I'm drawing a blank.  Can you help me identify the statute and/or reg that describes the Plan Administrator's responsibility to annually advise recipients of periodic distributions (typically, monthly) of their tax-withholding election?  Thanks.

Some details are sketchy, but as far as I'm able to determine at this point...

A participant terminated employment in early 2021. Left funds in the plan. Less than $5,000. There should have been a mandatory forceout in 2022 when the 2021 valuation was done, but for reasons unknown, it wasn't. When the 2022 valuation was done, (in 2023) this was caught, and a mandatory IRS rollover was processed in the fall of 2023.

Unknown to everyone, (apparently) the participant had died in the summer of 2022! Just to make it more interesting, no named beneficiary, and minor children involved, but that's a separate issue.

I'm really not sure what the ramifications are here, and it is a small amount of money, so I'm sure the Plan Administrator is willing to take a little "risk" if necessary, to clean this up without excessive time and effort.

If the vendor is willing to reestablish this as a plan account, (they are being questioned now) then it should be simple, other than correcting the 1099 (which may or may not have been issued yet - I don't know) - the death distribution will simply be processed according to plan provisions.

Any thoughts on this? I've never encountered this situation...

Thanks.

I've got a NFP MP plan with an hours requirement to get the allocation.  They make deposits during the year to estimate the annual contribution (it's a straight formula, so in theory this is easy to calculate each month).  This year, they put in too much because someone ended up not working the required hours.

So this is an excess contribution to the plan based on the formula, not the 415 limit for anyone (and not over 404, not that they have a deduction to worry about).  Does it have to be refunded?  Any penalty?  I know the plan sponsor is going to want to let it stay in the plan; is that subject to an excise tax then?

Thanks.

 

I have a question regarding family attribution. Does it apply to owners who own more than 1% of the company?

Thank you in advance for your assistance.

Client in process of Chapter 11 bankruptcy and near appointment of Liquidating Trustee.  In process on terminating the 401(k) Plan and the record keeper / trustee (very large mutual fund company) has prepared draft Letter of Direction with some unusual (at least to me) provisions.  Curious for any thoughts / experience from similar situations.

First, just to note the draft Letter served up is really "sloppy."  As the client said, it's like they asked ChatGPT to prepare rather than starting with some customization of a standard template document.  Among other things, draft letter provides as follows:

1.  Repeatedly says company "is" terminating plan and phrasing all the provisions throughout as if this will be of a future date when they know plan was already "terminated' and even reference prior date.  Not a big deal really as we can revise (assuming they will accept any edits) but the whole thing is very sloppy and confusing to read on some timing points.

2. Provides plan sponsor will not restore the forfeiture account funds to participants and if participants reach out "the Plan Sponsor will handle outside the Plan."  Huh?  Not sure what participants are going to be seeking forfeiture restorals in the future but how can the plan sponsor (which is bankrupt and about to be completely gone) handle outside the plan?  I guess not doing anything might be "handling outside the plan?"  Also, do record keepers typically suggest that potentially legit claims can be handled "outside the plan?"

3. Expressly indicates this is a Chapter 11 bankruptcy and that a Bankruptcy Trustee has been appointed and will act as a fiduciary of the plan going forward.   I don't know much about bankruptcy but understand Bankuptcy Trustees in Chapter 7 cases may have duty to step into the role of a plan administrator and take over some fiduciary duties.  Here, however, there is no Bankruptcy Trustee nor will there ever be.  There will be a Liquidating Trustee to liquidate and pay out to creditors but bankruptcy lawyer says they won't step into the role of plan admininstrator or take on other duties of for the company (debtor) / plan administrator.  Understand they may just be confused on roles here but who does step in normally in these cases? 

4.  There are also provisions noting that no FDIC or DOL Trustee will be appointed.  I'm unfamiliar with an FDIC Trustee or DOL Trustee.  Is that a real thing?   Is that possibly some reference to abandoned plan situations or something?  

5. Following appointment of the Liquidating Trustee, the company / debtor (and officers) will cease to exist as a matter of law so there technically is nobody around with any real authority to act for the company / plan administrator or take action for the plan.  I understand the DOL may consider the existing officers functioning as fiduciaries to continue in that role after the company is gone and employment has ended but is that what typically happens in these situations?  Is there any other way to approach?

6.  There are a few participants in a capital preservation fund that cannot be liquidated / removed by the plan without at least 12 months' notice.  If the participants in that fund affirmatively elect to move their funds out of the account and roll over their balances, is the 12-month notice period still applicable or is that only an issue if they must be forced out?  The letter suggest it may apply whether or not they request to roll over.  If so, they're into 2025 before all amounts get paid.

7. Letter notes the company will continue to be responsible for recordkeeping fees through end of quarter following the plan termination date.  Well, the company adopted resolutions "terminating" the plan in September so that suggests fees through December 31, 2023 but there is a lot left to be done by the record keeper (which has been moving like the bureaucratic behemoth it is) and so presumably lots more fees to come.  I should know this but don't--how do fees typically work in bankruptcy terminations?  There are some funds in the forfeiture and suspense accounts that, per the plan, can be used to pay plan expenses.  Will they hold making any allocations / distributions from those accounts until all work is done then follow any force out distributions with some later distribution?  If so, how long does that take--they have to do final 5500 which is a long time in the future.

Apologies for the long post / questions (and embedded rant) but welcome any feedback or suggestions with any or all of these if anybody has the appetite to address.  Thanks.

Our software for minimum gateway purposes uses 414(s) comp for the 1/3 test and 415(c)(3) comp for the 5% test.

Example: employee became eligible 7/1/2023 -total wages for the year $50,000 of which $25,000 was earned after the plan entry date.  The person terminated so top heavy does not apply.  The plan defines compensation as W-2 wages.  But the person has to get the minimum gateway as the plan is cross-tested.

The Question: Is $25,000 compensation used for both the 1/3 test and the 5% test or must $50,000 be used for the 5% test.  The software seems to indicate $25,000 is used for the 1/3 test and $50,000 is used for the 5% test. This could be an input error.   I didn't check the system comp fields, only the output report.  

Thank you for any help in clarifying this!

50,000 in a has-a-ticker-symbol MM fund transferred in kind to a owner-only DB plan last month as a calendar year plan's 2023 deposit.  Smells bad because it's not really cash.  Am I right? 

(And what's the way out of it?  I read a bunch of past threads here and it sounded like "sell it at arm's length" but who's gonna pay this guy's plan 50,000 in actual cash to buy his plan's mutual fund?)

Thanks!

--bri

Plan excludes fringe benefits from definition of compensation.  Is jury duty pay included or excluded from plan compensation?  I have not been able to find anything definitive.  Thanks!

Has anyone talked to Relius about when the 2024 specimen plan termination amendment is going to be available? I've just spent a very frustrating 1/2 hour trying to navigate their "ticket" system and telephone support when I couldn't get the ticket system to work.  And the telephone option didn't work either...

I miss the old days.

Just to be 100% on this so 5500s are not rejected.  I know our plan letter serial number.  I assume the date of the letter is as below 6/30/2020, NOT the date of submission which was in 2018.

Thanks

I think this might be a no brainer. But then there are so many nit-picky rules.   A potential new client is asking questions.  Within the email I received there is a bullet item "Rollover funds entirely".  I asked for clarity, wanted to know what the intention was.  I know they can't just dig into their plan balance and roll out employer contributions whenever they want.  That said, if they rolled money into the plan into a designated rollover account from an IRA or a balance they had as a participant in another qualified plan, can they take a distribution from those plan accounts at any time? 

Thanks

Please forgive the very basic question, but in the case of a DB plan lump sum window, does the lump sum payment need to be the greater of the plan's actuarial equivalence factors and the 417(e) factors? If so, does this hold true in all circumstances and for all participants (i.e., after NRA, ER eligible, not ER eligible, etc.)? Thanks in advance. 

Plan is terminating due to Stock sale and the sale date is 01/31/2024 and the termination date is 01/30/2024.  The pay period is until  01/31/2024, the Plan sponsor will deduct the employee contribution on 01/29/2024 which will include the 01/31/2024 contribution, can the contribution for 01/31 be included though they are deducting the contribution before the termination date? the reason I ask is 01/31 is the sale date as well and since its a stock sale I believe they should be deducting only up to the termination date which 01/30/2024. 

Is anyone familiar with any guidance dictating the proper handling of automatically enrolled participants who never made a subsequent affirmative election when the plan is amended to cease auto enrollment (assuming the plan document is silent)? My inclination is to leave their current deferral rate as is, but I’m also aware of a school of thought that says their deferrals must stop unless/until an affirmative election is made. 

Finally got my system updated and confirmed my suspicions but want to ask out there as well.

Looks like at 65, the APR is lower for 2024 then 2023 and for someone at age 65 with full 415 limit, the 415 lumpsum dropped by approximately 33.9k, ouch

All agree?

Hi Everyone, 

Here is what happened: my client would like to change the profit-sharing formula mid-year. The current plan profit sharing is 8% to eligible employees. There is no age, no service required, and no last-day service requirements for the profit-sharing contribution, and the contribution is being funded per payroll. There are 1000 hours for vesting. 

Now, the client would like to change the formula to lower it based on age.

If age 45 or less: 4%

   Age 46-59: 6%,

  Age 60 and above: 8%.

They like to make it effective mid-year.  From my understanding is the formula was already set for the plan year 2024, the client cannot change it anymore. I understand they can amend the plan to have it effective 01/01/2025. 

My question: Is it possible to change the PS formula mid-year 2024 in this case? if yes, what are the consequences that we need to know? 

Thanks in advance for all the input!

A plan with Roth can have an in-plan rollover to the Roth account.  Notice 2014-54 says an after-tax account can have its after-tax employee contributions sent to a Roth IRA and its pre-tax investment return sent to a traditional IRA. Participant does not want to pay income tax on his after-tax account in-plan rollover.

• Can a participant send after-tax employee contributions to the Plan's Roth Account and leave the investment return in the After-Tax Account under the plan?  
• Is Notice 2014-54 insufficient relief such that the investment return has to be sent to a traditional IRA, instead of being left in the Plan?  With the traditional IRA being rolled back into the Plan as a third step.
• Could the investment return just be rolled to the Plan's own rollover account (assuming all rights are preserved) in order to skip the IRA two-step dance?

Assume an individually designed plan that can be drafted/amended in any legal manner for a qualified plan.

Hi

A sole prop can now set up a 401k plan retro to 2023 and make a deferral, correct?

No employees and must be set up prior to 4/15/24 (no extension allowed)

SECURE 2.0 - effective date was for plan years beginning after 12/29/2022

Am I wrong?

Plan administrator switched in the middle of the QDRO process with my old employer. HR at my old company says new plan administrator wants everything re-done. Do I need re-do QDRO, get court submission / approval done again, and then resubmit to HR? My retirement assets were basically frozen when I submitted it, but HR says it has to be redone: new plan administrator wouldn't process it due to gains losses unknown because it was with old plans administrator,  said qdro needs redone and plan name changed to new plan adminstrator since it was converted.

thank you

Does anyone know when the IRS will have the fill-in version of the 2023 Form 5500-EZ posted to their website? The information I found stated after January 1, 2024. I have been checking the website daily since in previous years they were available within a week after the new year. I can see from the informational version, (attached) that a question was added, which is likely the cause of the delay. However, it would be helpful to know when the fill-in version is expected to be posted.  

2023-ez-instructions.pdf 2023-form-5500-ez.pdf