I work in HR benefits management and just got two odd letters from the Social Security Administration about two of our employees.  They were basically performance appraisals.  They asked questions such as "did the person show up for work on time?", "did they need extra assistance in performing their jobs?" or "did they need additional time to perform their duties compared to employees in similar positions?"   I have never seen anything like this before in my very long career.  One person is retirement-age but the other is not anywhere near old enough for OASDI benefits.  Does anyone know what on earth this is about?  Has SSA potentially "outed" employees who might be applying for or receiving disability benefits?

We have a client "Company A" who sponsors a 401(k) plan and recently purchased another business "Company B" via stock-sale late in 2023. Company B also sponsors a plan and that plan was not terminated prior to the close of the sale. The plans can't be merged mid-year, so we were planning on merging the two plans for 2025 and relying on the transition relief period through 12/31/2024.

We were just told that Company A signed on as Plan Sponsor of Company B's 401(k) plan, has moved all of Company B's employees onto Company A's payroll, and still has those same employees participating (deferring and receiving match) in Company B's plan.

What do we do here? My first thought would be that the employees who were moved to Company A's payroll would also move to Company A's 401(k) plan, but it's confused by the fact that Company A is now the Plan Sponsor on both plans. Did they knock themselves out of transition relief? If so, do they need to do a corrective amendment for the "carveout" of employees still participating in Company B's plan and now they need to pass coverage? 

Gotta love being the last to know with M&A

High earner under age 50 works for two employers. For 2023, he electively deferred $22,500 into one employer's 401k plan as Roth. In the other, he electively deferred $7,500 as tax deferred. He will have to have $7500 returned to him. Is there any ordering of such, i.e., Roth before tax deferred or tax deferred before Roth, that must be followed or can he choose whichever?

We have an audited plan that transferred to a PEP last year.  The assets transferred May 31, 2023, the PEP considered it a transfer of assets not a plan termination.  The auditors are doing a combined audit of 2022 and the for the short plan year period of 1/1/2023-5/31/2023 (when the assets transferred).  My question is... what is the due date of the Form 5500 for the short 2023 plan year? 

Thank you, 

Hi, 

I'm looking for some advise on Abandoned plans.  When a plan sponsor decides to terminate their 401k retirement plan as per regulation it need to be closed within 12 months from the termination dates however we have seen plan sponsor becoming unresponsive which ultimately leads to Abandoned plan.  

From a record keeper perceptive what will be challenges to maintain an abandoned plan? also on the regulatory part if any? Kindly assist.

Thank you

I'm checking the admin software on this which says the person is not key for 2023.  99% of our plans are small with owners/officers being the same and always >5%.  But now the top-heavy issue comes into question for a client with a non-owner officer.

Question:  For PYE 12/31/2023 the top-heavy determination date is 12/31/2022 and the plan is top heavy as of that date.  The employee in question is not an owner or officer in 2022 but became an officer 1/1/2023 (no ownership) and has $250,000 in comp for 2023.  I believe this person is non-key for 2023 and needs a top heavy contribution for 2023.  This is what our software indicates.  

Likewise if someone buys into a company in 2023 at over 5% (is not an officer) they would not be key for the year of their buy-in since the determination date of their status is the last day of the prior year. They would be non-key for 2023 and key for 2024.  (They would be HCE for 2023  however.)

Comments? Thank you!

"The Helping Young Americans Save for Retirement Act is a bipartisan legislation that aims to encourage savings by younger workers in defined contribution plans. The bill would allow employees aged 18 to 20 to contribute to 401(k) and ERISA-covered 403(b) plans after completing one year of service, although employers could exclude them from receiving employer-matching or nonelective contributions."

It's too much.  They need to give us a minute!  Does anyone have Brian Graffs direct dial/email address?  If so tell him Austin Powers will make himself available Congressional Testimony for as long as it takes to convince Congress that this has to stop.

https://www.mercer.com/insights/law-and-policy/bipartisan-bill-would-lower-dc-plan-eligibility-age-to-18/

Just a question, after having a discussion with a co-worker.  Can a plan have different eligibility dates for a 401(k) and 3% Safe Harbor Contribution, or should they match?

I know the eligibility date for a Profit Sharing (or any discretionary contribution) can be different.  I just wanted to confirm if the Safe Harbor had to match the 401(k) or not.

Thanks in advance!

I have a prospective client who received a $500K payment in 2024 for signing a  “non-compete agreement”.  This will be reported on a 1099.  Can income for signing a non-complete be used as “earned income” for pension purposes? 

This person has other self-employment income that can be used, but wondering if they could also use the $500k in 2024?

In late 2023 we calculated the 2023 profit sharing contribution allocation for a 401k plan.  Only 4 participants shared in it (1 HCE).  The profit sharing is optional and is allocated on a cross-tested basis, each participant as its own allocation group.

The PS amount for each participant was communicated to each participant.  The NHCE's allocation was more than the minimum needed to pass testing.

Early 2024, one of the NHCEs is leaving the company.

Can the employer change only his allocation to a lower amount (enough to still pass testing)?  Since the employer previously informed the participants of their 2023 PS allocation, is it a problem to go back and change that allocation to a lower amount just for this specific NHCE?

Thank you

Any advice would be appreciated regarding the following question:

Can I switch from 5500-SF to 5500-EZ if a one-participant plan has been filing 5500-SF for several years, but it seems that it should have been filing 5500-EZ instead?  

To clarify - as a single owner LLC I have been filing 5500-SF since 2015 (don’t remember why I started with 5500-SF instead of 5500-EZ, but at the time that seemed the right form), and now in 2024 accidentally I read that I should have been fining 5500-EZ instead since 2021.  Which form should I file in 2024 and should I do anything about the prior filings?  Is it possible to hide all of my 5500-SF filings since 2015 from the public, which I just learned are visible to all?

Thank you.

Hi, 

I'm looking for some clarification on final 5500 for Terminating plans. Is the final 5500 based on the Plan Termination date of final asset exist date.  We received a Plan for Termination in 2022 and the Term date was 8/31/2022 and the asset exist date was 12/26/2023, post the asset exist date there was a residual amount that got posted on 01/02/2024 since the plan had assets in 2023 the final 5500 will be for 2023 right? and the residual amount can be adjusted in 2023?

Thank you. 

I have a 401k plan that is TOP HEAVY and makes a PS contribution (new comparability).  The Service Requirement is 1 year, 1000 hrs, age 19 to enter the 401k plan but for the Profit Sharing has a Age 21 requirement. I have a NHCE (non-highly compensated employee) that is age 20 so they are entitled to the 3% Top Heavy Contribution, but the client wants to give him a 5% contribution since he is giving all other NHCEs 5% for the Profit Sharing. Can I do this? I am just concerned about the age requirement.

Please consider the following:

Calendar year DC plan with a non-elective discretionary employer contribution. The plan document is written with the following allocation condition to receive the non-elective:

"To be eligible to receive such Non-elective Contribution, the Participant must be employed by the Company on the date the Company makes the Non-elective Contribution."

The plan administrator will fund the contribution on March 1, 2024 for the 2023 plan year to only eligible participants actively employed on March 1, 2024.

This is a new one for me, I was under the impression that you could not have an allocation condition beyond the end of the plan year. Am I wrong? Do the regulations allow for this type of allocation condition? Or can the word "makes" be interpreted differently (e.g. "makes" means the plan year to which it is allocated, or does it mean the date money is deposited to the plan)?

Thank you!

I just can not fathom a PT worker wanting to contribute to an employer 401(k)- I can't be the only one!!

No one has said anything about a LTPT employee doing an election form with either $0 or 0% of pay, which would appear to solve the problem.

I would think clients will scream like stuffed pigs if they have to bring in LTPT employees in any event.  At least some of mine have.

If I change eligibility to 1 YOS and drop the hours requirement, I don't think you can do that for only deferrals as well I don't think software can handle it; and keep the customary age 21/1,000 hours within a 12 month period for the SH and profit sharing contributions, if any are to be made.

I would think the other options would either be elapsed time (but this would apply to FT as well) or change eligibility to age 21/500 hours, but that again would apply to all eligible.

Then again, and pardon my ignorance, the 500 hours is for entry or entry and contribution, or both?

Too many changes to digest - starting to question whether this is worth it.

Bob owns his own RIA 100% pushing investments. He also owns a 50% stake in an insurance business.  No control group.

The insurance business has 4 EEs.  If they setup a 3% SH 401(k) plan I don't have to worry about Bob exceeding the 415 limit if he maxes out the RIA business.  Correct  

Of course I need to watch the 402(g) limit.

What is the correction method for an operational failure to exclude rollovers when applying the $5000 involuntary cashout distribution rule in a plan to termed participants?  The plan has operated since 2018 as if rollovers were included. Do we go back to each prior plan year and look at the small accounts that should have been cashed out and cash them out now in 2024 even though the  vested balance could now exceed $5000. Thank you for your thoughts. 

An RMD was requested on 12/29/2023. The fund company didn't process it until 1/2/2024. They said a 2024 1099-R will be generated since the distribution wasn't actually done until 2024.

How is the handled by the participant regarding his taxes? He is expected to reflect a 2023 RMD but will not have a 1099-R to show for it. in 2024, he will end up with 2 1099-R's.

We have a Safe Harbor Non-Elective plan that wants to terminate the plan in January of 2024. The plan's only participants at this point are the owner and his spouse.

What would be the requirements to terminate the plan? The owner would like to terminate the plan as early as possible.

Thank you.

Plan provides for immediate entry for deferrals and Safe harbor non-elective.  Profit Sharing requires 12 months of service.   Plan is not top heavy. 

In 2023 an owner's son got hired and deferred and is getting the safe harbor along with 6 other NHCEs.   They all are getting the 3% safe harbor.  I am testing the plan using cross testing.  This passes non-discrim testing for the >12-month group but fails for the <12-month group.  I'll have to allocate profit sharing to the <12-month group to pass testing.  Or does it need to be allocated as QNEC?  In hindsight, the plan should have excluded HCEs from the safe harbor non-elective.  But that is obviously too late.

Thank you in advance for any comments.

Tom