I have a somewhat unusual situation.  We have a defined benefit plan that was frozen back in 2017.  The Plan Sponsor recently amended the Plan to allow for lump sum payments.  We had a terminated vested participant who just passed away.  The only death benefit was the QPSA for married participants.  This individual was divorced (I believe back in 2020).

The Plan sponsor received a copy of the divorce settlement from the ex-wife after the Participant died.  The divorce settlement stated that the full benefit from the defined benefit plan was payable to the spouse.  No QDRO was ever written.

The Plan Document is an FIS Cycle 3 Document with the following language:

5.22 QUALIFIED DOMESTIC RELATIONS ORDERS
All rights and benefits, including elections, provided to a Participant in this Plan shall be subject to the rights afforded to any Alternate Payee under a "qualified domestic relations order." Furthermore, a distribution to an Alternate Payee shall be permitted if such distribution is authorized by a "qualified domestic relations order," even if the affected Participant has not reached the "earliest retirement age." For the purposes of this Section, "qualified domestic relations order" and "earliest retirement age" shall have the meanings set forth under Code §414(p).
A domestic relations order that otherwise satisfies the requirements for a "qualified domestic relations order" will not fail to be a "qualified domestic relations order": (i) solely because the order is issued after, or revises, another "qualified domestic relations order"; or (ii) solely because of the time at which the order is issued, including issuance after the Annuity Starting Date or after the Participant's death.

We told the ex-wife that she needs a QDRO before any payment can be made.  However, there is some disagreement in our office as to whether or not there are any benefits payable to the ex.  My arguement is that the Participant died prior to the request for any payments to begin.  He had attained Early Retirment Age but was a few years from Normal Retirement Age.  As an unmarried Participant, there is no death benefit so the ex is not entitled to any benefit.

Another administrator in the office thinks that if a QDRO is written, then the death of the participant should not affect the payment available to the ex since she was the Alternate Payee and entitled to 100% of the benefit.   

I still think any benefit payable to the ex is contingent on the Participant being alive at the time an election is made.

The Plan Sponsor has no problem with paying the benefit to the ex if she can get a QDRO issued.

Any thoughts out there on the benefit payable in this situation?

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We have a money purchase plan that the client wants to merge into an new profit sharing plan effective 1/1/2026. Since the psp is new, does it need to have the auto enrollment provisions? Or because of it being a merged plan, it won't need those auto enrollment provisions?

Does anyone have any examples of a merger agreement that I can use?

Is there anything else that is needed? The participant notices will be going out.

We are trying to terminate a plan but we have a participant who worked a long time ago for the company and provided a fake social security number. The amount of the benefit is small however do we set up an automatic rollover IRA with the fake social security number or do we forfeit the benefit?

Suppose a calendar year plan  terminates 7/7/2025. A question has arisen as to the proper 415(c) reduced limit. According to treasury regulation 1.415(j)-1(d)(3) (emphasis is mine) fractional parts of a month are included. So the proper fraction is 7/12, not 7.226/12, correct?

(d) Change of limitation year -

I recently inherited  DB/401k combo plans.  The company is an LLC and currently has only included the husband's partnership income for benefit purposes (wife has never participated).  For 2025, they want to bring in the wife and daughter.  Will this cause the DB plan to require PBGC coverage? 

A partnership (2 partners) with a safe harbor match 401(k) wants to terminate the plan.  Plan is top heavy.  Historically the partners' K1s are not completed until late September of the following year.  Also historically, the partners make deferrals during the plan year which are matched, usually incorrectly and corrections are needed after the K1s are available.

To terminate the plan I was thinking we remove match for HCEs (the 2 partners are the only HCEs) starting 1/1/2026, and terminate the plan in 2026 after the K1s are completed and we know that we have the correct match for 2025.  Currently there is enough funds in the forfeiture account to fund the 2026 safe harbor match for the non-HCEs, and there is a very low risk that the partners 2026 K1 compensation would not support their salary deferrals, which I'm sure they would continue to make.

Appreciate any feedback or ideas.

Thank you.

A loan a participant uses to buy her principal residence may set a repayment period longer than five years (within what the plan’s governing documents, often including a written policy or procedure, allow).

But if the plan’s sponsor-administrator is listening to your advice, what maximum do you suggest?

50 years?

30 years?

20 years?

15 years?

Something else?

The longest repayment period the recordkeeper agrees to process?

And whichever maximum you suggest, why do you prefer it over other possibilities?

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I came across this article from Verrill about implementing Roth Catch Ups when a plan has a provision to spillover deferrals to a NQDC once the 401(k) limits are reached.  The article in particular highlights a potential conflict between giving the participant an effective opportunity to elect out of a deemed Roth election and a requirement to make deferral elections before the start of the year for the NQDC.

https://www.verrill-law.com/blog/consider-nonqualified-plans-when-implementing-new-roth-catch-up-contribution-rules/

The article makes suggestions on steps to take now to be sure the operation and administration of plans with the spillover/link to a NQDC is reviewed before 2026 starts, and that everyone involved with the plan - plan administrator, plan sponsor, service providers, participants - are all informed.

This wasn't on my radar screen when discussing implementing Roth Catch Ups, so I am sharing it in case others also have plans that use these features.

We have a client that maintains 2 plans with us, one of which uses safe harbor match and the other that does not use a safe harbor contribution.  They became a control group 2  years ago and we have relied on the transition rule to avoid coverage but that is expiring.  What happens if the plans will not pass coverage to be able to be tested alone and technically need to be tested together? I know you are not able to aggregate plans for testing when one is safe harbor and one is not.  At this point, they do not want to change the plan design of either plan so we are trying to figure out how to fix this if coverage fails.

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Talking to a potential plan, and there are two f/t employees and 10 who are 'half-time'.  Assuming that these people really do work only half of a f/t schedule, do the rules really let us treat this as 2 + (10 x 50%) = 7 and therefore exempt from the mandatory automatic enrollment?  I realize that it might be safer to just include it for many reasons, but if the client is really against it... it's OK, right?  Thanks.

I just want to make sure I'm accurate in this.  A Plan has two participants, a husband & wife, both of which are deferring th maximum 401(k) contribution for the year:

Husband - $100,000 salary
Wife - $23,000 salary

Wouldn't the maximum deductible contribution be 25% of the total between them ($123,000 x 25%)?

I know the wife's full salary is being deducted as a 401(k) contribution, but couldn't we still use her salary and give the husband the total 25% of their combined salaries as a profit sharing contribution since her salary is still technically eligible income?

Thanks in advance!

What year do you file the 5500 for if the plan is an off calendar year plan. For some reason I wasn't able to read in the 5500 instructions on which year you'd file the 5500 for. Maybe I'm missing something? 

Client has sold the assets of their LLC, employees received their last paycheck 9/2/2025 and were obviously notified of the plan closing.

The business is not closing, and the new owners do not want the responsibility of the existing plan.

Can the plan termination date be 12/31/25 even though the employees were off payroll earlier?

In order to calculate the employer contribution, obviously a P&L is needed; I have not yet seen a P&L for less than a 12 month period.

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Hi

The sponsor terminated the DB plan in 2024 - not sure when the distributions happened - 2024 or 2025 - waiting for info, I did not do the termination and this will be a takeover.

The sponsor now decides that termination was a mistake and wants another DB plan.

As far as I know, there is no 1 year wait on this situation and can start the new plan in 2025 even if the final distributions happened in 2025 (they did unfortunately and account is closed, no luck there to rescind the termination).

Am I forgetting anything?

Thanks

Assume a participant severs from employment with a nonforfeitable account less than $7,000 (and more than $1,000) and the plan provides an involuntary distribution.

Despite that small size, the account includes both Roth and non-Roth subaccounts. (For example, elective deferrals were Roth and matching contributions were non-Roth.)

Assume the participant, after the proper notices, does not specify her preference for the distribution, invoking the plan’s default rollover.

Does a plan's administrator with its service provider pay separately the Roth and non-Roth amounts?

Or does a plan’s administrator and its service provider pay one sum, and instruct the default IRA provide on the distinct Roth and non-Roth amounts?

Does a default IRA provider separately account for the Roth and non-Roth amounts?

Does a default IRA provider put this in two IRAs? Or in one IRA with subaccounts?