Question: A participant of a company dies, and their life insurance premiums have been paid by employer contributions. The life insurance company can only make the check out to "The Trustee of the ABC Company 401K." Can the employer deposit the check to trust at the record keeper  and, from there, allocate the funds to the deceased participant account? 

Or how else does this get done?  I have very little experience with life insurance contracts in 401(k) plans, and this might be the first time I've ever had one pay out.

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Asking for a CPA friend

A terminated participant rolls over his pre-tax 401k account and employer account (SH+PS) directly into a ROTH IRA without any conversion during July 2025 and is now concerned about the taxes.

As this is out of my knowledge base, what is wrong with this scenario, what should have been done and what should be done now?

Thank you

I'm wondering any one has any insight into calculating the implicit bifurcation (annuity payment bifurcation) for SSLIOs when valued for a joint life such as a 50% J&S SSLIO.  Particularly, my team is debating whether or not it is appropriate to use the plan basis for the J&S conversion or the 417(e) basis.  When leveling both the participant and beneficiary benefit I can see a defense for either.  I can't seem to find any guidance on this so any input would be appreciated.  As a corollary, what are your thoughts when leveling just the participant benefit for something like a 50% J&S SSLIO?  We're thinking it makes the most sense to use the plan basis for such a case.

Thanks for the help!

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Has anyone thought about the permissibility of escheat in the context of annuity contracts issued under a terminated defined benefit plan?

Field Assistance Bulletin No. 2025-01 currently permits escheat from a qualified plan only for benefits of less than $1,000 (among other conditions).  However, we are now dealing with a terminating defined benefit plan which is seeking an insurer to provide the annuities required in the case of a terminated plan.  Several of the companies have provisions in their contracts saying that they will escheat benefits of missing participants in accordance with state law (with no cap on the amount that may be escheated).  When questioned, they say that the insurance company is not subject to ERISA and thus need only comply with state law.

My concern here is that even if the insurer is not subject to ERISA, the plan is.  And if the plan cannot directly escheat benefits of missing participants, is the plan violating its fiduciary duties if it signs a contract to purchase an annuity that explicitly states that benefits may be escheated?

What are other plans doing in this situation?

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Company A and Company B each sponsor their own 401(k) plan. Both entities are owned 50/50 by Tommy and Cooper. Both plans have the same plan year (fiscal year-end), testing method (current year), and neither is a safe harbor plan. No employer contributions are made to either plan for the year in question.

Plan A:

• Participants: Tommy and Cooper only (the only employees/participants)

Plan B:

• Tommy and Cooper are employees of Company B (and eligible participants in Plan B) but do not make elective deferrals. 

• There are 16 HCEs total (including Tommy and Cooper)

• There are 79 NHCEs eligible to participate (2 are otherwise excludable, 77 are not)

How are these plans required to be tested for 410(b) coverage and ADP testing?

Specifically:

• Are the two plans required to be aggregated for testing purposes due to common ownership/controlled group rules, or may they be tested separately?

• If aggregation is required, how does that affect coverage and ADP results in this fact pattern?

• If separate testing is permitted, under what circumstances would that apply?

• Are there any other issues or traps in this structure that we should be aware of?

Thanks in advance for any insight.

Good morning. I have a client (1 ee plan) who rolled INTO the Plan aftertax money. To establish basis within his Plan, I'm preparing a 1099-R showing the after-tax amount as being 'converted' to Roth inside the Plan.

Can you please tell me if I'm thinking right about the 1099-R?

Box 1, the amount that came in is shown ($30k). Box 2a, taxable amount $0. Box 7 - H (what else could this code be? is H right?)

Thanks !

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When is the following rehired employee eligible?

John was hired in 2019 and worked very part time generally speaking, never working 1000 hours... until he did.

The Plan at that time was a Profit Sharing Plan and it was frozen.

John's service history is:

2019 370 hours

2020 111 hours

2021 393 hours

2022 1000 hours (age > 21)

2023 516 hours and Terminated 7/2023.  Because the Plan is frozen John does not enter the Plan, is not a "Participant" even though he completed 1000 hours and min age 21. No account balance, 0% vested.

2024 -0- hours [1st One-Year Break-in-service]

2025 Rehired Dec 2025, 71 hours

TO NOTE: The frozen PSPlan was Amended and Restated effective 1/2024 into a Safe Harbor 401k PSPlan, eligibility is 12 mos / 1000 hours, min age 21. [LTPT eligibility is based on the standard provisions.]

The A&R Plan document provides the new eligibility provisions apply if an Employee is not yet a "Participant" as of the effective date of the change. Further it defines "Participant" as an Employee having satisfied eligibility AND entered the Plan.

[X] This amendment or restatement (or a prior amendment or restatement) modified the eligibility and/or entry date requirements and the prior eligibility and/or entry date conditions continue to apply to the Eligible Employees specified below. If this option is NOT selected, then all Eligible Employees must satisfy the eligibility and entry date conditions set forth above.
        1.   [X]    The modified eligibility and entry date conditions above only apply to Eligible Employees who were not Participants as of the effective date of the modification.

QUESTION: is John eligible and his Entry Date is as of Rehire in December 2025 or must he wait until he completes 1 year/1000 hours (or LTPT elig reqs) and enter per Plan Entry Dates?

Thank you.