We offered the new maximum DCFSA limit ($7,500), performed the test following our open enrollment period and have one HCE that elected the new maximum $7,500, that needs to be reduced in order to pass the test. My questions are:

1. Since it's possible for us to have another HCE enroll mid-year, am I correct that we have to apply the same reduction to any HCE mid-year enrollees? 

2. If yes, how do we determine what the reduced amount should be? 

3. Other than exclude HCEs altogether moving forward or setting a low election maximum, is there anything else I'm missing? 

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We are taking over a client whose TPA messed up the original plan setup and didn't put in the correct provisions for certain things (particularly Normal Retirement Age & Vesting Schedule).  The question is, how far back can we go to correct these things (the plan is roughly 2 years old, the client just didn't notice the error until now)?  Or can we not do them retroactively and just have to do it moving forward.

I'll be honest, this is one I've never encountered so I wanted to be sure we did it correctly.

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Hi folks,

Anyone have any recommendation for an IT service provider who excels at Security and can host a virtual TPA practice? Just found out my local service provider is getting out of the business as soon as possible so hoping to make a move by year's end.

Thanks to anyone. If more comfortable, can message me direct.

The California "stay or pay" rule effective January 1, 2026 will in general prohibit clawbacks when an employee leaves employment.  However, under limited circumstances, the rule does not apply to a signing bonus.  Among the conditions for it not applying is that the employee must have the option to delay the signing bonus until the end of the retention period.

Has anyone thought about the taxation of the signing bonus if it is deferred?  Presumably, if it is considered "made available," it would be taxed immediately upon hire, even if the employee elected to defer it until the end of the retention period.  And a signing bonus that is actually paid is taxed upon payment, even if it has to be returned if the employee doesn't stay until the end of the retention period, so presumably the same rule would apply to a bonus that is made available.

In the 409A context, presumably in order to avoid this issue, a deferral is recognized only if it is made within the first 30 days, and only if it relates to compensation earned after the election.  But a signing bonus is earned upon signing, so that wouldn't work here.

Any thoughts?

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Hi,

I have a question about a Controlled Group relationship.

A sponsor owns two companies: A and B. For company A, she has a 401(k) Plan and there is no 401(k) Plan for company B. Company B is currently an LLC (that she also owns 100% of) where she has 1 household employee. She is thinking of dissolving the LLC to avoid the 2 companies being in a Controlled Group relationship.

According to the plan sponsor, the household employee (at Company B) is not part of a trade or business (and their payroll and any 401k contributions would not be tax deductible) so they believe the household employee would not need to be covered by the Company A's 401(k) Plan if the LLC is dissolved.

"Reading from IRC 414:

(c)Employees of partnerships, proprietorships, etc., which are under common control
(1)In general
Except as provided in paragraph (2), for purposes of sections 401, 408(k), 408(p), 410, 411, 415, and 416, under regulations prescribed by the Secretary, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer."

Is this still a Controlled Group relationship and would the household employee from Company B need to be covered by Company A's 401(k) Plan.

I tried to find this, but couldn't seem to.  If an owner is RMD eligible, actively working and receiving a Profit Sharing contribution for his 12/31 balance do you use:

1) The Investment Balance
2) The Investment Balance + any Receivable contributions made after the close of the year

I just wanted to be 100% sure, as I'm started to confuse myself.

Thanks everyone!

I keep overthinking this because I've heard two different answers. Thoughts on if this is a controlled group? 

Comp A - husband A 51%, wife A 49%

Comp B - husband A 24%, wife A 26%, husband B 24%, wife B 26%

A small business sells to a larger business.  The new owners have their own 401k plan.

The small business 401k plan and business fiscal year are 7/1 - 6/30.  The business was sold on October 1.  The status of the small biz 401k plan was not addressed in the sales agreement (crazy, i know.  We just found out about the sale today, almost 2 months later).

Theres more involved but an initial question:  Who would make the decisions on if/when to terminate the small biz 401k (I do not believe a plan merger is being considered)?  The plan document and trust agreement still show the small biz owners as the trustee.  

Thank  you

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In 1977, as I began law school, I started working as a law clerk and was quickly given responsibility for the firm’s qualified plan practice. When I passed the bar in 1980, I stepped fully into a career that has now spanned more than four decades. As I begin to slowly wind down those years as an ERISA attorney, I am deeply grateful for the opportunities that have come my way and for the encouragement and help of so many good men and women.

I never dreamed, in the ’70s and ’80s, where this practice would take me. As this year began, my ERISA work fell into six main roles:

1. I’m an author. I have written or co-authored five books dealing with retirement plans, and am nearly done with my sixth—the ERISA Fiduciary Navigator eSource—all published by ERISApedia.com.
2. I head the ERISApedia ASK service, where my protégé, Adriana Starr, and I answer questions from ERISA practitioners.
3. I present webcasts and live seminars on retirement topics.
4. I draft plan documents and interim amendments on behalf of the Relius division of FIS.
5. I serve as of counsel to the Ferenczy Benefit Law Center.
6. I assist some clients in a private practice.

One of the observations that has struck me over the years about the Employee Retirement Income Security Act is that it never defines “retirement.” My own working definition has been “separating from service once you’re old.” But the older I get, the older “old” gets. Still, as I near RMD age (even after SECURE 2.0), it's time to start thinking about saddling up and riding into the sunset.

I envision retirement as gradually dropping things out of the saddlebags. So, with mixed emotions, I announce that I will no longer be acting as of counsel to the Ferenczy Benefit Law Center or conducting a private practice. I will consult on special cases, but otherwise, for now, my professional endeavors will focus on writing, teaching, FIS, and the ASK service.

Planning for the financial side of retirement has been the easy part. The emotional and professional side is more challenging. My hope is that a slow and gentle ride toward tomorrow will make that transition easier. I am profoundly grateful to the colleagues, clients, and friends who have shared this journey with me—and I look forward to continuing to write, teach, and cheer you on from slightly lighter saddlebags.

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I have a client who just got a call from a "former participant" requesting to cash out his profit sharing plan account balance. 

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Is there a way to get the job listing posts out of my stream?  I find they are clogging up my feed.

At this point, going on nearly NO details - just a quick second-hand question based on a phone call from a plaintiff's attorney. We will of course be telling the client to talk with his legal counsel. But as much as I understand the situation so far:

A participant terminated employment in 2023. He was an owner, and was bought out. Apparently, there is some sort of a lawsuit - the nature of which I have no idea, but the terminated participant is apparently getting some sort of settlement, and wants to know if he can contribute to the 401(k) for 2025 to save on taxes. The plaintiff's attorney wants to talk to us, apparently.

This is way above my pay grade/knowledge, but I'd like to have some idea for my own background. I "think" I generally have an idea that a "restorative payment" which is determined under the facts and circumstances (Revenue Ruling 20something-25 - can't remember specific number) is not considered a contribution subject to 404, 415, etc., etc.) But this dealt with fiduciary breach-type situations as I recall.

Assuming for the moment that this lawsuit is for other reasons, perhaps wage issues, unjust termination of employment, whatever, if the settlement is considered wages, then if he was still employed by the employer, he should be able to defer up to the normal limit. But, since he terminated in 2023 I don't believe he could defer into the plan. Could he?

Please don't waste a lot of time on this, because as I said, it'll be handled by the client's ERISA attorney, and/or the plaintiff's attorney and/or tax counsel. But for my own edification, if you might have any quick general info based on your experience, I'd be grateful for anything you might care to share. We've been fortunate to never have run into this situation.

Thanks!

P.S. - The Revenue Ruling I was thinking of is old - 2002-45. No wonder I couldn't remember...