one recordkeeper to another calls for not only caring work from every service provider but also strong and sustained oversight and supervision from the plan’s responsible plan fiduciary. Each recordkeeper might, to supplement the plan fiduciary’s attention, appeal to the other recordkeeper’s sense of business decency and fair dealing. A mature recordkeeper might work to get and keep a good reputation as both a graceful loser and an accommodating winner. Bill Presson is right that—at least regarding mutual fund shares, collective trust fund units, and insurance company separate account units (forms of investment designed for redemptions)—a transfer of property other than a payment of money is unusual.

If I understand the issue, the plan limit is 10% of the sum of the pre-tax and Roth deferrals for the year, the excess deferrals are excess amounts that must be refunded. The correction is to make a refund so the total of deferrals remaining in the plan are 10% of compensation. The correction method does not specify any requirement on whether that the refunded excess amounts must reflect proportion of pre-tax and Roth deferrals that were originally made into the plan. The plan also has no guidance. With the lack of specific guidance, its on the Plan Administrator to decide how the plan will address the situation. The PA needs to keep in mind that this type of operational decision establishes a precedent for future occurrences. One consideration for the PA to keep in mind is the time and effort involved in making the refund. Operationally, refunding from pre-tax first before refunding any Roth is far less complicated than either refunding pro-rata or refunding Roth first. Consider that refunds of Roth get into issues like tax basis accounting, possible taxation of earnings paid from the Roth account, and year of taxation. If these are not concerns for the PA or the PA is a masochist, then the PA could consider asking the participant to specify how much to refund from each account.

If the point you ask about isn’t in the IRS’s correction procedures, consider: Remove the excess from the elective-deferral non-Roth and Roth subaccounts in the same proportions that the participant contributions (including the incorrect amounts) had been directed to those non-Roth and Roth subaccounts. That way might approximate what would be the account had the incorrect amounts not been taken from the participant’s pay. And it might lessen a participant’s opportunity to make an after-the-fact tax-treatment choice. Yet, this might be merely one of a few ways to correct the failure. This is not advice to anyone.

Yes, if someone gets employer contributions in a year that are equal to their 415(c) limit of the lesser of 100% of pay or $72,000, then any and all deferrals would be deemed catch-up contributions. In your example, the person could actually have had compensation of $72,000, an employer contribution of $72,000, and $8,000 in catch-up contributions.

@SSRRS Did you file using third party software (FIS, FTW, etc...)? Did you get an AckID, or did this prevent you from actually getting it filed? While I agree it sounds like an error on their end, it will probably take quite a bit of back and forth to get it resolved.

Hoping that Mike Johnson doesn't see his shadow and give us 6 weeks of government shutdown!

I would like to chime in. Participants actual account balance is the sum of the actual assets in his account plus the value of the outstanding loan. Assets remaining after the loan - $25,000 Outstanding loan - $25,000 His account balance is $50,000 50% of this is $25,000 Less outstanding loan of $25,000 Remaining loan available is $0 You need to remember to add back in the loan since it is part of his account value before you determine the 50% of vested balance. Unless the asset value drops from the original time you took the loan, you should never get a negative answer.

Your math and logic is all wrong. Read the IRS examples: https://links.us1.defend.egress.com/Warning?crId=6984f4a2c933bcd338c721dd&Domain=oneblueridge.com&Threat=eNpzrShJLcpLzAEADmkDRA%3D%3D&Lang=en&Base64Url=eNrLKCkpKLbS1y9JTcwt1svNTC7KL85PK9FLzs_Vz01NLdE3MrE0s7AwMbe0tDA3M7IvsA21zEsvrfIrzM4M8CrLyvIMzQYALWcXFw%3D%3D&@OriginalLink=teams.microsoft.com

The Instructions for a Form 5500 report generally allow a plan’s administrator (see I.R.C. § 414(g)) to report financial information on a cash, modified-cash, or accrual basis of accounting for recognition of transactions (if the administrator uses one method consistently). If an administrator reports with accruals, it might recognize a dividend receivable (for the amount, if any, not paid to the plan’s trust by December 31) and a distribution payable as at December 31, 2025 (for the follow-on increment of the final distribution not paid until January). Consider that a plan’s administrator, not a nondiscretionary service provider, decides the method of accounting. Likewise, the administrator decides how accounting principles apply to a set of facts. Even if an administrator made all preceding years’ reports on the cash-receipts-and-disbursements method of accounting, an administrator in its discretion might find that accrual accounting fits for an intended plan-termination year and facts like those you describe. If an administrator lacks enough knowledge about generally accepted accounting principles, it might seek a certified public accountant’s advice (even if that professional will not audit, review, compile, or assemble any financial statements or other report). This is not advice to anyone.

Im assuming this is not the first year filing a return for the plan, and you filed an SF for the prior year? If so, you can continue to file an SF until you cover more than 120 participants and meet the other eligibility conditions (total of eight conditions). See instructions to the 5500-SF, page 3, Who May File Form 5500-SF, for all conditions.

Sounds like you have an AckID then, so you can prove that it was filed. I would start with EFAST support, but when it comes to issues beyond what can be found in the instructions to the forms, they usually refer you to Office of the Chief Accountant at the DOL at 202/693-8360.

There is much to like in Paul I's sense about avoiding an ordering regarding previously-taxed amounts if a corrective distribution would not be a Roth-qualified distribution.

Check the documents governing the plan to discern whether the plan allows or precludes a distribution made by delivering property rather than paying money. If need be, amend the plan to allow a distribution of property. Instruct the broker-dealer to redeem or sell the window account’s securities other than the one that’s untradeable. Apply the money raised as the plan ordinarily does. Instruct the broker-dealer to re-title the remaining securities account as the distributee’s individual “taxable” account, no longer held regarding the retirement plan. Report one or more Form 1099-Rs so a report includes the fair-market value of the untradeable security. That a security no longer trades on an exchange (or never traded on an exchange) does not by itself mean that the fair-market value is $0.00. Even a petition, involuntary or voluntary, of the issuer’s bankruptcy, even for a liquidation bankruptcy, does not necessarily make common stock shares worthless. The plan’s administration should not deprive the distributee of the value of the untradeable security. Even if untradeable now, it might later get an offer. This is not advice to anyone.

A plan that tax law classifies as a profit-sharing plan, whether it includes or omits a § 401(k) cash-or-deferred arrangement, is a pension plan if one follows ERISA title I’s definitions. ERISA § 3(2)(A), 29 U.S.C. § 1002(2)(A) https://www.govinfo.gov/content/pkg/USCODE-2023-title29/pdf/USCODE-2023-title29-chap18-subchapI-subtitleA-sec1002.pdf. And while tax law might not distinguish between “solo-k” and some other plan with a § 401(k) arrangement, an investment or service provider’s business classifications can matter greatly to consumers and to their intermediaries and advisers. For example, Individual(k)Ô (Ascensus claims this as a trademark) gets a set of service agreement, trust agreement, plan documents, investment arrangements, and other provisions that’s distinct from other business lines. And differences between a “solo” and a “regular” 401(k) service arrangement can affect even a plan’s provisions. The plan-documents set Ascensus requires for an Individual(k)Ô omits some choices Ascensus allows for other business lines, and imposes some plan provisions Ascensus does not require for other business lines. The sales or business lingo might seem awkward to a tax practitioner, but might convey meaning to consumers, intermediaries, and advisers. For better or worse, “solo 401(k)” now has some trade-usage meaning to describe generally an arrangement a service provider designed for an individual-account (defined-contribution) retirement plan its sponsor intends as one not expected to cover any employee beyond a shareholder-employee or a self-employed deemed employee, or one’s spouse. And that trade-usage meaning includes a sense that investment and service providers offer constrained terms for those plans.

They are likely a control group so one plan with each LLC adopting should be fine. Even if not a CG they could do that as a multiple employer plan. However, if the desire is to use a vendor's solo-k product, need to make sure it accommodates whatever structure/LLC relationship you have.

Before IRAs’ custodial-account agreements next are amended (by December 31, 2027), those accounts will have been operated for about eight years with at least some in-operation provisions different than the ostensible written provisions. How does an individual learn which provisions are real, and which are displaced by Internal Revenue Code and other law changes? Remember, many, perhaps most, of an IRA’s tax-sensitive provisions call for an individual to administer her account. Often, a custodian is protected in following the account holder’s instructions. Why does the IRS not allow an agreement to state provisions by referring to the Internal Revenue Code?