Some individual-account retirement plans that provide participant-directed investment lack designated investment alternatives. Instead, each participant gets a securities account with a bank or a securities broker-dealer. Trade lingo calls this a brokerage-window-only plan. According to an ERISA Advisory Council report, “BWO” is mostly with small (< 100 participants) plans, and especially plans with “fewer than 25 employees.”

A brokerage-window-only plan calls the plan’s trustee to open and maintain a securities account for each participant. Although the trustee is the account’s holder, the participant instructs the broker-dealer on what securities to buy, hold, or sell.

An automatic-contribution arrangement sometimes requires a plan’s administrator and trustee to act for a participant who does not communicate (other than by not counteracting an automatic-contribution notice).

About a broker-dealer’s account-opening forms (or anything needed to maintain an account):

Does anything require a signature from the participant?

Does anything require information about a participant that the plan’s administrator lacks?

Will a broker-dealer open an account if the individual’s profile information is incomplete?

Did some brokerage-window-only plans have, before any I.R.C. § 414A condition, an automatic-contribution arrangement? Did it work, or have there been difficulties?

If your clients include brokerage-window-only plans that have a § 401(k) arrangement (or will have one by 2025), do you expect difficulties in setting up and maintaining securities accounts for those participants who neither opt out nor affirmatively enroll?

So, I've seen various opinions on this.

One is that for purposes of DEFERRALS ONLY, (not employer contributions) the "less than 20 hour exclusion" is no longer valid at all, and therefore all employees must be allowed to defer under the universal availability rule, absent another valid exclusion category.

Another is that the "less than 20 hour" exclusion is still valid for deferrals, EXCEPT for LTPT employees. In other words, someone who works only, say,  6 hours per week could still be excluded for deferral purposes.

I'm not 100% sure which is correct. From a practical standpoint, since most plans (of ours, anyway) don't use the 20 hour exclusion anyway, it isn't a giant problem for most small plans regardless.

Thoughts?

I have a pension plan that is terminating.  A number of assets in the plan are LLC's that are near worthless, but not easily sellable.  The question is what is the best option to remove these assets from these plans before it is terminated.

If a bankruptcy trustee is involved in the abandoned plan termination (at the initial stage, until a QTA is chosen), can those fees be added to reasonable expenses to be paid out of the pension assets (under the abandoned plan regs) or does the trustee only get paid as "trustee time" paid through the bankruptcy proceeding (where comp is statutorily determined by a formula based upon money disbursed)?

For the “evicted from principal residence” category, would an uninhabitable house qualify?

 I have a participant whose septic system needs repairs.  Without a septic system, the house will be considered uninhabitable and they will have to move out (albeit temporarily).

How do you handle RMD in a defined benefit plan?

Plan has SH Match.

Eligibility is 1 YOS, 1000 hours, monthly entry

Plan Excludes NRAs with US Source Income. I don't believe this group can be considered "Excludable".  

The company has approx 900 Employees of which 700 are in this "NRA" class.  These employees are long term employees who work over 1000 hours each year.  The ratio is about 35%. Plan fails ABT testing.  

Question:  Can they do a QNCE to fix the 401(k) coverage only?  This QNEC would allow them to pass the  ABPT giving them a lower ratio threshold for the 401(m) coverage.  I am thinking no since not all of those "eligible" for the Pretax would be receiving the SHM.  I also believe it should be a 3% contribution since it is a SH Plan?

They also have H2B visa employees.  How are these employees treated?

We've always used Box 5 for the compensation when a document defines it as W2 Compensation.  We have an auditor questioning it, wanting us to use the Gross Pay (which isn't a box on the W2).  Which one is commonly used?

I know if someone is funding the Safe Harbor Match on a payroll-by-payroll basis, a true-up is not required.  However, what happens if someone is inadvertently overfunded?  Does that money need to be pulled from the account or since it's on a payroll-by-payroll basis no adjustments are needed?

Thanks in advance!

I’m looking at an ATP STD program in Florida. No employee contributions. The administrator bills by participant for every activity they do, phone calls, emails faxes, consulting. The participant invoice show the amount of ATP services as taxable income to the participant. Can this be correct?

Hi

I usually manage to file 5500 forms for late adopters but there is one, could not do it.

So, for 2024, when filing the 5500 forms, I know I need to attach a copy of the 2023 SB.

A few things I am not clear about:

1. How do I attach a second SB? My program has a specific SB attachment option with additional sub-attachments for the SB attachments. If I do that, no issue

2. If above is not the right way then I need to attach under "other" option but with this option, I will not have sub-attachment options for SB which means all attachments have to go under "other".

Any suggestions?

Thanks

Is there a new option to contact someone at the DOL that you are working on putting together past 5500's, including this past year, and submit them all together at one time?

CPA seems to think there is. I don't think I missed something, or did I?

Hi there,

Are non-erisa church plans allowed to have adopting employers?  If so, are there any rules around why they may or may not be able to?  

I have a client who is a non-erisa church plan who acquired a new entity.  They have 100% ownership of said entity, however, the new entity will be maintaining its own EIN.  Can those employees participate in my clients existing non-erisa church 403b?

Thanks, 

I have a QDRO for a plan and it has awarded a dollar amount to the former spouse Alternate Payee.  

The date of segregation is 8/2/2024.

Is the Alternate Payee entitled to gains on that amount of assignment from the date of segregation until now?  I thought the answer was yes, but a co-worker felt that this might not be necessary.

Anyone confirm that Alternate Payee is only entitled to the flat dollar amount?

Note the plan's assets are held at Hancock, so we will move the amount over to an account for the Alt Payee until she fills out a distribution form.  Right now, I am trying to determine how much to move and split it over his 3 sources.

I have an ineligible employee who was allowed to defer prior to meeting eligibility.  I would normally just amend the Plan to allow early entry for this employee.  My only concern is that the Plan is Top Heavy.  Is there anyway to avoid allocating a Top Heavy Benefit to this employee?

Administer a 1 participant DB plan. Sent to us by an insurance agent.

When the plan was established 10 years ago, the life insurance was exactly 100 times the projected benefit. The client still wants to keep the plan but does not want to fund as much. Dropping the benefit formula will make the insurance more than 100 times the projected benefit.

What happens if the plan were audited and it was determined that the life insurance upon purchase and for 10 following years met the 100 X rule but now does not?

Thanks.

I passed my QKA exam last year and am now interested in taking the QPA exam. Could you please clarify if it’s possible to take the QPA exam without first completing the QKC exam, or if the QKC is a prerequisite?

I appreciate your guidance.
John

One-person plan that at one point had some assets - never enough to need to file a 5500-EZ.  All the money was invested in two limited partnerships... that went bankrupt.  So the two assets are literally worth zero.  Now he's terminating the plan, and I've got to file a 5500-EZ for the final year.  But it's going to start with $0 BOY; that seems like we're just asking for trouble.  Any suggestions other than to wait for the inevitable letter from the IRS?  Thanks.

If the benefit is distributed as an annuity for life, can it begin any time, even if the employee is still employed, without the employee incurring a 10% early distribution excise tax under Code section 72(t)? 

So hopefully I got your attention.   A medical practice agreed to convert their plan from RK A to RK B.  The plan has several self-directed brokerage accounts that are offered through RK As recordkeeping system so everything is (was) working fine.  Upon notification that the plan was leaving RK A told the Plan Sponsor that all assets in the SDAs would need to be liquidated and the cash transferred to the core accounts to then be liquidated and transferred to RK B.  Dr. X, who is a partner / member / owner, but not a majority owner, refused to liquidate his positions because he has a specific Russian ETF that is illiquid and represents a $250k unrealized loss. The fund is actually in the process of being liquidated by the fund company, but there is no known timeframe for when this process will end.  The Plan Sponsor still wants to convert from RK A to RK B but is at a standstill due to Dr X's refusal to liquidate his account.  Dr. X is not eligible for in-service withdrawals so he can't distribute in-kind shares to an IRA.  We have politely told him that he is potentially creating a fiduciary issue since he is taking his personal account into consideration and not doing what is in best interest of plan and other participants.  Can anyone chime in with thoughts on how to proceed? If at all?  Maybe I shouldn't want this plan, but the rest of the decision makers are great and they are VERY frustrated with Dr. X.