Looking for guidance on the following scenario.

If a participating employer in a MEP completes a stock sale of one of their entities which is covered by the MEP 401k and the new owner is not eligible to participate in the MEP (and participants are not eligible for distribution due to the same-desk rule) is it correct that the new owner would still be responsible for plan documentation and participant communications? 

A defined contribution plan has an age 72+ Active Participant who is not a 5% owner, who would like to receive an in-service distribution which the plan permits.

Required Minimum Distributions are generally required for non-5% owners in this plan upon the later of the year that he or she reaches 72 (70 ½ if you reach 70 ½ before January 1, 2020), or, the year in which he or she retires.

Q: The question is whether or not a Required Minimum Distribution is necessary since the Active Participant is beyond Age 70.5/72 but has not retired and does not intend to retire this year?

Fidelity provided a client with a discretionary matching contribution notice and this was surprising to me as I had never seen or heard of such a thing. After looking around, it appears the IRS never formally announced that this new notice is required. Instead, they may have forced document providers to incorporate this notice into the actual plan document. Has anyone else come across this? Is there a formal regulation that I'm missing or was this a way for the IRS to backdoor regulate plans? Thanks! 

I know one or more people have asked about DC plan litigation statistics within the last year. I came  across Part II in another newsletter and found Part I so linking these for anyone interested.

https://www.callan.com/blog-archive/dc-plan-lawsuits/

https://www.callan.com/blog-archive/dc-plan-litigation/?utm_campaign=Headlines_102722_US&utm_medium=email&utm_source=Eloqua

Participant terms with a loan balance.  He takes his money, taxes taken and loan offset at the record keeper.

A month later he's rehired and wants to start repaying his loan.

is that an option?  

The R/K said they could "convert" a loan using the prior balance (plus any interest, etc) and go from there.  But is that w/in the rules?

My question is, what if he terms again in 6 months and the loan gets defaulted/offset again?  He'll be paying taxes on it again.

I have a plan that is a MEP and the assets are all in one big account at the recordkeeper.

 From time to time there are forfeitures from participant accounts due to distributions.  Those forfs go to the forfeiture account.  But it is also just one account for the plan, not broken out by company.

 How can/must those forfeitures be used?  That is, can the forfs from one company be used to cover the contribution or fees of another?

 From my limited research on the issue, people suggest the forfeitures from each of the companies be used only for the respective entities.  However, the regs are silent on the issue.  It seems the IRS did not contemplate this situation.

Have not had this situation.

Client, through payroll error contributed more than $26,000 for 2021; but took the deduction for only $26,000 and that is what the W-2 shows.

Error most probably made with the last payroll in December, but all deposits for 2021 were made in 2021.

Just because it does not make sense to take the excess out of the plan then put it back in one week later I don't think negates the fact that there was an excess, but it was cured in less than a week.

Still need a 5330 and payment of the excise tax?  

Of course the accountant told the client not to worry about it, leave it alone because it was not an over-deduction, count the contriubtion for 2022, and hope they don't get audited.

I have a plan that is asking if they can not to a Safe Harbor (3% NE) contribuiton for 2022. Their document states that there will be a SH contribution But only if the plan sponsor provides a follow-up notice. I have not seen that language before on an adoption agreement. 

I'm not sure if that qualifier gets them out of having to make one,Edited: they did not distribute the notice last year

Also, if they are supposed to make the contribution and do not, The plan is out of compliance, but I'm not sure what would happen after that. 

Can a plan sponsor with a 403b have an automatic enrollment feature where the match is 50% up to 10% of pay, all 100% vested?  What limitation would there need to be as far as the initial defaulted employee contribution?

Thank you

A recordkeeper is basing their fee to service a PEP based on the merits of each individual adopting employer. In other words, the fees for each adopting employer within a given PEP will be different and determined based on their respective total assets (the greater the assets, the lesser the fee). This will inevitably create a situation where the PEP participants will be paying different fees from one another. Could this create a prohibited transaction or otherwise violate ERISA?

Client allocated a match contribution to a participant is excess of the match formula.  The excess match amount is less than $250 and does not cause the participant to exceed a statutory limit.  If the plan chooses not to forfeit the excess match contribution, does the excess match have to be included in the ACP test?   EPCRS makes it clear that if the excess contribution is forfeited it is not included in ACP testing.  However, does the free pass not to forfeit de minimis amount, give a free pass not to test de minimis amounts?

I feel this is a very basic question, but still want a more professional explanation: To become catch up eligible, does the participants need to max out the 402g limit?

My understand is: to be eligible for catch up contribution, the participants need to meet the age requirement and max out the 402g limit. However, SPD indicated if you reach age 50 during the year, you can contribute catch up contribution anytime(people interpret this as no requirement for max out 402g because if the contribution is by paycheck, most employee won't max out at the 1st paycheck). This caused a lot of employees able to select a % for both contribution at 1st day of the calendar year they become age 50, and they may not max out the 402g limit at the year end.

Plan is a calendar plan and catch up is not matched.

Good afternoon.

We have a safe harbor 401(k) plan that uses the top-heavy exemption due to the fact that the only employer contributions to the plan are safe harbor contribution.  They are merging with a non-safe harbor plan January 1, 2023, that is going to be deemed (more than likely) top heavy on December 31, 2022.  The question is if the top-heavy contribution is going to be made to the surviving safe harbor plan sometime in 2023, does the safe harbor plan loose it's top-heavy testing exemption?  Both plans are calendar year.  I am understanding because the non-safe harbor plan is considered terminated, they should make the final top-heavy contribution. Any comments are greatly appreciated.

So memory is that you couldn't have both the carryover(rollover) AND a grace period with regard to a health FSA. Then Covid/CAA/etc. came along, and I'm not sure now whether the temporary allowance of rollover if you also had carryover expired, or is it permanent?

Or maybe I'm completely off-base anyway...

Thanks.

Plan year end is 09/30/2022.  Funds at Nationwide.  Are RMDs done based on 12/31/2021 balance or the 09/30/2021 balance? Thanks in advance! 

Hello.

I have a terminated participant that we sent distribution instructions.  Back in June he called with questions.  During the phone call he indicated that he was divorced and his former spouse was entitled to part of his 401(k) account.  He stated the former spouse was supposedly having her attorney prepare the QDRO.

As of today we have not received a QDRO.  However the terminated participant has requested his distribution (on-line).  The plan does not require spousal consent.

Do we hold off on processing the distribution since the participant did indicate his former spouse was entitled to a benefit?  or do we process the distribution?

Appreicate any advise.  Thanks!

If the employee about to max out at 402g, let's say he contributed $20k, and still have$500 left. and his original contribution % is 10% pretax and 5% Roth. Either 10% pretax and 5%Roth will over $500. How should payroll to set up split this $500? Weight average? or evenly?

The plan set up by payroll match, but the employee max out earlier of the year, is that wrong to keep allocation match to employee even though there are no employee contributions in later payrolls? Match is immediately vested and the plan is not a safe harbor plan.

IRS Notice 2022-55, published at noon today (Friday, October 20)

https://www.irs.gov/pub/irs-drop/n-22-55.pdf

• Effective January 1, 2023, the limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) of the Code is increased from $245,000 to $265,000....
• The limitation for defined contribution plans under section 415(c)(1)(A) is increased in 2023 from $61,000 to $66,000....
• The limitation under section 402(g)(1) on the exclusion for elective deferrals described in section 402(g)(3) is increased from $20,500 to $22,500.
• The annual compensation limit under sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $305,000 to $330,000.
• The dollar limitation under section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $200,000 to $215,000....
• The limitation used in the definition of “highly compensated employee” under section 414(q)(1)(B) is increased from $135,000 to $150,000.
• The dollar limitation under section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in section 401(k)(11) or section 408(p) for individuals aged 50 or over is increased from $6,500 to $7,500."

Good morning

Sponsor just signed the resolution to terminate the plan by 12/31/2022 (PBGC termination). Form 500 will be filed in 2023.

They just told me about a recently terminated employee.

Can they pay out this employee now with 60% vesting or have to wait thru the whole termination process and pay in 2023 with 100% vesting?

Thanks