I’ve moved from the 401(k) to this board AMDG’s question:

“Self-certification is now permissible for governmental 457(b) plans, but the 457(b) regs are not as formulaic as the 401(k) regs regarding the events that constitute [an unforeseeable emergency]. Pending IRS guidance, it seems reasonable to me for a gov’t plan sponsor to adopt the 401(k) self-certification service model for its 457(b) plan, especially as EPCRS applies differently (basically, no risk of plan disqualification). I would love your thoughts! Thanks!”

Here’s some information, and some of what I think.

Internal Revenue Code of 1986 § 457(d)(4) provides:

“In determining whether a distribution to a participant is made when the participant is faced with an unforeseeable emergency, the administrator of a plan maintained by an eligible employer described in subsection (e)(1)(A) may rely on a written certification by the participant that the distribution is—

(A)  made when the participant is faced with an unforeseeable emergency of a type which is described in regulations prescribed by the Secretary as an unforeseeable emergency, and

(B)  not in excess of the amount required to satisfy the emergency need, and

that the participant has no alternative means reasonably available to satisfy such emergency need. The Secretary may provide by regulations for exceptions to the rule of the preceding sentence in cases where the plan administrator has actual knowledge to the contrary of the participant’s certification, and for procedures for addressing cases of participant misrepresentation.

An unnumbered flush paragraph at the end of § 457(b) provides:

“A plan which is established and maintained by an employer which is described in subsection (e)(1)(A) and which is administered in a manner which is inconsistent with the requirements of any of the preceding paragraphs [§ 457(b)(1)-(6)] shall be treated as not meeting the requirements of such paragraph as of the 1st plan year beginning more than 180 days after the date of notification by the Secretary of the inconsistency unless the employer corrects the inconsistency before the 1st day of such plan year.”

And here’s the rule or regulation § 457(d)(4)(A) refers to:

26 C.F.R. § 1.457-6(c) https://www.ecfr.gov/current/title-26/part-1/section-1.457-6#p-1.457-6(c).

I think (but advise no one):

Until another Treasury final or temporary rule is published, effective, and applicable, a State or local government employer may rely in good faith on its reasonable interpretation of the statutes.

Several interpretations of § 457(d)(4) are at least reasonable.

That a participant may self-certify she faces a situation particularly or generally described in § 1.457-6(c)(2)(i) seems at least a plausible interpretation of the statutes.

Observe that § 401(k)(14)(C) refers to “a financial need of a type which is deemed in regulations prescribed by the Secretary to be an immediate and heavy financial need” while § 457(d)(4)(A) refers to “an unforeseeable emergency of a type which is described in regulations prescribed by the Secretary as an unforeseeable emergency[.]”

As always, a government official, participant, service provider, or anyone affected by the question should get her or its lawyer’s advice.

Last week, a BenefitsLink discussion considered whether self-certifying claims for a hardship distribution might be good or bad.

Advantages: Self-certifying might remove unwanted discretion; simplify claims procedure; lower plan-administration expense; and help employers avoid information one would prefer not to know or even have access to.

Disadvantages: Self-certifying might weaken retirement savings (and might lower an investment or service provider’s revenue); and might speed impostor thefts.

https://benefitslink.com/boards/index.php?/topic/70898-form-for-relying-on-a-participant%E2%80%99s-written-statement-that-she-has-a-hardship/

A hardship is not the only kind of claim for a before-severance distribution a plan may permit a participant to self-certify. Others include:

an emergency personal expense distribution [§ 72(t)(I)];

a qualified birth or adoption distribution [§ 72(t)(H)];

an eligible distribution to a domestic abuse victim [§ 72(t)(2)(K)].

If a plan’s sponsor or administrator is considering not allowing § 401(k)(14)(C) self-certification for hardship claims, are there reasons to treat differently these other claims?

Hello,

What would be deemed the RMD for a participant from a DB plan, Age 79, who is receiving $2,948.26 in the form of a Life with 5-year Certain annuity, and, who also receives a single sum distribution of $43,342.26 as catch-up payment for underpayments in the past, all in the same calendar year 2023? One issue at hand is, if he is allowed to roll over all or part of the single sum that he is receiving?

Your response will be greatly appreciated.

Thank you.

I just want to make sure I'm reading this correctly in the Plan Document for a client.  Here is the excerpt, regarding the true-up for the Safe Harbor Match:

Notwithstanding the foregoing, if the Employer elects to contribute and allocate separately ADP Safe Harbor Matching
Contributions for an Allocation Period of less than the Plan Year, a true-up will be required unless ADP Safe
Harbor Matching Contributions with respect to any Elective Contributions made during a Plan Year quarter are
contributed to the Plan by the last day of the immediately following Plan Year quarter.

So if the client is funding the match on a payroll-by-payroll basis, a true-up for shortages is not required correct?

Has any big recordkeeper yet made available (if a plan-administrator customer asks for it) a form for relying on a participant’s written statement that she has a hardship?

hi! If a SH plan has a missed deferral opportunity and requires a corrective QNEC - does that then remove the top heavy exemption? I'm curious and can't really find anything that says yes or no on this. I'm leaning towards YES because regs state that it's top heavy if it consists of anything besides deferral and the safe harbor contribution; BUT would it really cause a failure if you correct your plan? I can't wrap my head around this. 

Thank you!

Client sponsors a cash balance plan and is solely owned by a Parent entity.  All employees are employees of the Client and receive W-2s from the Client.  Prior to August 1, the Parent was neither the plan sponsor nor a participating employer in the pension plan.  On August 1^st, the Parent sold 100% of the stock of the Client to a third party Buyer.  Following the closing, Client and Parent are no longer part of a controlled group.  Immediately prior to the sale, the Client and Parent both signed resolutions that, effective August 1, transferred sponsorship of the plan from Client to Parent, and removed Client as a participating employer in the plan.  Parent is now taking steps to terminate the plan.

Clearly, all compensation and accruals for January 1 through August 1 for employment with Client should be counted under the plan.  However, no 204(h) notice was provided to employees giving them notice of the August 1 change in plan sponsorship.  Does the Parent still have to include post-August 1 compensation until a 204(h) notice is given and its timing runs out?  Or, are they just treated as having terminated employment because their employer no longer participates in the plan?  There was no amendment to freeze or change benefits, although the change in plan sponsor has that effect because none of the employees work for the Parent and all employees remained Employees of client.  

Thanks for any thoughts.  The change in sponsorship is not a PBGC reportable event because the plan is fully funded, and the parties will treat the transaction as a partial plan termination and fully vest all participants.  

We've had several client receive letters from the IRS approving the 5500 & 8955-SSA extensions through 8/15/23. The 5558 was submitted for calendar year plans Ending 12/31/22, but the approval letter states the Tax Period as "October 31, 2022" and "File your return by AUG. 15, 2023". Has anyone else seen this? Is this another IRS computer error?

We are currently on Datair and looking at other options.  We are looking at Ft Williams (given we use their document & 5500 system), ASC, and possibly Relius (but unlikely given costs).  One concern is the processing of huge plans.  Currently, we have issues with Datair stalling during busy season when someone is importing or calculating a huge plan.  We do not want to relive this.  We also would like a program that provides some reconciliation options between the accrued balance on the software and vendor ending balance by participants.  Do you have any of these retirement software companies and can you provide pros & cons?

Here's the data:

Company #1 owner A = 50%; owner B = 50%

Company #2 same owner A = 25%; same owner B = 25%; owner C = 25%; owner D = 8%; owner E = 8%; owner F = 4%; owner F wife = 4%

Owners A, B, D, E and F are brothers, owner C has no family relationship.

Company #2 does 100% of it's work for Company #1 (no outside companies).

Would this be an affiliated service group relationship or any other?

Our firm serves as counsel to the local union and the associated pension fund. The union asked the pension fund staff for mailing labels (name and address). The union intends to give the information to a third-party so that participants will be mailed information (unrelated). Issues?

A client (husband and wife) that was a single member plan for many years in 2021 became a plan with a rank and file employee.  Naturally due to this added employee they are required to have a full administration performed and a form 5500-SF filed electronically.  For 2021 the relationship was peachy. Come the 2022 annual administration and the client balks at the price-tag of the annual admin work performed.  A back and forth via email ensues where I explain everything.  Old emails are used to show that she was accepting of the cost, even offered to pay me more for all the back and forth questions.  Yet now she is being cheap.  Her excuse?  She thought the 2021 fee was only for that year due to the added work.  Here is the kicker, my process is to email the client the form 5500 and efile authorization form along with my invoice.  The client returns the form signed and upon payment in full I would file the return electronically and then forward on the complete bound report.  I hear nothing from this client so I file an extension since the 7/31 filing deadline was approaching.  Just now I looked at the DOL website and can see that the return was filed on 7/21.  I am guessing she took my completed form and filed the return herself.  I'm sorry, WTF!

Here is my question, the DOL site says on the form 5500 that the return was "Filed with authorized/valid electronic signature" in the signature space.  Is there a way to find out who exactly filed the return? Who's credentials?

I'm so angry.  You work your @ss off researching, helping someone, holding their hand to get everything the way they want it, you are more than fair to them and then you are taken advantage of.  I need to be more cutthroat and business strong.

And, to head off the inevitable question, no, a current contract was not executed (my bad).  This unfortunate event is making a review of all client contracts a priority. But on that subject, it is in writing that she is ok with the cost quoted and she did pay the first year setting a precedent, right? 

Anyone have a sample notice they have seen / prepared that they are willing to share?  I assume some of the big providers have put something together...

Just saw a brief article from Fred Reish on this.

I'm wondering why an employer would want to get involved in this, if approached by a recordkeeper, etc.? Seems like yet another possible fiduciary issue, yet another possible complication or item that may bring up questions, etc.

From my viewpoint, a participant has been notified about the cashout. They haven't responded, so account is rolled to IRA. Period. No further involvement - wash your hands of the whole thing. The participant then can do anything they want with the IRA.

Don't know what other thoughts folks might have? 

Where or what details can be provided by ERISA guidance that say allocations must be deposited into the investment election that the participant chose or was defaulted too? I know this is a Plan Failure but does it disqualify the Plan? 
example - company provides small catch up profit sharing contribution. It was requested for these funds to be deposited into specific accounts that do not follow the QIDA. 

We have an employer with 100% of employees in its 403b plan that is considering terminating the 403b plan in order to accomplish two things:

1. Start up with a new 403b

2. Provide access to cash for one of the employees

My understanding is that a termination results in a distributable event for employees, where they can either get the cash or rollover to another institution.

If a rollover to another 403b is possible, don't the regulations state that the employer cannot participate in another 403b for 12 months starting the date the funds are liquidated due to termination?

Meaning the funds that make it to the new 403b institution will need to just "sit there" for a year and employees will lose out on contributions that would have otherwise been sent to the initial 403(b). Is my understanding correct? 

Participant died in 2023.  He did not receive his 2023 RMD.

Who would receive the RMD.? Who pays the tax and receives the 1099?

We're planning an early retirement program, and want to make sure our 401k plan synergizes with the new program. We do currently have an early retirement provision in the plan document:

"Early Retirement Age" means the later of: (i) attainment of age 55, and (ii) the 5 anniversary of Plan participation. If a Participant terminates from service before attaining age 55, but after the 5 anniversary of Plan participation, the Participant will be entitled to elect an early retirement benefit upon attaining 55.

Our current match vesting schedule is 3 years (profit sharing is 6, but we don't do that) - I'm wondering if the vesting provision in the above is providing any additional benefit - doesn't seem like it. Is it standard to have that provision match regular vesting, or offer an accelerated vesting? If our goal is to have an attractive early retirement package, woul dit make more sense to not have a plan participation requirement?

I'd love to hear anyone's thoughts who has an ERISA early retirement program!

I am helping my former employer (TPA) do a DFVC filing for a client with several years 5500 filings due.  Rather than signing an E-signature authorization for each year, what they want to do is get a form 2848 giving me the POA to sign and file all the years.  I would have to of course get the EFAST credentials to do this.

Q:  If I have POA and e-sign all the 5500 filings on EFAST, am I opening myself to any liability? 

I have a Cash Balance Plan that is looking to buy an investment property and renovate it, hopefully as an asset of the Plan. 

The property is about $1.35 million, then they would want to spent $1.5 million to renovate it and create a multi-unit rental.

I know owning the property and generating income via rentals isn't an issue, as long as all revenue goes back into the Plan since it is a Plan asset (at least that's my understanding)?

Can they also pay for the renovation out of Plan assets?