Deferrals and match for three payrolls posted to the participants account ( all deposits made timely).  The employer discovered the employee was actually terminated an not eligible for the compensation paid.  The employee returned to compensation to the client. However, he took his distribution from the plan before the incorrect match and deferral could be returned from the account.

Is the correction to request the participant return the overpayment? Vendor will need to modify the 1099R to reflect the overpayment

If the participant does not return the funds, can the deferral and match be excluded from the ADP/ACP Test ( NHCE)? Based on this updated compensation, his match will exceed the match formula.

We are pretty sure the participant will return the funds, but need to figure out plan B in case he does not step forward and correct the error.

We're taking over a client's plan starting next year and looking over their 2022 information, and it looks like they added a Safe Harbor match mid way through the year. It does appear that the date they added the Safe Harbor is the same date as the effective date for deferrals. Even though the plan has a 1/1/22 start date. I always thought mid year Safe Harbor wasn't acceptable, but I'm wondering if this structure makes it ok?

Plan has dual eligibility. Few Employees with PW does not qualify for receiving PS contribution(Did not satisfy eligibility requirement for PS) hence the gateway fails How this needs to be handled?

Note: PW not enough for 5%.

My client is a dentist and he wants to reduce vesting hours for a year of vesting credit retroactively to make a couple part time hygienists happier.   He will be selling the practice soon and he wants to keep them around until then.  Once he sells, he will then make everyone 100% (even terms).

When I went to restate the plan to reduce vesting hours from 1000 to 500, I didn't have the option to put in a retroactive effective date.  Do you think it is ok to drop hours for vesting and bump up the % for the part timers?  This hasn't affected anyone who has been previously paid out in the last 6 years that I am aware of.

Hi, 

I have been with a large employer for several years that has had an employer-funded pension plan. 

The employer announced that at the end of this year (2022) it is going to stop adding contributions to that plan "because other companies don't do that anymore". 

I do not fully understand the possible impacts / implications for me personally.  This makes me nervous.  I cannot withdraw or roll over my pension proceeds without leaving the company, but it also seems me that the pension can only start to dissipate over time once further contributions are "frozen". 

My immediate problem is I do not even know what specific questions to ask, or what to monitor in deciding whether I should "take the money and run" or stay with the company.  From my point of view, anyway, the current sum involved is not insignificant - around $250K. 

In lieu of 401(k) contributions, over the years I have looked to the pension as a resource for future retirement.  I have a 401(k), but there is not much in it.  

Any thoughts / ideas / suggestions?

Thanks!

W.R. Smith

Question regarding the termination of a Cash Balance Plan.  Obviously, like most plans, the assets are down in '22 so now that they are looking to terminate the Plan they are roughly $20k short of the balances earned to date.  That said, the only participants are the owner and his wife.

Is it necessary for them to make a contribution in order to bring the balance up to the earned balances?  Or can they simply distribute the money that's in the plan?

Thanks everyone!

A defined benefit plan purchased an annuity from Prudential for one of its participants. The plan is terminating and the participant is willing to either take a distribution or purchase the annuity from the plan. The annuity has a Highest Daily Lifetime 6 Plus Rider, which Prudential is saying will terminate if the annuity is transferred to the annuitant. this rider provides the major value of the annuity. Examining the rider, there is nothing to indicate that a transfer to the annuitant is not allowed.

I have little experience analyzing these annuities, but it does not make sense that an annuity sold to a qualified plan would have provisions negating its provisions if the ownership of the annuity is changed from the Plan to the annuitant. This is what we expect would happen either upon termination of employment or termination of the Plan.

Prudential is being opaque. They keep saying the transfer will not be allowed to maintain the rider, but will not offer language in the rider (or elsewhere) that supports this assertion. Can anyone offer insight and guidance here?

I believe I know the answer here, but I am just looking for something definitive that supports my position.

A client had approximately $60K worth of Bitcoin in their Roth IRA that was stolen through a hack on one of the crypto exchanges. They believe they are going to receive a settlement check (unsure of the amount) from a lawsuit. Client wants 100% of the proceeds to go back into their Roth IRA. 

I believe this would be permissible and would not be considered a contribution for the year. I can't find anything definitive to support/oppose that position though. 

Thoughts? Agree/Disagree?

My web browser (Safari on my non-work laptop) tells me "The password for your 'benefitslink.com' account has appeared in a data leak, putting your account at high risk of compromise."

I'm not super worried because

A) I don't use the password for anywhere else

B) I've used the same password since 2000 with no issues

C) You'd have to put forth at least some effort in digging to figure out who I am from my profile

D) Who would want to come on here and pretend to be me anyway?  Being me is not a profitable endeavor.

But anyway, seeing the message today for the first time was a bit surprising.

A Dr. has a plan.  He is a sole member entity.  He took a position with a larger medical practice starting Jan 1, 2023.  He fully funded his plan for 2022.  There is no reason we need to keep the plan open past 12/31/2022, right?  The 2022 contribution money is in and now want's to roll everything out and into an IRA to close the plan before the year end so he doesn't have a 2023 administration.  No problem right?  

- Roll everything out into the IRA
- Generate a 1099-R for the rollover
- File a final form 5500-EZ for 2022

Thanks

(There is so much good info to learn when you start clicking on posts in all message board areas! I find myself getting into topics that I did not intend to and before you know it you have forgotten why you are here)

Someone suggested this might be a way to help a failing plan fail less badly, and it's something I never would have thought of... is that because it's too out there, or because I'm too conservative?

6/30 plan year 401k plan, non-safe harbor is failing ADP test.  It failed 6/30/21, too, but by recharacterizing $1,200 of the sole HCE's deferrals, a refund was avoided.  For 6/30/22, the same sole HCE doubled his deferrals so is failing much worse.  He deferred $28,100 for the plan year (not exceeding any calendar year limits), so even when subtracting the catchup, he still needs a refund of $6,700.

The thought was that there's $6,500 - $1,200 = $5,300 of catchup that was unused from the previous calendar year - can that be used in this plan year somehow as well?  Either to reduce the starting deferrals that are used to calculate the ADP test ($28,100 - $6,500 = $21,600 currently), or to partially offset the amount that is slated to be refunded ($6,700 currently)?

Thanks.

As an open-architecture recordkeeper, we routinely prepare combined Sarbanes-Oxley/404a-5 notices and manage the fund change process for the advisors when plan wide fund changes are requested.  We have not traditionally charged a fee to do this.  Lately, advisors have been asking us how much we charge.  Is this something you guys are seeing as a line item fee and if possible, can you share a range of how much a fee are you seeing?

Hello -  need some help!

plan has year of service 1000 hours and entry dates of 1/1 & 7/1

I have an employee hired 6/2017 and terminated 7/2017.  Only worked 12 hours

She has rehired 2/2022 - worked over 1000 hours in the 2022. 

Plan does not have rule of parity or one year hold and elig switches to plan year.

Does she enter the plan 1/1/2023?

Thanks!

Here is the situation.   The prospect (S corp, just husband and wife) has started 401(k) Plan in 2021 using the free plan doc from Fidelity(?). Year-to-date no contributions/deferrals have been made so the account is sitting pretty with a zero balance.  Obviously, that Plan Doc does not allow for any "fancy" stuff like Voluntary After-Tax ("VAT") contributions.   Now the prospect would like to do the VAT contribution and do In-Plan conversion to Roth (for 2021 - what else is new - why not wait until New Year's Eve?).   So, I am trying to think through viable options (given we are already in December):

1) Take the Plan and restate it on our plan document system, have the additional brokerage account opened (to accept VAT and conversion to Roth in the Plan) and help the prospect to get it done.   I am concerned that Fidelity might not accommodate the existing account without them sponsoring the Plan doc.  And it might take some extra time to sort it through which will diminish the opportunity to meet the objective by December 31

2) Leave the Fidelity Plan alone (and not fund it at all) and start a new 401(K) Plan for 2021 using our platform.  That would leave an "empty" plan for some time and then later on I would terminate it.  The shortcomings are having an extra Plan lingering around, cost of termination, extra 5500, etc.   The whole nonsense but squared....

3) Terminate Fidelity plan and start another one.    Obviously this triggers the "replacement" plan issue.  But the Fidelity Plan is empty and it should have never existed in a first place?

All thoughts with pros and cons are appreciated.  I apologize in advance if this does not make much sense because I am not a "401(k) guy" but unfortunately an actuary.   Thank you.

We have a brand new plan starting up in 2023.  We have been including the CARES Act amendment with every new plan document we've drafted but now we are wondering if there is any reason to actually adopt the amendment for new 2023 plans.  I can't find anything indicating that we should.  Anyone else have input or support otherwise?

Hello All - I have a US based company that may be hiring a Canadian employee.  The client tells me that the employee will be paid on a W-2 form and therefore would otherwise be eligible for the client's 401k.  Is it possible for the plan to have "Canadian based employees" as an excluded category for eligibility?  I wasn't sure if that category would be considered discriminatory in any way or if there is a better way to accomplish what the client wants.  This particular client plan will easily pass coverage. 

Thanks in advance. 

In the context of terminating and liquidating a deferred compensation plan, does anyone have advice or a good rule of thumb for valuing the liquidation payments to participants in non-account balance plans where the ultimate benefit (had the plan continued) would be uncertain?

For example, a 45-year-old participant who must work until age 60 to vest, at which point she would receive fixed installment payments for, say, five years?

Would you discount the liquidation value not only for time, but also likelihood of reaching vesting?

Appreciate any insights.

This client is putting in their discretionary match on a payroll basis. They are putting in 10% of the participant's deferral amount. So if a person is putting in a flat $100 amount, they are getting a $10 match. If a person is putting in 20% of pay and it comes to $2500 then they are getting a $250 match. 

I always thought the match had to be based on percentage of compensation not deferral amount. Am I wrong or am I just confused?

The owner of  the LLC sold his practice May, 2022,  (plans were terminated, all participants paid, final 5500SF filed,

The former owner is now receiving 1099 income from the new owners .

Can the former owner start a new profit sharing plan in 2022 using

his 1099 income for contribution.

Group:

Potential client has had a DB plan for approximately 20 years. 

The adoption agreement states the following under Unit Benefit Formula 

 "(1) Uniform formula.   10 % of Average Compensation multiplied by Years of Credited Service.

(i) Years of Credited Service above 25 will not be taken into account.

 (this box checked) (ii) Years of Credited Service above 10 will not be taken into account. "

Does this mean on an annual basis any eligible employees are not entitled to a contribution past year 10?

Or Is this merely part of the actuarial equation the TPA uses for annual valuation purposes? 

Client was informed that a non-owner employee/100% vested participant is due $315k if terminated plan as of 12/31/22.

I'm told there is approx $2.mm in various stocks/bonds/some annuities at this time. 

Only two participants. Owner (age 72) and one rank and file employee (age 47) who's worked there for 20 years 

He's just trying to get a handle on whether or not the TPA is accurate is the $315k amount. As he doesn't believe that's the true amount and that any distribution should be lower than. 

Thoughts and comments appreciated. Or other guidance and resources are appreciated. 

I note I may not have provided all facts and am awaiting on information. 

Thank you