We are using a Third party to prepare our 5500. They sent me a copy to review and I noticed in Part III 8b it shows a loss of 41,465 for 2024. Outside of the yearly contributions for 2024 I calculate a net gain for the year of $25,300. Being a newbie I want to make sure the information is accurate before we sign and file it. Am I looking at this wrong? Any help would be appreciated. thank you!

Brian  

Many of us have probably run into this scenario:

We administer a small defined benefit plan for an attorney. He has no employees and gets most (if not all of his paralegal work) done by a firm that provides contractors. The plan has been in place for 7 years and is currently frozen. The idea was that it will soon be terminated and distributed. The attorney is now selling his law practice through a stock sale. Each year the buyer will receive 20% of the corporation's stock until 100% is owned after the fifth year.

The seller wants to unfreeze the plan and make substantial contributions for one year of about $300,000 then terminate the plan. 

Question: when this sale is taking place, does an affiliated service group exist? And if so, I would think the buyer and his 3 employees and the seller (only him) would need to be aggregated for all testing in the now unfrozen defined benefit plan.

It turns out the seller does not want to cover anyone but him. If an affiliated service group exists I would think we would have 5 to consider. Just for 401(a)26 he would then need to cover (5 x 40% = 2).

Just out of curiosity, would an affiliated service group exist if this were an asset sale (for example a sale price of $1.5M with the buyer paying 20% of $1.5M each year for 5 years)?

Thanks.

Soon (unless Congress changes the law, or the IRS publishes another nonenforcement), for a participant whose FICA wages from the employer in the preceding calendar year was more than $145,000 (or the inflation-indexed amount), an age-based catch-up deferral must be made only as Roth deferrals. For those participants, non-Roth deferrals are allowed only up to the without-catchup elective-deferral limit (or the plan’s constraint, including a constraint that follows a nondiscrimination measure).

On January 13, 2025, the Treasury published a proposed rule stating interpretations of Internal Revenue Code § 414(v)(7) and related tax law.

That notice includes some ways an employer might treat an affected participant’s election to make non-Roth deferrals as, to the extent of what would be beyond the without-catchup elective-deferral limit, a deemed election to make Roth deferrals.

I’ve heard about (at least) two ways an employer and its recordkeeper might use such a deemed election:

1.     Starting with the first pay period of 2026, adjust a § 414(v)-affected participant’s per-pay amounts or percentages between non-Roth and Roth deferrals so they would result in fitting amounts for 2026 if one assumes a participant remains employed throughout the year and makes deferrals in every pay period of the year.

2.    During 2026, apply a participant’s election for non-Roth deferrals until the sum of those deferrals reaches the year’s without-catchup elective-deferral limit. Then, treat any further deferral as Roth deferrals, until the year ends.

Are both those ways logically consistent with the Treasury’s proposed rule?

If not, which way does not fall in with the proposed rule?

If there is a choice, which way would you suggest? And why?

If you like way 1 (starting with the first pay period), what adjustment would you allow if the participant’s employment ended before the year ended and this would result—without an adjustment or reclassification—in not filling-up with non-Roth deferrals all that may be done within the year’s without-catchup elective-deferral limit?

In thinking through your suggestion and reasoning, assume: your client is the employer; the plan has hundreds or thousands of § 414(v)-affected participants; the plan gets services from a big recordkeeper; and your advice is needed now because a half-year is a short time for software and systems changes. Also, assume the proposed rule, although it does not apply for 2026, is the available Treasury interpretation, which a plan may apply regarding a participant’s tax year after 2023.

Plan X, is a profit-sharing plan which provides that if a participant cannot be located after a diligent search has been made, his/her account balance shall be forfeited, subject to restoration upon the making of a claim. If a participant's beneficiary makes a claim for the participant's account balance, does the plan need to restore earnings that would have been credited to the account?

Merely to act as a valid cross-reference, this discussion in a different forum is QDRO-related.

A big thank you to Lois and the entire IT team (is that just Lois?) for cleaning up the site after the major spam attack over the weekend.  Every board was littered with messages.  These boards are very useful to many people and it doesn't happen without great support.

Thank you to the entire clean up crew. 

Hi everyone, I hope that I am posting this question in the correct forum.  Thanks in advance for any input you can give me.

I am 66. My job at a large company ended June 30, 2025.  I enrolled in Medicare so that everything except Part A would be effective July 1 (Part A is retroactive to August 1, 2024).  Specifically, I enrolled in Part B, Plan G, and Plan D and the coverage became effective July 1. 

The information that my employer provided me was confusing as to whether I'd be offered COBRA so it was not in my sights until I just got the COBRA paperwork.  The benefits administrator (a company they engaged to do the billing) confirmed when I inquired that I could be enrolled in both Medicare and COBRA since both started (or would start, for COBRA) on the same day. 

The cost of COBRA coverage, through Aetna, would be $800/month. I would not consider paying that amount since I am already taking a beating through IRMAA, but I have two mental health providers who do not take Medicare. Because of the shortage of good mental health providers, I do not want to switch to someone who does take Medicare just so it costs less.  Therefore, if COBRA would pay the benefits I have become accustomed to, I would at least break even if I did elect COBRA and have Aetna pay as the secondary insurer.

Before I commit to COBRA, I have a few questions that I have not been able to find clear answers for, even when calling Aetna and Medicare.

1. The Aetna representative was obviously not familiar with the complexities of Medicare since she just kept repeating "submit an EOB from the primary insurer" as if that insurer were not Medicare.  Does anyone know how I would get an EOB if the provider does not take Medicare (and therefore would not file a claim)? 
2. Another Aetna rep I spoke to said "if the provider opted out of Medicare, we will cover it."  However, the provider did not strictly opt out, they just don't take Medicare.
3. Do I have to submit the Medicare claim form before submitting to Aetna?  (Section 3 of the form asks about other insurance, so perhaps not?)
4. In terms of the claim form, does anyone know what the difference is between (a) "refused to file a claim," (b) "is unable to file a claim," or (c) "is not enrolled with Medicare."   If I don't go with COBRA and have to file this form, would I choose (c)?
5. If my Plan D coverage has a very high cost for a medication, can I file for reimbursement with Aetna to get my amount down to what I would pay with them?
6. Does anyone have any other cautions about embarking on this somewhat risky plan, since I could end up paying for COBRA and not getting those non-accepting Medicare providers' costs covered?

Thank you so much, and please let me know if any additional information is needed.
Lena

401k PS plan.  The Owner and his wife are going through a divorce which has been ongoing since last year.  It is a nasty divorce scenario and may go on for another year or so.  The Owner and his wife both have an account in the 401k plan.  The wife terminated employment last year and is requesting a partial distribution now to pay her Attorney's fees.  We received the request to approve her partial distribution.  Since we are aware of the impending divorce since last year, we informed all parties that a QDRO is be prepared for both the Owner and his wife's benefits.  The Attorneys on both sides indicated that the QDRO is not necessary as the Owner said it was okay for his soon to be ex-wife to take the distribution.  I am not in agreement with this.  There is nothing in the QDRO procedure in the plan document that addresses this issue.  Can this distribution be processed without a QDRO?

A client maintains, as part of its health plan, a healthy lifestyles program. This program provides reimbursements to participants and their dependents for vitamins, non-medical nutritional counseling, gym memberships, massage therapy and weight management, among others.  The program's administrative services provider was recently changed and it has been issuing reimbursements of expenses incurred by adult dependent children directly to the children rather than the participant. When questioned about their rationale for this practice, the provider claims that Affordable Care Act regulations require that the reimbursements to such individuals must be made payable to adult dependents instead of to the member participant. 

My understanding is that the ACA mandate merely requires a group health plan to extend coverage to a child until s/he attains age 26. There is no requirement stated in the provisions of the Code, ERISA or the PHSA that was amended by ACA (or their underlying regulations) requiring that such reimbursements be paid directly to the adult dependent child. As an analogy, for a married couple, if the spouse of a participant incurs medical expenses, the reimbursements are paid to the participant and not to the spouse. Do you agree with my understanding?

Thanks in advance.

Hi,

I’m exploring project tracking software options commonly used in the 401(k) industry—specifically PensionPro and PensionPal—and would really appreciate some insights.

I have a few questions I’m hoping to get thoughts on:

1.     From your experience, which platform is more convenient and user-friendly for daily operations?

2.     What is the typical training curve for new users? How long might it take for a team to get fully comfortable using it?

3.     What are the estimated pricing models—ideally per user, per year?

4.     Are there any strong alternatives worth considering in this space?

5.     Are there any potential drawbacks or limitations I should be aware of before committing to one?

Any knowledge or experience sharing would be extremely helpful.

Thanks in advance!

Best regards!

okay maybe it's a silly question.  Terminated participant receiving RMD's passed away with no surviving spouse.  His daughter is handling his affairs but was never specifically set up as a beneficiary.  Can she be treated as a Designated Beneficiary?

fwiw, the account balance is under $1,000.

Merger documents says Plan B merged into Plan A as of 12/1st 2024.  The money from Plan B's provider was wired over to Plan A on January 15th.

A) My personal "best" interpretation here is that Plan B no longer exists on 12/1/2024.  The merger agreements say that Plan B is now a part of Plan A.  To me that means the money held by the Plan B provider is now a part of Plan A. 

B) The other interpretation is that in spite of the fact that the merger agreements indicate that Plan B is now part of Plan A, that that's not really so because the assets have not yet moved.  So I continue to file 5500's (and in my case get an audit) for Plan B until the assets are down to zero.

What do you guys think?

I recall a post regarding a DB Plan short plan year, mentioning that if the amendment for the short plan year did not mention anything re prorating or giving an accrual for the short plan year than there are no benefit accruals for the short plan year.

1. Is this correct. Or must the amendment state clearly whether  there are or that there are no benfit accruals f93r the short year?

2. If there are no accruals must a 204(h) notice be provided to the participants, as the plan is not frozen?

3. Can one plan amendment include two amendments to For plan or must a separate amendment be drafted for each plan change. Foir example in the amendment that changed the plan year, it will also include a second amendment to the plan that the retirement age will be amended for the following plan year, and that the benfit formula will be changed for the next plan year. Or must these 3 plan changes have a separate amendment drawn up for each change? Seems no problem...but would like to double check.   Thank you.

We have a client with a participant who wanted to start contributing Roth contributions at the beginning of the year, but there was a payroll error and they never started.  Now the participant is asking how they can make up the missed contributions, since they are looking to make sure they get the Safe Harbor Match.

The question is, how can the participant makeup any missed contributions?  They are asking if they can fund them themselves and send a check.  I didn't think this was possible, and that it should have to be done through payroll (even though it's Roth).

I just wanted to make sure that I wasn't missing something.

Thanks in advance!

Wow. So, non-profit 457 plan. A participant wants to donate a large sum of money from their 457 account back to the non-profit. Assuming the plan does not specifically provide for this (I haven't read the document, but I don't see how it could) it seems like a taxable distribution to the participant would have to be made, and then donated to the non-profit. I have no opinion on the possible charitable deduction side of things for doing so. Any thoughts on this one?

I have recently connected to a new financial advisor (sinigle member RIA).  This advisor actually has 2 businesses... lets call them Store-Front Advisors (SFA) and Store-Front Investments (SFI).  I was just told right now that SFA sponsors a Simple.  I already knew SFI sponsored the 401(k).  Since the advisor owns both businesses that means it's a control group.   My question is... is it possible for this advisor to fund the Simple through SFA and fund the 401(k) through SFI for the same year?  If there was only one business I wouild advise that it is not possible to fund both plans.  But there are 2 separate businesses (owned by the same person).  

If so I assume we combine both plan contributions to ensure 415 limits are not exceeded.

Thanks for any insight.

I know ISOs are exempt from 409A.  In an ISO, you have to be an employee and you only have a limited time post-employment to exercise the ISO.  Under 409A there are specific rules for what it means to have a termination of employment / separation from service.  Is there a similar rule for an ISO?

In other words, can a company continue to employ someone at a very low level (e.g. 10% of previous service level) and still let them vest/exercise the ISO during that period (i.e. treat them as still an employee)?  I know under 409A, that would be a separation (below 20% previous service level), but I can't find any similar guideline for ISOs.

When running the ADP test, I recall it's easier to switch from prior to current year testing than vice versa. I also recall that it must be done by end of the plan year.

I'm curious if there are options to change it from prior to current after the end of the plan year?

A PSP that was set up many years ago is now being amended into a 401(k) plan.  Once this occurs, does it have to include LTPT employees or is it excluded from this requirement by virtue of the fact that the plan has existed for a long time?

An attorney & participant in a governmental 457(b) plan sent a vague email inquiry of statements related to distribution rules. The one that has me stumped is, "The SECURE Act of 2019 permitted in-service distributions from governmental 457(b) plans if the plan fails to offer a specific in-plan annuity option." My experience is mostly in the ERISA space, but I cannot find anything specific surrounding this statement in the original SECURE Act or other legislation. Ultimately, I believe he's fishing to take an in-service distribution.

The NRA is 65 and in-service distribution age is 70.5. (This individual is 58 and married.) The Adoption Agreement allows for life and joint life annuitization, so I believe it nullifies an in-service distribution "mandate," if you will, from any legislation. That said, the document language does not state if the annuitization option is available pre-70.5 for active employees.

If allowed, it also does not specify if he chooses to annuitize, could he:

1. Do a partial annuitization? (As he has a sizeable balance, over $500k.)
2. Continue to make elective deferrals?

If anyone has any insight or experience with similar scenarios, I'd love to hear some thoughts.