Do the plan sponsors who adopt a PEP also need to carry their own ERISA Bond ?

Hi -- I have a client that has failed to implement participant deferrals into a state 457(b) plan that the employer participates in. My understanding is that, since there is limited opportunity to submit corrections to the IRS under Section 4.09 of EPCRS, and Reg 1.457-9 provides that governmental entities have until the first day of the plan year that begins more than 180 days after the IRS notifies them of the failure to correct their plan failures, practitioners interpret that to mean that corrections for 457(b) plans can generally follow those prescribed under EPCRS for qualified plans. So in this case we would corrective contributions for the participant's missed opportunity to make a contribution/invest (e.g., 50% of missed deferral) as under EPCRS. 

Is that understanding correct?

Thanks!

I have the following excerpt from an old write-up. Can't recall the name of the firm that posted it. Maybe "Plan Sponsor" ? Any opinions as to whether this is still accurate?

The final 403(b) regulations do not state conditions under which an entire 403(b) plan would lose its tax-qualified status and thus fail to be a 403(b) plan. However, the final regulations do list  three situations where all of the contracts in a 403(b) plan would not be section 403(b) contracts, as follows: 

a)      If the employer fails to have a written plan which, in form, satisfies 403(b) (plan document requirement); 

b)      If the employer is not an employer eligible to sponsor a 403(b) plan; and
c)      If a plan fails to satisfy the nondiscrimination rules (including the universal availability requirement for elective deferrals).

Well, if they are not section 403(b) contracts, what are they? They become nonqualified annuity contracts under Section 403(c), where the contributions (but interestingly, not the earnings), would become taxable to employees. Note that, though it is not entirely clear, it is presumed that custodial accounts would be treated the same as annuity contracts for this purpose, since 403(b)(7)(A) of the Code treats contributions to a custodial account as amounts contributed to an annuity contract.

Not the most important question - but sometimes plans come across my desk where the plan name seems to be exactly the company name, as confirmed not just on the 5500 but on the plan document.

One I just saw has simply '401k' after the company name without 'plan'.

I guess there's no requirement that the word 'plan' be in a plan name, but it does seem odd to me.

According to a report from the Pension Benefit Guaranty Corporation’s Office of Inspector General, the US overpaid the Central States teamsters pension plan about $127 million because an application for special financial assistance reported 3,479 participants who had died.

“While the [PBGC]’s review process required Central States to provide a list of all Plan participants and proof of a search for deceased participants (death audit), the [PBGC] did not cross-check the information against the Social Security Administration’s (SSA) Full Death Master File (DMF)—the source recommended by the U.S. Government Accountability Office for reducing improper payments to deceased people. (The Full DMF is more accurate than any database private pension plans have access to[,] and is used by the [PBGC] in its other insurance programs to ensure proper payments of pension benefits to plan participants).”

Deceased Participants in the Central States' Special Financial Assistance Calculation.pdf

Had an account call me this morning. They have a client with a partnership inside retirement plan that is subject to UBTI.

In the past, the partnership has generated Net Operating Losses (NOL) so no UBTI was owed so they did not file a 990-T.

This year they are going to have a substantial gain and will owe UBTI taxes.

It looks like they can offset gains by Net Operating Loss carry forwards, Which seem to have different rules pre and post 2018 but can be used to offset some or all of the gain, in perpetuity.

The question is do they have to file past 990-Ts claiming NOL to use these NOLs? And if yes how far can they go back with filings?

If the question is too complicated for a post here on benefits link and you know a CPA who deals with these issues in the California Bay Area, I'd be happy to have my CPA contact that CPA directly as this is a bit out of my area of expertise. I know just enough about UBTI to be dangerous.

If a 403(b) plan excludes EEs who work <20 hours a week, are they excluded from the 410(b) coverage test by default?

How are other TPA firms dealing with increasing their prices, and communicating this to their clients?

We have not raised our rates for almost 10 years, but believe it may be necessary now.

Wondering what other firms are doing in this regard. If you have had to raise your rates, how did you communicate this to your clients? What was the impact, if any?

Can anyone share?

Thank you!

I have always understood that a pension plan must have a business to sponsor it.  If the business closes then the plan must close.  It's as simple as that, correct? A client want's to keep the plan going so that if by chance down the line he want to take a loan he could.  I advised him that if he can't keep the plan if he closes his business.  

We had an SEC audit recently, and the SEC found some issues that they say require remediation.

I don't want to get into too much detail about the actual issues, but we would like to remediate them by contacting the affected parties directly and explaining to them the issue and what we are doing to correct it.  We do not want to put anything in writing.  While we want to fully correct the issues, we do not want to risk any reputational harm that may stem from having written documentation out there, implying that we did something nefarious.

Is anyone aware whether the SEC ever allows "oral" remediation?  Are there any examples out there of this ever happening?

The SEC handbook defines remediation as "dismissing or appropriately disciplining wrongdoers, modifying and improving internal controls and procedures to prevent recurrence of the misconduct, and appropriately compensating those adversely affected."  We intend to do this; we just want to do it orally.

Thank you all!

Good morning, I hope all is well.  I have a Cash Balance Plan that's terminating as of the end of the year.  I know upon termination everyone becomes 100% vested.  My question is, what is the rule to "forfeit" (not the right word) your benefit.  If someone has been out for 5 years, do they lose their benefit if they weren't 100% vested?  It's a 3-year cliff vesting schedule, if that matters.  I looked in the document, but I can't seem to find the wording, just want to make sure I'm right.

Thanks!

Hi

Checking for someone

DC plan - calendar

Joe DOB 12/1/1951 - when is first RMD due?

Mary DOB 10/1/1950 - when is first RMD due?

In both cases when is second RMD due?

Thanks

Controlled Group

Company A sponsors a traditional 401(k)

Company B sponsors a traditional 401(k)

1. Plan design is identical - same service, match etc.

When completing the coverage test each plan on its own will pass coverage

Company A   25 HCE all benefiting / 100 NHCEs all benefiting.

Company A   75 HCE all benefiting / 1250 NHCEs all benefiting.

Each entity passes coverage on their own.  It there a requirement that the numerator in the coverage test include the total for each entity?

I have a combo 401(k) PS/CB. Owner died unexpectedly in December 2022 while in his 50's. He has no spouse, children, or completed beneficiary forms. His parents (in their late 70's) are the beneficiaries for both plans. There was some up in the air, but now both plans are being terminated. 

My question is on RMDs. Are the parents required to take RMDs from the plans due to their ages or not since the owner was not of RMD age? The plans should be paid out by the end of 2023 or early 2024. There will be required payments from the inherited IRAs, but that is outside the plans. I am more concerned that while the plans are open, the RMD rules are being followed. 

If a participant's last day of service is 12/31/2022 and as of 01/01/2023 does not return to work, will a 2022 RMD be required? 

Company recently established using a ROBS (not our client and we aren't directly involved) is doing well and has potential investor.  The investor would like to invest in exchange for issuance of preferred stock.  The ROBS company has apparently told investor that because the ROBS 401(k) holds shares in the company, the company cannot issue preferred stock.  Instead, they have proposed a temporary workaround whereby they will issue a debt instrument (loan agreement with de minimis interest) that will convert to preferred stock within 180 days.

Investor has asked us generally if that makes sense.  We don't work with ROBS and have suggested they need to find experienced counsel if they want to proceed but just curious with all of this but, in interim, just curious if this is a common ROBS issue.  And, if so, does the work-around really solve for it?  Thanks 

A client whose safe harbor match is based on the pay period and funded each pay period would like to make a true-up this year although it is not required.  The FtWilliam PPA document contained the following language which appears to allow a discretionary true-up:

Notwithstanding the foregoing, after the end of each Plan Year, the Company may make an additional Matching Contribution ("true-up") on behalf of each Participant in the amount of the positive difference, if any, between the Matching Contributions that would have been allocated to his Account had such contributions been determined on the basis of Compensation for the entire Plan Year and the Matching Contributions previously allocated to such Participant's Account.

The Cycle 3 document does not contain this language (at least that I can find) and only addresses required true-ups:

If the Employer funds Matching Contributions more frequently than the determination period indicated in the Adoption Agreement, a true-up contribution will be made to any Participant who did not receive a Matching Contribution based on Matched Employee Contributions or Plan Compensation for the entire determination period indicated in the Adoption Agreement.

Does the absence of language specifically addressing a discretionary true-up preclude the client from making one?  Or, can the language in the document be interpreted as the bare minimum an employer must do, but it does not preclude something more?

Would like to get your thoughts on this.  Thank you.

Scheduled publication date is November 3, 2023 -- which would put the close of the 60-day comment period at January 2, 2024.

Links to Federal Register:

• Proposed regs
• Proposed amendments to PTE 2020-02
• Proposed amendments to PTE 84-24
• Proposed amendments to PTEs 75-1, 77-4, 80-83, 83-1

Sole owner dies in 2022.  Business had participants other than the owner so 5500-SF had been filed in all years.  By the end of 2022 all assets had been distributed except for the deceased owner's.  They have a final filing for 2023, do they file a 5500-EZ or continue with the 5500-SF?  

Thanks for any guidance.

An employer of my acquaintance, who uses a well-respected 5500 software product, filed a number of 5500s timely.  Upon checking on the government web site they discovered that the auditors' report was missing for one of their many plans--the remaining are fine.  On further examination it looks as though it might have been omitted when everything was uploaded to the vendor's web site for filing.  Don't know if this is system error or human error but obviously needs to be corrected.  Any advice to avoid a penalty for an incomplete filing?  Do they file an amended return even though none of the numbers changed?  Should they contact the vendor?  Other?  Thoughts appreciated!