Plan has assets with one of the big 401k vendors as well as outside pooled managed funds.  Owner participant (who was already receiving RMDs, born in 1939) passes away.  Past RMDs have been calculated by the TPA on the entire balance and distributed from the pooled managed funds.  Spouse is the beneficiary and plans to roll the decedent's balance out of the plan to an IRA.   Vendor wants to process RMD prior to rollover.  Anyone ever been able to convince the vendor that the beneficiary can roll 100% of the account that they hold and the RMD will be made from the outside plan assets?  I would think that if the Trustee of the plan directed them to pay out 100% of the deceased participant's account to the beneficiary they would have to do that.  It will probably end up that the vendor will take the RMD anyway for their portion and then the TPA will calculate and have the Trustee pay the balance of the RMD from the pooled funds but it would be nice if the beneficiary only had to deal with one total RMD payout.   

DB Plan owner only . Plan effective 1 1 2014. Owner was working since 2003. Frozen after 12 31 16 year (3/1/2017 frozen) Avg salary 263,000. Terminating Plan now and overfunded. Plan provides to allocate excess assets to the participant up to the 415 limit. Is the 415 Accrued  Benefit $5,250 (as the 415 benefit at 2016 was 17,500 and three years of participation at the freeze date of 3/1/2017)? Or is possibly higher due to increases? Thank you very much for any insights.

I have seen references to HRA funding that recite that a HRA must be: "funded solely through employer contributions or mandatory employee contributions."   

But the vast majority of commentary and even the IRS' own publications say that HRA funding is solely through employer funds.

Are there any instances where one would provide for mandatory employee funding in a HRA Plan? Would the tax treatment of employee funds be the same as employer funds? Are those employee funds at risk? Capable of being withdrawn under certain circumstances?

Any guidance on this category of funding would be appreciated greatly. Thank you!

Participant has been taking distributions for a few year based on the pre-2022 IRS Table.

What does he do for 2022 and forward?

Generally, if a plan disaggregates otherwise excludable employees to satisfy the coverage requirements of IRC §410(b) its my understating it must do the same for nondiscrimination testing.  My question, if the plan does NOT disaggregate for coverage CAN it be disaggregated for nondiscrimination testing i.e., ADP/ACP.

In other words 410(b) would not be disag'd but ADP would be...?

It's been a long time since I've worked on a non-safe harbor 401(k) plan, so a refamiliarization is in order.  A plan that has been using current year testing for >5 years fails both the ADP and ACP tests for 2022 and switching to the prior year method is being considered.  The plan was amended in mid-2022 to eliminate the eligibility requirements, effectively permitting about 20% more employees to become participants when compared to the prior year.  Is it safe to presume that this would not be considered a plan coverage change pursuant to Treas. Reg. 1.401(k)-2(c)(4) and that it would be OK to change to the prior year testing method and just use the actual NHCE ADP/ACP results from 2021?

Also, my understanding is that earnings for any refunds made by 3/15/23 should only be calculated through 12/31/22 using any reasonable method - is this correct?  Thanks in advance for all assistance. 

Have a client plan, 5 life case, Deferrals with basic Safe Harbor Match, so no testing, there are no automatic contributions, no profit sharing contributions.

Employee made Roth deferrals and did not exceed the 402(g) limit, when the client uploaded the final payroll deferrals for 12/31/2022 instead of entering $4,500 they entered $5,500 for this employee therefore submitting $1,000 more then they should have. W2 box 12 reflects the correct Roth deferral for the year.

From what I have read about using "mistake of fact" the $1,000 would be considered a typographical error and therefore the money can be returned to the Employer

Was just looking to see if anyone has any additional thoughts or has used mistake of fact for return of erroneous contributions 

Michele 

I have a plan sponsor that bought a small company that participated in a multiple employer plan, and whose 401(k) plan is going to be accepting a spin/off transfer of assets/liabilities from a multiple-employer plan that offered QBADs.

Notice 20-68 says that a plan that issued a QBAD must accept repayment of one. However, it doesn't address what happens if the participant is no longer a participant in the same "plan" that issued the QBAD (such as when a plan spin-off or transfer of assets and liabilities occurs after the QBAD is taken that causes the participant to no longer be part of the original plan that distributed it).  When the account is spun off/transferred to another plan, does the requirement to accept the repayment move with the transferred assets?    

My thoughts are as follows: it appears that the right to take a QBAD is a protected benefit under 411(d)(6) with respect to the assets transferred (and it is not excepted from 411(d)(6) anti-cutback rules like hardship withdrawals are).  Therefore my client's plan will need to add QBADs, and will need to accept repayment of QBADs (even if they were taken from the multiple employer plan before the spin-off/transfer). 

Do you agree? Or, do you think repayment of QBADs made to the prior plan would not need to be accepted by the plan accepting the spin-off/transfer (since the prior multiple employer plan still exists, the person who received the QBAD is no longer a participant in it and that plan wouldn't accept a rollover from a former participant)?  

For purposes of determining ownership, are ESOP shares counted? We have a disagreement here...

Section 316 of Secure 2.0 seems to allow the adoption of discretionary amendments improving accrued benefits up until the tax filing due date including extensions. IRC 412(d) seems to only allow reflection of such an amendment in funding if adopted within 2.5 months after the close of the year. Do we think that these new amendments adopted after 2.5 months but before the date indicated in secure 2.0 will fall in the same camp as 1.404(11)(g) amendments adopted after 2.5 months? Does this now trisect the window for retroactive plan amendments in terms of their effect for defined benefit plans?. The secure 2.0 provision is not effective until 2024 years so we have time to digest this...

Owner over age 50 defers $6,500 and receives a Profit Sharing contribution of $61,000.  Does the $6,500 get testing for ADP?

For many years (and before turning 50), Jane has been, and still is, a partner in a business organization. With many partners, Jane’s capital interest and her profits interest both have been always less than 5%. Now in her 90s, Jane remains an equity partner, still has her capital interest, and gets a draw on her profits interest. Jane still performs some personal services in the business.

Assume the business organization’s individual-account retirement plan requires no more than is needed to meet § 401(a)(9) to tax-qualify.

When is Jane’s required beginning date?

The plan document for a new 401k plan is written with a January 1, 2022 effective date, even though the deferrals do not commence until a date which is later than January 1, 2022, in order to avoid an initial short Plan Year, and the plan document does not include a special effective date for the deferrals.

Does this result in a missed deferral opportunity?

2022 excess contribution to * Bank HSA. The HSA account has a "cash" component and an "investment" component (segregated and listed separately on the monthly statement) - the cash portion earns .01% APY and the investment component is in mutual funds. Excess deposited in cash account on 12/19/2022, distribution from cash account on 2/14/2023 - interest for 1/1/2023-1/31/2023 was about 4 cents. Taxpayer requested distribution of excess, and * Bank calculated excess earnings. * Bank used the entire account balance (cash and investment portions) to calculate earnings on the excess, and distributed $110 earnings on a $1,825 excess. 

 The excess was a result of a severance from service and the taxpayer no longer participated in a HDHP - * Bank told taxpayer he could fund the remaining HSA contribution available from private funds as opposed to payroll deductions (this was not correct). Upon severance, taxpayer was able to draw down from cash/investments, but the investment account was frozen for additional contributions.

I understand the HSA excess/earnings rules follow IRA rules, but is there a different calculation for earnings when the contribution went into a segregated cash account and distributed from that cash account (.01% APY), and never subject to investment experience in the mutual funds?

Thanks for reading!

Someone (Paychex) convinced a very small Employer to join a PEP containing an EACA provision in early 2022.  The ADP test fails (terribly) for 2022 so the goal is to get them out of the PEP and establish a new single-employer plan with a more meaningful plan design as soon as possible.

• Can they leave the PEP mid-year (i.e., now) or do they have to wait until 12/31/2023?  The plan document doesn't specifically address leaving the PEP.
• They intend to transfer assets from the PEP to the new 401(k) plan, so would this be accomplished through a 'spin-off' (vs. plan termination)?
• What is the earliest effective date the new single-employer plan without automatic enrollment and including a safe harbor provision can be established?

Any input would be greatly appreciated.  This is all new to us.

Thank you very much.

Uh oh. Some brothers and sisters just found out, after ten years, that their companies are not a brother-sister controlled group. (No brother-sister aggregation for this test.)

They have always operated their 401(k) plan as if it were "single employer" with everyone getting the same contribution. The 401(k) and (m) tests were also operated on a "single employer" basis, which is the problem because those tests need to be company by company in a multiple employer plan. Maybe if they could find the data, the 401(k) and (m) tests would be passed. The document is set up since the begiinning of time as a single employer plan, also a problem.

Here's the question, and I am sure the answer is No, but it would be great to hear something different. Is there any permissive way that a plan can elect to aggregate as if it were single employer, even if there is no controlled group or affiliated service group but a family relationship among the owners?

A non-owner participant was told that since she was over 72 she had to take an RMD for 2022, slightly over $1,000.

Does this mean she has to continue in the future?

This is a discretionary match that was paid throughout the plan year. The plan document states the match computation period is payroll by payroll. My understanding is that the computation period dictates the mathematical components used to determine each participant’s matching contribution. If the computation period is each pay period, then the formula is applied to deferrals/compensation earned only during that specific payroll period. Therefore, a true-up would only be applicable in a plan where the match computation period is annual (regardless if the match was actually PAID per payroll or annually). So the question is whether the true-up is possible with a per payroll computation period, and also does a true up provision need to be included in the plan document? I'm not sure if the mechanism is simply implied by the choice of computation period, or if it needs to be explicitly stated. 

What makes the situation even more confusing (and concerning), is that the plan document includes a last-day rule as a condition for receiving match contributions. Isn't the plan in operational failure if they fail to forfeit/refund all of the match paid to the employees during the year? 

Additionally, the employer wants to exclude terminated employees from their hypothetical true-up. I don't see how they can exclude them from a true-up (if they can make the true-up), without also acknowledging that they are not entitled to any match accrued during the plan year.

As you can see, a lot of red flags here and a few inconsistencies with the plan document. Any guidance would be appreciated.

The plan administrator checked "establish an account in my name" as opposed to what she stated in MULTIPLE emails to me which was that she was asking ADP to expedite a cash out or me.  So, I thought I was getting a check but the money went into another 401K plan and actually lost money because I thought I was getting a check AND nobody told me the money was in an account.  I called daily/weekly asking for updates.  So now what?  I lost money because of this bungle.

Also, Plan Admin is telling me she is not "allowed" to talk to me on the phone because I'm not the client (my ex husband is the employee).  She says she can email with me but not talk.  Is that accurate?  That seems incorrect.  

Is it permissible for match contributions to be structured in a way so that different groups receive different match?  This is a non-profit and there will not be any HCEs.

The organization would like to give a match 100% match up to 6% of pay for Group A.

For Group B, in year 1 they get 0%; year 2 50% match, and year 3 100% match.  

Is that acceptable?

Thank you