Husband and wife are getting a divorce and have a signed Marital Settlement Agreement saying they each waive their rights to any retirement plan of the other. Plan has J&S provisions.

My understanding is that the MSA is not enforceable by the plan itself - that is, the plan would have to pay the husband if wife died before their divorce was final (which should be soon so this is a bit of a theoretical question, we hope). Putting it more clearly perhaps, the plan could not recognize a bene designation for anyone other than the husband unless he specifically signed a plan waiver; the plan cannot look at the MSA and say that is a satisfactory waiver.

My "research" (a quick google search) seems to imply that without a plan waiver, the plan would have to pay the husband, but then the estate could seek to recover assets from the husband since he had waived his rights. But the plan itself cannot recognize the MSA. That last part is what I've always thought. 

Getting a little pushback from the attorney and wanted to double-check here; thanks in advance.

An interesting situation has arisen and I'm looking for any and all opinions.  Company A is a physician's office and the Company A 401(k) Plan has been around for 20 years - one owner/doctor with a dozen employees.  The owner reached an agreement to "partner" with a large organization which created an Affiliated Service Group (ERISA counsel confirmed) back in 2021.  In the pile of paperwork the owner/doctor signed was a "participation agreement" with the large organization's 401(k) plan that was to be effective 1/1/2023.  That agreement is a boilerplate 1-page joinder agreement.

The Company A 401(k) Plan is never frozen, terminated, or merged, and the participants continue to participate in this plan to this day (Feb 2024). The owner/doctor and his employees never intended to participate in the large organization's 401(k) plan - in essence, he was slipped a piece of paper and signed it without knowing what it was about (not an excuse, but not unusual in my experience with physicians).

The large organization is now demanding Company A cease operating the Company A 401(k) Plan, return all 2024 contributions to the Company A 401(k) Plan as a "mistake-of-fact", and start participating in the large organization's 401(k) plan by the end of February 2024.  The employees have never been provided enrollment materials, the SPD, or any other documentation for the large organization's 401(k) plan.  They have deferral agreements in place with Company A and the Company A 401(k) Plan so I don't see how a mistake of fact would apply.  Also, since the "participation agreement" has an effective date of 1/1/2023, I don't see how trying to back-out 2024 contributions from the Company A 401(k) Plan fixes anything.

The owner/doctor doesn't want to change the plan he has in place and wants to disregard the "participation agreement" that he never would have signed had he known what it represented.

1. Has anyone come across a similar situation and if so, what was the outcome?

2. Is the "mistake-of-fact" correction being thrown out there by the large organization appropriate?

3. If the doctor just ignores the large organization's "participation agreement", and continues to keep the Company A 401(k) plan active, are there any issues he should be warned about (other than coverage testing)?

4. Any other comments/suggestions are very welcome.

Hi

Looking at a proposal for combo plan DB/DC, owner plus a bunch of employees

DC is in existence for many years and DB will be retro to 2023. No PBGC coverage.

Just found out that, the owner of the company sponsoring the DC plan also has a schedule c (no employees) which has substantial income but not adopted the DC plan as an additional employer so only w-2 is being used as his income. FYI W2 is 150k and schedule c income is 1M

Q1. Can the schedule c retroactively adopt the DC plan as additional employer?

Q2. If schedule c cannot adopt the DC plan retroactively as an additional employer but is included in the new DB plan, what compensation can be used for:

• Combined testing
• Combined deduction at 6% DC limit
• Combined deduction at 31% limit

Thank you

Good afternoon, thank you in advance for your help!  I have a two-man plan who has a Cash Balance + Profit Sharing combo Plan.  One of the owners if, given the 6% limit into the Profit Sharing for deductibility, does he still have the ability to a mega backdoor Roth.  Anyone have any guidance?

Thanks in advance!

For a 401-k plan that allows hardship withdrawals I have 3 questions as I'm confused as to what has changed with the Secures Act, and what may have changed back!!:

1. For a 1st time homebuyer is there a limit of $10,000 or is it based on need (which may be $14,000 for example).

2.  Can funds be used from the safe harbor match (for a safe harbor 401-k)?  Are there certain needs it could or couldn't be used for.  

3.  Can the new qualifying birth and adoption withdrawal come from all sources?  (safe harbor match included)

Any help is appreciated!!!

Large plan filer with payroll integration to the recordkeeper. Originally safe harbor match 100% up to 5%. However, signed an amendment for 2021 plan year to change to safe harbor basic match and distributed the participant notice as such. The plan information on the recordkeeper website and materials were updated to safe harbor basic match.  This is where I get the plan without any of the knowledge of the amendment. Plan was restated later (effective date 1/1/21 signed 2022) with the prior safe harbor match 100% up to 5% and have provided the annual notices accordingly to plan sponsor to distribute to participants in 2023.  The plan sponsor never changed the safe harbor matching formula in their payroll and has been matching 100% up to 5% for 2021, 2022 and 2023. Before and after the determination period was on pay period basis. Since the restated and signed plan document matches the operation of the plan, is there anything to correct?

We have a client that was using a Custodian that allowed for participant loans to be repaid using ACH. The Plan permits a terminated participant, making payments via participant ACH, who has elected to defer receipt of a final distribution, to continue making scheduled installment payments on the participant's outstanding loan. 

When the Plan document was restated as a Post PPA document, the ACH/terminated participant repayment loan provisions were not maintained. Since 1/1/22, the Plan has not been operating in accordance with their written loan policy. (They continued to allow for ACH/terminated participant repayment because it was never their intent to remove this provision. The Post PPA loan policy change was a Scrivener's error.)

We are thinking about doing a retroactive amendment to return the ACH/terminated participant repayment loan provisions to the Post PPA document. Is this an appropriate correction? It almost seems too straightforward. Am I missing something?

Hoping for confirmation if the below is correct:  solo 401k plan.  Owner doing the mega backdoor Roth.  Contributes $30,000 after-tax in 2023, converts $30,100 to a Roth IRA in 2023.  The 1099-R would be as follows:

box 1:  $30,100.00

box 2a taxable:  $100.00

box 5: $30,000.00

Box 7:  G

Does this look correct?

Thank you

Group:

It's been a while since I filed a Declaratory action for retirement plan disqualification filed in USTC. 

In the Reply to Govt Answer am I correct the only paragraphs I should reply to relate to where the Govt has burden of proof.  Under USTC rule 213 says:

Rule 213 Form and Content:   "In response to each material allegation in the answer and the facts in support thereof on which the Commissioner has the burden of proof, the reply must contain a specific admission or denial; however, if the petitioner lacks knowledge or information sufficient to form a belief as to the truth of an allegation, the petitioner must so state, and that statement will have the effect of a denial. "

I've always thought that unless there's a new issue under US tax court rule 142 the burden almost always stays with petitioner. Or of course if the court shifts burden under 7491. Which seems to be very rare. 

Thoughts on how do you prepare your Reply? 

Do you Reply to each Answered paragraph? 

Thoughts and comments appreciated. 

Husband owns his S corp, Wife owns her S corp.  Business are not related (different fields).  Can one DB plan cover both H&W?  State NC.  Just trying to keep the admin cost on a low side.

Everyone's favorite subject...I just want to see if I'm understanding this correctly, with regard to safe harbor plans using Otherwise Excludable Employees exception.

So, in a safe harbor plan that does NOT use the OEE provision, LTPT employees can be excluded from all employer contributions, and the plan does not automatically lose its top heavy exemption, assuming only contributions made are deferrals and safe harbor match or nonelective. 

However, the loss of top heavy exemption remains in place if the safe harbor plan uses the OEE exclusion, even though LTPT employees are still permitted to be excluded from safe harbor and top heavy if the plan is top heavy.

Have I got that right? For some reason, I'm finding this very confusing.

Client missed filing Form 5500 SF in 2019, 2020, 2021, and 2022.  According to the DOL's current penalty of $2,670 per day, the total penalty could come out to over $7m -- the IRS penalties would be almost $500k.  

We can't use the VFCP (at least not without permission) because we've already been told by the DOL that we are delinquent.

This is not a big plan.  A $7m penalty would be WAY more than the plan is even worth.

What should our expectation be?

Having informed a small business owner who plans to retire in 2024 that they cannot start a pension plan for 2023, contribute for 2023 and 2024, then retire and terminate the plan, since there is no long term intent for the plan and it would create a significant audit risk of disqualification, she is asking if she can instead create a 401k/ps plan for 2023-2024.

I feel like the answer is the same, but I'm really not sure if the risk exposure is as great as if it were a pension plan.

DBP with limit on lump sums (PVAB < $50k)

In a separate interest QDRO, would this apply individually to the participant's and AP's respective portions or to the pre-split benefit in total? Checking if the plan's QDRO provisions have any exceptions to that LS limit, but looking for opinions in case there are no exceptions.

I can see both sides - AP is treated as a separate participant with separate benefit, so apply separately, but the flip side is if total PVAB is >$50k, say $80k for example and participant can take a $45k LS and AP a $35k LS, then the plan will have been forced to pay a LS total on the one (albeit split) benefit in excess of the plan's $50k limit.

I have a plan participant that is requesting a hardship distribution under the down payment for purchase of primary residence.  When evidence was requested, it turns out that it is for down payment and rent for a home that the participant will be leasing.  If I am not mistaken, in order to qualify for a hardship distribution, the amount requested must be necessary to cover costs directly related to the purchase itself and not a deposit and first month rent.  Is there any wiggle room for leasing other than for reason of eviction?

I wasn't aware of this case until just this week. Have other folks been following it? 

What do people think? Its so rare that I hear about a participant getting in trouble for a bad self-certification, so I find this one interesting!

I know that likely if lots of other circumstances weren't also at issue the perjury one case likely wouldn't have been brought, but maybe I'm wrong. I know many of you have interesting insight and opinions so was just curious. 

https://www.justice.gov/usao-md/pr/former-baltimore-city-states-attorney-marilyn-mosby-convicted-two-counts-perjury

Does anyone know of any companies/sole proprietors who offer defined benefit administration & actuarial software/platforms for lease or purchase? This would be on a smaller scale - plans with less than 3,000 lives typically. Thank you. 

Does anyone know how to request that the IRS abate the now 10% penalty tax on a missed RMD for 2023? I know no one knows if they will abate now that they have reduced it but I still think that the same logic of "don't stick it to an octogenarian living off of social security for a silly mistake" should still rule the day...  Regardless I'm going to give it a shot but curious if anyone knows how it is done!

Plan switched investment platforms and during the switch, the way fees were paid got changed.  The client usually pays the fees directly from the company not the participant accounts, but when it moved it got set up to pay from participant accounts.  This has been going on for about 4-5 months.  Client realizes this and wants to fix but platform says you signed the form, it's not a mistake so we can't reverse this.  Client wants to find a way to rectify this mistake.  Any suggestions?  It involves about $3000, averages about $50-$100 per person.  my thought it to do a small profit-sharing contribution for that amount to each participant assuming it passes testing, which i think it would.

A client of mine had an employee who requested a loan which was approved for $20,000 The employee received and cashed the check a couple of days after being fired. It is unlikely that the employee could afford to repay the loan to the plan, but, if he could afford it, is there a period of time during which he could repay the loan?