I have another strange one, but this time I made sure to make sure that I have this well documented before asking questions. 

Client left employer a few years ago, after age 55. She had a pension benefit (Defined Benefit Plan) that was from a frozen plan. In 2019, the pension offered a lump sum buyout. They opted to continue to delay starting the pension. In June of 2023, the pension terminated and sent out elections for, again, lump sum, start income now, or delay. Again, they opted to delay. Their plan was to start the pension now, at 62 years old. Normal retirement age is 65. Every communication at every point indicated that they were eligible for Early Retirement, though, as of both the 2019 documents and the 2023 documents. We have it in writing: "You have met the requirements for Early Retirement as described in the Plan. You are eligible to receive an early retirement benefit at any time between now and your normal retirement date reduced under the terms of the plan." 

F&G "issued a group annuity contract" for the pension in December 2023. F&G is now stating that they cannot start their benefit until 2027, when they hit 65 years old. I was certain that the person they spoke with must just have been mistaken, so we logged in, and sure enough: the site shows February 2027 as both the "Early Retirement Date" and the "Normal Retirement Age." 

This is not something they could have changed, correct?

This is a screen shot from a video that the sponsor released regarding the plan termination.  

What recourse does the client have in this situation? 

Unfortunately, I don't have access to the actual plan documents. The annuity certificate has apparently not been issued yet (or at least isn't available on the site yet) and the previous pension service center does not have any documents available. But we do have the election notices from both 2019 and 2023 clearly stating that they are eligible for early retirement. 
 

I was married for 17 years and divorced in 2010.  We were supposed to file a QDRO, but none was done because my ex couldn't come up with her half of the costs.  We had no assets, and the QDRO was for my retirement.

I'm planning on remarrying and I wanted to know: after I remarry, can my ex file a QDRO and try to go after assets acquired after the divorce?  Could she go after my new spouse's assets?  Or would she be limited to the assets at the time of the divorce?

Trying to get some peace of mind since I plan on remarrying soon.  I'm starting the process for a QDRO now.

Thanks

Here’s my understanding:

SECURE Act 2.0 amended IRC section 403(b)(12(A) to make the universal availability rule subject to new ERISA Section 202(c).  This means that 403(b) plans can still exclude students and employees who normally work 20 hours per week. But, once an employee who is expected to work less than 20 hours per week meets the definition of LTPT, that employee must be permitted to make salary deferral contributions under the Plan.  

Because the “student” employee exclusion is not based on service, that classification is not impacted by the LTPT rules.

The issue where further guidance is needed is how does IRC Section 410(b)(4) impact this.  Under IRC Section 410(b)(4), the “20 hours per week” exclusion cannot be used unless all employees within that exclusion category are excluded. Does this mean that if one “20 hours per week” employee later meets the LTPT requirements, then all “20 hours per week” employees must be covered? I think it probably does.

I do not think 403(b) plan sponsors that are excluding “20 hours per week” employees should necessarily amend their plan to remove the “20 hours per week” exclusion. Here’s why: Employers are not required to make non-elective or matching contributions on behalf of participants who are eligible to participate solely by reason of the LTPT rules. If the plan sponsor removes the “20 hours per week” exclusion, then part-time employees become eligible without regard to the LTPT rules.  My concern is that the non-discrimination (and top-heavy) rules would now apply to this otherwise excludable classification.

Agree, disagree? Thanks.

If a participant didn't defer the maximum they could in one plan year, is it allowable to allow them to make a sort of true up contribution and give them the opportunity to make additional contributions for the prior year?

In a recent webcast on the "IRS grab bag" regarding automatic enrollment,  it was noted that for plans joining a PEP or MEP - "remember - the determination is based on the participating employer and not the MEP/PEP original effective date".  In this case, I believe that if a plan with an original effective date of 1/1/2020 joins a PEP on 1/1/2023, they are "grandfathered" and would not be subject to automatic enrollment.  The webcast did not address when the PEP was established.

However, in a recordkeeper's summary, it is noted  "A pre-enactment single employer plan that merges into a MEP established on or after December 29, 2022 (a post-enactment MEP) will lose its pre-enactment / grandfathered status." 

These seem to be contradictions.  When I look through Notice 2024-2, I do not find any references to PEPs or MEPs.  Is anyone aware of a site that addresses the PEP / MEP establishment date trumps a plan's original effective date?

I just need some clarification.  I know how to do the calculation.  The profit figure to use is line 7 of the Schedule C?

Line 7 profit
multiply by 1402(a)(12) deduction (.9235)
calculate and deduct FICA
calculate and deduct MED
Back into plan contribution

Add it all up and the result is Line 7

Right? I want to explain it succinctly to the financial advisor.

I'm doing a final PS allocation for a calendar year plan that was terminated 9/15/23.  That was the final pay date before they were purchased, and all payroll stopped then, and the purchase agreement required that the plan be terminated as of that date.  I couldn't convince them to let the plan run until 12/31/23.

The PS formula is integrated at 80% SSTWB + $1.  So for 2023, if it was a full calendar year, that would be $128,161.  x8.5 /12 = $90,780.71 (or something like that, depending on when you add the extra dollar).  The question is what to do with the integration level.  This is below 80% of the annual limit, so do I have to use 4.3?  Or do I get to still use 5.4% because it's 80%+ of the applicable limit once the pro rating is considered?  My software gives me an error on the latter because 56.667% of the TWB is not at least 80%, but I know to always double-check things in tricky situations...

Can/must a church having a 501(c)(3) determination and offering a nonqualified deferred compensation plan limit eligibility to a "top-hat" group?  Also, as I understand 457(f) doesn't apply in the case of a church employer, can plan accounts avoid current taxation upon vesting, as usually occurs with other tax-exempt organization nonqualified plans?

I have an issue where a 2023 contribution that was intended to be made as an employee contribution was erroneously made as an employer contribution (due to a new employee being unaware of the correct forms to use). Can this contribution be recharacterized as an employee contribution? If so, would we use ECPRS or VCP?

Thanks!

I have two 401(k) Plans that are a controlled group, and they fail both 410(b) and average benefits tested separately.  I'm testing them together, but the issue is one plan has a basic SHM and the other plan has an enhanced safe harbor match of 100% up to 4%.  I believe that both plans should have the same match formula but I'm having difficulty putting my eyes on any articles or regs saying this to confirm what I believe.  I read something recently where it mentions if there's a 3% safe harbor non-elective then both plans should have the same formula and the plan without the 3% would have to give the 3% to the eligible participants. Has anyone else ran into this issue with safe harbor match plans that are required to be aggregated for testing?  Thank you so much!

I have a sponsor that changed payroll systems in 2021.  As a result of that change , overtime was not calculated correctly in 2021 through 2023 for a group of participants.  Sponsor self-discovered the error in late 2023 and paid this group of employees back pay on a separate 10/20/2023 payroll.  The plan is a 401(k) deferral only plan covering only collectively bargained employees.  The plan does not include an automatic contribution arrangement.

According to their plan document, the back pay is eligible compensation/allocation pay.  The sponsor did not take elective deferrals for this separate payroll. We didn't learn about this issue until after 1/20/2024.  No notice has been provided to the affected participants.

I'm trying to figure out if there is a way to turn this into a notice only or zero QNEC correction.  My conservative view is that correct deferrals began with the payroll following 10/20/2023, which would have started the 45 day clock for a notice only correction.

Thoughts?

Assuming the SH notice is a "maybe not" notice, then such an amendment has the effect of reducing the safe harbor 3% (in this case) contribution. This is permissible under the requirements outlined in 1.401(k)-3(g)(ii), and will take the plan out of safe harbor status for 2024, requiring ADP test for whole year, etc., etc. - all requirements as outlined in the regulation.

Anyone disagree with this outcome?

I am looking for a vendor that can do a mental health parity audit for a self-insured health plan with about 700 employees. Any recommendations and/or good and bad experiences with the vendors are appreciated.  I’d also be interested in your experiences with respect to services provided, cost, and timeline.  Thanks in advance.

Real estate agent Joe operates as a corporation, only owner, only employee.

Checked the website and Joe has a team, Mary, sales associates and Jane, marketing manager.

I am told that Mary and Jane are both paid as 1099 employees. The burden of proof for independent contractor is not me, the TPA

Joe wants to set up DB and 401k plans.

So, what is wrong with this picture?

I have a plan that has 2 participants an owner and employee. The employee was on long term disability for the prior plan year and subsequently fired for refusing to come back to work. He received a w-2 for the month he was still "employed" reflecting his long term disability payment. The software is including him in the profit sharing allocation. Are LTD payments included in 415 compensation? the plans compensation is defined as 415 excluding post severence payments.  

I'm drawing a blank.  Can you help me identify the statute and/or reg that describes the Plan Administrator's responsibility to annually advise recipients of periodic distributions (typically, monthly) of their tax-withholding election?  Thanks.

Some details are sketchy, but as far as I'm able to determine at this point...

A participant terminated employment in early 2021. Left funds in the plan. Less than $5,000. There should have been a mandatory forceout in 2022 when the 2021 valuation was done, but for reasons unknown, it wasn't. When the 2022 valuation was done, (in 2023) this was caught, and a mandatory IRS rollover was processed in the fall of 2023.

Unknown to everyone, (apparently) the participant had died in the summer of 2022! Just to make it more interesting, no named beneficiary, and minor children involved, but that's a separate issue.

I'm really not sure what the ramifications are here, and it is a small amount of money, so I'm sure the Plan Administrator is willing to take a little "risk" if necessary, to clean this up without excessive time and effort.

If the vendor is willing to reestablish this as a plan account, (they are being questioned now) then it should be simple, other than correcting the 1099 (which may or may not have been issued yet - I don't know) - the death distribution will simply be processed according to plan provisions.

Any thoughts on this? I've never encountered this situation...

Thanks.

I've got a NFP MP plan with an hours requirement to get the allocation.  They make deposits during the year to estimate the annual contribution (it's a straight formula, so in theory this is easy to calculate each month).  This year, they put in too much because someone ended up not working the required hours.

So this is an excess contribution to the plan based on the formula, not the 415 limit for anyone (and not over 404, not that they have a deduction to worry about).  Does it have to be refunded?  Any penalty?  I know the plan sponsor is going to want to let it stay in the plan; is that subject to an excise tax then?

Thanks.

 

I have a question regarding family attribution. Does it apply to owners who own more than 1% of the company?

Thank you in advance for your assistance.

Client in process of Chapter 11 bankruptcy and near appointment of Liquidating Trustee.  In process on terminating the 401(k) Plan and the record keeper / trustee (very large mutual fund company) has prepared draft Letter of Direction with some unusual (at least to me) provisions.  Curious for any thoughts / experience from similar situations.

First, just to note the draft Letter served up is really "sloppy."  As the client said, it's like they asked ChatGPT to prepare rather than starting with some customization of a standard template document.  Among other things, draft letter provides as follows:

1.  Repeatedly says company "is" terminating plan and phrasing all the provisions throughout as if this will be of a future date when they know plan was already "terminated' and even reference prior date.  Not a big deal really as we can revise (assuming they will accept any edits) but the whole thing is very sloppy and confusing to read on some timing points.

2. Provides plan sponsor will not restore the forfeiture account funds to participants and if participants reach out "the Plan Sponsor will handle outside the Plan."  Huh?  Not sure what participants are going to be seeking forfeiture restorals in the future but how can the plan sponsor (which is bankrupt and about to be completely gone) handle outside the plan?  I guess not doing anything might be "handling outside the plan?"  Also, do record keepers typically suggest that potentially legit claims can be handled "outside the plan?"

3. Expressly indicates this is a Chapter 11 bankruptcy and that a Bankruptcy Trustee has been appointed and will act as a fiduciary of the plan going forward.   I don't know much about bankruptcy but understand Bankuptcy Trustees in Chapter 7 cases may have duty to step into the role of a plan administrator and take over some fiduciary duties.  Here, however, there is no Bankruptcy Trustee nor will there ever be.  There will be a Liquidating Trustee to liquidate and pay out to creditors but bankruptcy lawyer says they won't step into the role of plan admininstrator or take on other duties of for the company (debtor) / plan administrator.  Understand they may just be confused on roles here but who does step in normally in these cases? 

4.  There are also provisions noting that no FDIC or DOL Trustee will be appointed.  I'm unfamiliar with an FDIC Trustee or DOL Trustee.  Is that a real thing?   Is that possibly some reference to abandoned plan situations or something?  

5. Following appointment of the Liquidating Trustee, the company / debtor (and officers) will cease to exist as a matter of law so there technically is nobody around with any real authority to act for the company / plan administrator or take action for the plan.  I understand the DOL may consider the existing officers functioning as fiduciaries to continue in that role after the company is gone and employment has ended but is that what typically happens in these situations?  Is there any other way to approach?

6.  There are a few participants in a capital preservation fund that cannot be liquidated / removed by the plan without at least 12 months' notice.  If the participants in that fund affirmatively elect to move their funds out of the account and roll over their balances, is the 12-month notice period still applicable or is that only an issue if they must be forced out?  The letter suggest it may apply whether or not they request to roll over.  If so, they're into 2025 before all amounts get paid.

7. Letter notes the company will continue to be responsible for recordkeeping fees through end of quarter following the plan termination date.  Well, the company adopted resolutions "terminating" the plan in September so that suggests fees through December 31, 2023 but there is a lot left to be done by the record keeper (which has been moving like the bureaucratic behemoth it is) and so presumably lots more fees to come.  I should know this but don't--how do fees typically work in bankruptcy terminations?  There are some funds in the forfeiture and suspense accounts that, per the plan, can be used to pay plan expenses.  Will they hold making any allocations / distributions from those accounts until all work is done then follow any force out distributions with some later distribution?  If so, how long does that take--they have to do final 5500 which is a long time in the future.

Apologies for the long post / questions (and embedded rant) but welcome any feedback or suggestions with any or all of these if anybody has the appetite to address.  Thanks.