Hello all,

As my username clearly states, I am a sanctioned man through penalties on interest-bearing accounts. I have never had an employer hear my situation and then reject my waiver of rights to participate in a 401k, thus marking me ineligible, and life continues...until now. My current employer is fighting me every step of the way. This new company has auto-enrollment AND yearly escalations. Considering I am fined $15k for every individual contribution and $1,500 on every $0.01 of interest earned, for life, I will never be participating. The auto-escalation then sits like an anvil over my head. The DOL has written my employer urging them to accept my waiver and have the administrator draw up a one-off that applies to me, make me ineligible, and that's that. Again, they refuse, citing, "We CAN force you to do this. Therefore, we ARE forcing you to do this." They also COULD accept my waiver, but I digress. What recourse do I have here? Does anyone have any advice?

 Many thanks!

I am employed by a New York company (since the early 1990s) where I had initially been in their defined benefit pension plan (aka traditional pension). In the early 2000s we were told about the option to switch to a cash balance pension plan or stay with the defined benefit plan. I vaguely remember a website we were instructed to visit in the 2000s where we were to make some type of choice regarding staying/leaving the defined contribution pension for the cash balance pension. I don't have any recollection of what choices there were to make, what the website looked like, or even what would happen if I did not go online and just ignored making any choice.

Fast-forward 30 years and the 3rd-party website our company uses to manage/display retirement benefits shows I'm in a cash balance plan. But, here's the thing... I'm almost positive that I did not accept being changed to the cash balance plan (as I remembered my colleagues' advice to stay in the defined contribution plan) and so I'm considering pressing HR/Retirement departments at our organization for actual proof/documentation/signatures/etc. for this change I supposedly authorized.

NOTE: I understand that I should have paid more attention over the last couple of decades to my retirement plans, but as a young employee back then I just "set it and forget it". Now that retirement is in sight I'm trying to understand what income will be available to me. Also, I'm of the belief that it's entirely possible I did accept switching plans and just didn't remember doing so (but I still would like proof).

What types of documentation does my employer by law have to provide to show I gave permission to switch plans?

Is there a statue of limitations with my challenge?

I am working with a client regarding an inheritance from a 401K plan that has some unusual moving parts. The client is the personal representative of his uncle's estate. The facts of the situation are as follows:

• Uncle dies in 2021 and has 401k assets at their employer with no stated beneficiary
• Wife of uncle (aunt) does nothing with the assets
• Aunt dies in 2024 and personal representative discovers Uncle's 401k assets at employer. 
• Uncle has a will that specifies that retirement assets upon his death will end up in a trust. Trust has named, identifiable beneficiaries.

Probate proceedings started on the Uncle because they were never done in 2021 with the court ordering the 401k assets to be paid to the trust. The PR wishes to go down the road of seeing if the situation would qualify for see-through treatment rather than the distribution being taxable to the trust and subsequent beneficiaries. Since the 401k company was not notified by October of the year following the Uncle's death, I believe this automatically disqualifies the assets (amongst other issues). 

Although I've prepared 100's of 5500's in the past, that was when we used paper. I don't know how to complete a 5500 so my client can file on EFast.

I've subbed out 5500's to a CPA firm for years, but this new client does not want his 401(k) and PS Plans information shared outside of my office. I realize 5500s are public record anyway, but I want to honor the client's wishes. 

Where do I prepare his 5500's for him?

Thank you, and have a great day. 

Hi. We are acquiring multiple companies. They each have their own H&W benefits. If the employees of the target companies don't join our health plan immediately (but stay on their own health plans), how long can that transition period last? How does that impact nondiscrimination testing? In other words, does the length of the transition period matter when it comes to how the testing is performed?

Thanks for any thoughts.

I’ve been impressed with the guidance on this site, so I'm sharing my story.

My wife signed a letter of intent for her job as a family medicine doctor a decade ago, which specifically stated the benefit of a retirement plan as part of her employment package. After ten years without receiving any retirement benefits, she was promised part ownership of her medical practice. We were ecstatic. We both signed agreements under the assurance that this was risk-free and would benefit us from the eventual sale of the practice. She was verbally promised frequent dividends to pay down her ownership loan.

However, we later discovered that the medical practice was only profitable because it failed to repay federal COVID loans, and the company had actually been incurring debt. We have received no dividends. Now, my wife is part owner of a massive debt, nearly more than the equity of our home. If she leaves her job, we lose everything—our home, our two young children’s college funds. Staying has resulted in the realities of mismanagement: significant pay cuts, additional responsibilities, and denied earned paid time off to offset company debt. Her salary, along with another owner's, has been cut by 20%, while two new doctors, just out of residency, have been hired at double her salary.

She is increasingly burdened with more tasks because she cannot resign under the threat of having to pay off the debt, while work conditions worsen. Between the empty promise of retirement benefits and the reduced salary, her ownership loan accrues interest without any of the promised dividends or reliable salary to pay it down. Our family is getting deeper and deeper in debt with absolutely nothing to show for it. It seems we have been conned into supporting something her boss owns, and possibly their lifestyle, from which we derive no tangible benefit. I cannot fathom that we owe $200K+ on something we cannot touch, experience, or benefit from.

I was frugal in my early years, planning for our children’s college fund and early retirement as an engineer, but all of this fiscally responsible planning is being wiped out due to her current employer's mismanagement. What can we do? We fear bankruptcy and worse. Any guidance is greatly appreciated.

Thank you!

-Desperate in Denver

Hi

Plan terminated 12/31/2023 with force out at $1,000 (i/o $5,000). No SECURE amendment was made to increase to $7,000.

I was not an issue as the participant with 1.5k balance was eager to get the monies but now not returning the distribution paperwork.

Can the plan be amended now to increase the force out to 5k so that this participant can get paid the lump sum?

Thanks

Being new to the DC 401k industry, what educational material would you all recommend for me to read and or certifications? Any suggestions would be helpful. I'm going through the QKA material from ASPPA -thanks 

Hi. We currently offer simple IRA to employees. Offered to 5 employees in 2022, all (30) in 2023. However, only 3 took it - most didn’t even realize we have this plan.

we are looking to terminate simple ira and start safe harbor 401k with profit sharing. We will be offering to all employees. Would we be eligible to receive secure 2.0 act tax credits?

can we say these plans are “not substantially same” and hence claim tax credit?

thanks 

Our company was acquired earlier this year.  New company has a 401k plan design that stops employees from contributing once they hit the $345,000 compensation limit (even if they are below the 23,000 contribution limit). While not common, I believe this is permissible.

The new company defines Eligible Wages as "base pay, annual bonus, sales bonuses, overtime and shift differentials and merit payments, as applicable."

Old company was acquired in March of this year and 401k deferrals continued through the close date in March.  From March - June, employees were paid on old payroll system and not eligible to contribute to either 401k plan.

Starting in July, employees are being paid on new company payroll and are eligible for new company 401k.  The problem - several employees are not able to contribute to the new 401k because they are showing as hitting the $345,000 compensation limit?

Not sure how or why earnings that occurred under the old 401k plan and earnings that weren't eligible for any 401k contribution at all, are being considered towards the compensation limit under the new 401k plan....I think this might be an error by the new company.  The old 401k plan is being shut down (not merging or being acquired by the new company/plan), and will have its own independent testing and 5500.

Under these circumstances, is it proper to have earnings from previous payroll be considered as compensation under the new 401k plan?  Anyone experience something similar?

Thanks if advance.

We have a participant who passed away in 2024. He has both Traditional and Roth balances in the 401(k) plan. In the past, he has been taking RMDs from the Roth source.

For 2024, which balance would we use for RMD calculation (just the 12/31/2023 Traditional Balance or 12/31/2023 Total Balance - that includes the Roth) and can the RMD for 2024 be distributed from the Roth source to the beneficiary? The reason I ask is because I know that for Roth IRAs, the RMDs are required after the person's death, but is that the case for deceased 401(k) participants with Roth balances?

According to this link from the IRS, it seems like only the Roth IRAs have RMDs for deceased participants: https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs#:~:text=Roth IRAs do not require,required from designated Roth accounts.

In my opinion, only the participant's 12/31/2023 Traditional Balance would be considered for RMD calculations and the RMD must be taken from the Traditional source. Would you agree?

I have 4 missing participants with the following balances:

$95.76     $52.07     $14.90     $39.56

We use Penchecks to process our 1099-Rs  and we also pull the distribution fee that we charge from the participant's distribution.  After all distribution expenses are deducted each of these payouts will have a negative balance. 

Can I zero these accounts out with expenses? or do I need to open missing person IRAs and get the expenses somewhere else?

We file one 5500 for a 403(b) plan.  It is long frozen.  I asked for their IRS Opinion letter.  They provided me one with an approval date of 8/7/2017.  This does not seem current.  Does anyone know?  I requested this from the plan sponsor.  But I believe I need to tell them to contact TIAA to make sure this is the most recent.

Thank you,

Tom

Got a call today from an eye doc who owns 100% of his practice (which will be an LLC taxed as a sole prop starting in 2024; previously it was an S-corp where he owned 100%), looking to put in a new plan.  He also owns ~21% of a surgery center where he performs all his surgeries (so I would say that, yes, he refers his business there).  This immediately made me think of ASG.

Doc is convinced that this isn't a problem.  "The other doctors/owners of the surgery center have plans that cover only their practices and not the surgery center employees, so I'm sure it's fine."  Without meaning to disparage any other potential TPAs working on those plans, I think I'll look at it with fresh eyes...

So, we don't have a management ASG.  Good.

For a B-Org, I don't know the relative revenue numbers, but I'll assume that if my doc owns 20%+, it means his revenue is at least 10% of the practice.  I suppose you could argue if the surgery center employees perform services that were 'historically' done by a doctor's office; I might argue they were historically done at a hospital.

I think the A-Org argument is even stronger, as they are definitely 'regularly associated'.

Oh - and of course doc owns his building as a R/E LLC... and his brother owns a lens shop in the building.  "I don't specifically refer people there; they can go anywhere... but I tell them it's easy to go right across the hall to get their prescription filled."  I think that is separated enough to not be a problem.

I know that the best answer is "consult with an ERISA attorney", and that will be my ultimate recommendation.  But I want to at least see if it can be ruled out so we don't waste our efforts and resources going down that direction if it's clearly NOT one.  Is that what I've got here?

Thanks.
 

I have a plan that has terminated.  The owner retired and sold the business.

Preparing the final 5500. 

Do we need to change the address on the 5500 to the home address of the plan sponsor or leave as is (which is the company address)?

Thoughts?  Thank you!

Hello,

One year in practice ERISA attorney here, so please, go easy on me.

FACTS

In the financial services industry, three individuals, A, B and C each maintain their own entity in which the individual has 100% ownership.

• A's LLC - maintains no plans. 
• B'S LLC - maintains a SIMPLE 401K in which only B participates
• C's Corp. - maintains a SEP in which C and spouse participate. 

Each entity has a 33% interest in the Main LLC. A, B, and C, through their entities, provide financial advice to clients of the Main LLC. Main LLC then pays A, B and C's entities 1099 income. Main LLC has five employees, none of which are A, B or C or their spouses. The employees of Main LLC have never been given the opportunity to participate in either the SIMPLE or the SEP.

CONCLUSIONS 

I've concluded that under the ASG rules, Main LLC is a FSO and A, B & C entity's are A-Orgs. Thus, Main LLC and A, B & C's entities are an affiliated service group. 

Client is the Main LLC, and its goal is to provide a retainment plan for the Main LLC and its employees. Potentially later adding in a health plan. 

My conclusion is that B LLC's SIMPLE 401(K) AND C Corp's SEP have both made significant errors and must make a VCP submission. However, how can they correct with the improperly excluded employees?

ERRORS

SIMPLE 401(k)

1. Maintained during the same year as another retirement plan. Contributions must stop immediately. 
2. Main LLC employees improperly excluded. Make corrective contributions to employees.

SEP

1. Main LLC employees improperly excluded. Make corrective contributions. 

How can both Plans be corrected? Do you undo the SIMPLE contributions/correct deferral deductions then terminate the Plan? 

Immediate Eligibility - plan excludes seasonal employees

In the "good ole" days, employer only had to worry about enrolling these employees if they worked 1,000 hours now they have to contend with the 500 rule. The problem is seasonal employees leave and come back on a regular basis

Hired 5/1/2023 

1. Need to look at hours worked from 5/1/2023 - 4/30/2024. Participant worked a total of 650 hours. However he left and came back twice during this period

2. Plan switches to plan year  - The plan then measures hours from 1/1/2024  to 12/31/2024 - assume during this period he works 650 hours.

Participant would be eligible to enter 1/1/2025.

Am I looking at this correctly?

The fact the employee left and came back during the initial 12 month period, does his hours pre termination count towards the 500,or does the counting start all over?

I thought I read LTPTE rules do not include the break-in service rules or concept.

Thanks

Suppose you have no common law employees and 3 unequal partners, and the theoretical "cost" for each of the partners is $50,000, $75,000, and $150,000. I'm not a DB person, but I seem to remember from a VERY distant past that the "default" is that the total cost is allocated to each partner in proportion the her/his partnership interest, but that this can be modified if there is a special allocation formula in the partnership agreement that provides a different result.

Is that still true (if indeed it was ever true)? And if true, can it be modified each year as necessary due to changing demographics?

Muchas Gracias.

Hi Everyone,

I have a client who offers an enhanced SH Match ($1 for $1 on the first 4%).  They then stack a discretionary match on top of that ($1 for $1 on the next 2%).  It almost works like a two-tiered match, but it's the same $1 for $1 formula.  Ascensus is now telling them they can't do that.  Ascensus is saying that the discretionary match must be made on the first 2% of deferrals, meaning if someone defers 1%, they get the 1% SH match and 1% discretionary match.

Here's what we've been told:  The 4 and the 2 are not added together. If an employee defers 4%, they get the full 4% Safe Harbor Match and the 2% Employer Match. If an employee defers 1%, they get 1% Safe Harbor Match and 1% Employer Match. If an employee contributes 6% they get the 4% Safe Harbor Match and the 2% Employer Match. If they defer 7% or above, they get the 4% Safe Harbor Match and the 2% Employer Match.

Is that right?  The plan sponsor is not allowed to choose to match percents 5 and 6 only on a discretionary basis?

Any help is appreciated!

Company has to give people "retro pay" going back to 2022.  Do they need to take deferrals from those?  Do they need to include that income for the 2022 and/or 2023 ER contributions?

It's a 403(b) Plan, and the document excludes all post-severance compensation.

But it this post severance pay?  It should have been paid way back when.  It's not like a trailing commission or a bonus that was genuinely paid post-severance.

Your thoughts are apprciated.