We have a tax client (not a TPA client) who is a participant in her medical K plan and a hospital 403(b) plan.  Turns out her deferrals for 2024 between the plans are $10,000 over the 402(g) limit.  

My understanding has always been (and confirmed by ChatGPT) since not corrected by April 15, the amount is taxable for 2024 and in the year distributed.  But also that it must be distributed and I assume as reasonably soon as discovered.

Someone else here asked CoPilot and it says it does not have to be distributed but is taxable whenever it is. 

Comments?  We all know we need to check AI for correctness.  I have more confidence in this group than AI at this point. 

Thank you,

Tom

I need to have the plan sponsor clarify if they are being acquired through stock purchase or asset purchase.  I believe if asset purchase, employees of the acquired company are considered terminated and the plan can terminate and distribute.

But if corporate merger through stock purchase, my understanding is employees are not considered terminated and that the acquired company plan can either be merged or terminated but 401(k) elective deferrals may not be distributed since there is a successor plan.  I'm questioning if even safe harbor and profit sharing can be distributed since employment has not terminated and thus no distributable event and so perhaps the entire plan must merge into the acquiring company plan.

Your comments are appreciated!

Tom

Hi

Owner only DB plan, wants to terminate and distribute during 2025

Already turned 73 during 2025 i.e. first RMD is due 4/1/2026.

Needs an RMD during 2025 i.e. split the distribution between rollover and RMD?

In a different scenario for the same owner, plan is overfunded but only wants to rollover the full benefit and keep the plan open as will hire others to eat up the overfunding. As this in-service distribution will happen during 2025, is it subject to RMD during 2025 i.e. before the rollover?

Thanks

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414A(b)(4)

An eligible automatic contribution arrangement meets the requirements of this paragraph if amounts contributed pursuant to such arrangement, and for which no investment is elected by the participant, are invested in accordance with the requirements of section 2550.404c-5 of title 29 [ie., a QDIA], Code of Federal Regulations (or any successor regulations).

Are pooled trustee directed plans gone for good?  That's too bad because they were a real cheap way of getting a small 401k plan in place. Participant direction is expensive (investment advice, recordkeeping, etc).

Also what if the pooled plan was invested 50/50?  Isn't a 50/50 option eligible to be used as a QDIA?

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What are the penalties if someone can't fund their minimum contribution?  It's been awhile since I've been in this situation, so I wanted to be sure what we were looking at.

Thanks in advance

A governmental 457(b) plan excludes from participation employees regularly scheduled to work fewer than 36 hours per week.  The plan also provides that an employee will enter the plan on the first day of the calendar quarter next following the later of the employee's (i) completion of 6 months of service during which the employee is regularly scheduled to work at least 36 hours per week, or (ii) attainment of age 21.

Anyone see a problem with these eligibility and entry date provisions?

Also, must a governmental 457(b) plan allow long-term part-time employees to make elective deferrals?

How, if at all, might state law (specifically, Colorado's) affect the answer to these questions? 

Hi

When filing the 5500 forms on behalf of a client with the esigner authorization signed by the client, does the 5500 form need to be a wet signature? I have attended many podiums where it was ok thru DocuSign or something similar.

Someone I am dealing with is insisting on being wet which I do not think it is correct?

Also, looking at a possible takeover where the actuary signature on SB is electronic. I thought SB's has to be wet signatures.

Thanks for your comments.

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Curious as to what your method is for when a participant changes an address. What method are you using for confirmation? Sending via email or regular mail and to both old and new addresses? And, are you implementing a waiting period for taking a distribution after an address change? 

We have a new plan we are setting up as profit sharing only in 2025. They will be adding deferrals/SH Match effective 1/1/26. In an effort to stream line things, can we add this in the initial Plan document (indicating that the CODA portion isn't effective until 1/1/26) or do we need to do a separate amendment to add this?

For traditional tested plans, an ADP test failure can be corrected by recharacterizing excess contributions as catch-up contributions, provided the HCE has not yet reached their maximum catch-up contribution limit for the year.  I have not been able to find much, if anything, on the impact of testing failures where recharacterizing excess contributions as catch-up contributions will cause a the catch-up  to be recharacterized as Roth for those that are HCEs who are also High Income Earners.  If the HCE (is also HIE) made only pre-tax contributions, will recharacterizing excess contributions to catch-up mean that we have to do a Roth Transfer for the catch-up portion?

A small top-heavy calendar-year profit sharing plan has a 1,000 hour requirement for allocations.  It has a new comp allocation method, with each participant as their own rate group.  There's an NHCE participant who went from full-time in 2023 to <500 hours in 2024 and worked through the end of the year, so she will get the TH min and I believe also the gateway contribution (as the HCEs are getting hefty allocations), but does not qualify for a PS allocation.  The new comp testing would work out a lot better if she did get a PS allocation - is it permissible to retroactively amend the plan for 2024 now to eliminate the hours requirement so that she can get a 2024 PS allocation?  No HCEs would benefit from this change.

I'm sure this has been asked already and I have probably missed it.  Does the "small" plan status also extend to deposit timing rules with the new 2023 DOL change to the participant counting methodology?  I have a client with 1,000 plus eligible plan participants but less than one hundred participants with account balances, so are they a small plan with regard to the deposit timing rules? 

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Now that SIMPLE plans can allow Roth, can you roll SIMPLE Roth into a 401k Roth?

I know regular Roth IRAs cannot be rolled into a 401k plan but couldn't find any rules on SIMPLE plans.

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