Has anyone ever heard of this company? A client of mine just told me they called her (with a heavy accent) and said they represented my firm and were doing an independent review of the plan. We all know about cold calling based on public DOL data (nothing to do about that) and even scare tactics using the Judy Diamond "score", but saying they represent me is a a new low.

Is it possible for a terminated plan to file Form 8955 with an end date different than the 5500.  

Example: plan final 5500 2/28/2025; 8955 3/31/2025.

Comments?

Tom

I know for PBGC covered DB plans, you must give notice to the participants 60-90 days before plan termination.  For Safe Harbor plans, you must give notice 30 days before plan termination.  Are there any requirements to notify the participants in profit sharing plans or non-PBGC covered DB plans?  Do you have to give 15 days notice before plan termination, or can we make the termination date the same day we are preparing the amendment in these cases?

A business is 100% owned by an ESOP. 

The question came up about RMD.  The employee involved was a >5% owner 10 years before the business sold to an ESOP and he was well below the RBD age.

I think we are ok with no RMD to this person.

Thanks in advance for comments.

Tom

For some reason, a plan has allowed a lower paid participant to contribute Voluntary After Tax instead of as Roth 401(k).  Annual contributions are around $1,000.

I can't seem to think of a reason why this would be better for the participant.

Aside from that, Voluntary After Tax Contributions are not even in the Plan Document, so I'm wondering if it's an oversight and they can be reclassified at the recordkeeper as Roth Contributions.

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR2b7577e2af5412b/section-1.436-1

URL: https://www.ecfr.gov/current/title-26/part-1/section-1.436-1#p-1.436-1(a)(3)(ii)(B) 

Citation: 26 CFR 1.436-1(a)(3)(ii)(B)

Application of section 436 after termination of a plan —

(A) In general.  Except as otherwise provided in paragraph (a)(3)(ii)(B) of this section, any section 436 limitations in effect immediately before the termination of a plan do not cease to apply thereafter.

(B) Exception for payments pursuant to plan termination.  The limitations under section 436(d) and paragraph (d) of this section do not apply to prohibited payments (within the meaning of paragraph (j)(6) of this section) that are made to carry out the termination of a plan in accordance with applicable law. For example, a plan sponsor's purchase of an irrevocable commitment from an insurer to pay benefit liabilities in connection with the standard termination of a plan in accordance with section 4041(b)(3) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), and in accordance with 29 CFR 4041.28, does not violate section 436(d) or this section.
__________________________________________________________________________________________________________________________________________________________________________________________________

Please indicate if unpredictable contingent event benefits form part of the exceptions for plan terminations.

Hello. We have a new hire that elected Roth, but the contributions were mistakenly set to pre-tax. This only occurred on his third paycheck. I’ll be working with our 401k provider to move the funds to the Roth account, but What else do we need to do to correct this? Is a qnec necessary? 

Many adoption-agreement forms for a set of IRS-preapproved documents present a choice of ways to define a disability.

Often, one of those ways is to follow the Social Security Administration’s determination that the person is eligible to receive Social Security Disability Insurance benefits under the Social Security Act of 1935. Suppose the plan sponsor ticked that box.

But what if there would be no Social Security determination because the participant is an alien, but not a qualified alien, or is a citizen or qualified alien but lacks sufficient Social Security work credits?

Does a basic plan document provide a fail-safe provision to determine a disability if there would be no Social Security determination?

And what if no document states any such provision: May a plan’s administrator interpret the plan to treat a participant as not disabled, absent a Social Security determination, no matter how bad the individual’s physical or mental condition?

Can the deferral amount used for ADP test be reduced by the available catch up for the year on the front end?  For example, have a catch-up eligible participant that deferred $27,000 during 2024.  The deferral amount used for the ADP test was $23,000 (401(a)(30) limit for 2024).  Since the participant is catch-up eligible can $7,500 of the $23000 be classified as catch-up reducing the amount used for the ADP test to $15,500 ($23000-$7500)?   

This plan is our CPA client not our TPA client.  The TPA is now indicating the plan needs an audit for 2024 which of course will not be done by Oct 15.  The 2023 5500 shows 125 participants with an account balance as of 12/31/2023.  So presumably there would be 125 as of 1/1/2024 which would mean an audit.  The plan never crossed the 120 threshhold under the old or new counting rules until now.

Why this is coming up now I don't know.   But it got us thinking - does account balance mean actual money deposited into ones account or does an accrued contribution count.  This employer likely funds the 3% nonelective and profit sharing contributions for 2023 sometime in 2024.  So some employees have an accrued plan balance as of 12/31/2023 but not an actual plan balance.  I believe admin systems count the accrual when determining the count for 5500 purposes.

Also, I know this has been commented on but I don't remember what the consequences are of filing a 5500 without the audit report, and adding it later as an amended 5500.

Thoughts? Thank you,

Tom

Suppose a controlled group has two 401k plans - A and B. The decision makers told both plans not to add super catch-ups. Plan B ignored the direction and added super catch-ups. For sake of argument, decision makers refuse to add super catch-ups to plan A. How does one fix a universal availability failure? Does plan B have to be amended retroactively to remove super catch-up and therefore remove/distribute any super catch-up deferrals? Or is plan A forced to add super catch-ups?

Thanks

The final regs allow this. Other than for possible administrative simplicity/consistency, is there any other good reason to do this? I can't think of one. Most of our clients (we are primarily smaller plan market) would prefer NOT to be forced into HPI status if not required to do so.

Thoughts?

Employee A works for Company X. For 2025, A elected family medical coverage under X's health plan. Family coverage costs the employee $275 in monthly premium payments. Employee A was actually charged $300 per month for such coverage. X's health plan discovers the error in the third quarter of 2025. Is X required to repay A the amount of the extra premium amount? Is X required to include interest on the reimbursed premium amount?

I can't believe this happenned!  This client is very responsive and always gets to me the annual census, financial info, and once completed the 5500 signed so that we can file quickly.  Unfortunately, for 2023 I just didn't hit the file button so the 5500 didn't get filed.  2024 has been filed.  They received and sent to me the love letter from the IRS saying that they don't have record of receiveing the 5500 for 2023.    So...

• Can I still do the DFVC?  No penalty letter has been received. 
• Is there no way to plead to the IRS to let it go?  I can show a long history of better than timely filing
  I'm going to have to eat this one aren't I.   People make mistakes... there was no ill intent... it was just missed.  Give a small TPA a break!

What's the best way to go about this??

Hello - is anyone familiar with a 3(16) service agreement and what is typical language for indemnification? We are reviewing a contract for a potential 3(16) for our client.  For example, I have seen one agreement refer to the indemnification of fiduciaries in the basic plan document and another one that limits liability to the fees collected from the Employer in the prior 36 months preceding the date of the error, which would equate to a total of $18,000.Thank you for any insight.

The plan has a total of 14 eligible participants, comprising 4 Highly Compensated Employees (HCEs) and 10 Non-Highly Compensated Employees (NHCEs). It uses statutory eligibility and includes both Safe Harbor Matching and Profit Sharing under a new comparability formula.

The client has elected to provide a Profit Sharing contribution of 5.6% to all HCEs and 1.86% to only 4 NHCEs. Using ASC software, we performed cross-testing under the Annual Accrual method with Permitted Disparity.

Based on the plan design and testing methodology, it is our understanding that the plan is not subject to the Gateway minimum contribution requirement because only Profit Sharing no other nonelective contribution. Accordingly, we have overridden the status of the remaining 6 NHCEs to “N/A” to facilitate passing the nondiscrimination tests. Both the Average Benefit Percentage Test and the Rate Group Test have passed.

However, during the Coverage Test for Profit Sharing, the plan initially failed due to an NHCE ratio of 40% (4 out of 10 NHCEs receiving contributions). In cross testing, concentration ratio was calculated at 71%, with the Safe Harbor threshold at 41.75%, Non-Safe Harbor at 31.75%, and the midpoint at 36.75%. Since the coverage ratio fell below the Safe Harbor threshold, the plan failed through Average Benefit Percentage Test.

To ensure the plan passes the coverage test under the Average Benefit Test, I allocated a nominal $1 Profit Sharing contribution to one additional NHCE, thereby treating them as benefiting under the plan. This increased the NHCE benefiting count from 4 to 5, raising the coverage ratio to 50%. Since the Safe Harbor threshold is 41.25%, the plan is deemed to pass the coverage test.

However, I’m uncertain whether allocating just $1 is sufficient for compliance purposes, or if I should have applied the same 1.86% contribution that was provided to the other NHCEs. The client has clearly stated they do not wish to increase contributions or modify the existing allocation structure.

I’ve proceeded with the $1 allocation to meet the testing requirement, but I’m posting this for feedback—would appreciate any insights on whether this approach is acceptable under current compliance standards.

How are plans typically set-up with regards to employee deferrals and matching contributions once someone hits the 401(a)(17) limit?

I believe most plans will still allow contributions once the limit has been reached (I've only seen one that stops contributions), but curious to know how matching contributions are handled once the comp limit has been reached.

Do plans have an option to match once the 401(a)(17) limit is reached or must they stop matching?  If stopping is a requirement, what section of the law/code dictates that it must stop?

Also, if matching dollars must stop at the limit, won't a plan with a true-up negate some of the negative impact a high earner might experience.  For example, a plan that matches 100% of contributions up to 6%, wouldn't that provide up to $21,000 in matching contributions in catch-up?  So maybe the impact would be the timing of when an employee potentially receives the match?

Thanks in advance.

For the 12/31/2024 plan year, the client has several unresolved compliance issues from the 2022 plan year that remain uncorrected as of 2025. Specifically, there is a 402(g) excess deferral of $2,000 for Participant A, who is a non-highly compensated employee (NHCE), and a 415(c) excess annual addition of $6,000 for Participant B. Based on the records available, neither of these excesses has been corrected or reported to date.

In addition, another plan has two uncorrected issues from the 2022 plan year related to plan-imposed limits. First, a deferral was made in excess of the plan’s stated deferral limit (as defined in the plan document), separate from the statutory 402(g) limit. Second, the employer matching contributions were calculated at 3.5% of compensation, whereas the plan document limited the match to 3%. This resulted in an excess matching contribution. As of 2025, neither the excess deferral (under the plan-imposed limit) nor the excess match has been corrected — the excess deferral was not returned to the participant, and the excess match was not distributed or reallocated to the forfeiture account.

1. What is the appropriate method of correction under IRS guidance, specifically for each of the following issues: the uncorrected 402(g) excess, 415(c) excess, plan-imposed deferral limit violation, and the excess employer match?

2. What penalties, if any, apply to the plan sponsor for not correcting these issues within the applicable correction window?

3. What are the tax implications for both the plan sponsor and the affected participants upon correction of each issue, including income inclusion, excise taxes, and any other tax consequences?

4. What IRS forms are required to properly report the corrections (e.g., Form 1099-R for corrective distributions, Form 5330 for excise taxes, or other applicable forms)?

Clarification is also needed on whether these issues may be corrected under the Self-Correction Program (SCP), considering the time elapsed and the types of failures involved, or whether a Voluntary Correction Program (VCP) filing is required — particularly for the plan-imposed limits and uncorrected statutory excess.

The plan document allows for the distributions of After-Tax Employee Contributions at any time.

In this case, can you rollover the After-Tax Contributions (in a 401(k) plan) directly into a Roth IRA?

I believe you can and the code should be code "G".

Is that correct?

The Federal Register is scheduled tomorrow to publish the IRS notice of PTIN user fees for 2026.  It will say the "amount of the user fee as $10 per application or application for renewal, plus an $8.75 fee per application or application for renewal payable directly to a third-party contractor."  There are 14 pages of history and legislation disclosing how the IRS arrived at the new number.

The "big" news is a reduction in the PTIN user fee to $10 from $11.  (Start planning now on how to use this windfall. 😀)