Start-up 401(k) plan for small employer (no more than 5 regular employees, not including interns) intends to have eligibility criteria for all contribution sources attainment of age 18 and completion of 6 months of service, elapsed time, with quarterly entry dates.  The sponsor wants to exclude interns, but there is a concern that the exclusion may result in a coverage failure, given the number of interns and their potential duration of service.

To avoid a coverage failure, can the plan provide for an exclusion of interns subject to a fail-safe that allows an intern to enter the plan effective the first day of the quarter coincident with or next following the intern's attainment of age 21 and completion of 12 months and 1,000 hours of service? 

A few questions about FSA during M&A:

1. Scenario: The FSA plan continues under the seller's plan - after the two parties agree that the seller will continue its medical FSA for the transferred employees, I am reading the buyer must have an existing medical FSA plan OR be prepared to adopt a new one. 

    QUESTION:   How soon does the buyer have to adopt a new FSA plan?  Say for example, the parties agree the buyer will continue the seller's plan until the end of the plan year.  Would the buyer have to adopt the new one after the end of the seller's plan year or is it expected that the buyer will have to adopt the new FSA plan ASAP after the close of sale?

   QUESTION:  If the buyer assumes the seller's medical FSA how does that usually work with the FSA vendor and the contract?  Does the buyer have their own contract with the vendor?  What is the usual situation with this? 

So I have an owner of an LLC who is the only employee.  She owns her company 100% and her company is a participating ER of the plan that her husband's company (another owner only LLC) that sponsor's the plan.  It is a control group for now anyway, thanks to Secure 2.0.

She has been talking to someone other than us (her TPA) and her broker and thinks she can open a 2nd 401k plan.  Since her company is an adopter of the plan she is currently in, wouldn't she be prohibited from creating a 2nd 401k plan?

Since there will no longer be a control group next year because of the family attribution changes, she could spin off her own plan, right?  I have done a small handfull of mergers, but this is the opposite and am not sure how this would be handled...

We are a midsize TPA firm established in 1977 looking for an acquisition or merger.  Please respond to steve@apspension.com.

Now that new pre-approved 403(b) documents have been submitted to the IRS for new Cycle (or maybe Sickle?) does anyone have contacts at the IRS as to how the discretionary matches might work? With the Cycle 3 401(k), they allowed the "flexible discretionary match" provision due to the late decision that previously "normal" flexibility shouldn't be allowed, but word on the street was that they would NOT permit this approach on the 403(b) plans.

I don't know about the rest of you, but some of our non-profits have some of the most ridiculously complicated flexible match scenarios, which likely won't be allowed. Anyone have IRS contacts/feedback, at this early stage, as to what parameters might be imposed on match formula provisions? Never too early to start preparing them that they might have to think about other possibilities...

Thanks.

Group

I'm looking for a comprehensive checklist to review an ESOP plan for compliance. Anyone have a checklist they're willing to share and/or a resource that does a pretty good job. Anyone using artificial intelligence/chatgpt /othet apps to review ESOP plans and compliance? 

I have an old checklist and just want to see if there's something I'm missing or should change. 

Thoughts and comments and resources are much appreciated. 

Hi

Did a proposal for 2022 for a one lifer. They said to go ahead, asked for w-2 and when I got it, there were 2 listed.

CPA said the other was part-timer and terminated in 2022. Insisted on DOH and DOT.

Surprise surprise, DOH early 2021 with DOT late 2022. I asked for hours and of course, full-time employee.

Can set up the plan with 3 year cliff and/or 2/20 with no prior service before 1/1/2022 aka effective date of the plan. Not sure how the partial termination would play here as employee is not replaced. What do you think on this?

The question here: Is it ok to set up the plan now with 2 year wait (100% vesting is not an issue as it is only the owner)?

This is unchartered territory for me and not sure about discrimination issues.

Thanks

This one is new to me, so I wanted to check.  We have a potential new client, who plans to employee their 10-year old son (I'm not really sure of the specifics, to be honest).  So the question is:

1) Can someone legitimately have a 10-year old on their payroll?
2) If they are allowed to be on payroll, could they then allow them to participate in the 401(k) Plan?

The whole thing seems a little odd to me, but they are asking questions so I wanted to try and get the correct answers.

Thanks!

I'm looking at a 5500 Schedule I that was prepared for an ESOP. Diversification elections were made, whereby assets were transferred to the employer's 401(k) plan. The Schedule I, Line 5b, does NOT show these transfers. It seems to me, reading the instructions (excerpt below) that this should have been reported on Line 5b? They were included on the distribution line on the 5500 itself.

I don't know how critical this is, in real life terms. If it was reported incorrectly, at least it was "reported" - if the DOL audited the report, maybe just an "oops - reported on wrong line" and do amended 5500 form(s)? I have no idea how far back this goes... 

Line 5b. Enter information concerning assets and/or liabilities transferred from this plan to another plan(s) (including spinoffs) during the plan year. A transfer of assets or liabilities occurs when there is a reduction of assets or liabilities with respect to one plan and the receipt of these assets or the assumption of these liabilities by another plan. Enter the name, plan sponsor EIN, and PN for the transferee plan(s) involved on lines 5(b)1, (2), and (3). Do not use a social security number in lieu of an EIN or include an attachment that contains visible social security numbers. The Schedule I and its attachments are open to public inspection, and the contents are public information and are subject to publication on the Internet. Because of privacy concerns, the inclusion of a social security number or any portion thereof on this Schedule I or the inclusion of a visible social security number or any portion thereof on an attachment may result in the rejection of the filing. Note. A distribution of all or part of an individual participant’s account balance that is reportable on IRS Form 1099-R should not be included on line 5b. Do not submit IRS Form 1099-R with the Form 5500.

I am looking for some guidance on the following scenario please.

1. In January 2023 an HSA account holder intended to contribute x amount toward the 2022 tax year. Howeever, in error, he contributed the funds toward the 2023 tax year. In February 2023 all funds are transferred to a new HSA trustee in a trustee-to-trustee transfer. In March the account holder realizes the error and requests to have the January contribution recoded as a 2022 contribution. What obligation does the new trustee have to make this correction? How will this correction affect the trustee's 5498-SA filing?

Is anyone aware of a list of approved VCP corrections? A co-worker recalled seeing a list (over ten years ago...) complied by someone which laid out a bunch of approved correction methods. 

I have not been able to find such a list, and I'm not sure how someone would even have access to this info to create such a thing. 

Thanks! 

How is a buyer to treat cobra continuation coverage under the following circumstance:  Seller has former employees who have elected mini-COBRA coverage pre acquisition.  Seller will terminate the benefit plans so Buyer will have the obligation to provide COBRA to all M&A qualified beneficiaries which would include those individuals currently receiving mini-COBRA.  Does Buyer continue to provide coverage for the mini-COBRA period (12 months) even if Buyer is a large employer and not eligible for mini-COBRA or does the COBRA continuation period increase for those already receiving mini-COBRA because Buyer is subject to the federal COBRA regulations?

If you're aware of any  guidance, PLRs, cases, please share.  

A physician (of course) has owned  a part of a business in his 401(k) account (yes we've been filing 990-Ts.)  Now the partnership has been sold and he is receiving amounts in 3 installments 2023 (already received), 2024, and 2025.  He says the plan is now closed since all cash has been paid out but there is an A/R for the other 2 payments.  He says the other payments will be made to his Rollover IRA per his broker.  I mentioned 5500s for two more years and likely required plan amendments.  He sold his practice and so he wants the plan to go away naturally.

The other option  could be to file a 1099-R for the entire amount including the 2 receivable payments and so to treat the remaining two payments as receivable to the IRA.  can an IRA hold an A/R or note?  If not would the IRS match the plan 1099-R to the IRA rollover 5498?    The other 2 payments might total $80 to $100K.  And so our 1099-R woudl be very different than the 5498 filed by the recipient IRA.

I know I can advise and he as Trustee and Plan Administrator can provide direction.

Comments? Thanks

Tom

I am working for a multi-state organization that allows for Domestic Partner coverage.  I have one vendor contract that requires individuals to cohabitate for 12 consecutive months in order to qualify as a Domestic Partners.  In writing a company policy pertaining to the qualifications required to be a Domestic Partner, it would make sense use the most stringent set of rules presented in the collective contracts to develop our official policy.  With that said, I'm wondering if this 12 month cohabitation rule might violate any state requirements?  If a state's definition of domestic partnership does not require a 12 month cohabitation period and that state/local jurisdiction requires an employer to provide benefits to domestic partners, this creates a conflict.

Curious to know how others might be handling things from a policy standpoint.

Hi

Veterinary, PLLC, 10 participants, 2 owners (50/50) and their spouses

Controlled group with Corp X, LTD, employees are the spouses only and it does not perform veterinary services nor any other professional services.

Is the DB plan covered by PBGC?

Thanks

If you have a valid beneficiary designation on file, to you segregate those assets to the beneficiary right away?

For example, if Sam passes away and there are two beneficiaries, his son and daughter, do you split the account up for them and wait for then to claim the benefit?  Or do you leave the funds in the deceased participant's account until they come calling?

Is there anything that restricts a participant to take a loan while they are out on a leave of absence?  The loan specifically states that all repayments must be made via payroll deduction, so the thought is that it naturally restricts it.  The Trustees are asking if there is anything more specific, though.

Thanks in advance!

Has anyone else received calls from clients stating their former employees have received SSA Potential Private Retirement Benefit Information Letters when they took full distributions years ago?  In the last week, we've received calls from several and in every case the participants were reported with a code D on a form 8955-SSA at some point in the past. The oldest one was from 1994! 

Anyone aware of any issues at the DOL that might have resulted in this, or aware of something that has been released about this that I might have missed?

Thanks!

I thought I had seen this discussed here previously, but I'm not finding it...

We offer plans the ability to have our participant loan fees (both initial set up and annual maintenance) paid directly from the accounts on the recordkeeping platform, or some plan sponsors offer to pay the fees themselves (usually when there are few loans, or it's a tight-knit group).  And then sometimes this kind of thing happens, where the plan sponsor was paying the fees... and then at some point they decided that was stupid and started having the participants reimburse the employer for those loan fees on an annual basis once they got our invoice (it's itemized enough to show the fees for the loan charges, so it's not hard to figure out who the loan charges are for, especially for a small plan).

Of course, they don't tell us they are doing this until it is mentioned accidentally in a conversation and my distribution team person has her eyes pop out of her head.  She offers to change the plan so that the fees come from the accounts, and is told that, it's OK, this works for us.

So... does it, really?  The loan policy DOES include our loan fee in the amount that is being charged to participants (both at setup and annually), so maybe it does... though it does say that fees are deducted from the accounts from which the loan is taken, which is not correct, so we'd have to modify that.  But it's not on their 404a5 fee disclosure from the recordkeeper - only the recordkeeper's loan fees are shown.  And I don't think they'll let us add our fees there unless we are charging them from the plan accounts.  So my overall gut feeling is that this is danger zone territory.

Or, does the fact that this is handled "outside the plan" make this a moot point?  That feels wrong just typing that, but I think that's their rationale.

As I dabble as a benefit plan auditor in my spare time, the following issue came up yesterday; any thoughts would be appreciated:

We have a benefit plan out in New Jersey where the manager on the plan reached out to Nationwide for an asset certification so that an ERISA Section 103(a)(3)(C) audit could be completed for 2022; they have always received a certification from Nationwide in the past, but one was not included in the package they received this year. They received a response from Nationwide that “after consultation with our auditors, we are no longer issuing certifications on assets held with Nationwide”. I have a Nationwide client that I have already received the certification letter from for 2022. Has anybody heard anything about Nationwide not certifying their reports anymore? All of a sudden there could be folks out there that need a non-ERISA Section 103(a)(3)(C) audit…..