Plan defines normal retirement as "the later of 59 1/2 or 5 years of plan participation".  100% vesting occurs at that point per the Plan.  Plan defines a "year of service" as "1000 hours during the plan year" for vesting.  Plan does not separately define a year of participation. 

Participant was hired in 2017 at age 66.  Termed as of 02/05/2021 (but had no hours or comp in 2021).  Participant had 4 years over 1000 hours (2017, 2018, 2019 and 2020).  Employer match has 2/20 vesting.  Participant is 60% vested in the match upon termination on 02/05/2021) because he had not yet reached his NRD.  So far so good.   

Participant is rehired as of 05/17/2022 working approx 16 hours per week.  Reenters plan on rehire per plan provisions.  Participant needs another 2 years of participation to reach normal retirement under the plan definition.  If he ends up working over 1000 hours he will become 100% vested by the vesting anyway however since he is only scheduled for 16/wk he probably won't make 1000 hours. 

Where I'm getting hung up is trying to figure out if this participant will fully vest upon attainment of the plan's normal retirement definition regardless of his hours worked in the next two years?   

Client is a small company with a 401k plan.  Current employees are owners and one of owners children.  Last non-related employee terminated in 2018.  There is a small forfeiture of $1,500 in the plan.  No participant has had any income after 2018.

There are no unpaid fees, and no income to base an allocation on.

Allocating forfeiture based on account balance has been mentioned, but I don't see how that would work since forfeiture allocations are annual additions, and 100% of the participants income is $0...

Any ideas other than revising 2018 to allocate the forfeiture?

Thanks!

Here is a new one for me.

Sent docs for 2021 plan year 5/31/2022 and they executed on 6/3/2022.

I now get a confirmation that they made the deposit on 5/23/2022.

So, what is wrong with this picture, if anything?

Am I being paranoid that they opened an account without a plan document and also without an executed plan document?

Thanks for comments.

Client has requested an amendment to reduce the maximum allowable loan amount to 50% of vested balance, but not to exceed $25,000.  Client also wants to reduce loan repayment period to 3 years.  Can these elections be made and the loan still satisfy 72(p)?

Any guidance you can provide would be greatly appreciated.

Under our QDRO procedures, under a child support Order, the Participant is responsible for taxes owed on the QDRO distribution.  Normally, we give the Participant the option of either (1) paying the tax amount out of pocket or, (2) increasing the distribution in an amount needed to cover the taxes.  For example, if the QDRO award the AP $100, we can either distribute the $100 to the AP and have the participant pay $10 (10%) out of pocket, or we increase the distribution to $110 so that $100 can go to the AP and $10 can cover the taxes.

We recently received a child support Order that awards the AP 100% of the participant's account.  Clearly, we can't increase the distribution to cover the taxes.  Do we just send the Participant a demand for payment to cover the taxes?  What happens if the Participant refuses to pay?

An auditor friend of mine was reviewing an audit report for an ERISA 403(b) plan. The assets are held by VOYA and Equitable, and are listed on the audited financial statements as Pooled Separate Accounts. His question was that he was of the belief that 403(b) plans cannot invest in PSA's; the investments must be in mutual funds or annuity contracts. Researching this over the weekend led me to believe him.

In reviewing the Equitable report, it appears that each participant has their own unique "contract number". Therefore his and my question is whether the investments with Equitable are appropriate for a 403(b) plan.

Thanks for any replies.

I posted this in the "401(k)" forum, but I think it is relevant here, too.

A participant made an elective deferral election of 25% of his bonus.  The bonus was $4,000, so $1,000 was deferred under the 401(k).

However, the bonus was subject to the participant remaining employed with our company for at least one year.  The participant has chosen to leave the company after 6 months, and is required to pay back $2,000 of the bonus.

How does this affect the $1,000 deferred under the 401(k)?  Since half the bonus was forfeited, does that mean we have to remove half the deferral that was based on the bonus before forfeiture?  In other words, do we kick $500 out of the plan?

*Please note:  The numbers are made up, so to the extent some de minimis rule applies to the figures above, it is probably not applicable in this situation.

Some other facts:

• The Bonus was paid this year and is being clawed back this year.
• The Bonus is going to be paid back directly by the employee (we aren't reducing any compensation payments). 
• On the participant's 2022 tax statement, it will be reported that she earned a $2,000 bonus (not the full $4,000, half of which was clawed back).

I appreciate any help!

Group:

In reviewing a client's ESOP Plan docs adopted 2013 the employer excludes leased employees from participating. However, then I read the payroll and employee census and see a leasing company was the employer of record and issued W2's in the leasing Co name. 

At the time of adoption there were approximately 22 employees including 2 HCE. 

IRS has begun to audit the plan and we have already received IDR's asking about the leased employees. 

My research thus far is as follows:

Under TEFRA 1982 Tax Equity and Fiscal Responsibility Act (TEFRA) Public Law 97-248 to curb certain abuses, the 1982 TEFRA act promulgated a law that leased employees are not subject to the same pension rules if the leased employee is covered by a plan maintained by the leasing organization that allows for immediate participation, full and immediate vesting, and employer contributions of at least 7.5 percent of the employee's salary.

In other words, Leased employee are subject to employer/plan sponsor pension rules if lease Co doesn't allow immediate participation , full and immediate vesting and employer contributions at least 7.5% employees salaries. 

Then under TRA of 1986 public law 99-514 seemed to modify the 1982 law by adding the following:

Additionally, IRC§414(n)(5)(A) states that the safe harbor provisions do not apply if leased employees constitute more than 20 percent of the recipient's nonhighly compensated workforce.

Q: To prevent the plan from being disqualified is there any argument that the leased employees are under control and direction of plan sponsor and the leasing company doesn't provide a money pension plan with immediate vesting and participation? (I may be getting the rules confused)

The '86 law seemed to remove the safe harbor and no other work around to prevent disqualification. 

Q: Would the result change if instead of leasing company there was a PEO? 

Any cases or other treatise to review for my research would be greatly appreciated. 

Thank you 

Hi

A corporation wants to start a new 401k/SH plan (basic match) for 2022.

The only non-owner employee was fired early in the year as was stealing money from the company and worked over 500 hours during the year.

If the owner sets up a 401k/SH plan today for 2022 and makes no profit sharing contribution i.e. deferral plus safe harbor match, I see no issue, correct?

How about, adding profit sharing? As the employee would need to get an allocation for 2022 to pass 410b, would the employee need to be vested at all?

Thanks

A recent BenefitsLink discussion points out a potential difficulty when a retirement plan’s named fiduciary is the plan sponsor’s sole proprietor and her death leaves doubt about who has power to administer the plan. (The inquirer described an investment custodian’s unwillingness to accept, absent a court order, instructions from a person many would treat as the sole proprietor’s successor.) https://benefitslink.com/boards/index.php?/topic/69560-orphan-plan-how-to-appoint-a-new-trustee/#comment-324850

Imagine another business similarly controlled and managed by its only owner. It is organized as a corporation or limited-liability company, but no one beyond the sole shareholder or sole member had been named as a director or officer, or as a manager.

Is a difficulty about who has authority to administer the retirement plan avoided if the employer/administrator is a corporation or a limited-liability company?

Does State law—whether about a corporation or company, or for decedents’ estates—provide enough authority for someone to manage the corporation or company, and its retirement plan?

What are your experiences about whether investment custodians and recordkeepers will accept instructions from someone who shows some reasonable explanation about the source of her authority?

What evidence or information is enough to persuade a custodian or recordkeeper to take instructions?

We have a 401k plan that has excluded certain employees when they should not have and as a result, quite a few never were given the opportunity to contribute to the plan.  The plan sponsor wants to go through EPCRS, make the participants/plan whole.  But how far back do they go on this?  The plan was effective back in the 1990s and as far as we know has always excluded a certain group of employees (when they shouldn't have).  Do we have to go all the way back?  Do we go back 3,4,5,or 6 years, go through EPCRS and wait for the IRS to determine if we need to go back further?

Thank you

I have a question one of the client is considering to terminate they 401k plan and they are a safe harbor non-elective setup. Is it possible to terminate the plan as of 12/31/22? If so, how does the Safe Harbor Non-elective contribution work since it can’t be calculated till after the plan year?

Company A and Company B are related employers (part of a controlled group). Company A sponsors non-safe harbor 401(k) plan. Company B is a participating employer under Company A plan. Company A and Company B can pass 410(b) coverage, separately. Can Company A and Company B be disaggregated for purposes of ADP/ACP testing? Can Company B adopt safe harbor 401(k) plan provisions with respect to Company B employees only?

I think this is permissible if Company A and Company B sponsor separate plans. Can we get to the same conclusion if there is only one plan?

Thanks.

Group, I apologize if this has been answered some time ago but how many years back can the Department of Labor go when investigating potential breach of fiduciary duties related to an ESOP? 

I thought there was a 3 yr SOL under IRC 6501 similar to an irs assessment. 

But can't seem to find a case on point. 

I seem to be getting conflicting information in my own initial research and discussing with clients general counsel. 

Anyone have a case where DOL was outside of their SOL in asking for information from 10 years prior? 

Thoughts and comments appreciated. 

Would a plan sponsor of a 401k with a match (non-safe harbor) be able to require exclude certain groups of employees from sharing in the match (regardless of hours worked)?

And then could they specifically say that employees with less than 30 hours/week will not share in the match? (I don't think this would be permitted).

A participant made an elective deferral election of 25% of his bonus.  The bonus was $4,000, so $1,000 was deferred under the 401(k).

However, the bonus was subject to the participant remaining employed with our company for at least one year.  The participant has chosen to leave the company after 6 months, and is required to pay back $2,000 of the bonus.

How does this affect the $1,000 deferred under the 401(k)?  Since half the bonus was forfeited, does that mean we have to remove half the deferral that was based on the bonus before forfeiture?  In other words, do we kick $500 out of the plan?

*Please note:  The numbers are made up, so to the extent some de minimis rule applies to the figures above, it is probably not applicable in this situation.

A 63-year-old active participant died in 2022.  Her 75-year-old spouse is trying to roll the balance to an IRA.  The product platform is saying that an RMD must be taken first.

Looking at 1.401(a)(9)-5 Q&A 5, it seems that there is a catch.  The way I'm reading it, it talks about the calculation for the year after the year of the participant's death... but nothing for the year OF the participant's death.  Does that mean that there's a "free year"?  I can kind of justify that, since as of 12/31/21, there was no RMD to be calculated for 2022.  Or am I just reading into it what I want to see?

Of course, if the product says "we're making the beneficiary do an RMD because that's how we do it, period", then that's the way it goes, but since we do non-product plans, I figured I'd see if I was at least taking a reasonable position (in case this comes up again, which I hope it never does).  Thanks.

We have a situation where a client has a new safe harbor match plan "001" with a 1/1/22 effective date with a bundled provider. They will be moving from the original service provider to our firm and. in order to meet their objectives, we will be setting up a profit sharing only plan (cross tested/new comp) and then merging the plans effective 1/1/23. They would like to setup the new profit sharing plan, with a retroactive effective date of 1/1/21. I'm wondering if anyone sees any issues with the new plan, eff. 1/1/21, being plan 002 even though it has an earlier effective date than plan 001? We'll be skipping the 2021 5500 filing for this plan and the first 5500 filing will be for the second plan year (2022).

Simple question that I couldn't find a straight answer on. Does the IRS limit the number of hardship distributions that a person can take in a plan year? Can the plan itself limit the number that can be taken?

Thank you!

We have an orphan plan (doctor died in 2014, he was the only participant in the profit sharing plan).  He did not designate a beneficiary and according to the document, the assets are payable to his estate.

Daughter is the executor of the estate (doctor's wife predeceased him) .  The assets are with Morgan Stanley (approx. 1.1 mil) - MS will not take instructions from daughter, as executor of the estate, but instead requires a court order appointing a successor trustee of the plan  

The plan document has not been updated and no form 5500s have been filed so we want to terminate the plan via EPCRS and file the delinquent returns.

Do we need to file a court proceeding to appoint a successor trustee? How do you do that for a profit sharing plan?  I can't find any instructions on how to appoint a new trustee for a retirement plan.