I have a 457b plan that is changing its eligibility going forward. And one of the current participants will no longer meet the criteria. Can that participants still contribute and keep balance in the plan b/c he met eligibility previously?

Very sketchy info at this point, but likely that at least some years will be a large plan.

Sure, they can do DFVCP, but how far back do they go with this? And there will likely be no way to get full data for all the post-2009 plan audits. We'll see.

No, this isn't April Fool - I wish it was!

Heckuva way to start a Monday morning...

Anyone had one of these situations before? What were the results?

Thanks!

It's been over 20 years since I've actively worked with retirement plans, and I'm rusty.  Before I lead someone down the wrong path, could I please get confirmation that my route is correct?

• Over the years, a self-employed person has greatly benefited from SEP-IRA contributions.  Her business did well, and her SEP deposits were large. 
• For 2023, her SE income is unusually low.  Her SEP-IRA maximum is about $2,500.
• If she doesn't make a 2023 SEP contribution (she has no employees), she (1) isn't covered by an employer plan for the year and (2) can make tax-deductible, traditional IRA deposits for herself and her fully-disabled, nonworking husband.  The amount is about 5X greater than the available SEP-IRA.

Is my methodology correct?  I see this option as a good way to help someone who wants to maximize both her retirement savings and 2023 deduction.

Thank you for your help.

Large plan started a few years ago, but no 5500 was ever filed.

Currently working on past filings and ultimately DFVC.

They also never had a fidelity bond, or they can't find record of it due to complete change in personnel.

Question is - I know retroactive fidelity bonds can be purchased, and that this is not meant to be done illegally, but can the 5500 be marked Yes for coverage, when it is being filed late for the first time?  if not, is there any reason to buy the fidelity bond retroactively?  Alternatively, it would not be marked yes until the 2024 plan year during which it is finally purchased.

Client sold assets of his business and most employees terminated employment.

Client has a valid 242(b) election.

Client is considering freezing the 401(k) plan (and maintaining the entity that sponsors the plan) so as not to revoke 242(b) election.

I think terminating the plan (on purpose) would cause the 242(b) election to be revoked.

I think there was definitely a partial termination but I don't think this causes anything other than vesting of affected participants - I don't think this would revoke the 242(b) election.

Does anyone disagree?

We TPA a doctor's office.  The doctor is 100% owner of the practice but does not participate in the 401k plan.  His top assistant is an officer and makes over $250,000 but has no ownership.  Based on that, she is an HCE and a key.  She has 3 children working there not at that compensation level.  They are not HCE or Key.

The top assistant is 100% owner of a separate business that has most of its business with the doctors office.  We are looking into it but lets assume an ASG exists.  She is also the only employee of the separate business.

The separate business is not an adopting employer, but we still need to include the ASG for testing purposes.  With no other employees in that business, this does not impact the plan very much. 

(1) Unless, because of the Top Assistant being 100% of the other business, would she be considered HCE and Key regardless of income?

(2) And if so, does that mean her 3 children are now HCE and Key?

But if the separate business did become an adopting employer of the 401k plan:

(3) Would the top assistant would now be HCE and Key regardless of income?

(4) Would the 3 children also become HCE and Key in the 401k plan?  Two are over 21 and one is 20.

Thank you for any comments.    

403b plan sponsor wants to allow temporary part-time employees to make elective deferrals, but not "regular" part-time employees.  Assuming both subsets meet the definition of part-time under the IRS universal availability rules, would excluding "regular" part-time but not temporary part-time run afoul of the universal availability rules?

I'm doing the plan document for another TPA, 401(k)/PSP with effective date of 1/1/2023 except there will be no deferrals for 2023, deferrals to start 1/1/24 and the other TPA says to me- leave the effective date 1/1/23, we won't use the 401(k) portion until 2024.

I am more inclined to do a 401(k)/PSP effective 1/1/23 for the profit sharing with a "special effective date of 1/1/24 for deferrals, which I think makes more sense.

Owner only plan, no employees.

Other thoughts?

If I understand correctly, a one-person owner of a business with a DB plan can ultimately contribute more than their W-2 to a DB plan.

Can a Sole Proprietor (with no W-2 income) do that as well?  Seems the subtraction on Schedule C would make it impossible.

Hello..

Plan is going into black out... notices have been mailed timely, however some are returned for former terminated employees.

What do you do if a black out notice is returned via USPS due to insufficient address?

Thanks!

A prospect is wanting to set up a solo K plan for 2023.  My first reaction was the deferral for 2023 is not allowed since it was not elected by 12/31/2023 nor contributed on time.  But wasn't there a exception for first year plan adoption for sole proprietors.  I'm thinking I saw that somewhere.  I will research further but I know this group will know this right off the bat. 

Thanks

Tom

Just a simple clarification...

A client with a 5 participant 401(k) plan asked about the mega backdoor roth option.  I explained that every year we max out the plan to the 415 limit, there is no room for a voluntary after tax contribution.   Can she convert the PS contribution to ROTH each year with an in-plan conversion?

Terminated participant, instructions sent to brokerage firm to pay out said participant.  The payout didn't happen, and participant is asking for earnings on top of the original distribution amount.

Is there a standard for how to calculate "lost earnings"?  Should the brokerage firm have standards that would dictate this answer?

Thanks all!

"In the event hat a Plan is top-heavy for a Plan Year, no Key Employees shall be eligbile to participate to make any Elective Deferrals under the Plan."

Is that a valid exclusion? What I'm trying to do is have a stop-gap in the plan so that even if a Key Employee contributes to a plan that ends up being top-heavy they just have ineligible contributions and not a top-heavy minimum.  We have plans where we 'know' it's going to be top-heavy eventually. We just don't know if it's in 1 year, 2 years or 3 years for example.  And of course we tell them to stop contributing in January until we can run the test but I'm afraid if someone forgets it could cost them tens of thousands.

I will tell you I asked a guru and he felt that operationally it was a cutback.  I would be comfortable explaining that risk to the client but telling them on the plus side their plan as written can never be required to fund the THM.  And that is invaluable.

1. Plan established 2022

2. Prior year testing method elected in the document

3. Discretionary Match - nothing funded for 2022

For the first year, the 3% rule was used - HCEs 0% NHCEs 3% - plan passes ADP

They never made a match until 2023.  Since this was the first plan year of the match, can they use the 3% first year rule for the match contribution?

I'd love some feedback on the following scenario to see if I'm thinking about this correctly.   

Company A (which maintains a 401k plan) and Company B (which maintains a SIMPLE IRA) intend to create a JV.  Company A will hold less than 80% interest in the JV after the transaction.  Company B's employees will be transferred to Company A in connection with the transaction and become employees of Company A.  The intent is to offer Company A's 401k plan to the former employees of Company B (who participated in the SIMPLE IRA) immediately after close.  Post-closing the SIMPLE IRA will continue to be maintained by the JV or Company B.  I'd appreciate any thoughts on the following:

• Do you see any issue with offering former Company B's employees who become employees of Company A in connection with the transaction the ability to participate in Company A's 401k plan immediately after close?  Post-closing Company A will not be in a controlled group of corporations that includes the JV or Company B.  I'm assuming that the transaction will trigger a separation from service for former Company B's employees that come over to Company A.
• Will the entity that maintains the SIMPLE IRA (either Company B or the JV) have an obligation to fund elective deferrals and employer contributions through the end of the calendar year for the employees who terminate with Company B and transfer employment to Company A? 
• If the JV/Company B do not have any employees post-closing would they be able to dissolve the SIMPLE IRA mid year?

    Thanks for any guidance you can provide.  I'm not fluent in SIMPLE IRAs/408(p) and want to ensure I'm not missing something.

I'm hoping someone can help me solve a disconnect I'm encountering (or at least I think I'm encountering).

Many off-the-shelf cafeteria plan documents that I see from vendors restrict eligible employees to those eligible for the employer's major medical plan. I understand that for certain components (e.g., pre-taxing medical premiums, health FSA, HSA) initial and continuing cafeteria plan eligibility should be tied to medical plan eligibility. 

However, many of those cafeteria plans also cover other benefits, like pre-taxing dental, vision, and other insurance premiums, dependent care FSAs, etc. where the underlying eligibility rules are often different from major medical. This would seem to cause a problem if, for example, an ongoing employee goes from part-time to full-time during an ACA stability period. They may not be eligible for major medical for several more months (or longer), but would often become eligible for other benefits upon converting to full-time status. While the special enrollment rights allow participants to make or change elections, in most documents I have reviewed, the underlying eligibility rules themselves remain the same. In other words, even though the employee would otherwise be allowed to enroll in the other benefits upon converting to full-time, they technically would not be eligible for cafeteria plan participation until they became eligible for major medical. 

Am I missing something that would otherwise make a blanket eligibility statement like this appropriate in these situations?

Thanks in advance. 

Can anyone out there share their experiences with a 211 whistleblower filing regarding Employee Plans, specifically the timeline.

I am born on 12/30/1950 and am more than 5% owner.

Is my RBD 4/1/2023?

Is my second RMD due 12/31/2023?

Thanks

I retired in May after 26 years in a public school system. I had taken one 6,000 loan out in 2016 due to hardship  and then another loan for covid hardship in  2020. They made no mention of an outstanding defaulted loan in 2020. in fact, all of my annuity was with metlife and they split it into two when they sold out to Brighthouse. now they treated these annuity as two separate annuities. It took them months and an OCI involvement to attempt to have my Annuity roll over to another 403B with another company. It took them so long that in fact, a close my account due to no activity. I took an early withdrawal from one account that had the hardship Covid loan.. I was told that Brighthouse account had $28,000 in it. Several times I was told that there was no loan attached to it when I was no longer able to roll over and it had been 10 months of fighting. I asked them to just take a whole lump sum out. The amount I got was $4600, they took out for taxes on the defaulted loan as they used it as a gross amount and they took $17,000 in interest I have more than enough money in both accounts to cover the loan. Once during this entire 10 months, they mention the 17th interest in fact on my quarterly statements the 17,000 is stated as collateral and no interest is written on the metlife. There was collateral of $892.00 and 1100.00 interest. To be the collateral with the over 50% that you needed in order to take out alone in the first place.