We were recently hired to takeover as TPA for a plan. It is a mess. The previous TPA was sold in 2021 and the Plan was left to fend for itself. In the time since, the Plan Sponsor has retired most of the previous owners. The remaining owners and associates are all pretty new to the Plan. Outside of knowing where they funds are currently being held, they have little information on their Plan. 

Through some digging they were able to locate a plan document. It is a PPA document. None of the Trustees listed on this PPA document are with the company currently.  Our office is working to get them a new document, but I am unsure about the exact process we need to take to keep everything in good standing as we correct everything that has happened over the last 2 years. 

Can we take their PPA document and restate it on our provider's Post PPA Document? What should we use as the effective date? Who should be listed as Trustees? They also changed the Plan Sponsor and Plan name in 2023. Does this change need to be made as an amendment after we have restated the Plan?

Any assistance/guidance is greatly appreciated.

This question might go out of style with the change in counting participants to determine whether a plan is required to have an audit.

Normally, the answer is yes, you can split a plan into two and avoid the audit, assuming all of the good things that go into maintaining separate plans. The question that was brought to my attention is whether a sponsor, finding out today that their particpant count went over 120 on 1/1/22, do the split retroactively to 1/1/22. I don't think you can, but I raise this to make certain that I'm correct on that. Thanks for any replies.

Sole-prop situation with the CB Plan.  The minimum for 2022 is 160K, the client has made only 150K contribution in 2022 for 2022 Plan Year.  CPA went ahead and has already filed the tax return for 2022 without consulting with anyone.  Per my conversation with the advisor, the "missing" 10K has been deposited today.

My understanding that reliance on revenue ruling 76-28 - https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/rev.-rul.-76-28/dcb4  still secures the deduction of that 10,000 for 2022 tax year as long as the tax return is refiled.

1) Anything I might be missing here?

2) Reliance on 76-28 requires a designation in writing by Sponsor to Plan Administrator of that contribution as being made for 2022.  Does anyone has a sample of such language they would be willing to share?

3) Tax return will have to be amended - I do not believe it needs to be amended by 4/15 and can be really amended at any point.   Thoughts? 

Can a company with over 100 employees sponsor a SEP? 

Matching contributions fail coverage due to allocation conditions. 

1.  To correct, we have to provide QNEC to some NHCEs at the ACP rate.  Can these QNECs be used in the ADP tests?  Can they be used in the ACP test  I believe the answer is yes to both

2.  Or do we run the ADP/ACP tests first, then make QNEC to correct ACP failure which will correct the match coverage failure?

I think # 1 is the correct methodology, but looking for other opinions.  Thanks.

Here’s another statute-reading exercise for BenefitsLink mavens.

Internal Revenue Code § 414(v)(7)(A) restricts to Roth treatment a § 414(v)(1) catch-up deferral for “an eligible participant whose wages (as defined in section 3121(a)) for the preceding calendar year from the employer sponsoring the plan exceed $145,000[.]”

If a retirement plan’s participant who otherwise would have had wages more than $145,000 had no wages (but as a partner had net earnings from self-employment more than $145,000), may she choose non-Roth catch-up deferrals?

As many of you run into, we sometimes have on-going plans with former employee participants that cannot be located.

I believe the rule is as follows:

1. For on-going plans - after a diligent search, the plan can distribute a former employee's vested benefit to a default IRA Custodian, but only if it is $5,000 or less.

2. For Terminated plans - (non pbgc plans) after a diligent search, the plan can distribute a participant's benefit to a default IRA custodian no matter how large the participant's benefit is.

Anyone disagree with this?

Thanks.

We have a 401(k) Plan that has safe harbor match.    The employer acquired a second company in October 2022 and this company has a 401(k) Plan that does not have any safe harbor contribution.    I'm not sure how to test the 2 plans.     Can we test them separately or are they required to be aggregated?   

With a heading “Mandatory Distribution Rules Not to Apply Before Death”, Internal Revenue Code § 402A(d)(5), as SECURE 2022 adds it for tax years that begin on or after January 1, 2024 (with a transition for 2023 measures to be paid in 2024), provides:

Notwithstanding sections 403(b)(10) and 457(d)(2), the following provisions shall not apply to any designated Roth account:

(A) — Section 401(a)(9)(A).

(B) — The incidental death benefit requirements of section 401(a).

Am I reading correctly that only Roth 403(b) and Roth 457(b) participants are excused from minimum distribution before death?

Or is there another provision I didn’t read thoroughly enough to find?

I'm having trouble getting my head around the rules in EPCRS about when a sponsor doesn't have to make a corrective distribution of small benefits.

EPCRS Section 6.02(5)(b) says: Delivery of small benefits. If the total corrective distribution due a participant or beneficiary is $75 or less, the Plan Sponsor is not required to make the corrective distribution if the reasonable direct costs of processing and delivering the distribution to the participant or beneficiary would exceed the amount of the distribution. This section 6.02(5)(b) does not apply to corrective contributions. Corrective contributions are required to be made with respect to a current or former participant, without regard to the amount of the corrective contributions.

My questions are:

• What may be considered a "corrective distribution"? Like are corrective distributions limited to 415 excess, 402(g) excess, and ADP/ACP refunds?
• When it says "This section 6.02(5)(b) does not apply to corrective contributions.", does that mean corrective contributions for former participants with no balance still have to made if the amount is < $75 or the actual cost of making a distribution, even if the TPA's cost for making a distribution will wipe out the benefit?
  • Can corrective contributions for former participants with no balance be forfeited if they are less than $75 or the cost of making the distribution?
• Essentially, how liberally can this section be used to avoid having to fund small corrections to terminated participants with no balance?

A Plan Sponsor elects to discontinue their single-employer plan and join a PEO/MEP. 3 months later, the Plan Sponsor decides they want to leave the PEO/MEP and go back to a single-employer plan. Is this an issue since less than 12 months have passed since the Plan Sponsor originally discontinued their single-employer plan in favor of joining the PEO/MEP?

I just wanted to know if anyone is dealing with the same issue. We use Relius pre-approved IDP Volume Submitters Plan documents. Currently we have 100+ plans that don't allow for Roth 401k deferrals. We are trying to determine if we now have to force these plans to allow for Roth 401k because of the new rules (taking out the catch-up provision is not a route we want to go, we know this is an option to avoid the roth catch up). 

Currently there's no way to amend the FIS/Relius IDP VS to add Roth 401k deferrals, without losing reliance. We would have to restate the entire plan document, which we are trying to avoid since we recently restated all plans for Cycle 3. 

We thought a plan could possibly only allow Roth for Catch Up eligible but that doesn't seem to be the case, it looks like we may have to force plans that don't allow for Roth deferrals to now allow for it because of the new rules (well at least that's what our understanding is so far).

Again not so much a question but just wanted to know if we're the only ones dealing with this right now :).

A sponsor and a job applicant were 99% sure the applicant would become an employee of the sponsor.   While final negotiations was taking some time, the applicant rolled in money from a prior company to this sponsor's 401k plan, this sponsor signed approval of the roll-in, and the roll-in was completed, and an account holding assets was created for a non-employee roll-in to this plan.  Then the negotiations fell apart without the applicant ever becoming an employee (though in this case, the applicant may still become an employee in the next 6-12 months).  

I've no background on this to even know where to begin asking questions, but here goes.......

Is this a violation of ERISA type rules?   

Is it an automatic violation of plan document design? 

What type of penalties exist? 

Must the plan disgorge the assets back to "never-employee" immediately? 

Does the "never employee" now have rights as a current plan participant? 

Can they just treat this "never-employee" account balance as a terminated employee? 

Does it have any impact on testing?   

Would it impact the count for plan audit status? 

Any thoughts on how to address this are appreciated. 

Thank you.

Keith

An employer maintains two § 401(a)-(k) plans, one for manufacturing employees, who are union-represented, and another for office employees, none of whom is union-represented.

The employer is considering merging the two plans into one.

The plan for office employees uses a safe-harbor matching contribution to meet rules about coverage, nondiscrimination, and top-heavy.

Even after the plans’ merger, there would be no risk, even with substantial growth in both headcounts, that the merged plan’s participant count would reach a number that calls for engaging an independent qualified public accountant.

The employer is not worried about a tax-qualification defect for either plan.

Are there other reasons for not merging the plans?

Are there other reasons to prefer the hygiene of separate plans?

Question:  For the Covid distributions that did not get paid back, do they count as an in-service distribution that needs to be added back/included in top heavy balances?

Personal question: I turn age 65 in November, 2023, and am currently deferring amounts to an HSA account to cover the HDHP deductible. I know I have to cease HSA contributions when I turn 65, but the question is when do I have to stop? I currently plan to retire in January, 2024, and keep my health coverage through my employer through the end of 2023, starting Medicare Part B on 1/1/24. I've heard conflicting theories as to when deferrals have to cease, so I'd thought I'd ask the question here.

Thanks for any replies.

I’m terminating a cash balance plan with a PYE 7/31 and am trying to get all benefits paid out prior to that date so that the 5500 for that PY will be the final 5500. The plan document is from FT William which has a Secure Act amendment for terminating DC plans but has advised that it won’t have one for terminating CB plans for several months. Any ideas? Thanks.

We prepared a 2021 Form 5330 for a client who had late deposits.  For several reasons, we did not prepare it until December 2022 but we calculated the interest/excise tax through 12/31/2022.  They will also need a 2022 Form 5330, which I believe we could have included the 2021 info on that for only one filing, but we elected to do two separate filings.  

The client remitted the form (along with excise tax payment) fairly quickly; the IRS apparently received these on Jan 9, 2023.  I know this because they actually sent our client a letter assessing penalties.  Granted, the amount is quite small (< $10) but I have never heard of a late 5330 letter being sent by the IRS. 

Has anyone else heard of their clients receiving a late 5330 letter, ever?  I know the IRS is beefing up their staff and perhaps now have employees eager to take action on things like this.

Also, could the client have avoided a penalty if we had done a combined reporting on one 2022 Form 5330? 

Thanks!

A client claims that some ESOPs freeze the share value on termination of employment for the terminating participant. That participant's share value/account balance would not change in the future, regardless of how long the participant waits to receive distribution. There would also be no interest credit or any other adjustment to the account balance at termination. The purported rationale is that a terminated participant should neither share in the upside of future stock increases nor bear the potential risk of share price decline in the future.  I can find nothing on this. Seems dubious to me. Has anyone heard of this?