What type of calculations do you normally use for RMD calculations for Cash Balance and/or Defined Benefit Plans? I am aware that one option is a lump sum option in which a calculated monthly benefit from last year's valuation report * 12 months = current year RMD. Just wondering what has worked for you and if the method you use helps reduce the amount of taxes paid for the affected participant taking the RMD.

Can a 6/30 fiscal year tax-exempt plan sponsor adopt a calendar year nongovernmental 457(b) plan today, having an effective date of 1/1/2022?  The plan will have no employee elective deferrals, so the only contributions will be employer nonelective contributions.  The idea is for the employer to be able to contribute the maximum of $20,500 for 2022 based on full-year compensation of eligible employees by providing for either a retroactive 1/1/2022 entry date or a current entry date while including pre-participation compensation since the beginning of the calendar year.  Relatedly, must employer nonelective contributions for 2022 be made by 12/31/2022?

We have a plan that terminated and distributed all of the assets.  Unfortunately a residual dividend came in, despite the money having been liquidated into cash.  It's a small amount, so what's the best way to handle this without having to cut everyone a $0.50 check?

Can the plan sponsor issue an invoice to the Plan for mailing, etc. and pay it that way?

We are taking over a plan that has an insurance company document.  The document indicates spousal consent is not required for distributions (unless the plan includes a source that requires such - and there is no such source in the plan.)  The plan offers 5 annuity options as alternative forms of benefit.   We never have those in plans and I'd like to eliminate these with our restatement effective 1/1/2023.  It's been awhile since I looked at this.  Upon some quick research it appears that yes these can be eliminated prospectively with a 90-day advance notice and provided the plan has the lump sum option.  

I like to get the opinion of this group which is very trustworthy - more so than my own "research." 

Thank you, Tom

I'm really not sure about this. Suppose you have a tax-exempt (non-governmental) corporation sponsoring a 457(b) plan. This corporation also has a couple of 1-person LLC's that are "disregarded entities" for tax purposes. Question is - can those employees (1 in each LLC) be allowed to participate in the sponsoring organization's 457(b) plan? (Assuming they otherwise qualify in the select group of management or highly compensated employees.) Common sense (to me) says yes, but does anyone know of anything concrete one way or the other? Or have an opinion? Thanks!

A small CB Plan is terminating.  2 participants have elected deferred annuity.  3 participants with a balance of 5K did not return the forms.  Cumulative value for those 5 is about 60K.  Need a recommendation/reference/contact info who would underwrite this if anyone?  What are the options if no insurance carrier is interested?

Defined Contribution Plan is in termination stage.  IRS Form 5310 has been submitted and the Plan is waiting for IRS determination letter. The Plan Administrator wants to wait for the favorable determination letter prior to processing distributions.

However, the Plan Administrator would like to mail out distribution election forms for the Participants to complete sooner than later.  How long can the administrator hold the completed distribution election forms on file prior to processing?

Is it 180 days?

For example, if the Plan Administrator receives completed distribution election forms and maintains them on file and the IRS determination letter arrives 7 months after receipt of the forms, would that require new election forms to be obtained.

Hi

Owner just took the 2022 RMD in one shot based on 60% vested balance.

Now decides to terminate the plan in 2022 i.e. becomes 100% vested.

Does he need to get additional RMD or still based on 12/31/2021 vested percentage?

Thanks

When merging two 401(k) plans into a single plan, is it possible to merge the two trusts into a single trust after a designated plan merger date (i.e., corporate action taken to approve the merger and documents merged on the designated date, but trusts moved later)?  

Plan sponsor acquired a company with a 401(k) plan in 2021 and did not do anything about merging the plans until recently. Section 410(b)(6) transition rule ends 12/31/2022. Providers have said it's not possible to merge the two trusts by that date. Can the plan sponsor approve the plan merger and adopt a single plan document as of 12/31/2022 and merge the trusts in February 2023? Does this satisfy Section 410(b)(6)? Or do the trusts have to be merged to actually constitute a plan merger? 

Also, in what situations (if any) can two members of a controlled group maintain two separate 401(k) plans?

Company would like a deferred comp plan to pay an executive 10% of the value of the company in 5 equal annual payments beginning 60 days after separation of service, where the value of the company would be determined as of the date of separation by an independent appraiser.  Does this proposal violate 1.409A-3(i)(1), which requires that "objectively determinable amounts" be payable on the payment dates, and says an amount is objectively determinable if it is "specifically identified," or if the amount may be determined "pursuant to an objective, nondiscretionary formula . . . (for example, 50% of an account balance)?"

The regulations don't define "specifically identified."  Is it broad enough to include the appraised value, or does it need to be an exact number or something close to it?  It wouldn't seem that the appraised value would satisfy the objective, nondiscretionary formula, unless the plan specifies how the appraiser is to come up with the value, which isn't the intent.

If the proposed plan doesn't satisfy 1.409A-3(i)(1), is there any way to argue that provision doesn't apply to payments based on separation from service?

I have a one-person EZ that all the assets are in a brokerage account with an advisor. Somehow, with the changing of jobs and the relationship between us (the TPA) and them, this was missed. 

I explained that the VCP is the most straighforward way to do this, but they want to roll the dice. so my questions are:

what is the downside? isn't there a max $500 penalty either way?

what should the letter look like? addressed to the DOL or IRS, signed by the employer? A basic statement saying her two professional contacts missed the filing?

Thank you, this is the first time I've been in this situation. 

I have a plan that has a start date of 1/1/2022 with an effective date for deferrals of 11/1/2022, with an eligibility requirement of 6 months. If someone has been at the company for a year but has an "effective date" into the plan of 11/1/2022 does that mean they will have to work another 6 months before they are eligible to defer or since they have been at the company for a year they are eligible on the effective date? 

I have the same question for vesting. The company has a vesting schedule of 1 year, with a plan start date of 1/1/2022 and effective date of 11/1/2022. If an employee was hired on 1/1/2020 will they have to wait another 1 year to fully vest after the effective date? 

Is there a maximum percent of eligible pay that the NFP has to stay below?  In the for-profit world, they have to stay below 25% to keep the contribution deductible... but there's no deduction issue for a non-profit.  Whether or not a NFP should be spending 30% of payroll on a plan contribution is another question altogether, but if they had the cash, is there anything stopping it?  I'm sure there is, but I haven't found it yet.  Thanks.

If a § 401(k), § 403(b), or governmental § 457(b) plan’s sponsor or administrator removes from the plan’s investment alternatives a lifetime-income investment (which might include an annuity contract with guaranteed-lifetime-withdrawal-benefit provisions), an exception from the usual restrictions against a distribution before severance-from-employment or age 59½ allows a limited distribution to remove from the plan the annuity contracts. This could include delivering to a participant a qualified plan distribution annuity contract.

Internal Revenue Code §§ 401(a)(38), 401(k)(2)(B)(i)(VI), 403(b)(11)(D), 457(d)(1)(A)(iv).

Has anyone done this?

Did you have a good experience, or a bad time?

Did the insurance company cooperate?

What difficulties did you encounter?

What cautions and pointers would you suggest to someone now planning a project?

(Please don’t misunderstand my query as suggesting any view for or against any insurance or investment product. Rather, I seek help about how a practitioner might guide a plan sponsor that has already decided to remove lifetime-income investments.)

Plan was created in August 2022 with a 1/1/21 effective date so they could do a PS contribution for '21.

Was there supposed to be a 5500 filed?  If so, how do you go about it?  Plan wasn't in existence until August, well after the extensions were due.

is there a special 5500 rule for plan that are retroactively adopted?

I have a plan that sometimes runs into participants checks being lower than their 401k deductions. So for example the check is $50.00 but they have $75.00 as their deferral election. Are they supposed to then withhold the other $25.00 in a future check? We have two different opinions here and trying to find some back up.

Hi, 

One plan is moving to the "retail" and making the current RK as the custodian and not the record keeper.  The accounts can be used to hold 401k assets on the "retail" side of where the plan is record kept. 

In order to open these types of accounts, the Plan Sponsors must sign a new Retail Adoption Agreement and a new Retail Service Agreement, in order to do this the plan must terminate.  

My confusion is "Will this be even considered as a Plan termination"  as per my understanding Plan termination is a corporate action, participant have the right to choose they distribution option, they cannot simply be moved over to retail side.  

Can participants just be rolled over ( Active and Terminated) into the retail account?  I've never encountered something like this. 

Thanks 

Hi, 

one of the terminating plan have 5-6 participants who had forfeited the checks, the money was moved into the forfeiture account which was used to pay an invoice.  Since we are working with the DOL and the forfeited check needs to be re-issued and considering the fact that the balance in the forfeiture is less by $100 can we re-issue on a pro-rata base and also will this needs to be reported on the 1099-R?

Thanks

Hi all:

I have a client who we are taking over from a prior TPA.  They have a retirement plan as well as a SUB (supplemental unemployment benefit) plan.  The client is a prevailing wage client (long story short the fringe is what funds the SUB plan).  Because it is a SUB plan they file a 5500 for it, but they have not been able to get a copy of their plan document or SPD - instead their prior TPA keeps giving them a copy of their 125 plan.

My understanding was that a SUB plan needs to have a separate document.  Even if I was going to correct that for them with the IRS, I have no idea where to start in getting a SUB plan document - aka I have no idea which companies provide this specialized plan document that isn't a TPA.

So, my questions are, does a SUB Plan Document need to be separate from a traditional cafeteria plan document, and does anyone know of a document provider I could use to draft a SUB plan document?

Cash balance plan currently has immediate 100% vesting. Plan sponsor would like to change to 3 year cliff vesting effective for those hired 1/1/23 and later. Eligibility is 21 & 1, and entry is 1/1 & 7/1. What are the considerations in terms of whether or not this works?