A non-ERISA plan’s sponsor/employer/administrator found that its recordkeeper made a few years’ monthly ACH payments after the participant’s death but before either the administrator or its recordkeeper had notice of the death.

The payments were made under the participant’s instruction to use the recordkeeper’s service for automated payments of the amounts the recordkeeper computed as the participant’s § 401(a)(9) minimums.

The payments were made to a bank account for which the participant and her spouse were joint holders. But the nonparticipant spouse is not, and never was, the participant’s named beneficiary. Also, the plan provides no right to the spouse.

The plan’s trustee is a State-chartered trust company that is a subsidiary or affiliate of the recordkeeper. The payer is that trust company or its paying agent.

Am I right in thinking the payer should demand a return of (at least) the amounts the payee’s bank collected after that bank had notice of the payee’s death?

Is this a task recordkeepers routinely handle?

If not, will a trustee/recordkeeper do it on the plan administrator’s instruction?

Wondering if for the Solo type client people require their client to have a full annual administration performed.  If the assets are less than $250K is one necessary?  Maybe a modified type of administration?

What responsibility is it for the 3rd party FSA provider to process FSA claims correctly. Example if an employee sends in a claim and there is a possibilty the item or service is not eligible or my need more clarification, like a Dr's letter but it is paid out without asking for more clairification,  is it ok for a 3rd party provider to not looking into the expense furthur, like holding it for more info. And their thought process is ultimately its on the employee if they claim something and shouldn't have and it was reimbursed. Where is the line that the 3rd party FSA provider must hold a claim or servi e for more clarification to either reimburse or deny as not an eligible expense?

A 401(k) plan allows participants to convert their after-tax contributions to Roth via an in-plan Roth conversion feature. After a conversion, are those dollars completely recharacterized as Roth such that they would no longer be eligible for a penalty-free early withdrawal? For example, if a 50 year old participant had $7,000 in after-tax contributions, he would be able to withdraw them at any time without an early withdrawal penalty. If he converts them to Roth via the in-plan conversion, would he lose that ability to withdraw the funds before age 59.5? 

Under Federal Regs, I understand a governmental entity can make employer contributions to a 457(b) plan.  What I am unclear on is if the State of PA allows for this?  Anyone work on PA governmental where employer match or nonelective is permitted.  I realize Er and Ee would be subject to 402(g) limitation.  I've gotten various responses from attorneys.

Following is an excerpt from an online article prepared by a law firm.  Although it is outdated, I can confirm that they are still taking this position.  I understand it for sole-proprietors but not for others.  Have I missed something?  I appreciate the exepertise represented on this forum.

"Both employee [emphasis added] and employer contributions can be made up until the company’s tax return deadline including  extensions. If you have a sole proprietorship (e.g. single-member LLC or schedule C income) or C-Corporation, then the company tax return deadline is April 18th, 2022. If you have an S-Corporation or partnership LLC, the deadline for 2021 contributions is March 15th, 2022. Both deadlines (March 15th and April 18th) to make 2021 contributions may be extended another six months by filing an extension. This is a huge benefit for those that want to make 2021 contributions but who won’t have funds until later in the year to do so.

While employee [emphasis added] and employer contributions may be extended until the company tax return deadline, you will typically need to file a W-2 for your wages (e.g. an S-Corporation) by January 31st, 2022. The W-2 will include your wage income and any deduction for employee [emphasis added] retirement plan contributions will be reduced on the W-2 in box 12. As a result, you should make your employee [emphasis added] contributions (up to $19,500 for 2021) by January 31st, 2022 or you should at least determine the amount you plan to contribute so that you can file an accurate W-2 by January 31st, 2022. If you don’t have all or a portion of the funds you plan to contribute available by the time your W-2 is due, you can set the amount you plan to contribute to the 401(k) as an employee contribution, and will then need to make said contribution by the tax return deadline (including extensions)."

Does a plan sponsor have control over the fund(s) used for balances in their pre-funded account? Or is a pre-funded account required to use some sort of conservative capital-preservation type fund?

An employee goes on a leave of absence and chooses to continue having their HCFSA deduction taken from paid portion of leave but does not return to work. Does the HCFSA eligibility end as of the last day worked prior to the leave, or does it tie to the health insurance plan end date, which is last day of the month in which the employee notified us that they would not be returning to work? If eligibility ends as of the last day worked prior to the leave, how do you handle HCFSA reimbursements made while on leave? 

An employee goes on a leave of absence and chooses to continue having their HCFSA deduction taken from paid portion of leave but does not return to work. Does the HCFSA eligibility end as of the last day worked prior to the leave, or does it tie to the health insurance plan end date, which is last day of the month in which the employee notified us that they would not be returning to work? If eligibility ends as of the last day worked prior to the leave, how do you handle HCFSA reimbursements made while on leave?   

Anyone else received one of these? Client submitted a fully completed and signed 5330 for late deposits of 401(k) deferrals. Client received an IRS letter, from Ogden. No form #. The letter states that the 5330 was unsigned,, doesn't say whether the PT was Discrete or other than Discrete, didn't give the amount of the PT, doesn't indicate whether you corrected all of the PT's. Of course, ALL of these items were completed, and completed properly.

They give you the option of checking the boxes and completing a couple of items, and signing a declaration that the form is true, correct, and complete. BUT, they tell you NOT to include a copy of the original for 5330, unless you are correcting/amending it, which of course you aren't, because it was correct and complete in the first place.

So, you are left with the choice of completing their form, or calling, which is likely to take hours and probably get wrong info anyway...

If this was an automobile, I'd be suffering from road rage...

If a nongovernmental and nonchurch charitable organization prefers to make available voluntary-only wage-reduction arrangements to buy a contract with Internal Revenue Code § 403(b) Federal income tax treatment and do so without establishing or maintaining a plan that would be ERISA-governed, such an employer prefers to avoid discretionary decision-making.

That includes avoiding discretion about whether a participant has a hardship withing the meaning of § 403(b)(7)(A)(i)(V) or § 403(b)(11)(B).

Many public-school employers too prefer to avoid involvement in those decisions.

Are 403(b) insurers and custodians allowing a participant to self-certify her hardship?

Does allowing self-certification help remove not only an employer but also an insurer or custodian from discretionary decisions about hardships?

What’s happening in the real world?

Does anyone have a form for the beneficiary. He must select form of payment from a DB plan,

Hi. We have a participant that wants to take multiple in-service distributions within a calendar year. In early 2023, he took an in-service distribution against his 2022 principal credit. He recently received his 2023 principal credit and now wants to take another in-service distribution. He is in his mid-60s and I can't find anything in the plan document that prohibits this (the document is silent on this topic other than to say in-service distributions are permitted). But it just doesn't feel right to me. Does anyone know if this is legal?

Plan provides for nonelective employer contributions and permits an election with respect to the time and form of payment.  For a newly eligible employee, it seems the 30-day rule would apply to permit an election regarding time and form of payment within 30 days of initial eligibility.  

The 30-day rule includes the requirement that the deferral election can only apply to compensation paid for services performed after the election.  

If the only contributions are nonelective employer contributions (thus the employee can't choose whether or not to defer it to the plan), does the requirement that the election apply to compensation paid for services performed after the election have any application?  In other words, if the employee becomes eligible on March 1 and makes a time and form of payment election within 30 days of March 1, and the employer makes a $5,000 discretionary contribution on November 1 - is the time and form of payment election applicable to all of the $5,000 discretionary contribution?  It seems that it would be.   

I am trying to understand which event triggers taxation - vesting or when the SRF lapses. For instance, if the document states a participant is 0% vested until attainment of Normal Retirement Age (age 65 in the document) and also that the participant will forfeit 100% of the account if no longer employed on 1/1/2026, when is the participant taxed if the participant is age 52 as of 1/1/2026 and still employed as of 1/1/2026. On the one hand, I think he's taxed because the SRF lapsed on 1/1/2026; on the other, he isn't vested in the funds yet because he hasn't attained NRA (but he will no longer lose the right to the funds, since the SRF lapsed. He's merely got to wait until he reaches age 65).

Note, I did not write this document.

I have a client asking about the mechanics of making the employer matching contribution as Roth, as allowed under Secure 2.0.  In particular how the taxes are being handled.  Is the Match being put through payroll, or are companies paying the taxes independently?

Good Morning,

i think i know the answer, but rehires always get me... 

ee worked 4/15/2021-6/17/2021

Rehired 12/10/2023

 on FTW document. 6 e is marked for 6 months of service, elapsed time.  With monthly entry dates.

Neither Rule of parity or one year hold out are marked.

Since he was gone more than 12 months and he didn't meet eligibility, does his 6 months start over and his entry date would be 7/1/2024?

Appreciate your input!  Thanks!

How do your plans handle the situation in which a divorce decree grants an ex-spouse an interest in retirement benefits, but the ex-spouse dies before a QDRO is filed with the Plan? In this case, the participant is nowhere close to retirement age. It seems the estate should be put on notice and given a time frame to file a posthumous QDRO, but would appreciate thoughts.

I do not work enough with after-tax contributions and came across a question for an owner-only sole prop where the owner wants to contribution profit sharing and after-tax.

(1) The owner has gross income for the year is $100,000.  Minus expenses (not counting plan contributions), this his net compensation down to $80,000.

(2) He is looking to contribute 20% profit sharing and, as much after-tax as he can (under age 50 FWIW)

Do we determine the PS amount first and then subtract the after-tax or after-tax first and then PS?

Thank you

Mike

I feel like I should know the answer to this one but I don't.  We sponsor a 403(b) and one of our participants deferred the maximum to both our plan and his former employer's 401(k) plan in 2022.  (Yes, 2022.)  He is now (December 2023) requesting a refund from us.  Can we do it?  He is active and under 59 1/2 and we do not consider him to otherwise have had a distributable event.  If this were a 401(k) I would say "no" but I am unsure about the 403(b) aspect.