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?

I trying to get a sense of how long employers are prohibiting the re-hire of employees who have a 401k account and are under age 59 1/2 to support there is a true termination of employment versus a sham termination.  I have seen time periods that range from 3 months to 6 months and less often 12 months.  For this purpose, assume there is no pre-termination agreement between the employer and employee to re-hire.  Thanks!

Plan has a last day worked requirement in order to receive nonelective contributions.

However, participants that terminate employment on 12/31 (cal yr plan) are not eligible.

Never seen this, what is the justification? Do plan specs state clearly, must be active employee on last day of the plan year?

Hi

Not a 401k expert

401k plan with 3% NESH+PS

An employee erroneously was allowed to defer in 2021 as never met eligibility.

Got the refund timely, I am told

Totally excluded for 2021, correct?

Thank you

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Does this follow the same rules as qualified plans, or is there a whole separate regulatory scheme?

If enacted as it passed the House of Representatives, the “SECURE 2.0” bill [H.R. 2954] would require a new § 401(k) or § 403(b) salary-reduction agreement to include an automatic-contribution arrangement.

What do BenefitsLink neighbors think about this? Would you like the new requirement? Would you dislike it? And for either view, why would you like or dislike an automatic-contribution requirement?

A participant was working while they attained age 70.5 back in 1998.  They continued to work through 2008.  Each year, through 2004, the benefit was increased to reflect additional accruals.  After 2004, there were no increases. 

We're trying to figure out if the benefit should have been increased after 2004 through termination.  I seem to recall a test or rules of some sort for people working past 70.5 and receiving their benefit, something like comparing the present value of the benefit as if it was always being made to the accumulated value of benefits already paid, and if the difference was greater than you increase, otherwise you don't.  But, I can't seem to find this anywhere.

Does anyone recall this?
Thanks,

A plan sponsor wants to make profit-sharing contributions for the 2021 plan year to employees who did not meet the plan's eligibility criteria in 2021. There is no testing failure if they remain excluded.

Is it possible to amend the plan now to make the eligibility terms less restrictive? It seems like an -11(g) amendment would not work because it wouldn't be correcting a failure. Likewise, we're beyond the timeline for adopting a discretionary amendment.

If they received allocations anyway, despite the plan terms, how would everyone view a retroactive corrective amendment under SCP to conform to the plan's actual operations (i.e., retroactively loosen the eligibility terms for the profit-sharing component only)? Only non-HCEs are in the potentially expanded group. The expansion would not cover the deferral components so there wouldn't be an issue with their inability to defer in 2021.

Is there any other way to accomplish?

Appreciate any insights.

Client selling the assets of his company, effective 6/5/2022; all employees will be terminated, employee contributions cease as of that date.

Employer has yet to make the 3% safe harbor (always made after the end of the plan year), so the plan must stay open to receive those contributions. 

The buyer maintains a 401(k) to which all participants in seller plan will rollover, but the plan has a 60 day eligibility requirement,

Can't the seller's plan remain open for those 60 days??

One participant has an outstanding loan, to which no further payments can be made after the participant terminates.  The outstanding loan balance is a QPLO which can be rolled over, can't it just sit in the seller's plan until expiration of the 60 days?

The solution would be for buyer and seller to agree to waive the 60 day eligibility for employees of the seller's plan, but that has yet to be decided.

This isn't specific to IRAs, etc. but is an estate close-out issue.  Filing form 5495 to request an estate trustee's discharge of any personal liability after 9 months, I need to list and attach the returns for which this is requested, in this case forms 1040 and 1041.  The returns are filed, the 5495 asks for the IRS service center where they were filed.  1041 was mailed to Ogden, but the 1040 was filed electronically.  So in the service center box, should I put "filed electronically", or list the service center where the paper return would have otherwise been mailed?   IRS instructions are very brief and don't address this. 

Thanks. 

If a 401k PS Plan holds an Exchange-Traded Fund (ETF) that is registered with the SEC, should those assets be reported on line 1c(13)?

Is there a rule that says that an IRA including nondeductible contributions cannot be rolled over to a 401(k) plan?  Ordinarily  I would say forget it but in this case it is the owner who wants to consolidate.

If the answer was no, wouldn't that be indicated on this chart?  I don't see any mention of any such restriction.

https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

Hoping to be able to import this existing document from Sungard into FT William. Any ideas are appreciated!

Hi --

Census:

HCE1 & HCE2

NHCE1, NHCE2 & NHCE3

CB plan covers HCE1 and NHCE1

401k/PS covers all

In general, I managed to pass annual but due client's request for the HCE2, things got complicated.

410b is not an issue, passing both ratio and ABPT.

Is there a way to test HCE1, NHCE1 & NHCE2 under annual method and HCE2 and NHCE3 under component rule?

The reason I am asking is because neither HCE2 nor NHCE3 are covered under the CB plan.

Thank you

Employer contributed $10,000 in January, 2022 as a 12/31/2021 elective deferral to the account of the business owner's wife, who is a Participant, but had no compensation in 2021.  Should/can the contribution, adjusted for earnings/losses be returned to the employer?  Is there any way the funds can stay in the Plan, if not in the Participant's account?      

I don't generally use healthcare.  If something breaks or stops working, I get assistance via the emergency room.  My wife is deceased.  My youngest child is about to get his own healthcare.  This year I decided to switch to a High Deductible Healthcare Plan and open a Healthcare Savings Account.  HDHP went into effect the first of the year.  On March 14th, I fully funded the HSA ($8300).  I expect to use the account to pay my deductible and other expenses like dental.  I found Publication 502 which I believe lists covered expenses for the HSA.  I have just a few expenses this year...

• OPTUMRX, April 05, 2022, $883.01

• OPTUMRX, March 18, 2022, $2.62

• DENTALCARE, March 15, 2022, $50.00 (date of 2/5/22)

• MASS GENERAL, February 04, 2022, $798.94 (date of service 12/23/21 and 12/28/21)

Does date of service or date of billing determine whether cost of a service can be reimbursed from my HSA?  Can charges incurred prior to the creation of the HSA be reimbursed?  What kind of documentation do I need to keep as evidence of eligibility?

Also, my company's HDHP is not 'creditable'.  My understanding is that people who delay Medicare past 65 who do not have creditable coverage face penalties when they enroll in Medicare.  Should I switch to a creditable plan the year before enrolling or enroll on the first day of eligibility?

Topic has been used as a continuation of a previous discussion

The IRS states that the Audit CAP correction penalties will not be excessive and will bear a reasonable relationship to the nature, extent and severity of the plan failures. However, Rev Proc. Section 5.01 states that the Maximum Payment Amount would be the tax imposed due to plan disqualification including tax on trust income, failure to file form 1041, income tax due to loss of employer deductions, etc., Has anyone experienced this type of an Audit CAP penalty or a similar severe penalty imposed on a client plan. Typically given my experience with Audit CAP I've seen penalties in the $15,000 range due to multiple plan qualification failure issues. Has anyone had a client that experienced the Maximum Payment Amount penalty, or severe high $  penalties, and if so, what amounts? 

What is the right basis for correcting an MDO for automatic enrollment?  50% of the ADP, or the pct of the auto enrollment?

Here it looks like it would be 50% of the auto enrollment pct:

https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-correcting-a-failure-to-effect-employee-deferral-elections

Our situation: elections are made on our recordkeeper site, and transfer over to our payroll system.  Due to human error, some elections were not transferred.  These non-transferred errors include automatic enrollments as well as positive elections.  

It seems to me that all these participants were given the option to defer, as they received info from the recordkeeper and were directed to the site.  As they were given the opportunity, this 401k plan fix would not apply:

https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-eligible-employees-were-not-given-the-opportunity-to-make-an-elective-deferral-election-excluding-eligible-employees

Thanks in advance for any comments!