Maximum participant loan (residential) was granted at the end of 2021.  Due to turnover at the plan sponsor repayment was not set up.  Error was detected during 2022 plan audit.    Recordkeeper is proposing correction by amortizing the loan over the remaining term using the original $50,000 loan as the loan balance with interest only payments until the accrued interest is repaid (entire amount of loan payment applied to interest for the next 13 months).  Is this permissible or should the current accrued interest be repaid to the plan now?   With accrued interest the balance is about $53,000.  if this loan was not already at the maximum limit, I believe their correction would be appropriate.   However, I am not sure it is OK when the loan plus accrued interest is over $50,000.   Any guidance would be appreciated, I can't seem to find anything that is on point.   

I think I'm getting confused with how this works and tracking all the moving parts...

Calendar year 401k, SHNEC, PS plan for a partnership that we took over this year.  As we're reconciling it, we notice that the 2021 employer contributions were not deposited in 2022 - presumably they were deducted.

We've always taken the position that the SH has to be corrected so that has to be deposited ASAP with corrective earnings.  Fine, that's easy.

On PS... since the deposit was not made by 9/15/22, the deposit is subject to be counted in both the 2021 and 2022 annual addition limits.  But it wasn't deposited in 2022 at all... so there's no effect on 2022?  I assume this now becomes a SCP issue (it's small enough overall in the plan - we'll get to that in a minute)... and so even when they make the deposit now in 2023, it's under SCP and I don't see where that affects their annual additions limit (I just assumed it should, but most corrections don't).  So I must be missing something.  It must be somewhere that this would count towards the limit, otherwise any plan that missed the deposit deadline would just wait it out a couple of months and correct via SCP.

[Yes, the SH would also be in the same 'count towards annual additions' as the PS.  And, in fact, some of the partners' deferrals are in the same boat, too, so they've got late deferrals to add on top of this.]

So... I think it should be that all the missing 2021 deposits have to be made now, and they will offset either the 2022 or 2023 annual additions limit (their choice) by participant.  That feels right.  Nice to see that in black & white, though... or to have the actual right answer, either way.

Thanks.

Company A acquired Company B through a stock acquisition 12/1/2021.  Company B has a 401(k) plan with a 3% safe harbor non-elective and immediate eligibility - Company A does not have a 401(k) plan.  Company B continued to operate as a wholly owned subsidiary, but it will formally merge into Company A on July 3, 2023.  410(b)(6)(C) for 2021 and 2022 is good - nothing has occurred that would eliminate the transition period relief.

It is now June 30, 2023, and your friendly local TPA was just hired to takeover from a bundled provider who has done nothing to address the acquisition.  The plan documents were never amended to have Company A adopt the plan as a participating control group member.  The Company A employees, who were never employed by Company B, have not been given the opportunity to participate.  If they tried to exclude these Company A employees, the plan would fail coverage in spectacular fashion.

Assuming we restate the plan documents effective 7/3/2023 to list Company A as the plan sponsor (since Company B will no longer exist), and all employees are given the opportunity to participate 7/3/2023:

1. Is there a missed deferral opportunity for those Company A employees who were never employed by Company B dating back to January 1, 2023, when the transition relief ended?

2. For Company A employees who never worked for Company B and terminated prior to 7/3/2023, will they need to be included in the 3% safe harbor non-elective in 2023?

3. I know this is open-ended, but are there any other issues that I should be considering?

I think I know the answer but in case I'm wrong I thought I'd ask. For the exception to the 10% penalty, when does the distribution have to occur? That is does the distribution have to happen 6 months after the participant turns age 59 or is it anytime in the year in which they turn 59 1/2? This participant will reach 59 1/2 anniversary in October 2023.

Normally I'd just tell them to wait but the participant is going on leave due to medical issue that may be terminal so waiting until October may not be an issue.

If it is after age 59 1/2 is there a hardship exemption to the 10% penalty that would allow the distribution now without penalty?

I realize there is a work around where the client could deem him terminated and thus the withdrawal would be after separation of service after attainment of age 55 and not subject to the 10% penalty but there might be reasons like health insurance that they would want to classify him on leave instead of terminated.

Any thought would be appreciated.

Hi,

Does any know how many years after the 401k Plan terminates can a participant bring a claim against the Fiduciary and Plan Sponsor. One of my client has insurance policy for this type of claim, and they will need to purchase “tail coverage” for the policy for it to stay in effect in case anyone brings a claim. Is the statute of limitations for a 401k plan usually 3 years, or is it longer?

One of today's items in the Benefits Link newsletter had a write-up on hardship distribution self-certification. The following is an excerpt. I don't read Section 312 of SECURE 2.0 as containing any such restriction. What am I missing, if anything?

Employers may now rely on an employee self-certification that they have experienced a hardship and that the employee has no other funds available to satisfy the hardship. Self-certification is only available for the first hardship request during a plan year.  If the participant requests more than two hardship distributions in one year then the employer is required to have physical proof of the hardship. 

Can an employer cover portions of dependent premiums at different levels?  For example:

Employee Only Coverage:  Covered at 100%

Spouse Coverage: Covered at 0%

Child(ren) Coverage: Covered at 50%

Have a client that had their fiscal year end and plan year end 9/30. They changed fiscal year end to 12/31 but didn't change the plans year-end yet. They have a Safe Harbor 3% due for the 9/30/22 plan year end. When does it have to be funded by now that their fiscal year is 12/31?

Anyone have a "contact" at the IRS to know, first, IF they are planning to release any additional guidance on this subject, and if so, WHEN might it be expected?

 I have a union employee that used to participate in a non-union plan.  The employee is still employed at the company but no eligible now due to being union.  They just processed a loan from the non-union plan for this union employee.  Is this allowed?

Loan policy says : "Any Participant that is actively employed may apply for a loan from the Plan."

This person is a Participant due to the fact (at least) that they have a balance. And they are actively employed (so, thus can have payroll deductions). However, they are in an ineligible class. The loan policy does not address that.

I'm not sure this is a valid issue but given my history with our company's SIMPLE debacle from 2020, I wanted to cover my bases.

We hired a new accountant for Q422 and they used the wrong election form for my 2023 deductions.  I chose 4% for the past two years and they used my 2021 election form which was a 3% match.

I realized this after my 6/15/2023 check (due to other issues with our FLEX program) and brought this to their attention.  They decided to make up for this difference by adding the missing amount to the next 11 checks until all missed deduction amounts are accounted for.

My question:  Is this the proper way to do this (or perfectly ok) or does the company need to go through a proper correction method (i.e. VCP)?

Thanks!

I have a potential client who has been "maintaining" a SEP for sometime. The owner has always been the only participant in the plan. There have been no contributions to the SEP during 2023. What would be the problems, if any, of starting both a 401(k) plan plus a cash balance plan during this year? I am sensitive to the word "maintaining" with regard to the SEP. If no contributions are made on account of 2023, does this imply the the SEP is not being maintained during 2023 and there should be no problems establishing the other plans?

Thanks for the help

Rick

I have a client that wants to shorten the eligibility for 401(k) deferrals to 60 days, but leave the Safe Harbor Match at 1 year.  I would think this would cause an issue with the testing, but I wanted to make sure I wasn't overthinking things.

Thanks in advance!

I posted a similar question not too long ago but I'm really reaching out to anyone that uses the same document provider and type of documents we use. Which are the FIS/Relius pre-approved IDP Plan documents.  We are trying to determine if there's an easy way to amend our plans that don't currently allow Roth Deferrals to allow them to comply with the Secure Act Roth catch-up provision for 2024. 

It seems there is no way to amend a FIS/Relius IDP to add Roth 401k deferrals, without losing reliance. We are trying to avoid restating since we recently restated all plans for Cycle 3. 

If you use these types of documents, are you restating the plan documents now to add Roth deferrals?

Employee (in Florida) did not enroll children in employer plan because they were enrolled in Medicaid.  

Employee lost Medicaid coverage for the children due to income level but the children are instead eligible for the state's "Medically Needy" program, which basically means that Medicaid will kick in once a (rather large) deductible is satisfied.

Does this constitute a "loss of Medicaid coverage" giving rise to a HIPAA special enrollment event?

Thanks!

Hypothetical Scenario

A cash balance plan has a provision that states participant and spouse must consent to distributions over $1,000. The plan terminates and the plan thought the spousal consent was the standard IRC $5,000. Lump sum benefits between $1,000 and $5,000 were paid out with participant consent, but not spousal consent. 

The plan realizes the mistake and wants to do a post-Date of Plan Termination amendment to change the provision to state a participant and spouse must consent to a distribution over $5,000.  

Reviewing CFR 4041.8 Post-termination amendments, it seems like an amendment is allowed that does not 1) decrease the value of the participant or beneficiary benefit and 2) does not eliminate or restrict any form of benefit.

To me, this post-DOPT amendment only limits a spouse's right to consent to the distribution. It does not decrease the value or eliminate or restrict any form of benefit. Would this type of amendment be prohibited? I would love to hear thoughts and opinions on this.

Hello -

I have a DCFSA participant requesting to reduce her annual election mid-year due to the fact that her child will be starting kindergarten this Fall. Since the participant knew that the child would be starting kindergarten this year, it doesn't seem like this would be an acceptable qualfiying event. Thoughts?

I have an independent insurance agent who sponsors a single member plan.  He tells me that effective 1/1/23 he now has another new business, a financial advisory business.  These 2 businesses reek control group to me since they can feed off of each other so I am inclined to say "control group".  Yes?

But to further my knowledge, does it matter if the businesses benefit from each other?  If he added an ice cream parlor to the businesses that he owns would that make the insurance business and the Ice cream business a control group?

Thanks

I know ESOP Trustees are required to invest ESOP cash (that is not used to buy company stock) in a "prudent" manner.  Other than cash instruments (CDs, CDARs, Money Markets, etc) where else are they allowed to invest cash?  Or maybe better stated, what investment options are allowable to the ESOP Trustees?

Thanks in advance for your feedback.  

Does offering a group health plan that only offers preventive services allow an ALE to avoid the 4980H(a) penalty?

The only definition of minimum essential coverage I can find is on the CMS website and states that a MEC plan includes "employer-sponsored coverage."   Providers of preventive care only MEC plans argue that such plans satisfy an ALE's requirement to offer coverage and avoid the 4980H(a) penalty. I see how you could get to this conclusion based on the statute, but it doesn't seem consistent with the intent of the ACA employer mandate. 

Is there any guidance from the IRS or other agency on this? What are your thoughts?

TIA!