Plan sponsor has frozen DB plan that is well funded in economic sense, but does not satisfy the "well-funded plan safe harbor" of PBGC reg. sec. 4043.10, because pays variable rate premium. May or may not satisfy the "low-default risk" safe harbor. Have not determined that yet.

Pursuant to SECURE Act, sponsor amends pan to permit in-service lump sums at age 59-1/2. Enough active employees cash out so that at some point during 2020 the number of active participants in plan drops from 55 to 30, so more than a 20% reduction. Plan has several hundred terminated vesteds and retirees, and paid flat-rate premium for more than 100 participants for 2019, so does not satisfy the requirement for small plan waiver.

It does not seem clear to me under reg. sec. 4043.23 whether a greater than 20% active participant reduction reportable event occurred. The plan's amendment could be viewed as a "single cause" under 4043.23(a)(1)(ii), sort of like an early retirement incentive program, except that the participants didn't retire, they just cashed out their benefit, but 4043.23(a)(1)(i) defining a "single cause" greater than 20% active participant reduction refers only to a  greater than 20% reduction in the number of "active participants," without saying whether this is referring to a reduction in the number of "active participants" employed by the plan sponsor or covered by the plan, and the definition of "active participant" in 4043.23(b)(2) says it's someone working for, or on leave, etc., from the sponsor, again without referring to plan coverage. Thus, since all or most of the folks who took the in-service distribution are still working for the company, there was not, strictly speaking, a 20% reduction in the number of "active participants" as so defined. It's harder (maybe impossible) to wriggle out of the greater than 20% active participant reduction due to an "attrition event" [oxymoron?] definition in 4043.23(a)(2), because that definition does refer to the number of "active participants" covered by the plan at the end of the plan year as compared with at the beginning, but at least if I have an attrition event, the requirement for the reportable event notice is delayed.

Follow-on question: Assuming plan sponsor did, at least arguably, have a reportable event, does anyone have experience with reporting late to PBGC, voluntarily, with a "good cause" explanation? It does not appear that the PBGC has any guidance for obtaining a penalty waiver, but it seems likely that in a case such as the one described above they would likely waive or apply only a small penalty if the sponsor made a voluntary delinquent filing.

Company started a new plan, with a 1/1/2019 effective date. 2019 Form 5500 was filed, with a beginning of the year participant count of 188, making plan subject to audit. However, on Schedule H, Part III, the Form 5500 prepared and filed on EFAST checked box 3d2 - the audit will be attached to the next Form 5500 pursuant to 29 CFR 2520.104-50 (less than 7 month exception). Our reasoning for the exemption is that, for plan eligibility purposes, the plan Adoption Agreement indicates that anyone employed on July 1, 2019 was eligible. According to the plan sponsor, deferrals began in August 2020.

The 2020 Form 5500 has not been filed, as the TPA will not file the return without a 2019/2020 audit. We have been brought in to perhaps prepare the 2019 and 2020 audits. Question:

Can the plan claim the exemption for a year less than 7 months, utilizing the eligibility feature noted? Or should we, if engaged, recommend an amended 2019 filing with a 2019 audit, once it's complete, attached to the amended return?

Thanks for any replies.

Has anyone experienced problems with responses being changed in Form 5310 being filled out through pay.gov?  I'm using Chrome.  On multiple times, I've had the numbers in line 16a(3) change on me after I've logged back into the form.  I'm having similar issues with additional items being checked off in line item 3f and line item 20.

How does one submit the completed procedural checklist for the Form 5310 on pay.gov?  Does it appear after the signature page is completed?

Thanks

If one is awarded half of retirement account and QDRO but it is not with the benefit administrator of the spouse and he quits his job and takes all the money, can one sue the spouse for her portion?

Hi

An EE hired more 10 years ago and worked 1000+ hours each year. In 2014 becomes part-time but working 750/year.

Owner wants to set up combo plans for 2021 and wants to exclude this employee.

I think this employee is included in all testing because never terminated and never had a break-in-service, correct? He would be excluded categorically.

What if, worked under 501 hours since 2014, still needs to be included?

Thank you

EPCRS says if a deferral election is not started in an auto enrollment plan, a QNEC can be avoided if the election is started by: 

"(i) Correct deferrals begin no later than the earlier of the first payment of compensation made on or after the last day of the 9 1/2-month period after the end of the plan year in which the failure first occurred for the affected eligible employee or, if the Plan Sponsor was notified of the failure by the affected eligible employee, the first payment of compensation made on or after the end of the month after the month of notification;"

Say a plan with auto enrollment has payrolls the 15th and the last day of the month.  A participant is supposed to be auto enrolled on January 1, 2021, but is not.  The participant finally notices and informs the plan sponsor on June 1, 2021. 

When must the deferrals begin to avoid the QNEC? 

The month of notification is June.  The month after the month of notification would be July.  Since there would be a payroll on "the end of the month after the month of notification" (July 31, 2021), is that the payroll date that deferrals must start?

What if the last payroll in July was July 25, 2021, would the deferrals need to start with the first payroll in August, which would be the first payroll "on or AFTER" the end of the month after the month of notification?

Thanks very much.

One  Participant, owner only plan.

The owner was taking annual distributions and passed away.

He had elected a Joint and Survivor benefit and his spouse passed away years ago, and therefore there is no beneficiary to continue taking his annual distributions.

The Plan is heavily overfunded. What happens to the plan now. 1. Does the overfunding revert to the estate and the estate will owe the excise tax for he overfunding? 2. Can the estate sell the plan to an underfunded plan (as is done at times to avoid an excise tax on the overfunding)? Thank you very much.

Does anyone have a quick summary or chart that shows what SH Notices still need to be sent and which ones don't?

Plan has no exclusions to compensation.

Employer did vacation day buyback, but did not withhold 401(k) deferrals.  Were they required to?

Also, they do a 4% profit sharing each year, and did not remit the PS for the buyback.

I am thinking they owe a 50% QNEC on the missed deferrals (plus earnings).  No match.

The missed PS may be ok.  The PS allocation is New Comparability, and if it passes testing they are ok.

Is it your opinion the Employer must do a Profit Sharing Resolution each year to memorialize the amounts everyone gets because it is New Comp and not a stated formula?

Would appreciate it if someone would confirm the rule here.

Plan has a basic SH match to satisfy the ADP safe harbor requirements. It also has a discretionary match, which is not intended to satisfy the ACP safe harbor test.

If the discretionary match imposes a 1,000 hour or last day requirement, does that blow the ADP safe harbor because it could cause an HCE who works all year to get a higher rate of match than a non-HCE who leaves during the year?

Did the plan need to have loan provisions already in place before they issued CARES loans?

We have a client that issued an $80,000 loan without having a loan provision in the plan.

Could we retroactively amend the plan to allow for loans?

My husband passed away this year (March 2021).

We owed $13,587.66 in 401K loans prior to his death.

His 401K servicing company did NOT deduct the loan amount from the distribution into my Spousal Beneficiary IRA. (In fact, *I* was the one who discovered the error, but did not notify the company.)

If they send us a 1099R, will I have to pay income tax AND an early withdrawal penalty on it?

Thank you in advance for your help!

Kat

I have a governmental client that is switching vendors from one mutual fund company to another. It previously had a discretionary contribution DC plan (identified as profit sharing plan in the old adoption agreement) and is adding a 457(b) plan with the new vendor and will match employees' 457(b) elective deferrals in the revised 401(a) plan. The new vendor seems to think that in order to match 457(b) deferrals in the 401(a) plan, at least at a fixed rate, it is either required or advisable to change the 401(a) plan from a profit sharing plan to a money purchase. Has anyone seen this before and if so do you know the basis for it?

Off calendar plan year ends 10/31/21.

In calendar year 2020, the participant deferred $26,000 from 1/1/20 to 10/31/20.  So all of the catchup in 2020 was used for the plan year ending 10/31/2020.  No deferrals were made from 11/1/20 to 12/31/20.

From 1/1/21 to 10/31/21 the participant will defer $22,000.  $2500 of the deferrals will be catchup for the plan year ending 10/31/21.

I'm thinking when I allocate profit sharing to this participant I can allocate $42,500.  $2500 is treated as 402g catchup, and $4,000 is treated as 415 catchup.  The total allocated for the plan year would be $64,500.

Further, if the participant defers an additional $4,000 from 11/1/21 to 12/31/21 (for a total calendar year deferral of $26,000), those deferrals would be catchup for the plan year ending 10/31/22.

Note, this is a safe harbor 401(k) so ADP refund catchups are not a factor.

Am I thinking through the catchup process correctly?

Thanks very much.

Hi,

An owner only DB Plan (one participant the owner) elected a 100% Joint & Survivor (spouse) annuity and stared taking benefits (RMD). After 11 year of taking benefits, his spouse passed away. 1. He cannot change his election, even though his survivor passed away since he already started taking benefits. Correct?  2. The plan is very overfunded , what will happen in the event of the passing of the participant since he cannot change his election of the survivor? Will the assets revert to the estate and the estate will owe the excise tax for the overfunding reversion. 3. Can the estate sell the overfunded plan to an underfunded plan to avoid the excise tax? Thank you very much for any insights on this.

Group:

Plan is on an off-calendar plan year 10/1/2020 - 09/30/2021

Participant defers $34,500 during the plan year - divided as follows:  18,000 from 10/1/ through 12/31/2020 & 16,500 from 01/01/2021 through March 31, 2021 when he quit.

Does he have a 402g issue or is he ok.  He was not in another plan before this one during 2020.  However, we do not know what he did after he quit.  Thoughts??

Hi

First time doing a PBGC termination with excess assets being transferred to a qualified replacement plan - QRP. Just cannot seem to figure out the following:

Here is a breakdown

All participants:                          $3,000,000 - all rolled over to the QRP - existing DC plan - not relevant if consensual or not

Excess (overfunded portion):   $   300,000 - transferred to the QRP

Total DB distribution:                $3,300,000 - all to QRP

How do you show the $300,000 on 501?

Thank you

Hi, 

A terminating plan the plan sponsor terminated the plan as of 09/05/2021.  All contribution were stopped, the termination activity stated as of the term date were all part status every changed to term in the plan and everyone became 100% vested and also  communication was sent out to the part's about the term part and asking them to take action on their account balance.  The forced distribution is set for Dec-2021, however now they advisor has got back asking with the term date can be changed to a future date 10/15/2021 since they would want to allow contribution for few of they employees.  

Can the term date be changed now and contribution be allowed?  what will be the repercussion.  

We were the TPA on this one person plan, and the owner stopped paying our invoices.  We went back and forth a couple of times over it, he rolled his money out, we told him we wouldn't prepare the final 5500 until he paid us per our client service agreement, and then he never responded.

Just found out that he recently passed away.  So, clearly, we're not getting paid.  But... just wondering... what is going to happen with the 5500?  At some point, they'll figure out that a filing is missing and send a letter to the business that is no longer there.  The guy is dead.  Does the IRS have the authority to levy any penalties against a spouse, estate, heirs, etc.?  It's more of a morbid curiosity at this point.