DB plan covers husband and wife only. Biz is owned by husband but he retires/terminates and wife continues to to run the biz.

Does 110% rule apply to pay out the husband?

thanks

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I've got a MEP that allows for self-certified hardships.  A hardship request will go from the participant to the recordkeeper to us (TPA) to the MEP sponsor and then back to the recordkeeper for processing.  Fairly standard.

Found out today that the MEP sponsor will reach out to the adopting employer to say something like "hey, Participant is looking to take a hardship, maybe you want to talk to them about it", and sometimes they do and they arrange for a bonus or company loan so that the participant doesn't have to reduce their plan balance.

I don't think I like this.  I don't like that it introduces a possible level of unfairness (does every participant get spoken to?), maybe it blurs the line of investing advice ("don't take a taxable distribution, do this instead"), and maybe even some kind of privacy issue (though I'd think a participant should expect that they are requesting a hardship is pertinent plan administration information).

But I can't say for sure if this is actually black-and-white wrong, or if it just feels icky.  Thoughts?  Thanks.

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This is a really silly situation, but potentially confusing.

Corporation A purchases Corporation B during 2025. Corporation A sponsors a 401(k) plan that has true-ups. Corporation B's plan will be terminated, but effective December 1, the employees of corporation B will transfer to Corporation A. Corporation A credits service with Corporation B, so those employees will be eligible to defer in the Corporation  A plan immediately.

So, it seems that at least theoretically, there could be a true-up for these employees (fewer than 20) for the 1-month of salary deferrals in the Corporation A plan. Although the Corporation A plan calculates the match on an annual basis, they couldn't use compensation paid from another company while they were not a controlled group. Any disagreement with that? (As an aside - if they became a controlled group in, say, June, could/should the deferrals from that date be used in the calculation of a true-up in the Corporation A plan, even though those 2o employees were still employees of Corporation B?)

Then we come to the ridiculousness. The Corporation A HR person is adamant that they don't want to make any true-ups for the former Corporation B employees. If we assume that the deferrals for these former Corporation B employees only start in December and are based only on salary/match in December, the potential true-up is negligible at best. Is there any way to avoid a true-up in this situation, if the calculations require it? It seems like an amendment prior to 1/1/26 could result in a cutback.

I'm probably making this way more difficult than it is.

Employer A has a 401k plan.  The plan's eligibility provisions exclude employees of Related Employers.  Employer B purchases Employer A resulting in A and B in a controlled group.  A's 401k plan is not immediately terminated (plan still has assets that have not been distributed).  When performing coverage testing for A's 401k plan for the plan year after the transaction, the plan would like to exclude Employer B's employees from testing.  Under the IRS general rule (all employees of all employers in a controlled group must be included in testing), B's employees should be included in the testing.  A did not elect to include the 410(b)(6) transition period in 401k plan.  A would like to use permissive disaggregation to put separate out employees (specifically B's employee) that are not 21 and do not have 1 year of service (the 401k plan's eligibility provisions are more lenient - age 18 and 3 months of service).  Can A use permissive disaggregation as to B's employees if B's employees are not eligible to participate in the 401k plan in the first place?  Doesn't permissive disaggregation assume that the pool of employees are eligible employees?

We have a plan that is to merge into a large corporation plan (not our client.)  I see our perhaps only responsibility is to file the final 5500 showing the assets transferred to the acquiring plan.

Other than that, I am going to ask that the acquiring company to produce any corporate resolutions, notices, merger documents, etc.  I believe that would happen without my prompting. I don't think the plan being merged would need to be updated for SECURE acts since it is technically not terminating.  I'm going to indicate that the acquiring company handle all required communications to facilitate the merger.

We don't deal with these types of issues since our clients are primarily small businesses and professional.

Your comments are appreciated.

Tom

What happens to nondeductible contributions at plan termination?  We have a plan sponsor that has negative K-1 income and 2024 is their final plan year (12/31/2024 plan termination date).  They have a minimum required contribution and want to know what happens to this money at time of distribution.  For what it's worth, it's an owner only plan and presumably, the owners (50/50) will be rolling over their funds into an IRA.  I don't have any experience with nondeductible contributions at plan termination so am feeling a bit lost as the TPA.

Assume an unfunded welfare plan has gone above and below the 100-participant threshold over time and is currently under the threshold - so that it previously filed a 5500 but has not in a couple years. The Plan will terminate and pay all benefits this year (and had below 100 participants on 1/1/25). Does it need to file a final 5500 even though it's under the 100-participant threshold? 

Hypothetical situation:

Cash Balance Plan terminated and paid out 2 years ago, final 5500 was filed.  Plan was never filed with the PBGC due to qualifying exemption as a professional service firm.  You are requisitioned to assist with facilitating report and documentation exchange to a potential buyer in an acquisition of the (former) Plan Sponsor as your former colleague who handled this plan is no longer employed. You notice that the plan exceeded 25 active participants and probably should have been covered for the last 3 years.  In their very thorough due-diligence, appears the potential buyer has also noticed. 

What is the potential exposure here?  How would one go about even starting a corrective action. At minimum, I'm thinking comprehensive premium filings and payments for the years coverage is obligatory.  I also see ERISA 4071 states the max per-day penalty, which looks very significant, but also that they would not likely charge that in a case like this.  Would one go so far as to say this is a qualification failure with a need to seek IRS remediation? Any other considerations?

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Does anyone have any good resources, articles, webinars, links  etc on how testing is impacted when rank and file workers are handled through a PEO as their employer, but the owners are not? 
I've done some searches here on BenefitsLink but haven't some across anything particularly useful, but please feel free to share links to other related threads too. 

The PEO workers are covered by the plan offered by the PEO, the owners are not, and want the business to sponsor its own plan. 

I am fully aware PEO co-employment is NOT the same as Leased EE status, which is why I'm asking. I've had some sponsors argue that the NHCE are not their employees at all, which doesn't seem right to me, but I am not well versed in PEOs, and I'm sure there are varying flavors, so who knows. 

Think basic 401(k) plan with a safe harbor provision. 
Thanks folks!

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I would appreciate any input on helping me think through the deemed Roth catch-up contribution feature with respect to the new mandatory Roth catch-up contribution rules for high earners.

Here is the scenario:

1.      Plan will adopt a deemed Roth catch-up contribution feature.

2.      HPI will be presented with election form no later than 12/1/25, and will be given the opportunity to elect out of the deemed Roth feature.

3.      HPI elects out of deemed Roth feature before first pay date in 2026.

4.      Plan allows deferral election changes at any time.  Employer does not want to limit deferral election changes to only one time per year.

5.      Mid-year 2026, HPI wants to revoke her election opting out of the deemed Roth feature.  In other words, HPI now wants her catch-up contributions be deemed to be Roth catch-up contributions.

Can HPI revoke her opt out election mid-year, thus electing to be subject to the deemed Roth catch-up contribution feature?

• If she can revoke her opt out election mid-year, are there different mid-year revocation deadlines depending on whether the catch-up contribution will be triggered as a result of exceeding the 402(g) limit (which will be known mid-year) vis a vis exceeding the ADP limit (which won’t be known until early 2027)?
• If there are no hard rules under the CODA regulations for this type of mid-year revocation, can sponsor take the approach (as a reasonable interpretation of the regulations) that the mid-year revocation is permissible as long as it is not known at the time of revocation whether a specific deferral limit has been exceeded?

I appreciate any thoughts.  Thanks.

Very simple question...

Husband and wife cpa business.  Both HCEs.  When they make the PS contribution do each of them have to receive the same percentage?  As long as the 415 limit isn't exceeded can we do that?  

Does anyone have thoughts as to whether the decision to change method for determining minimum contributions and/or related application for IRS approval is considered a fiduciary or settlor function? 

We had this question come up several times, but a search of the BL discussion boards did not turn up anything.  Here is the situation.

Different companies in a controlled group sponsor different 401(k) plans.  They intend to satisfy coverage separately.  One of the plans fails coverage even when the not otherwise excludable employees are tested separately.

The question is this:  can they expand the coverage group to bring in otherwise excludible employees of the employer or must they bring in not otherwise excludible employees even if they are from other employers in the group?

For what it's worth, and based on the language of the regs, we are leaning towards the latter approach - that the additional employees must be not otherwise excludible to comply with the description of the two testing groups in the regs.

I would appreciate any thoughts and insights!

Hi everyone,

Came across an interesting one!  Participant in a tax exempt 457(f) plan died and a portion of the benefit was previously included in the participant's income (i.e. the participant paid taxes for a portion of the benefit which vested in a prior year).  Trustee says that the total amount distributed to the beneficiary, including the previously taxed amount, will be reported in Box 3 of 1099-Misc.  I am familiar with the timing rules for reporting death benefits in the w-2 and 1099-Misc, and have thoroughly reviewed the 1099-Misc instructions. 

My questions are:

1. Whether the trustee should be reporting the total distribution in Box 3 of the 1099-Misc, or just the taxable portion?
2. If the trustee insists on reporting the total distribution (both taxable and non-taxable portion) in Box 3, how should the beneficiary avoid double taxation on the portion that was previously taxed?  Should we provide some kind of statement to the beneficiary that includes the portion of the distribution that was previously taxed? 
3. Bonus question- any thoughts on how the beneficiary could have the previously taxed portion excluded from income when the beneficiary files their tax return? 

Thanks in advance!

I have never seen this happen.  One of our participants had a contentious divorce.  Defendant spouse is filing and appeal of the court order finalizing the divorce.  Spouse is claiming that she needs to remain covered under our medical plan until her appeal is heard.  Participant is objecting.  Has anyone ever had this happen before?  I am purposely omitting the state involved and recognize that might make it impossible to answer but I figure it is worth a try.