DB plan terminated and excess asset will be transferred to the 401k PS Plan (QRP).  Questions:

- Must the excess asset be allocated in the QRP based on 1/7th of the excess each year or can the allocation be an amount based on desired allocation by Plan Sponsor even if less in each year?

- Can the allocation be based on new comp 401(a)(4) method with the Owners at 415 max and employees at minimum to pass testing?  Or must employees receive allocation at 415 max as well.

- If there is excess asset at the end of the 7th year, must all participants receive an allocation up to 415 limit before refund of remaining excess at 20% excise tax? Continue to allocate until all excess funds depleted or QRP terminates?  In 7th year, allocate based on new comp max for owners / min for others and refund remaining excess?

- Can excess assets in the QRP be used to pay plan expenses.

Participant started installment payments in a 457(b) top hat plan (tax exempt employer), and then the participant died.  The beneficiary is asking about options.  Does the beneficiary need to continue the installments (assuming they meet RMD rules)?  or can they choose to take a lump sum distribution.

my concern is the language in Treas Reg 1.457-7(c)(2)(iv) since payments under the ppt's election started.  Thanks!

(iv) Election as to method of payment. An eligible plan of a tax-exempt entity may provide that an election as to the method of payment under the plan may be made at any time prior to the time the amounts are distributed in accordance with the participant or beneficiary's initial or additional election to defer commencement of distributions under paragraph (c)(2)(ii) or (iii) of this section. Where no method of payment is elected, the entire amount deferred will be includible in the gross income of the participant or beneficiary when the amounts first become made available in accordance with a participant's initial or additional elections to defer under paragraphs (c)(2)(ii) and (iii) of this section, unless the eligible plan provides for a default method of payment (in which case amounts are considered made available and taxable when paid under the terms of the default payment schedule). A method of payment means a distribution or a series of periodic distributions commencing on a date determined in accordance with paragraph (c)(2)(ii) or (iii) of this section.

Hi

Here is a new one for me.

I am looking into taking over a set of one life-owner only DB plans.

I am told that AFTAPs were never done because these were one lifers. AFTAPs are never exempt unless frozen prior to 9/5/2005, if I recall correctly.

Some of them have been around for many years.

I believe 101j notices are not required but benefit accruals should have been frozen in time.

The plan document provided had no 436 options elected which is odd - checking with the vendor (same as mine) on what can be done here or even it was possible to complete the document without any of these provisions.

If anyone has any experience with this situation, can they share on the fix?

Thank you,

Can anyone point me to a link that will outline the history of the IRS' 6 year restatement history? is there such a definitive list?  When it started?  Required and optional interim amendments, a chronological history?  

Thanks

Hello, new here (to the site and the retirement industry in general). Could anyone please help me understand in what circumstances it is permissible to amend to remove an optional benefit? We have a client who purchased two companies via stock purchase and need to merge both subsidiary plans into theirs (messy, I know). There are partial and installment withdrawals in one of the subsidiaries, but we would like the surviving plan to have lump-sum only (with partial and installment only available for RMDs as is standard). It seems like the Code is pretty clear, but I'm just not understand the regs on this matter. Any help you can provide would be much appreciated!

I currently have a 401k loan for $3k. My wife has a Roth 401k with a former employer worth $3k. Is it possible to roll my wife's 401k into my plan to pay off the loan? 

Two Questions. A terminating DB Plan has excess assets and wants to transfer to a 401(k) Qualified Replacement Plan ("QRP"). The 401(k) plan has standard QRP language stating it will accept such transfers and the terminating DB plan has a termination amendment stating excess assets will be transferred to a QRP.  Does the language have to specifically name the QRP and is there an amendment reflecting or documenting the actual transfer?. The second question is that for a different terminating plan, the excess assets were transferred to a 401(k) QRP but the excess assets are not being distributed rapidly enough for some participants. The plan sponsor has two other Profit Sharing Plans. Can he treat all 3 plans as QRP's and transfer excess assets from the original 401(k) QRP to the other 2 profit sharing plans and thus accelerate distributions?

Could a 403(b) loan program be established in a way that a loan can be taken for any reason, but only for individuals with “X” years of service (e.g., 10 years of service)?  The plan in question does not have any HCEs so there would not be a discrimination issue, but in general is it permitted to structure a loan program in this manner?

Thank you for any replies

Solo Proprietor earlier this year funded a SEP-IRA for the 2021 tax year
Now (due to a surprise increase in earnings) he wants to fund a Solo 401(k) - because he will be able to contribute the max @ $58,000 which he won't be able to with the SEP

I am aware you can't fund both a SEP and Solo $401(k) in the same tax tax assuming the SEP was established using IRS Form 5305-SEP. That being said, what options, if any does the owner have in reversing/canceling the SEP contributions? And instead fully funding the Solo(k) for 2021?

Thank you in advance

A little confused on how the timing works on what Datair is providing as additional PPA document amendments (Expanded Hardship, Qualified Plan Loan Offset, Forfeiture Allocation, and Disability Claims Procedure) that need to be in place by 12/31/21 (though only Expanded Hardship and QPLO need to be signed by the plan sponsor; the rest are adopted at our level or above).

We're restating our plans effective 1/1/22, signed (hopefully!) in December 2021.  We're getting unclear information from Datair themselves as to whether this means that these amendments need to be executed separately in 2021 because they belong to the PPA document, or if they are considered 'wrapped up' in the restatement because the restatement is executed prior to 12/31/21.  Any thoughts from other Datair users?  Or in general?  Thanks.

For a post-PPA restatement not signed by 12/31/21, I believe they would need these amendments executed separately.

Top-hat plans, gotta love em.

I came across this https://www.thompsoncoburn.com/insights/publications/item/2018-11-07/a-top-hat-plan-checklist-for-employers and within they suggest something I had not seen before. 

Quote

Give your plan administrator the power to issue binding determinations

In the Firestone case, the U.S. Supreme Court held that, if a plan administrator has been given the discretion to interpret and apply the provisions of a plan subject to ERISA, then judicial review of a benefits denial by the plan administrator will be conducted applying an arbitrary and capricious standard of review. 

There is a split in the federal Circuits regarding the standard of review that should be applied in cases involving top hat plans. The Seventh and Ninth Circuits have applied the arbitrary and capricious standard if the plan administrator has been granted the requisite discretion required under Firestone.[3] In contrast, the Third and Eighth Circuits have held that a de novo standard applies since plan administrators of top hat plans are not subject to the ERISA fiduciary rules.[4]

Notwithstanding the split in the Circuits on this issue, a top hat plan document should grant to the plan administrator the discretion to determine eligibility for benefits and to make all other determinations necessary for the administration of the plan. In addition, the plan should provide that all determinations by the plan administrator are binding unless determined to be arbitrary and capricious by a court having jurisdiction. Even if a court holds that ERISA rules relating to the applicable standard of review do not apply, it may decide to enforce such plan provisions as a matter of contract law.

Has anyone done this in practice? Our document allows for additional eligibility requirements such as " in order to become an eligible employee, the employee must be approved by the CEO of the plan sponsor". In the past I have just clearly labeled the employee classes that would be eligible (usually officers and a certain level of management). thoughts on this?

Hi

A calendar plan has 2 owner HCEs, one non-owner HCE and one non-HCE as participants.

All but one owner HCE terminated in June 2021.

Doing some testing for 2021 and if I can switch to top-paid group, the testing will be ok.

The question is, can the plan be amended now to make the non-owner HCE a non-HCE? Never saw this situation before.

Thank you

Got a client that signed a plan document but never did anything with it and terminated it in the same year it was effective.  Do you think a 5500 should be filed for this one and only plan year?

Thanks for your help in advance.

A DB plan terminates on December 31, 2021.  The distribution for the owner (only participant) will take place in early 2022 (will be age 63 or so).  Highest 3 year average = 285K so benefit will be based on 415 dollar limit. 

Is the calculation of the maximum lump sum benefit to be paid in 2022 based on $230,000 (in effect on plan termination date) or $245,000 (the new limit for 2022 since will be paid in 2022)?

Thanks

The standard beneficiary instruction form says, "NOTE: if you name a trust as beneficiary, you must also provide additional information to the Administrator. The Administrator will notify you as to what additional information is needed."

The standard designation of beneficiary form itself says, "Trust beneficiary. If you name a trust as beneficiary, the trustee must satisfy additional documentation requirements no later than October 31 of the calendar year following the calendar year of your death. The Administrator will provide you or the trustee with the additional forms you must complete." (My emphasis)

Now, spousal consent, if applicable, would require an additional form. The Administrator would need a copy of the Trust.

What else might be required, other than the Trust and spousal consent mentioned above - and for RMD purposes, you have the requirements that the Trust must be irrevocable, must be valid under state law, beneficiaries must be identifiable under the trust, and Plan Administrator needs either a copy of the trust, or a certified list of beneficiaries under the trust. Do you normally direct all this to the Plan Sponsor's attorney do determine what "additional forms" might be needed, if any? I'm a little foggy here.

Just taking the temperature of the room here.

What date do you use as the start to determine how late the deposit was.  Is it the pay roll date, or the end of the 7-day safe harbor?

For example:

Pay date:  1/4/21

Seven day safe harbor:  1/13/21

Deposit date:  1/15/21

You you use 1/4 as the starting date for interest calc (9 days late) or 1/13 (2 days late)?

Company formerly was two partners.  One left in 2015, now sole prop.  Former partner still has balance in the plan.

Can they still file an EZ?

For a September 30 FYE plan, when calculating the RMD can/do you use the 9/30 balance or do you need to determine the 12/31 balance and calculate the distribution based on that year end balance? 

Thanks

Maybe it's the lack of coffee but I'm lacking confidence in my answer...
We have a prospective client that is a controlled group and wants to set up separate Plans; they were hoping to avoid a SH option on Plan 2, which we advised is not permissible.  So I was thinking SH match (100% on 4%) for Plan 1 and for Plan 2 QACA match.  This provides SH benefits for both employers but a vesting schedule can be applied to Plan 2.  

Am I missing something...

Does your client’s plan still require a minimum distribution after age 70½ (not 72)?

In BenefitsLink discussions, many commenters observe that a plan’s administrator must obey the plan’s governing documents, even if a document’s provision is more restrictive than what’s needed for the plan to tax-qualify.

Imagine this not-so-hypothetical.  A § 401(a) plan’s sponsor completed its cycle 3 restatement, using its third-party administrator’s current IRS-preapproved documents package.  Those documents state the plan’s minimum-distribution provisions with no update for the SECURE Act.  And instead of specifying the required beginning date by reference to Internal Revenue Code § 401(a)(9)(C), the basic plan document’s definitions section states: “‘Required Beginning Date’ means April 1 of the calendar year following the later of the calendar year in which the Participant attains age 70½ or the calendar year in which the Participant retires[.]”  Although the adoption agreement allows a user some choices about the required beginning date, all those choices refer to age 70½.  Nothing in the documents package suggests one must or may read 70½ as 72.  Assume the plan’s sponsor has made no governing document beyond using the IRS-preapproved documents package.

Imagine a severed-from-employment participant had her 70th birthday on June 1, 2021.

Must the plan’s administrator begin her distribution by April 1, 2022?

Or may the administrator interpret the plan not to compel a distribution until April 1, 2024?

Would you (or could you) interpret the plan’s governing documents so the required beginning date is no sooner than as needed to meet Internal Revenue Code § 401(a)(9)(C), and so turning on age 72?

If you might, what is your reasoning about why that’s a reasonable interpretation of the plan’s governing documents?