I've broached the topic of an ASG with a client, and of course they want more information before deciding to engage an ERISA attorney.  DWC has a good article on their website about ASG; is there anything else that you've found that is relatively understandable that can be sent to accounants (and/or plan sponsors)?  Thanks.

S corporation, two owners - father and son, both are 50% shareholders, no other employees.  Is 5500-EZ or 5500-SF required?  In prior years EZ was filed but I do not think it is correct and SF is required?  Anything else that I might be missing?

Plan uses the top-paid group election because they have very high earners.  A small group of NHCE <1% owners do not want to participate in the plan or receive employer contributions. Assuming we can pass coverage, can they designate certain employee owners to be in this "Excluded Division"?  How do you define the division (or do you need to) when the only real differentiator is that they are partners who can not participate while in that division?  Thanks for any input. 

It seems to me that if a business owner has no employees and has less than $100,000 of compensation they would be eligible for the employer contribution credit.

The admin expense credit would not be available because the cap is based on the number of NHCEs and in this example there are zero. But the only restriction on the employer contribution credit is the 100k of comp limit.
 

Thoughts?

A 100% ESOP-owned company has received a letter of intent to be acquired by a private equity company.  The transaction is expected to be a stock sale about 40% above the 12/31/2023 FMV.  Should the expected sale price be disclosed on the diversification notice?  At least 2 of the diversification eligible participants have or will have knowledge of the sale discussion at the time the notices are scheduled to be distributed, but the rest of the eligible group may not know all the details.  Please assume the diversification is timely based upon the availability of the final FMV, I'm only concerned about the fiduciary responsibility of providing the information necessary to make an appropriate election.

Is there specific guidance anywhere that says Employers should not stop payroll matches when the employee reaches the max compensation during the year?

For example, plan matches dollar for dollar.  I don't see why the Employer should stop (testing reasons notwithstanding).

Or, maybe someone started deferring in March with a 50% of deferrals no more than 6% of comp (for a cap of $10,350 on $345,000 in comp).  They hit $345k in September, but hasn't hit that match cap yet.

We know they are supoosed to keep going until they hit a cap, but is there anywhere that says it outright?

I was always told/taught that receivable profit sharing contributions are due the earlier of:

1) September 15
2) The date you file your tax return

In researching something, I just found this on the IRS website:

For example, if the due date of the employer's calendar-year 2022 Form 1040 or Form 1120 is April 18, 2023, with an extended due date of October 16, 2023 (after the automatic six-month extension), the employer has until October 16, 2023, to make a 2022 profit-sharing contribution and deduct it on their 2022 return.

Have I always been taught the wrong thing?  Or am I confusing two different things?  Now I'm confused, but is this an instance that if the company is a C-Corp you do have until October 15 to fund the contribution?

Thanks in advance!

Employer going out of business that has two plans: 403B and a pension plan (assume 100 participants or more).  The 403B plan year is the calendar year.  The pension plan year ends on June 30.  Is the employer required to have an audit performed for each plan for the following time periods? 403B for CY2024 (plan terminated 7.31) ( I believe YES) and pension plan for plan year ending June 30,2025 (I assume also YES). Thanks.

Hello…I’m trying to create a model to project future balances for our participants but am running into a couple of roadblocks.

In past years, we have had 1 ESOP loan.  I reengineered the allocation calculation from our TPA and it seems that once we have an ESOP only allocation of contributions (after accounting for 415 limits and backing out 401k contributions), the loan is allocated to each participant to reduce the actual contribution amount paid.

Fast forward to 2024 and we will now have 2 loans due to a re-leverage.  When I use the same methodology to allocate the loans to participants, two of our participants have a negative contribution amount.  I’m not getting any clear answers from our TPA on how to handle this.

Similar to how 415 excess amounts are re-allocated to participants, would these negatives be re-allocated until no one is negative?

Furthermore, to make up for the fact that the bulk of our contributions are going toward loan payments, we will be doing an S-Corp Distribution in 2024.  S-Corp Distributions earned on allocated stock are allocated in proportion to participants based on beginning share balances less distributions and S-Corp Distributions earned on shares held in suspense are allocated based on Eligible Compensation.

What I’m unclear about is the timing.  Should contributions be allocated first, then S-Corp distributions, or vice versa?  I was going to model it out using both approaches, but the negatives caused by the loan impacted that original plan.

Thank you for your assistance.

Jeff

One of our clients is running into an issue with the testing due to being an employee owned cooperative (we don't administer this plan, just their retirement plans).  There are 17 employees and all are considered more than 5% owners due to the structure of the business.

The people doing the testing are saying they fail “25% Key Employee Test, 55% Average Benefit Test and 25% Owners Test, since by definition everyone is considered an owner and Key Employee.

Do these tests apply to a Plan under this type of structure?  They are asking me for guidance, but this isn't my forte.

Thanks!

In an ERISA Qualified Plan the Participant retired during the marriage of the parties and elected a 50% QJSA for his then current wife as he was required to do by law by Federal law. ERISA § 205(a)-(d), 29 U.S.C. § 1055(a)-(d)  

Now, 6 years later, cometh the divorce, and the Participant wants his now ex-wife, the Alternate Payee, to pay the cost of the QJSA election, that is, the actuarially deduction from his retirement annuity to fund the survivor annuity and achieve actuarial equivalence pursuant to ERISA §§ 205(d)(1)(B), (d)(2)(A)(ii), 29 U.S.C. §§ 1055(d)(1)(B), (d)(2)(A)(ii) and ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3).

Problem 1 - the Plan Administrators, like most Plan Administrators I have dealt with, have refused to allocate the cost to the ex-wife and to deduct that cost from the ex-wife's share of the retirement annuity.  

Problem 2 - I cannot find any authority to confirm that ERISA permits the parties to agree, on the courts to compel,  the cost of the survivor annuity to be paid by an Alternate Payee.  The sections of ERISA require the Participant to elect a QJSA, but is silent about the "cost". 

Any ideas?

Thanks.  

So, suppose you have a plan that doesn't qualify for any of the exceptions, so the SECURE auto-enrollment provisions apply. Plan is an ACA, but not an EACA, so will have to be amended to be an EACA, SECURE provisions, etc., etc. 

If the participant already has an election in place, can this be "carried over" under the updated SECURE plan provisions? Would your answer change if the election in place is LESS THAN the minimum 3%? 

409A account balance plan that says payment may be made in cash or in-kind. The plan is informally funded with COLI and payment is to be made in a lump sum. If the plan sponsor transfers the COLI policy to the participant as payment, is there an issue? I couldn't find anything in the Regs that prohibits this. 

We have a client who signed the Cycle 3 plan restatement document on Monday, August 1, 2022.

Is this late, or did we get a weekend extension in this case?

https://www.irs.gov/newsroom/irs-relief-now-available-to-hurricane-debby-victims-in-all-of-south-carolina-most-of-florida-and-north-carolina-part-of-georgia-various-deadlines-postponed-to-feb-3-2025

Plan sponsor is preparing a total rewards statement showing what the employee's pay and benefits sum up to and doesn't know what to put down under the Pension plan line.

Doesn't seem to make sense to put their accrued monthly benefit. I'm curious what other plan sponsors do?  Put down the value of the accrued benefit earned in the year? put down the present value of the accrued benefit earned during the year paid as a benefit at normal retirement age?

Does anyone know if CMS would consider an HSA-qualified HDHP to be an integrated plan (as defined by the Creditable Coverage Simplified Determination safe harbor)? I have been looking for an authoritative source that tells me how to apply the safe harbor criteria when lifetime and annual limits for EHBs are no longer allowed by the ACA. Is it safe to entirely disregard the integrated plan criteria solely because two of the three plan provisions are no longer valid for most plans? In other words, can an employer rely on the yellow-highlighted instructions and apply the non-integrated plan criteria to a plan with a combined plan year deductible if that plan no longer has combined annual and lifetime maximums per the ACA?

Per CMS simplified determination method:

Integrated Plan - An integrated plan is any plan of benefits that is offered to a Medicare eligible individual where the prescription drug benefit is combined with other coverage offered by the entity (i.e., medical, dental, vision, etc.) and the plan has all of the following plan provisions: 1) a combined plan year deductible for all benefits under the plan, 2) a combined annual benefit maximum for all benefits under the plan, and 3) a combined lifetime benefit maximum for all benefits under the plan.

A prescription drug plan that meets the above parameters is considered an integrated plan for the purpose of using the simplified method and would have to meet steps 1, 2, 3 and 4(c) of the simplified method If it does not meet all of the criteria, then it is not considered to be an integrated plan and would have to meet steps 1, 2, 3 and either 4(a) or 4(b).

A controlled group of companies, C, sponsors a 401(k) plan. Unbeknownst to C, one of its subsidiaries, N, in order to win a contract signed on as a participating employer in a multi-employer pension plan H.  

H has a frozen DB plan and a 401(k) plan, 12 of N's employees are eligible under both C's 401(k) and H's pension. H's DB plan could not pass testing, so using SECURE Act relief, they  aggregated H into a DB/DC plan and then demanded data on C's entire control group of 4,000 employees - which C gave them. The H plan then passed 410(b) and 401(a)(4) testing.

Of course, C has been performing its own independent ADP/ACP testing for years, not even being aware of H until the recent demand for control group data. H's actuaries are now recommending that C go back in time and re-do their ADP/ACP testing to aggregate H's 401(k) data. H's actuaries admit that the SECURE Act relief that allowed H to aggregate its DB plan with its DC plan, and thereby pull in C, is silent on how H's decision to aggregate would affect C.

So what say you experts? Does C have to re-do its historical ADP/ACP testing to add H's data to the mix?

I'm hoping someone can help me here:

• 401(k) plan excludes employees regularly scheduled for under 500 hours per year, with a failsafe that if such a person actually exceeds 500 hours in an eligibility computation period, they become eligible. This was done to avoid LTPT eligibility tracking, i.e., anyone with one year of 500 hours will be eligible to defer, so will not become an LTPT employee.
• Plan also provides that 500 hours in an eligibility computation period is an eligibility year of service. 
• BIS is 500 hours. 
• If someone moves from an eligible to ineligible class, they may no longer defer as of the date of the move. 
• An employee has worked full-time for several years, and will have well over 1,000 hours in 2024. As of 1/1/25, they will move to part-time, scheduled for under 500 hours per year. Assume they actually work under 500 hours in 2025.

Is it permissible to move this person to ineligible status starting in 1/1/25 (the date they are no longer in an eligible class) such that they are no longer eligible to defer, despite having satisfied a year of eligibility service?

If not, what about 1/1/26 after they have a one-year BIS in 2025?

Hello!  An employee was terminated August 15, 2024.  She will receive 2 months of severance pay.  

The Simple Plan is through Schwab and just a standard prototype plan along with Form 5305.  

It is unclear by the definition of compensation if deferrals and the match are required on the "severance pay".  

Any information would be helpful!

Thanks!