I'm looking at a 457(b) document and adoption agreement specifying that payments must commence no later than April 1 following date of termination. Obviously done back when that was the required beginning date.

I just want to confirm - for a 457(b) plan, I assume it is still ok to retain this provision, (if they want to) even if RMD date for active participants is the new 72 or 73, depending upon DOB?

I inquire if hardship distributions may occur from rollover accounts and/or Roth rollover accounts. Also, I inquire if hardship distributions may proceed from discretionary contributions. 

§ 401(k)(14):

26 USC 401: Qualified pension, profit-sharing, and stock bonus plans (house.gov)

(14) Special rules relating to hardship withdrawals
For purposes of paragraph (2)(B)(i)(IV)-

(A) Amounts which may be withdrawn
The following amounts may be distributed upon hardship of the employee:

(i) Contributions to a profit-sharing or stock bonus plan to which section 402(e)(3) applies.

(ii) Qualified nonelective contributions (as defined in subsection (m)(4)(C)).

(iii) Qualified matching contributions described in paragraph (3)(D)(ii)(I).

(iv) Earnings on any contributions described in clause (i), (ii), or (iii).

§ 402(e)(3)

https://uscode.house.gov/view.xhtml?req=(title:26 section:402 edition:prelim) OR (granuleid:USC-prelim-title26-section402)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_e_3

(3) Cash or deferred arrangements
For purposes of this title, contributions made by an employer on behalf of an employee to a trust which is a part of a qualified cash or deferred arrangement (as defined in section 401(k)(2)) or which is part of a salary reduction agreement under section 403(b) shall not be treated as distributed or made available to the employee nor as contributions made to the trust by the employee merely because the arrangement includes provisions under which the employee has an election whether the contribution will be made to the trust or received by the employee in cash.

I've been asked a question that I don't think is black and white but certainly smells funny if not outright bad.

Start-up payroll/TPA companies appear to be offering free payroll services to companies that move their 401(k) plans to their TPA arms. Is this a fiduciary breach by the plan sponsor? Maybe, or with certainty?

If the primary (any?) decision criteria to move the plan is the unrelated benefit to the plan sponsor and not solely in the best interest of plan participants, then that is clearly a breach, is it not?

But does the mere appearance of a conflict of interest (and breach) mean that there is one? Would a participant even know? Would this even be discoverable upon a routine audit? Or are these types of arrangements littering the skies flying under the radar without scrutiny?

I remember reading either something similar a few years back, where some economic benefit is offered to the employer if plan administration is moved, and thought the opinion or consensus then was it didn't pass the smell test.

Thoughts and opinions please.

ERISA § 206(d)(3)(A) provides: “Each pension plan shall provide for the payment of benefits in accordance with the applicable requirements of any qualified domestic relations order.”

Even for a plan that is ERISA-governed, the quoted sentence about recognizing a QDRO does not apply to “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees[.]” ERISA § 201(2).

BenefitsLink neighbors, in your experience how likely is it that an unfunded deferred compensation plan omits provisions for following a domestic relations order?

What legal, plan-design, and other reasons motivate an employer to omit QDRO provisions?

What legal, plan-design, and other reasons might motivate an employer, despite the absence of a public law command, to include QDRO provisions (within what tax law permits without defeating the plan’s tax treatment)?

What practical difficulties do employers and plan administrators encounter?

I know the option to rollover 529 account funds to a Roth IRA takes effect beginning IN 2024.  And can only be rolled over up to the Roth IRA contribution limits (i.e., $6,500 for 2023 and $7,000 for 2024).

Is the deadline to rollover the 2023 $6,500 contribution limit 4/15/24 -- or 12/31/23?

Is the deadline to rollover the 2024 $7,000 contribution limit 4/15/25 -- or 12/31/24?

Wondering if I can rollover both the 2023 max and 2024 max IN 2024 ($13,500).  Or only the 2024 max of $7,000.

I assume there is no clarification on this yet?

Plan year end was 6-30-23, so 5500-SF was due January 31 2024.
Plan was being audited for prior year, so they neglected to file before Jan 31 due date.
Now its 20 days into February. Can the return be filed electronically, although late, with reasonable cause explanation?
Or [when compared to $250 per day] is it safer just doing DFVCP for $750?  

Thanks

So, I'm not a CPA, and I wondered if this statement from a client's CPA makes sense, where there are two or more Schedule k-1's, but not a CG/ASG, and there are no participating employers? To me it seems odd, but perhaps it is perfectly normal:

The K-1 from that (other LLC) will have a substantial effect on his K-1 from (XXXX), but it won't change his earned income from (XXXX). His 2023 self-employment income from (XXXX) is expected to be ($$$$$) prior to employer contributions and reduction for self-employment taxes.

Here is a new one for me.

Told the active client RMD was 3k/month for 9 months (first year) but took 10.

There is no in-service allowed under the plan document.

Is this something that can be corrected under SCP?

There was no withholding nor spouse consent done as I just found out and was never told about this.

I know it is a small amount but I still want to make sure all ducks are in a row.

Thanks

So, the wording in IRS Notice 2004-2, Q&A L-2, and similarly in Q&A L-9, seem to contemplate the taxable year when "allocated" in a different manner than the normal interpretation of "allocation" for valuation, deduction, and 415 purposes. In this case, "allocation" seems to be synonymous with "deposited" or "contributed." Which makes sense - since it has to be reported on a 1099, how could it be done otherwise if the employer went on extension, and the employer contribution wasn't made until September, for example? Any other thoughts on this?

Q. L-2: If an employee designates a matching contribution or nonelective contribution as a Roth contribution, for which taxable year is that designated Roth matching contribution or designated Roth nonelective contribution includible in the individual’s gross income?

A. L-2: A designated Roth matching contribution or designated Roth nonelective contribution is includible in an individual’s gross income for the taxable year in which the contribution is allocated to the individual’s account. The preceding sentence applies even if the designated Roth matching contribution or designated Roth nonelective contribution is deemed to have been made on the last day of the prior taxable year of the employer under section 404(a)(6) of the Code.

Suppose you have a traditional 401(k) plan with about 20 participants.

The plan document specifically states that salary deferral contributions in excess of 40% of Compensation are not permitted.

In 2023 they had a participant with lower salary that funded salary deferrals of 70% of compensation.

Since this is a violation of the plan I would think the extra 30% needs to be removed from the plan and refunded to the participant.

Would the full 70% be included in the ADP test? I would think not because the plan specifically prohibits salary deferrals in excess of 40%.

Does anyone agree / disagree?

Thanks.

Have a real saver of an employee who has no ownership in the company sponsoring the 401(k) plan that she is a participant in.

This is a valued employee so she is an HCE. She has a substantial amount in an IRA and was thinking of rolling her IRA into the 401(k) plan to avoid having to take RMDs. She is currently 69 and is looking ahead. Anything wrong with rolling over the IRA now with the idea that she will not need to take RMDs until she actually retires, which she claims will be at least 10 years?

Thanks.

Hi. Under our cash balance plan, a contribution doesn’t receive interest until February of the following plan year.  For example, a 2023 contribution will start to receive interest credit in February of 2024.  We would like to amend the plan to eliminate the 1 month delay and have contributions receive the interest credit starting on January 1 of the following plan year.  Would it be permissible to make this amendment retroactively effective to January 1, 2024? 

Thanks.

Participant terminated employment in 2022.

Employer did not make the 2022 contribution until 9/2023 (terminated participant did not receive her contribution)

I revised the 2022 valuation to include terminated participants share of the 2022 contribution, plus share of 2023 earnings.

It is now 2024, participant wants a cash distribution.

I understand that 20% must be withheld from distribution.

Do I use 2023 945 to forward taxes to IRS or wait for the 2024 forms. Is it too late to do 2023 1099R?

Or is there another way to handle this situation.

Thank you for your help

I've seen conflicting things on this.  Is it 100% known yet whether or not this administrative horror show is mandatory or optional?

I have an plan with a 10/1 plan year end date.  When I file an extension for the 5500, is the extended filing due by 7/16, or can I count the entire month of October, through 10/31, and ask for an extension to 8/15?

Thank you.

Participant defers $20,000 in Roth and $18,500 in pretax for 2022.  Obviously, we are beyond the 4/15/2023 deadline.  

Does the participant have the option to tax the excess from Roth?  What were the tax consequences on the 2022 filing?  Did they have to claim the pretax as excess?  Which source is the better option to take the distribution from?

We became aware of a non-client plan sponsor who needs a 5500 audit for 2022.  This is not our TPA client.  The plan is bundled with ADP.  The plan sponsor contacted us for a plan audit.  The plan was small for 2021 but went well over 120 as of 01/01/2022.  The 5500 for 202 has not been filed.  ADP prepared the 5500 and I'm guessing takes the position - we posted it on our website and sent an email to the plan sponsor.  I've seen that before with another bundled provider.  And I realize plan sponsors need to be alert to deadlines as they are ultimately responsible.

My question is (and I've seen this before at webinars and didn't pay close attention because I didn't think it would ever apply to us) - should the 5500 be filed now without the audit report?  I'm told the audit will not be completed for a month.  I'd like to get the DFVC penalty paid before the IRS catches the late filing.  I'm surprised it hasn't already.

What do you think about filing the 5500 now without the audit report and amending a month later with the report?

Thank you,

Tom

An employer sponsors a 401(k) plan for their employees, plan year is 1/1 to 12/31. We'll call this Plan A. They spun-off a certain division of employees into a separate (new) plan on 9/1/2023. We'll call this Plan B. These individuals did NOT incur a termination of employment. 

When testing Plan A for 1/1/2023 to 12/31/2023, the spin-off individuals will be included, but it will only include their contributions from 1/1 to 8/31, correct? As for the compensation used on the test for Plan A (for the spin-off group), I think it is going to be dependent on the provisions of Plan A, and how it defines compensation for the ADP/ACP test. Would that be correct as well?

Depending on the plan's provisions - the compensation used for the spin-off group on the Plan A test could be from 1/1/2023 to 12/31/2023, or it could be from 1/1/2023 to 8/31/2023, if the plan excludes compensation while the participant is not an eligible employee (for Plan A). Thoughts?

I am narrowing my prior question. If a subsidiary/Participating Employer (PE) is participating in a single employer safe harbor plan via a participation agreement and the company is purchased mid-year in a Code Section 410(b)(6) transaction, what are there options to leave the safe harbor plan mid-year? Assume the buyer does not sponsor a safe harbor plan. I think one options is to spin out into their own mirror safe harbor plan, and this will keep safe harbor status for the PE and the former parent plan. Is there another option - such as can the PE cease participation in the safe harbor plan before the sale and allow a distributable event without the plan losing safe harbor status? Appreciate any comments!

If I was born on 4/11/1952, my first RMD is due 4/1/2025, am I correct?