A participant in a 401(k) plan ended up with lower than expected salary and consequently violated the 100% of compensation limit.

This is a 415 violation and we are in the process of correcting this by forfeiting some of his employer contribution allocation from last year and refunding some of his salary deferrals. The participant is an NHCE.

In applying the earnings on the corrections, we are lucky because the plan has self-directed investments that make it easy to determine the applicable earnings.

Question: suppose his account has 11% losses. Can we apply those losses to the $4,000 of salary deferrals to be refunded and $3,200 of employer contributions that will be forfeited and kept in a suspense account? I would think this should be ok, especially since he is an NHCE. Does anyone else agree / disagree?

Thanks!

A terminated 75 year old employee died prior to completing distribution forms.

It was her intention to take a lump sum distribution after paying  her RMD.

Since there are no papers to support this distribution, what should be done?

There is a living spouse.

The lump sum = $140,000

2023 RMD                18,000

Does her 2023 1099R show  158,000 with !8,000 taxable.

Or does the husband have a say regarding the distribution.

Any advice would be gratefully accepted

I have a feeling this happens more often than it should.

Financial Advisor convinces one-person business owner to start up Cash Balance Plan. It is explained clearly that the plan is meant to be long term, at least 5 years. Nice contribution made in first year. Nothing in second year and Plan Sponsor decides it's not for them. No 5500-ez filed as of yet.

Contemplating how to react.

I am taking over a plan that was previously a Solo K.  The plan was making deposits after their tax deadline with extensions for a few years.

For example.  They would fund their 2022 contribution after their tax deadline with extensions - but, not actually extend their taxes.  They were provided bad advice by the previous administrator that they had until 9/15 - of any given year to make the previous years contribution.

I am not exactly sure how to fix this or what the ramifications might be - as it is all owners money - Solo K.  

Any thoughts?

A participant in a qualified plan, stopped making loan repayments in which after 90 days the loan was deemed and reported on a 1099R the following year.  The active participant would like to borrow again from the plan, the plan allows for one (1) per participant at any time, is the participant permitted to take a brand new loan?  Or will he be required to pay-off the prior deemed loan first before he is able to initiate a new loan?

I should know this, but I am having a brain freeze.  Since partners deduct their own profit-sharing contributions on their own personal returns, is the funding deadline for a partner the due of the personal return or is it the due date of the partnership return?

Thanks for any guidance.

Under 20 hours/week is roughly equal to 1000 hours/year.  Our 403(b) plan would by definition possibly exclude individuals who work 500-999 hours, which would fit the LTPT classification.  Based on the guidance that was recently released, I would conclude that LTPT applies to any 403(b) employees who have been kept out of the plan but who have worked 500-999 hours each year since 2021.  They would have to be provided with the opportunity to contribute to the plan.  

Would you agree?

Thank you

Is Life Insurance permissible in a cash balance plan? If yes, how is the 'incidental' limit calculated? Is it 100x projected benefit as in DB plans, or a % of contribution? Is it discriminatory unless policies all purchased on all participants? Any guidance is appreciated! Thank you

ARA requests immediate administrative relief in the form of of delay of application and enforcement of LTPTE rules... 

https://www.napa-net.org/news-info/daily-news/american-retirement-association-asks-irs-more-time-ltpte-rule

https://www.napa-net.org/sites/napa-net.org/files/ARA letter_relief re LTPTE Rules_112923.pdf

Hi

DB plan - one lifer

Client takes full annual RMD on 4/1/2023 instead of monthly (12x)

Client decides to terminate the plan today and wants to rollover prior to 12/31/2023.

No further RMD is due, correct?

Thanks

My understanding is that for a plan started before SECURE 2.0 (and therefore grandfathered in for not being required to have automatic enrollment if over 10 employees), if they add an automatic enrollment provision voluntarily, then LTPTEs are not subject to the automatic enrollment.  I don't see anything in the proposed regs that counters this.  Am I correct with this?  Thanks.

Plan has different eligibility requirements for deferrals and safe harbor match.  If a participant is eligible for deferrals, but not the safe harbor portion, must that participant receive a safe harbor notice?  Generally the notice requirement is satisfied if notice is given to each employee eligible to participate, but I can't determine if that means eligible for safe harbor or for the plan in general.   

Thanks for any guidance.

Plan has a few participants whose religion precludes them from investing in any of the plan's alternatives.

There are several hundred active participants.

What duty, if any, do the fiduciaries/trustees have to include a fund/funds that would be eligible under a haram/halal investing strategy?

It is quite a niche corner of the investing world (at least here in the US), and funds can go from performing to underperforming quite rapidly quarter over quarter.

Would the these participants have some sort of religious discrimination claim if these types of investments are not offered?

just on a fact-finding mission for now.  I sent the plan sponsor to their attorney, but I'd like to get the community's take on this.

Starting to work my way through this. Welcome news that certain class exclusions can apply. But, they cannot be a proxy for for an age or service requirement.

Consider the following: plan currently excludes interns. ALL interns work between 500 and 999 hours. My reading is that this exclusion would not be valid, and LTPT rights would need to be granted to interns that otherwise satisfy the LTPT age/service requirements. Agree/disagree?

Now, if interns work various numbers of hours - some 500-999, some over 1,000, and interns are an excluded class, then it should be permissible to exclude them from LTPT requirements. Agree/disagree?

Thanks.

A sole prop established a solo 401k plan in 2023, wants to include after-tax employee contributions and do the mega-backdoor Roth with it.

(1) do the after-tax contributions have to be deposited by 12/31/2023?

(2) Does the Roth conversion have to be done by 12/31/2023 as well in order to be applied towards the 2023 tax year?

Thank you

Company inadvertently added a term date to a participants census at the r/k.  Subsequently, the participant was forced out (twice).

Neither of the checks were cashed and they will be re-deposited into her account.

However, there was 20% withholding from one of the checks.  How is this usually recouped?  (This did not cross tax years)

Hi all,

Wanted to start a discussion on what future interest crediting rates would be considered reasonable assumptions for funding valuations for Market Based Cash Balance Plans.

These plans are designed to reduce risks of underfunding but if the assets are aggressively invested and, depending on the method of determining a future return assumption, the assumed future interest crediting rate could be higher than the relief funding rates resulting in minimum required contributions greater than the pay credits. Is anyone aware of any regs or approved methods for determining a reasonable future interest crediting rate that would not result in unreasonable underfunding results and minimums greater than actual pay credits?
It seems applying a 6% cap on the projected ICR would be reasonable considering the new legislation in Secure 2.0 but this is still high.

Curious if anyone ties the projected ICR to a segment rate similar to how the future ICR would be determined at plan termination for market based rates? Goal is to avoid underfunding results when the plan sponsor is funding the annual pay credits and the plan has a more aggressive asset mix.

Hi, 

When a 401k Plan terminates, the plan sponsor is bound to send Plan termination notice to participant, beneficiaries and retired etc.  Should this notice be sent only via a certified mail or can they use digital platform like e-mail/online to send this notice instead of certified mail?

Thank you!