We have a typical situation where a participant went delinquent on his loan.  We would normally correct by reamortizing the loan over the remainder of the loan term, but in this case, the loan term (which is the statutory term) is recently expired.  According to EPCRS, if the statutory loan term is expired, the loan should be treated as a deemed distribution, not corrected according to the correction procedure.

The problem is, we are a big cause of the delinquency.  The 401(k) Plan under which the loan was granted was terminated (in connection with the employer/plan sponsor being acquired).  The purchaser in the transaction is allowing all plan loans under the 401(k) Plan to be transferred to the purchaser's plan.  Payment of loans was put on hold during the transition, the loan went into default, and now the loan term is expired.  The Loan currently sits in the purchaser's plan, in default, and now past its term.

Is there anything we can do?

We administer a Safe Harbor 401(k) plan sponsored by a partnership with 15 physicians and 5 nhces. The 3% safe harbor employer contribution is provided only to nhces and hce non-keys.

The issue here is that every year, one of the 5 nhces become a partner (often with less than a 5% interest). The odd thing is that these partners are often considered nhces because the prior year they were an employee making $80k. This would then force the less than 5% partners to fund their own 3% safe harbor contributions as well as at least an additional 2% employer contribution to meet the minimum gateway.

With this odd scenario happening, the managing partner wondered if they could have language in their partnership agreements indicating that any partner nhce will be responsible to fund their own safe harbor and other employer contributions

A large Company’s pay date is Friday.

The Company 401k contributions can be reasonably segregated on Friday.

Current practice for contributions is a wire order entered on Thursday and executed on Friday, so that the money is pulled from the Company general assets on Friday and the amounts are allocated to participant accounts on Friday before the market close.

Recordkeeper offers a new ACH process. Under the new ACH process, Recordkeeper will initiate the ACH process on Friday and will allocate the contribution amounts to participant accounts on that same Friday before the market deadline. Participants will receive market earnings for Friday.

However, the ACH process pulls the funds from the Company on the next business day. Thus, the contribution amount is pulled from the Company’s general assets on Monday.

Recordkeeper allocates the funds to participants on Friday when the ACH is initiated even though the funds are not pulled from the Company until Monday.

Recordkeeper says this is a common industry practice (to allocate contributions to participants before the contributions are actually remitted to the trust). Is this process OK? Do most recordkeepers allocate the amounts to participant accounts before the funds are actually remitted to the trust?

It appears to be an interest-free loan from the recordkeeper to the plan sponsor (party-in-interest to party-in-interest). Recordkeeper says that if the Company does not make payment when the ACH pulls the funds on the next business day, they will simply reverse the transaction/allocations under the mistake of fact provision. 

We can't find any guidance on loans between parties in interest. Does this violate ERISA? Other concerns? Or is this a common practice/no worries?

I am revising my question. I have Plan A merging into Plan B 12/31/23. Plan A has 4 year graded vesting - less than 2 years 0%, 2 years - 30%, 3 years - 60%, 4 years - 100%. Plan A will merge into successor plan B which has 5 year graded vesting - less than 1 year 0%, 1 year - 20%, 2 years - 40%, 3 years - 60%, 4 years - 80%, 5 years - 100%. For contributions accrued as of 12/31/23, I have to give participants with 3 or more years of service the right to elect to remain on the old schedule correct? What about participants with less than 3 years - can the old schedule continue to apply to accrued benefits even though the new schedule is better at year 1 and year 2? I am looking at the IRS example where they recommend a graded 3 year schedule even for a 0% vested participant in the accrued benefit. Please let me know your thoughts!

Change in Plan Vesting Schedules | Internal Revenue Service (irs.gov)

We have a cash balance plan that set a termination date in September this year. We permissively aggregate the DB and DC plan each year to pass general testing. Does the plan termination date create a short plan year for the DB plan and does that now make the two plans unable to be aggregated due to differing plan years or is amending the plan to terminate 9/30/2023 not creating a short plan year for testing purposes? No assets will be distributed this year and both plans define the limitation year as the plan year.

I don’t believe the regs are concrete on this scenario and that it could be interpreted as being a short plan year. But it could also be interpreted as being a short plan year only during the year when the assets are distributed not necessarily when the plan term date is effective.
 

Secondly If the DC plan is terminated 9/30 as well, I’m thinking it would be reasonable to aggregate them under this scenario?

Thank you!

Hi!

I misfiled a Solo 401k with Schwab. I thought I was a 1099 employee, but I am a K-1. I now need to get the IRS to send Schwab a letter of permission to release the funds. I was directed by Schwab to this website (https://www.irs.gov/retirement-plans/correcting-plan-errors-fix-plan-errors) to fill out a Letter of Instruction and then include the Date of Contribution, Amount of Principle, and How to Pay Back. However, after looking into this further, to submit an explanation to the IRS, I will need to create an account at pay.gov. From here, it looks like I will need to submit form 8950. This form requires a minimum fee of $1,500. Seems really high and can not believe they charge this. I tried to see if there was a way I could get this waived, however I don’t think my plan qualifies for the orphan plan, which is mentioned here (https://www.irs.gov/retirement-plans/voluntary-correction-program-fees).

What is the best way to resolve this? I made a stupid mistake and I can't figure out how to fix this.

Help!

Good Morning!

Plan is terminating due to business closure and there is still once active participant who wants to do a personal contribution strictly from his funds directly into the 401k plan.

Personal contribution (with no funds coming from the Company)  is this permissible? 

Thank you. 

Does anyone use Congruent Solutions for administration/distributions in their TPA office?  Any feedback?  Are there any other companies that offer administration?  Thank you.

Notice 2023-54 provides relief for missed 2021, 2022 and 2023 RMDs for a non-eligible designated beneficiary of an IRA or DC plan. What about a missed RMD for a non-eligible designated beneficiary of a DB plan participant?

I got divorced and had a Qdro written up. My ex-husband works for the city of Chicago and he has been remarried twice after. If I get remarried, do I lose the rights to the money?

Under SECURE 2.0, plan administrators do not have to furnish certain disclosures, notices, or plan documents to unenrolled participants if they provide the unenrolled participant with an annual reminder notice about the participant's eligibility to participate in the plan and any election deadlines.  The unenrolled participant must have received the SPD when initially eligible. 

From what I've read about the unenrolled participant notice, the required content seems to mirror the safe harbor notice.  Would you agree?

With the SECURE 2.0 notice relief, is the 404a5 fee disclosure distributed to only (a) participants with an account balance and (b) newly eligible employees?  Does an unenrolled participant need the 404a5 fee disclosure?

What are your TPA firms doing?  What documents are you telling your clients that they need to distribute by December 1st? 

For a non-safe harbor plan, what needs to be distributed to ongoing participants prior to 1/1 in a non-safe harbor plan?  Just the QDIA (when needed) and fee disclosure?  If the plan doesn't need to give a fee disclosure to an unenrolled participant, does than now create the need to draft a notice to unenrolled participants?

Thank you!

I have a Plan that's terminating.  Can they allocate the Forfeiture Account to any active participant at the time of Plan termination?  They had a few people who had been terminated for at least 6 years, 100% vested, that just refused to take their money from the Plan.  They want to avoid giving money to them from the Forfeiture Account, if possible.

Thanks!

Looking waaaaay ahead (except that time flies when you are having fun) - any bets on whether you think the IRS may delay this somewhat to allow providers to draft documents that take advantage of relatively late IRS guidance on SECURE/SECURE 2.0 items? Or will we just get stuck restating a document that already has a TON of changes?

I think I might just have to retire a little earlier than originally planned, to avoid that next restatement cycle...

Pre-approved Plan Providers: Submission Period for 4th Cycle Defined Contribution (DC) Opinion Letters

The IRS asks pre-approved plan providers and mass submitters to wait to apply for a 4th remedial amendment cycle (RAC) DC Opinion Letter until the IRS announces the opening of the one-year on-cycle submission window.

The 3rd pre-approved DC RAC ended on January 31, 2023, which means that the 4th RAC began on February 1, 2023; however, the submission window has not yet opened. We expect to issue an announcement later this year that opens the on-cycle submission window from February 1, 2024, through January 31, 2025. 

A client (sole-proprietorship, one person, income way over IRS comp limit) has decided to install a CB plan for 2023.  Unfortunately, he has already  fully funded his "solo 401(k)" plan at full $66,000.  So now he has to remove the excess of $23,700 (plus earnings).   His "solo 401(k)" is with one of the Big 3 (Schwab, Fidelity, Vanguagrd) using their simplified "solo 401(k)" documents which does not allow for "voluntary after-tax" nor for in-plan Roth conversion.   Is the following approach available (all done before December 31st):

1) Restate his plan using the customized plan document which will allow for VAT and In-Plan Roth conversion

2) Treat the excess of $23,700 as after-tax deposit

3) Do In-Plan Roth conversion of $23,700 (plus earnings)

Normally, I would say no on account of timing of the deposit being made before the provision is in the document.  However, I am wondering if the sole-proprietorship nature of the business changes the answer since all the compensation is deemed to be earned on December 31st?

my divorce decree states we agreed that I would receive 50% of 15yrs of my ex-spouses retirement.   He just retired and I was told that when he passes I will no longer receive the retirement.  If my divorce decree says differently than what was worded in the qudro is there a chance of amending it. Because why would I agree to only having the retirement while he was alive. It is well documented in the court hearing that he was a severe alcoholic and it would catch up to him. I was looking for lifetime. It seems useless to have it until he passes which at the rate he drinks won't take long.

We have a 401(k) plan in which we need to make a corrective distribution to an employee who made 401(k) deferrals in 2021, 2022 and 2023 but we have now determined was not eligible to make the 401(k) deferrals to the plan in those years. I understand that we have to calculate the gains on those deferrals and include them in the distribution but does each year's correction need to be reported on a separate 1099-R for that year or would the entire corrective distribution be reported on a 2023 1099-R?

Er Contribution for 2023 funded in 2024.  The tax credit is towards 2023 taxes, right?

When a plan allows for in-service distributions, and the owner participant has already taken their RMD, the additional distribution is subject to the mandatory 20% federal tax withholding.

Is there an exception that if you are over RMD age, the additional distribution is not subject to the 20% tax requirement?

Participant with a loan terminated and was rehired 6 weeks later.  Loan program specifies that the loan is in default upon termination, however, the loan has not yet been defaulted with the recordkeeper and there was no distribution of the remaining balance.  Is there any loophole that would allow the loan to be reinstated and the employee to continue repayment?  Does the Tax Cuts and Jobs Act allowing until the due date of the employee's tax return for repayment after termination come into play?

Oh, how I wish I was old enough to retire! My old brain can't handle these SECURE 2.0 items!

I have 2 plans that exclude per diem employees. Under the LTPT rules becoming effective soon, would these per diem employees now be allowed to participate in the plan?