Many practitioners recognize the wave of lawsuits asserting a retirement plan’s fiduciary’s breach in allowing unreasonable expenses began with the Schlicter firm’s first few in 2006.

An insurance business’s infographic BenefitsLink helpfully points to shows an average of 83 fiduciary-breach lawsuits a year for 2019-2022. https://www.sompo-intl.com/wp-content/uploads/Fiduciary-lines-Excessive-Fee-Litigation-0323.pdf And it shows 625 lawsuits for 2010-2022.

For 2009-2021, the Labor department’s EFAST database shows an average of 833,722.4 Form 5500 reports a year. https://www.efast.dol.gov/5500search/) Year by year, some plans enter that count, some plans exit that count, and many plans continue over many years (and decades). Further, not all plans are pension or retirement plans, and of those not all are individual-account (defined-contribution) plans. (I confess I didn’t even try to sort the database.)

But extrapolating from these numbers and filling-in or assuming other facts, what’s our guesstimate of the percentage of individual-account retirement plans’ fiduciaries not sued?

Is it 99%?

Hoping for some help.

Client had a late deposit for the 12/23/2022 pay date.  The total deferral was $1,400

It was discovered, deposited and the lost earning were calculated and deposited into the plan in Feb 2023.

 

Since the payroll was 12/23/2022 , is it considered late for 2022?   Do we need to put on the 2022 5500 and complete the 5330 for 2022?

Could this be corrected with self-correction and no need to report?

Your help is appreciated.

 

Normally, when we assign a signature to a 5500 filing, the signer receives an email from the DOL about signing the return.    We found out today that a few clients have not received these emails to sign their 5500.    These were all returns over the past month.      Anyone else having this issue?  

Employee wants to voluntarily drop group health coverage mid plan year (remain an active employee) and enroll in Medicare. The employer allows for this as a Life Event for dropping coverage, but I don't believe this a COBRA event as it is a voluntary drop of coverage and not an actual COBRA event. This in turn will affect the employee's spouse/dependents. Because the CMS website is very generic in this response and my reference materials don't mention voluntary drop, I'm having difficulty in providing information that will satisfy the employee, client, etc. I did reference an old post on here regarding voluntary drop of coverage, but I need more. Any clarification or assistance is appreciated.

EE who was under eligible age (21) was given a PS allocation last year (by small plan owner who thought they understood the plan).

This has just been discovered upon annual TPA review.

They have already filed their taxes and do not want to 'take money away' from that ee.

Must it be an 11g amendment, or possible to change eligibility age from 21 to 20 retroactively for prior plan year? 

 

 

I've got what used to be a paired MP-PS plan where we merged the MP into the PS 20 years ago back when that was all the rage.  Of course, that MP money is still tracked separately for purposes of making participants who have that money get the proper spousal consent for a distribution.

Now I've got a participant who is saying that when she Legally Separated from her spouse, as part of the separation agreement he waived all rights to her plan benefits.  There is no other plan paperwork to his effect - I presume he is on the beneficiary form as her beneficiary (which predates the separation agreement).  This is a new one to me.  Is this legit?  I feel pretty confident that she is still considered married for plan purposes, but can the spouse waive his rights that way?

Thanks.

The 401k/PS plan has 1 year of service eligibility.  Two NHCEs were allowed to defer before meeting the requirement.  The plan is going to be amended to allow them to make deferrals but they will not be eligible for PS contributions.  Are they required to receive the 5% minimum gateway (Plan is cross tested)?  

Thanks

I thought that there was a program for fixing 457(f) and 409A plan errors but I can't seem to find anything with the IRS. We have an erroneous deferral in our non qualified deferred comp plan. A participant reached their vesting date and should have been paid out their balance in 2021. I am looking for guidance on how to correct.

Thanks.

I've learned that one of my clients has a couple of employees that live and work in Japan. One of them has become a Japanese citizen. I have no info as to whether this person has dual citizenship.

I'm trying to figure out whether these employees should be covered under the 401k plan, which uses fairly standard language in its document (see below). I believe a nonresident citizen should be covered, though I'm not sure. Is it determined by whether the person receives US-based income? And what about the nonresident former citizen? Seems like that person should not be covered.

If anyone has some experience in this area, please shed some light.

Thanks, Greg

 

"Employee": A person who is currently or hereafter employed by the Employer, or by any other employer aggregated under Code sections 414(b), (c), (m), (n), or (o) and the regulations thereunder, including a Leased Employee subject to Code section 414(n) and a self-employed owner of an unincorporated employer, but, unless otherwise provided in the Adoption Agreement, excluding (a) an Employee who is a nonresident alien (within the meaning of Code section 7701(b)(1)(B) deriving no earned income (within the meaning of Code section 911(d)(2)) from the Employer that constitutes income from sources within the United States (within the meaning of Code section 861(a)(3)); and (b) employees who are included in the unit of Employees covered by a collective bargaining agreement between the Employer and employee representatives, provided benefits were the subject of good faith bargaining and 2% or less of the employees of the Employer who are covered pursuant to that agreement are "professional employees" as defined in Treasury Regulations section 1.410(b)-9. For this purpose, the term "employee representatives" does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer.

The owner of two entities in an affiliated service group earns W-2 income in one entity, and K-1 in the other.  His W-2 income is lower than his K-1 income.

When I aggregate the entities for 401(a)(4) / Gateway testing, the system (Datair) is disregarding the K-1 income for purposes of testing.  This impacts the Gateway minimum for starters.  It's the difference between a 5% Gateway and a 4.something% Gateway.  

The message I get is this:  Compensation for 401(a)(4) Discrimination/Gateway Testing differs for sub plans for owners of a sole proprietorship or partnership.  Smallest nonzero compensation will be used for testing in the Master Plan.

Is this a rule, or is this a shortcoming with Datair?

I tried looking for answers on this and haven’t found one that gives the plan sponsor view of what it is like to change recordkeepers. We are knee deep in converting our plan and the hurdles keep coming to us. We seems to take one step forward but then 15 steps backward each day. 
 

Any advise or previous experience in converting? This is a massive change in a very condensed timeframe and very small team. 

Plan has standard eligibility for ER contributions of 1000 hrs/1 yr of service.  If 1000 hrs not reached in 1st 12 months, determination period switches to calendar year.

Question --> Let's say an employee works a couple months, makes (immediate) eligibility for 401(k), but not for ER contributions.

Couple years later (< than 5), ee is rehired.  I'm wondering if that first period of employment means determination period must switch to calendar, or if plan calculates from date of rehire.

Example

• EE works 5/1/20 - 7/15/20
• EE rehired 8/1/22 and works over 1000 hours in 2022
• Eligibility for ER either 1/1/23 or 8/1/23

I have a client who has 8 employees, 6 of which whom earn a salary and 2 of which who get distributions from the fund each month as their compensation. The distributions are not W-2 compensation. Is there any way that these 2 employees can contribute to a 401k sponsored by the employer? Is there anything on the plan design that would allow for this compensation to be considered qualified compensation for their 401k? 

If that is not the case is there anyway that they can contribute on an after tax basis or since they technically are not earning any income and since a person cannot contribute more to their 401k then they earn in a year are they unable to add to this 401k? 

The employer has a plan that provides all sales employees (having worked a specific number of years) will continue to receive commissions on the book of business they created as employees for several years past retirement.  This is an actual plan, not individually designed agreements with the individual sales employees.

Is this an ERISA plan?

It clearly has an ongoing administrative scheme, it provides for a deferral of income past retirement, and provides for retirement income.

Our concern is that the plan is broad-based.  If it were limited to a "top-hat" group, I don't think we have an issue (because we can take some relief from the "top-hat" rules).

This appears to be a pretty common type of plan, but I can't find any guidance on the topic.  Is there some exception I'm not seeing?

I have a plan that has multiple Participating Employers in it. One of those PE's terminated with the original Employer 401(k) plan. They are wanting to start their own 401(k) plan. Would this cause any issues?

We filed an EZ form as final as of Nov 2022 on a 2021 form.  We received a Filing Received acknowledgement but with a warning message because of the short year and on a 2021 form I  suppose.  

Is there a way I can confirm the 5500 was filed with the DOL?  It isn't searchable on the regular search site of course.  But I wonder if there is a help line or other practitioner site.  Seems I knew of one at one time.

Tom

Hi

This is a first for me.

Existing calendar 401k plan with Corp A. Becomes CG in November with Corp B

Corp A has a 401k plan with eligibility of age 21/1year of service with 1000 hour requirement

Corp B has a 401k plan with eligibility of age 21/3 months of service.

When will the 2 plans need to be tested together?

How about if each plan passes the 410b and also 401a4 on their own, can they be tested separately? Top heavy issues aside.

What else am I not thinking of or not asking? May be something related to 410b6?

Thank you.

Brand new 401(k) plan, effective 1/1 of the last year, adopted the year before so 401(k) able to start on 1/1. It's not a safe harbor plan.

Took them awhile to get going with the admin of the 401(k) so they started 2/1 and only matched based on comp from 2/1. Match was done on a payroll basis.

The definition of comp is full year, so I believe the participants who contributed greater than the minimum required for the 3% match have been undermatched. Advisor disagrees. Curious of thoughts.

With the understanding that the entity sponsoring the plan is usually the employer, this question arose in connection with a transaction where we just found out the seller, and plan sponsor, is a trust.  Forgive me if there is an obvious answer, but wondering if, as a technical matter, a trust can be the plan sponsor of a 401(k) plan?  Thanks!

I'm having trouble determining whether commission payments constitute nonqualified deferred compensation ("NQDC").

Under the arrangement, employees build a book of business.  After they leave employment, they continue to receive commission payments for a set number of years based on the book of business they built.  Is this not NQDC?

From my view, the compensation is earned before employment ends.  A participant in the arrangement has a "legally binding right" to the compensation at the time the employee terminates employment.  It does not cease to be a "legally binding right" at the end of employment, since whether or not they get paid depends on the set terms of the arrangement (rather than discretion of the employer).  One might argue there is a substantial risk of forfeiture, but that seems tenuous here, since most customers will continue receiving services from the employer, so the risk of forfeiture is not substantial.

I know there are special rules for commission payments that allow you to treat the payment as "earned" when it is paid to the company by the customer.  But those special rules specifically apply with respect to when a payment is treated as "earned" for purposes of making deferral elections (not the case here).

So, give the above, aren't the post-termination commission payments NQDC?