I have come up with a question that I’m not sure I know the answer to:  A social service agency we just inherited sponsors a 401(a) Thrift Plan. The only contributions allowed to the plan are discretionary employer “Profit Sharing” contributions; no employee contributions are permitted. The Plan has been filing the Form 5500 series, and, since it has greater than 100 participants, has been audited by an independent accounting firm; however, the last audit performed for the plan was for PYE 6-30-2019. For 6-30-2020, the prior accounting firm attached the company financial statement to the 5500 filing, and for 6-30-2021, the accountant’s opinion section was left completely blank.

I have not personally dealt with a 401(a) plan for a long time, and I seem to remember that 401(a) plans are not subject to ERISA, and therefore, not subject to Form 5500 filing requirements. Therefore, should this thrift plan even be filing a 5500? The though of having to go and do a 6-30-20, 6-30-21 and 6-30-22 audit is making our assurance department head very sickly…..

I can't seem to find an answer to this question. 

Is electing the source of an in-service distribution a protected benefit? Potentially an optional form of benefit? Or maybe not protected as an "administrative procedure for distributing benefits"? I'm not asking about removing in-service distributions entirely. This is a scenario were currently participants are able to elect which account (e.g. pre-tax, after-tax, rollovers) the distribution comes from. Would it be impermissible to eliminate this election and instead institute a policy whereby any in-service distribution is taken from all accounts on a pro-rata basis?  

Did I miss any IRA guidance on exactly how beneficiaries must take distributions over 10 years? They initially said, or at least everyone thought, that any time was ok - all in the tenth year if that is what was desired. Then last year they said no, it had to be taken each year, but 2021 and 2022 were ok if RMDs weren't taken. But they didn't say if 2021 and 2022 had to be taken in 2023, or if it would be ok to do it ratably over the remaining years - seems kind of important to be left hanging this long.

Husband/wife (only) CB plan.  Terminated last March.

Plan was sufficiently funded, and the plan document allowed for a pro-rata increase to plan benefits up to the 415 limits.  (Neither was reached, even.)  IRA rollovers processed a year ago for MORE than the actual accrued benefits under the formula.

Problem is - there was a $200K residual balance stuck in a gated hedge fund.  It still exists a year later because they can't seem to liquidate it. 

So the "get all assets out in 12 months" has now been broken.  Technically the employees (not old enough for an in-service) both got more than they were required to.  

At this point I'm just wondering who's seen this kind of fact pattern before and what became of it.  I wouldn't think the original rollovers would draw IRS scrutiny, but would finally moving any further excess to IRAs at this point, even with re-papering the participants, be problematic?  Could the IRS deem any amounts at this point just a reversion to the sponsor?  (Hiding behind the idea that the participants are technically fully "paid enough" at this point.)

I wish I knew the limitations on changing the named investor on that hedge fund - whether or not it could be "transferred" between plans or to an IRA directly, since it's apparently not liquid enough to sell.  (I enjoyed 4-5 years of hell a decade ago due to a gated hedge fund in a DC plan.)

Hola,

I am working with a small 401k that is terminating due to a buyout. The existing 401k plan has a stable value fund, which is now triggering a Market Value Adjustment. I have reached out to the fund requesting information on a put option, but since the plan is terminating, I am not sure that even if the put is allowed.

Date of termination hasn't yet been established - but the assets generally must be distributed within a year of the date. I'm concerned that the put option (if available) might be more than 12 months.

Any guidance would be appreciated!

Thinking with my typing fingers here....  

CB plan expected to terminate with an asset sale pending.  With PBGC timeline, probably early 2024 we get everyone (about 35-40 folks) paid out.

IF there are any excess assets (and we're thinking at worst case, 50-100K), was thinking about a QRP transfer to their profit sharing plan.

1)  Gotta cover 95% of active employees.   If everyone's terminating employment with the seller, then do I need to cover 95% of zero employees?  There are 3 partners selling, so they could certainly still be potentially "active" in their hollowed-out shell.

Is that an appropriate interpretation?  95% of either just the 3 former owners, or 95% of just totally zero active participants? 

Anyway, the extra 50-100K would be allocated completely for the final 2023 profit sharing plan year, since although I only gotta worry about the DB shutting down, there will still be allocations due (it's a DB/DC combo) for the PS plan.  Eliminates the need to come up with a higher PS amount for its short year.  And could use it all up for 2023, since I wouldn't expect there to be six more years to release it from suspense.

Thanks...

--bri

A single member plan (Solo) wants to roll out the balance of her plan into an IRA.  She is not closing down her business, but she is ceasing her contributions to the plan.  She would like to keep the plan around in case she decides to make a contribution at a future date.  

I know that a plan that does not receive a contribution for 3-5 years means that everyone is 100% vested.  Not an issue here with this plan being a single member plan.  But can she do this?   Empty the plan out and keep it around with a small balance, $1,000 or so?  

Thanks

In the plan accounting, are qnec and qmacs considered the same as profit sharing? So for instance if for non elective contributions we say you must be employed on the last day of the year to qualify for a non elective contribution would that also apply to qnec and qmacs? So in essence are qnec and qmacs also considered non elective contributions and follow all the same rules in the plan doc as a non elective contribution? 

Any prohibition against Employer reimbursing Employee the 20% excise tax when using the program? 

client terminated plan this year.  There was never any turnover in this small plan so the only thing the Trust EIN has been used for was to establish their trust accounts with various brokerage firms.  1099Rs completed using Trust EIN are being rejected from filing electronically saying EIN isn't correct.  My guess is actually IRS deactivated the Trust EIN.  What is the solution for this issue?

This comes from a CPA we work with.  I'm not familiar with SIMPLE plans, so hoping others here can help.  The client had a SIMPLE 401(k) plan, with the 3% match.  The owner somehow managed to start automatically sending money from her personal checking account to the SIMPLE plan on a monthly basis.  Normal contributions were made through the company, no excess from that.  No match was made on the personal funds.  It started in September 2022 and she discovered the error recently.  About $5500 in 2022 and again in 2023.  Can this be self-corrected by removing the personal funds with earnings?

This comes from a CPA we work with.  Their client had a SIMPLE 401(k) plan, with the 3% match.  The owner somehow managed to start automatically sending money from her personal checking account to the SIMPLE plan on a monthly basis.  Normal contributions were made through the company, no excess from that.  No match was made on the personal funds.  It started in September 2022 and she discovered the error recently.  About $5500 in 2022 and again in 2023.  Can this be self-corrected by removing the personal funds with earnings?

Not a SIMPLE person, asking for a friend:

"My employer started a SIMPLE IRA plan for all employees in April of 2022 with the required 3% match. I contributed the maximum of $14,000 over the course of the remainder of the year. My salary is $200,000 per year, so I believe that the 3% should be based on my compensation over the whole year totaling $6,000. My employer’s accounting firm only deposited $4,500 as the employer match instead of the $6,000 that would equal 3% of my yearly salary and says that they only owe me 3/4 of the total 3% because the plan only existed for 3/4 of the year. This does not seem to correlate to the IRS language regarding SIMPLE IRAs, which states that the percentage is based on the employees’ compensation for the “entire year”, although I cannot find anywhere that says that this language applies even to plans started mid year. What is the correct interpretation?"

Any comments/suggestions are appreciated.

Thank you.

Maybe I should not ask "why", but here it goes:

Is there a reason ages 73 and 75 were chosen for the RMD age? Was it based on:

• data around life expectancy, such as a specific life expectancy table
• a specific report that shows employees are working longer and delaying retirement
• anecdotal evidence 
• balancing act with the budget and those ages just made the 10 year projections workout nicely
• moving from age 72 to 73 is the easiest change
• the drafters favorite numbers

Thanks for any thoughts/comments.

Curious as to how many Plans you either service, or see, that use the option to INCLUDE Deemed 125 Compensation.

I remember discussing this with a noted ERISA attorney many years ago, - I think it was in regard to restating for PPA - and to paraphrase what he said, was that if you include it you'll probably live to regret it. Very complicated for clients and TPA's alike.

I've seen some old discussions on this, but I wondered how people felt about it now, years later.

Hello, 

I have a few clients who are participating employers of H&W MEWAs. The MEWAs hold trusts but for reasons unknown, they  are not filing Form 5500s. Do the participating employers file 5500s for themselves, and if yes, do they file as a trust even though they are not the Plan Administrator of a trust but sent funds to a trust? 

If an employer wants to offer an election period more generous than the 60 days that is minimally required, does it impact the end date for the maximum continuation coverage period?

Taken to an extreme, if the employer allows an employee to elect continuation coverage up until the end of the maximum coverage period (let's say 18 months in a given case), is it correct to say that the maximum coverage period is still 18 months after the qualifying event, and that while the employer is on the hook for claims arising any time during that 18 month period if an employee so elects, an employee electing on the last day doesn't have any coverage beyond the date of the election? 

Does anyone see any other impacts lurking in that scenario?

In a recent BenefitsLink discussion on how to handle a situation about an absence of a participant’s beneficiary designation, Calavera alluded to some possibility that a pension plan might, if there is no surviving spouse and no participant-designated beneficiary, provide no benefit distributable after the participant’s death.

Even if it’s rare, has anyone seen a cash-balance pension plan with provisions like that?

I haven't seen this before, but I'm hoping it's not a problem.  This is for a large 401(k) plan that is administered by a major payroll/benefits company.  The funds for new loans are withdrawn from several sources, no problem with the amounts taken.  The loan repayments are what I'm questioning.  In most cases (if not all) for the repayments, principal is only applied to one source - the profit sharing source.  No principal is applied to deferral, roth or safe harbor match until the loan balance in the profit sharing source is paid in full.  For example, a participant took a $3200 loan - 75% from the deferral source, 12% from the safe harbor source, and 13% from the profit sharing source.  The payments show that only interest is credited back to the deferral & safe harbor match sources and the profit sharing source is credited with all the principal repayment and some interest.

Is this ok?  I have only seen repayments applied back in the same manner as they were withdrawn.

Thanks!

What do you think?

Can a plan allow Roth contributions to only be made for catch up contributions?

Participants who are under age 50 would have no option to make a Roth contribution - Roth would only be available to those who are making catch up contributions.