I have a potential client that is possibly looking to establish a 401(k) Plan before the end of this year. It is too late to make this a Safe Harbor Plan as we are past October 1st. Some time ago I recall reading about a method to maximize deferrals in the initial year using what I think was called the "popcorn" method. Has anyone ever heard of this? You would use this method in the initial year of the plan and then amend the plan the beginning of the following year making it a Safe Harbor. I might be totally off base on this one, but, I thought that I would ask. Either way, Happy Holidays to everyone.

Can't seem to get this straight in my head.  Participant passes away late in 2022 and has already taken his 2022 RMD.  Spousal beneficiary (also a plan participant) has not yet taken rollover of husband's plan balance.  She plans to rollover his balance in 2023 to her personal IRA. 

Is a 2023 RMD required from the deceased participant's plan account prior to the 2023 rollover to spousal beneficiary's personal IRA?  (Both participants are owners, well over age 72 and have already been taking RMDs from their plan account balances.)

If the rule of parity states:
If an Employee does not have any non-forfeitable right to Employer contributions, exclude eligibility service before a period of five (5) consecutive One-Year Breaks in Service/Periods of Severance - No

and the one year holdout state:
If an Employee has a One-Year Break in Service/Period of Severance, exclude eligibility service before such period until the Employee has completed a Year of Eligibility Service after returning to employment with the Employer - No

How far back are we required to look to determine if an employee who joins has any service that should be included because both of these rules do not exclude it? Is there a certain criteria given by the IRS or if it is not determined in the plan document is it like since the company began? 

Hey Relius users - anyone recall where the specification is to tell the system it's a short plan year?  I used to be able to log in to the old relius.net, which had all of those types of questions/answers but I can no longer access that.   The new FIS log in doesn't appear to have a similar Q & A section and I didn't want to have to wait to post an "incident" for such an easy question!

Thanks in advance...

Client has a 401k plan with age 21 and 12 mos service requirement for the purpose of employee deferrals, matching, and profit share.  The client hired two employees earlier this year, both of whom are HCE's (owners' spouses).  Client is wondering if it's possible to retroactively amend the eligibility to 6 mos to allow spouses to defer in 2022?  Or, is it possible to create a new class of employee with separate eligibility criteria for these two allowing them in the plan immediately and leave the age 21/12mos criteria in place for all others.  Plan otherwise passes ADP testing (no employer contributions are being made to the plan) and coverage testing.  

advisor I work with let me know that he has a client that had some employees enroll in 2021, but he never withheld anything, and did not deposit anything for these employees. Can they correct under VCP? how should they handle the fact nothing was ever withheld? I'm having some difficulty trying to figure out the best course of action.

if the SIMPLE is being treated as a qualified plan would be, then I think that this applies:

P test. .05 Exclusion of an eligible employee from all contributions or accruals under the plan for one or more plan years. (1) Improperly excluded employees: employer provided contributions or benefits. For plans with employer provided contributions or benefits (which are neither elective deferrals under a qualified cash or deferred arrangement under § 401(k) nor matching or after-tax employee contributions that are subject to § 401(m)), the permitted correction method is to make a contribution to the plan on behalf of the employees excluded from a defined contribution plan or to provide benefit accruals for the employees excluded from a defined benefit plan. (2) Improperly excluded employees: contributions subject to § 401(k) or 401(m). (a) For plans providing benefits subject to § 401(k) or 401(m), the corrective contribution for an improperly excluded employee is described in the following paragraphs of this section .05(2). (See Appendix B, Examples 3 through 12.) (b) If the employee was not provided the opportunity to elect and make elective deferrals (other than designated Roth contributions) to a § 401(k) plan that does not satisfy § 401(k)(3) by applying the safe harbor contribution requirements of § 401(k)(12) or 401(k)(13), the employer must make a QNEC to the plan on behalf of the employee that replaces the “missed deferral opportunity.” The missed deferral opportunity is equal to 50 percent of the employee’s “missed deferral.” The missed deferral is determined by multiplying the actual deferral percentage for the year of exclusion (whether or not the plan is using current or prior year testing) for the employee's group in the plan (either highly compensated or nonhighly compensated) by the employee’s compensation for that year. The employee’s missed deferral amount is reduced further to the extent necessary to ensure that the missed deferral does not exceed applicable plan limits, including the annual deferral limit under § 402(g) for the calendar year in which the failure occurred. Under this correction method, a plan may not be treated as two separate plans, one covering otherwise excludable employees and the other covering all other employees (as permitted in §1.410(b)-6(b)(3)) in order to reduce the applicable ADP, the corresponding missed deferral, and the required QNEC. Likewise, restructuring the plan into component plans is not permitted in order to reduce the applicable ADP, the corresponding missed deferral, and the required QNEC. The QNEC required for the employee for the missed deferral opportunity for the year of exclusion is adjusted for Earnings to the date the corrective QNEC is made on behalf of the affected employee. (c) If the employee should have been eligible for but did not receive an allocation of employer matching contributions under a non-safe harbor plan because he or she was not given the opportunity to make elective deferrals, the employer must make a Page 84 of 140 corrective employer nonelective contribution on behalf of the affected employee. The corrective employer nonelective contribution is equal to the matching contribution the employee would have received had the employee made a deferral equal to the missed deferral determined under section .05(2)(b). The corrective employer nonelective contribution must be adjusted for Earnings to the date the corrective contribution is made on behalf of the affected employee.

I thought there was some guidance that zero compensation employees were not to be included in testing. That's the way I've been handling it for over 20 years working at a number of TPAs.

However, my new employer has a policy to include zero compensation participants in coverage testing (but not in ADP/ACP). We're having a substantial number of plans failing coverage as a result (even safe harbor contributions...). I'm kind of stuck because I have no access to our legal group and don't know whether this interpretation originated with them.

Is there any on-line resource that has some level of definitive guidance on the subject?

Thanks for any help you can provide.

I just wanted to make sure this company was given good advice (not currently our client).

They currently have a 401(k) Plan and are looking to add a Cash Balance on top of that.  I don't believe there are currently any employer contributions going into the 401(k) Plan.  In that situation, do the Plans have to be tested together or can the Plans be separated and tested individually?  So when we are collecting EBAR for Rate Group testing, etc., can the 401(k) contributions going into the other plan be ignored?

Hopefully this question makes sense.  Thanks!

I'm trying to wrap my head around this and would love some input.

We have a 401(k) plan with qualified employer securities. The plan sponsor is a C-Corporation and is privately-held. The owner formed a new business in 2022 under a separate LLC that they own 100% and hired employees in early-2022. Since the C-Corporation is in a controlled group with the newly-formed LLC, the LLC was added as a participating employer of the plan effective 1/1/2023, recognizing prior service with the LLC. We expect there to be employees that meet the plan's eligibility requirements in July 2023. My question is -- how does the qualified employer securities investment option work with the employees of the LLC?

Would the LLC employees simply be treated the same as the employees of the C-Corporation and have the option to purchase stock in the C-Corporation?

Or, is there some other piece that I'm missing. ....such as, since the C-Corporation is technically not their employer, would the option to purchase employer securities in the C-Corporation be unavailable? Although, if this is the case, I would presume this would run into benefits, rights and features issues.

plan reporting is done on an accrual basis.  We are at 121 participants at beginning of plan year in part due to several participants who received a profit sharing contribution who had previously terminated and been paid out but now had this showing as in their account at the end of the plan year.  Any chance we could exclude them from the count.  I believe the answer is no but thought I'd get other opinions.

A participant is requesting a $5,000 withdrawal related to the birth of a child under the SECURE Act - The plan allows for this type of withdrawal. The question is whether the participant can "gross-up" the withdrawal so as to net $5,000? I truly have no idea.

Thanks for any replies.

Greetings, all. 

Recordkeeper for employer-sponsored retirement plans here.  I'm spinning my wheels, so I thought I'd consult the wisdom of the crowd. Here's my question:   Would it be feasible under ERISA/the Code for service provider to design a process to allow qualified plan participants to elect distributions over the phone without completing a form of any kind?  In other words, call center reps would orally guide participants through the election process, complete the online payment distribution form on behalf of the participant while they're on the call, and enter their choices in to our system. Totally verbal.   It's the call center rep that's completing/submitting the election, and the participant is doing everything over the phone.

Assume, for the sake of argument, that (1) we could authenticate the caller (2) the call would be on a recorded line and would be scripted, (3) the plan document doesn't say anything specifically requiring a written election, and (4) we would have a separate process to obtain spousal consents or other documents that required a notarized signature.

Personally, I don't expect this would be allowed.  I can think of about a half dozen reasons why this is a bad idea, (miscommunications, risk of offering "investment advice," etc.)  However, the business folks are convinced that "other companies do this" and that somehow it would easier/more efficient than just helping the participants go to the website and complete the online form on their own.  So if someone could tell me to find a definitive reason to shut this down it, I'd greatly appreciate it.

I have researched it and I cannot find much DOL/IRS guidance about it -- nothing forbidding it but nothing to suggest they would allow it either. The best guidance I can find seems to be 26 CFR 1.401(a)-21 - Rules relating to the use of an electronic medium to provide applicable notices and to make participant elections.  Maybe there's an argument that the call itself would be an "electronic medium" for making elections?  FWIW, it appears that the E-Sign act says that consumers could conceivably use an oral or voice signature to sign a document.

Has anyone had any experience with service providers allowing something like this?  'Please' and 'Thank You' for any insights you care to share! 

I have a 401(k) plan with an plan participant who retired from the plan and needs to take an RMD for Plan Year 2022. She has not taken any of her account balance out of the plan to date. My question is who is responsible (liable) to make sure she received her distribuition in a timely manner:

1. The Plan Sponsor or

2. the Plan Participant

In other words, if she does not get paid out, who was responsible for getting her paid out?

Rick

I am a bit confused on the W-4P and W-4R usage. 

Lets assume a lump-sum distribution, rollover eligible.  If a participant requests a distribution from a plan and completes a distribution form that includes a section where he/she can elect the withholding that they want to apply, is it also necessary that the participant complete  a W-4R? 

Along the same lines, I have seen some TPAs use a distribution form that has an election to pay the participant "In a single payment of my entire account balance, less required 20% withholding".  If the person chooses that election, do they also need to complete a W-4R form?

Thanks!

We have an owner-only 401k/PS plan.  He has the after-tax employee contributions and will be converting to Roth for 2022.  Is it recommended that he keep the converted $$$ in an plan account, or after the conversion move the $$$ to a Roth-IRA outside of the plan (plan allows for withdrawal of after-tax at any time)?  

Thank you

I am a benefit consultant who has been approached by two colleges who are currently participating in a self insured captive with other colleges for Health & Welfare benefits.  They would like to leave the health insurance captive, continuing to operate independently, but wish to create a new organization for shared services (finance, HR, IT, etc) that would service both colleges as well as potentially be a product they could offer (sell) to other colleges.  This new, shared services organization will have less than 100 employees (100 FTEs required in NYS for stop loss).  Does anyone have any ideas for the best path that would enable these two colleges to continue to operate independently, but for their to be common control (i.e. a parent organization) that is set up over both colleges and the new shared services organization so that from an employee count perspective, all 3 groups could be considered as one and the new shared services organization also be permitted to be self insured with stop loss?  

Are there any other paths that reach this same end that don't involve common control?

Thanks in advance for any help you can provide!

We have a plan that we took over recently.  its a small plan with little distribution activity.

It does not appear that they have applied for a Trust id.  They can not locate if they did.

Is there any way to find out if they have one? 

If i try to apply for a new one the plan was effective in 1994, more than 25 years ago.  The system only allows 1 year in the future or 25 years in the past.  Would you just enter 1997 to apply for it?

Thanks!

Can an employer offer an "Open Enrollment" option to allow ALL employees, even if they have NOT met eligibility requirements, to enter the plan?

Imagine this situation: An employer sponsors and administers a § 401(a) plan that allows § 401(k) elective deferrals, provides matching contributions, and provides nonelective contributions. None of this is a safe-harbor arrangement. All plan, limitation, accounting, and tax years are the calendar year.

When 2022 begins, the plan did not exclude union-represented employees; they were participants under the same conditions as all employees. In the spring, the employer and the union negotiate a collective-bargaining agreement. The CBA, effective June 1, provides for the union-represented employees to be covered only by the union’s multiemployer individual-account (defined-contribution) plan, including for § 401(k) elective deferrals, matching contributions, and nonelective contributions (which all are set to no less than what was provided under the single-employer plan).

Promptly after signing the collective-bargaining agreement, the employer amended its single-employer plan to exclude, from June 1, the union-represented employees. The amendment also specifies that the 2022 nonelective contribution allocated to a union-represented participant is counted only on her January-through-May compensation.

How does a plan’s administrator (and, more practically, its recordkeeper or third-party administrator) run coverage and nondiscrimination tests for this year?

Are there two sets of tests—one for the year’s first five months, and another for the year’s last seven months?

Or are there other ways the measures or tests (or both) adjust for the fact that classifications of participants changed during the year?

As noted in the title, I am dealing with a multiemployer 401k plan.  We are going through a situation where the employer contract holder is changing and we are being asked whether this should be treated as a severance event for impacted participants making them eligible for a distribution.

Our plan document notes that if a participant is deemed to be separated from covered employment, defined as quitting, discharge, or layoff, the participant is entitled to a distribution.  The plan document notes that there is no separation benefit if at the time of application for payment the participant is employed by his employer.

Any assistance appreciated.  My initial thought is that the answer is no, but it would be great to have some statute/regulation/case law to use to support the provided answer.