I have a situation where client wants to terminate its 401(k) before a stock sale. Client uses a Fidelity preapproved document and has already adopted its restatement but is being told by its Fidelity rep that it needs to come up with its own good faith amendment for SECURE Act and CARES Act because Fidelity does not have yet and will roll those out only later this year. I have a form of good faith amendment that I can use for this client, but I am a little incredulous that Fidelity does not have its own by now. Can anyone confirm or deny what the client’s Fidelity rep is saying? This must have affected a lot of terminating plans over the last couple of years.

I know part of the rule for SARs is that there not be a feature to further defer the compensation beyond exercise.  So a couple scenarios:

1) assuming the SARs have an exercise feature, would it still be considered a feature to further defer if we allow participants to elect to defer payments of SARs under a NQDC Plan IF we require the participant to make the deferral election in the year before the SARs are granted?

2) assuming the SARs have no exercise feature (i.e. the SARs are paid out automatically as soon as vested) THEN would it be okay to defer the SARs under a NQDC Plan so long as we require the participant to make the deferral election in the year before the SARs are granted?

Both 403(b) plans are subject to ERISA.  The 2 401(k) Plans will be merged.  The 401(k) Plans are Safe Harbor plans.  It is my understanding that the 403(b) Plans could be terminated and the employees would have a distributable event and that the distributions must be made within 12 months and they could rollover the assets to the 401(k) plan but are not required to do so.

Is there anything that would prevent the plan termination of the 403(b) Plans on 6/30/2022 with the covered employees becoming immediately eligible for the existing 401(k) plan on 7/1/2022?

I know if this were 401(k) Plans, the only option would be to merge the plans but because this is a 403(b) Plan, it cannot be merged into the 401(k).  Thanks!

We received a QDRO (just a draft at this point) under which the court is ording the Plan to pay the fees of the Guardian Ad Litem of the Participant's minor child.  I don't see any way this is possible, as QDROs are only supposed to award benefits to an Alternate Payee who is a spouse, former spouse, child, or other dependent.  Has anyone ever seen this before?  Is it legal?

DC plan provisions for hardship withdrawal - "Safe Harbor" hardship.

Ms. Jones wants a hardship withdrawal for the purchase of her primary residence.  The catch is the home will be in her husband's name.  Is this allowable?  

Hello, 

Money purchase pension plan with an anticipated termination date in the coming months. Sole participant is taking installment payments in the amount of annual RMDs. Duration of installments is likely to blow the ability for the participant to make an eligible rollover. As a result, participant looking to take remaining installment payments in a lump sum upon plan termination. QJSA rules do not apply to the distribution. This shouldn't be a cutback issue because the plan is not removing an optional form of benefit; instead, the participant in pay status is merely wanting to change the form of distribution. The plan does not prohibit this, and the participant election to take installment distributions did not say the election was irrevocable.

I know this issue has been dealt with in some fashion on the defined benefit side, but what about on the money purchase/defined contribution side? Can someone point me in the direction of authority for whether changing installment payments to a lump sum upon termination is prohibited or allowed? I am at a loss. 

Thanks in advance.

I know the missed deferral opportunity amount is a % of the ADP of the group to which the participant belongs.

But what if it crosses plan years?

I have someone who was missed on 7/1/21 and we just found out about it this month.  The ADP of his group was 3.25% for 2021.  But do I have to calculate the 2022 ADP (next year!), or do I just use 3.25% for the entire period?

Haven't seen this before. Fidelity bond coverage is lower than 10% needed, set at $20,000, but according to the agent, has a built in 'inflation guard' up to $500,000.

Assuming that is fine, what would we report on the 5500?  In this case $500,000 is greater than plan assets even.

Assume you have a Solo 401(k) that allows after-tax employee contributions and in-plan Roth rollovers and you have pre-tax money and after-tax employee money. Can you do an in-plan Roth rollover/conversion and convert only the after-tax amounts and exclude the pre-tax amounts from the conversion?

I don't do a lot of 403(b) work, and I have had another question proposed to me.

A Non-ERISA 403(b) for a private high school provides a "Profit Sharing" contribution based on the following:

0-9 years of service - 6% of gross salary

10-14 years of service - 7% of gross salary

15+ years of service - 8% of gross salary

However, the principal of the school, no matter how many years of service that they have, receives an 8% of gross salary contribution; this is written into the contract of the principal. The principal by definition is an HCE, and at this point, the principal has less than 9 years of service, and, per the document, should be receiving a 6% allocation, save for the provision in the contract.

Our firm, who is the auditor of this plan, is concerned that the higher percentage given to the HCE principal is a discriminatory allocation, and the 2% over the document prescribed allocation should be forfeited. As I have no clue as to the answer, I thought I'd throw this out here and see what opinions you have have. Thanks for any replies!

I was wondering why I'd been listed with the gold cup for yesterday when there were at least three other folks with the same 2 "reputation points".  Then I refreshed the page and our names were shuffled, so I was then listed with the silver.  Refresh again, and listed fourth.  Then back to first.

I surmise all our profiles say we last "won" the day on May 24th.  I had wondered if there were some underlying tiebreaker algorithm in play.

Honestly, it's not a vanity thing!  🤪

--bri

Hi

Testing 2 plans together for all.

DB and 401k/NESH/PS plans.

Top heavy provided under DC plan only. All participants benefit under both plans.

Key employee is getting 0.5% accrual in the DB and 3% allocation of NESH (plus full deferral), no additional PS for the key.

Combined gateway minimum is 4% (including 3% NESH)

What must I provide to all non-HCE's as additional PS allocation, 1% or 2%?

My vote is 2% but just wanted to check.

Thanks

Hello everyone. Section 508 of PPA requires the value of each investment to which assets in the participants' account have been allocated to be disclosed for all defined contribution plans. Can anyone steer me in the direction of court rulings regarding this subject matter? Thanks.

This is the first time that I've seen this- a DC participant submitted a "DRO"  in which a six figure sum of his DC account will be transferred to his spouse.  Participant and spouse are married, not seeking a dissolution of marriage and as far as we know, it is not intended for spousal support.  A quick Google search shows that there are some practitioners promoting in marriage qdros as a means of gaining access to pension or DC funds (likely without those pesky plan terms getting in the way). 

I'm just scratching the surface of my review, but it's hard for me to imagine that this was never tried in the past 30 some years. I seem to recall that there might have been cases of fake divorces just so people could access their pension accounts- why bother going through a fake divorce if you could simply claim a marital property transfer???

I'm curious as to what other people have seen/think of these?

6 doctors each had their own tax entity and shared employees who were all on the payroll of a separate tax entity.  One of the doctors (Doctor A) maintained a 401(k) plan in 2021 and covered employees for the portion of pay allocated to her based on their time worked for her and all hours worked for all doctors were counted in meeting eligibility.   I'm told none of the other doctors funded any type of plan, no Simple,  nor SEP.

They were convinced to form a group in which they are all equal shareholders and want to have one 401(k) plan covering all doctors and all eligible employees.  It will provide only a safe harbor match.  The plan has not yet started for 2022 and so there has been no plan funded by any of the doctors yet for 2022.  The goal is to have it set up by July 1, 2022.  

The thought is the group would assume sponsorship of Dr. A's frozen plan.  I wouldn't think there'd be any issue with safe harbor treatment for 2022 being adoption by a newly formed entity.  I'm also wondering about the new plan tax credit available for each of 3 years.  Seems that would require the start up of a new plan and closure of the old.  Yet for one of the 6 doctors, the plan is not new under her tax entity.  I may just not mention the tax credit if it is questionable and leave that to their tax advisor, if he even has that on his radar.

Comments as to safe harbor treatment for 2022, the tax credit?

Thank you for your comments.

Client has an auto-enrollment 401(k) plan.  They did a QNEC for a group of participants for missed deferral opportunity a few months ago and just realized some of them received an amount that was too high.  All impacted participants are NHCEs.  I'm not finding a correction for this.  Let the participants know of the error and forfeit?

Thanks for your help!

Have a plan sponsor who is acquiring another business in an Asset Sale.  The seller's 401k plan will be terminated.  The Buyer's plan has been amended to allow for service with the Seller towards vesting/eligibility in the Buyer's 401k plan.  The Buyer also wants to use the seller's Terminating plan participant deferral (pre-tax or roth) elections to immediately allow the seller's plan participants to defer into the Buyer's 401k plan (at least those meeting eligibility in the Buyer's plan).

Is this allowable?  I would think that one plan participant's deferral election cannot apply to another company's 401k, but I'm grasping....  

I'm hoping there is a workaround that I'm not thinking about though or something in the regs that would allow the buyer's plan to use the seller's plan deferral elections.  

Would the answer change if the seller's plan was merging into the buyer's 401k?

All help is greatly appreciated!  

I'm probably missing something obvious. A PS plan defines a year of service for eligibility as 1,000 hours. Actual eligibility for PS contributions is three months of continuous service. For purposes of applying the one year holdout rule, does a rehired employee have to complete 1,000 hours or three months to rejoin the plan?

I have a client (100% owner) who maintains both a 40(k) plan and a defined benefit plan. He will be having an associate age 59 joining the company later on this year earning >300,000 with no ownership in the company. The owner (age 49) wants to minimize the amount the company would have to put in either plan for this associate. Here are a couple of alternatives:

1) As a highly compensated employee, exclude him from both plans.

2) Exclude him from the DB plan. Include him in the 401(k) (comparability plan). The plan currently allows for a discretionary contribution, salary deferrals  and a Safe Harbor match. We can zero out his discretionary contribution, preclude him (agreement outside the plan) from making any salary deferrals which, in turn, would negate any safe harbor match. 

Let's us assume that in both cases discrimination requirements are met. Then In both cases, there would be no employer contributions for him.  Comments.

Would appreciate a sanity check here. Employer has a long-term bonus plan. Company and individual performance from, say, 1/1/21 - 12/31/23 determine the amount of bonus paid after 12/31/23. Generally participants must be employed on the last day of the performance period to be eligible. Participants who die, become disabled, retire (at a fixed age/service), or are involuntarily terminated during the performance period will receive pro rata payments at the same time as all other participants. Employer does not calculate the final amounts until after March 15 of the year following the end of the performance period, so all payments are subject to 409A. 

What practical impact does this have if the plan uses the year following the end of the performance period as a fixed payment date (as opposed to trying to pay before 3/15/24)? 

It would not allow payments to be made earlier than, or later than, 2024, which is fine. There are no opportunities to further defer the payment. The substitution rules would apply, which can be managed. The six-month delay would apply, but no payments are triggered by a separation from service, only a fixed date. The plan could be aggregated with other plans for plan termination rules.  

It also seems that these rules would apply to participants terminating prior to 2023, even if the payments were made by 3/15/24 in the ordinary course (e.g., a participant who retired in 2022 would not meet the short-term deferral timeline in any event if payment was 3/15/24). 

None of these strike me as particularly difficult as long as the employer is aware they are constraining themselves in some ways. 

Am I missing something that would make this impractical?