Hi,

Thank you as always for all the insights. If a DB plan has 2 trustees (the two owners of the company and the sponsors) are they allowed to act independently of each other? Thank you.

Can profits interests be granted to non-service providers?  If so, how do those work?  

Alternatively, can unit appreciation rights be granted to non-service providers?

President Trump’s Executive Order Modernizing Payments To and From America’s Bank Account calls for payments to the US government to be made only by electronic-funds-transfer. https://www.govinfo.gov/content/pkg/FR-2025-03-28/pdf/2025-05522.pdf

Is there a situation in which lacking an opportunity to pay—one’s own payment, or a client’s payment—by a paper check would be a hardship for a retirement, health, or other employee-benefits practitioner?

Flexible Discretionary Match, per the document definition the Employer has full discretion over the formula or formulas for allocating (with the exception of the allocation conditions noted in the document). Can the formula exclude a compensation type that is not excluded in the document?  For example, the plan only excludes Pre-Entry and Post-Severance leave cashouts Compensation.  Can the Employer's discretionary match formula exclude Bonuses?  Found several spots that indicated they could exclude Bonuses in the formula, if the match was definitely determinable and that the Administrator and Trustees were aware.   Just doesn't feel quite right.

I’ve seen some big recordkeepers ask for information on a participant’s or employee’s gender, with system fields and drop-downs for female, male, nonbinary, or unspecified.

An employment-based individual-account (defined-contribution) retirement plan often has no provision that determines a benefit according to the participant’s sex or gender.

Yet, I imagine a service provider has other service-related reasons for collecting the information.

What are a service provider’s uses for which it’s helpful to know whether a participant is female, male, or nonbinary?
 

Client filed for bankruptcy, has an underfunded plan, so PBGC is assuming administration/becoming trustee of the plan.  A final IRS Form will need to be filed. Who files this? Is it the bankruptcy trustee? PBGC says they would not file, although they would file the final 5500. Thanks

My husband went through a nasty divorce.  He did what was ordered by the Court, she received over $200,000 for house and he paid child support- never late.  Part of the divorce was he get half of her pension, 401K from Disney.  For years, it was a cat and mouse game where exwife and Disney Fidelity would not disclose the name of her plans.  Discovery, subpoenas filed (this was back in 2005).  Finally in 2022, my husband got an award from Disney Fidelity.  Not much, but it was purpose.  Now in Feb, we get a letter from Disney Fidelity that ex-wife is trying to retire but her funds are being held up.  Trying to speak to somebody from Disney Fidelity QDRO dept is virutally impossible, but we did get this one guy who was super helpful and although couldn't come right out - told my husband to do another QDRO because she had another plan which he could be entitled to.  My husband and his previous lawyer back in 2005 always felt she hid money.  His ex-wife has hired her new 5th lawyer and they are trying to do a Motion to Vacate the original QDRO back in 2005.  My question is that the QDRO would apply to the plans the ex wife had during their marriage of 1988 to 2005, I dont understand why the guy from Disney Fidelity told us to subpoena Fidelity for her plan subsequent to 2005?  Why then?  Any advice would be so helpful.  Thx

Internal Revenue Code § 414A, which sets an automatic-contribution arrangement as a tax-qualification condition for a § 401(k) arrangement, does not apply “earlier than the date that is [one] year after the close of the first taxable year with respect to which the employer maintaining the plan normally employed more than 10 employees.” I.R.C. § 414A(c)(4)(B).

Section 414A does not define what “the employer maintaining the plan” means.

Section 414(b)-(c)-(m)-(n)-(o) specifies several tax Code sections for which more than one organization or business might be treated as one employer. But § 414A is not among these.

Imagine a business organization is setting up a new plan with a new § 401(k) arrangement. Even counting owners, this organization has only six employees (and is unlikely ever to have more). The organization is commonly controlled with several other organizations, each of which has a separate retirement plan. (Assume none of coverage, nondiscrimination, or top-heavy is a worry.) The common-control employer has hundreds of employees.

If you advise this new plan sponsor, what do you say about whether it must or need not make its § 401(k) arrangement an automatic-contribution arrangement?

I got an email from a client concerned about how much data is public on EFAST2.  They have had this plan since the inception of EFAST why now I don't know. 

The CEO is saying he was reading on all the instructions that he saw something that said you could request some or all of your data to not be made public.  I couldn't find anything in the instruction or on the website talking about this. 

I thought I would throw it out here before I go back and say, "can you show me what you are reading" if anyone has heard of this? 

I mean if you could do this every company would try and it would be more common knowledge around a firm like I work at which has hundreds of employees. 

Have we missed the boat on this somehow? 

Any help would be appreciated. 

Thanks

Good morning everyone, and sorry for all the questions.  Been getting a lot of plans recently that have some interesting quirks/potential issues.

We have a plan that's coming over that's current matching formula is:

"133 1/3% of the first 3% of contributed eligible compensation, plus 100% of the next 3% of contributed eligible compensation"

Question 1) I've never seen a matching formula in excess of 100% of compensation, so I wanted to confirm that this was acceptable.

Question 2) They've asked about increasing the matching formula.  Can they simply do 133 1/3% of 100% of contributed eligible compensation?  Or is there a maximum of 100% of compensation?

Thanks in advance everyone!

Does any one have a link to a google sheet or a spreadsheet they could DM me that in which family attribution can be specified prior to calculation?

Thank you!

The sole owner of an S-Corp is depositing 401k and safe harbor match every 2 weeks.  His W-2 for 2024 supports his contributions.  I'm fuzzy on this part...  I was told that the payroll company processed a one-off payroll for $75,000 on 12/27/2024 in order to support his 2024 contributions.  His W-2 showed $75,000 in total compensation and a $30,500 401k contribution.  The CPA tells me it's ok because the IRS just wants to see that a W-2 at the end of the year supports the contributions.  Is an S-Corp owner not issued an official paycheck each pay period with the various payroll taxes deducted for that pay period?  The CPA said it's better from a tax perspective to run one payroll at the end of the year so that the W-2 supports the owner's contributions and the W-2 reports reasonable taxable compensation.  Maybe this is semantics but I don't understand how a paycheck isn't process for an S-Corp owner throughout a year and one can be run at the end of the year to report W-2 compensation for the prior 12 months.  Is this ok?

DB plan received an IRS compliance check for non filing of 5500. They didn't respond in time  and now received a notice that that since they did not hear from the sponsor they are refering the case for examinstion consideration. And you will be notified if your return is selected for examination. Could the sponsor still file now with the DFVCP? And would this help stop further action?

Thank you for any insights and help 

Just a question, because I honestly haven't dealt with too many frozen plans.  If someone is having some cash flow issues and want to freeze their cash balance plan for only 1 year, is that an issue?  I just wanted to make sure.  It's a discussion that's being had, but not necessarily going to happen.

It would be for 2025, since no one has worked 1,000 hours for the year.

A 401k plan has a 4 year graded vesting for all employees. The question is can they have a different more generous schedule for a certain job class, for example nurses. There are HCE's and NHCE's in the nurse job class. Will this require BRF testing? Thank you!

An accountant asked whether DB contributions in an owners only DB plan are deductible in New Jersey.

Any reason why they should not be?

Thanks

Company had a bonus run mid-March.  They told everyone mid February that the employees would have to go into the recordkeeper to change their deferral rate for the bonus if they wanted it changed, then go and switch it back after the run.

This is a 360 integration and the recordkeeper sends a file feed to the payroll company with deferral changes on a pre-determined schedule.

Turns out, the payroll company did not get the change file until several hours after the bonus was run.

There were some 200 people who changed their rates and nearly all lowered or eliminated the deferral for the bonus.

So now we have excess allocations.  Simple enough fix:  distribute the excess amounts (with earnings) to the participant.

However, some people had very large amounts deferred.  How does the company/payroll take into consideration that amount when looking at the 402(g) limit later int he year.  many of these people max out each year.

For example, Laura was deferring $2,000/month, intending on maxing out in December.  Her bonus run had a deferral of $15,000 (yes, deferral was $15,000, not the bonus!).  So, at the moment her YTD deferrals aer $19,000 (and will be $21k on Friday). If we refund her the $15k, it brings her PLAN contributions back to $4-6,000.  But int he PAYROLL system she will still be at $19-21,000.

Do they just go in and manually change the YTD 401(k)?  I don't want them to stop her after May and having true deposits of only $10,000.

I'm taking over a solo 401(k) Plan that has exceeded the $250k in assets and therefore need to file the Form 5500.  It used an Adoption Agreement, but what I was provided was dated back in 2018.

I'm just confirming, even these types of plans had to be restated prior to July 31, 2022 correct?  With the need to provide the date/serial number for the restatement on the Form 5500, I wanted to make sure.

Please respond, I am very curious to know if there is a consensus on how the DOL's new program will be used!

As a TPA, I have some clients that like to provide for Profit Sharing allocations, under Each in Own Class allocation formula, during the relevant plan year. After the year ends, we receive census data and prepare our cross-testing for allocations. 

The question is, if a client contributes in excess of a minimum benefit that we calculate, would it be permitted to forfeit that money from the participant account? How about offsetting for future year contributions?

My thoughts are that this may violate the Exclusive Benefit Rule with some overlap on Anti-cutback. Essentially, once money is deposited to an employee account, it becomes a plan asset. Plan assets are for the Exclusive Benefit of employees and beneficiaries. Reasons to return plan assets need to fall into Mistake of Fact, Disallowance of Deduction, or Failure to initially qualify with the IRS. 

To me, this boils down to, is this 'prefunding' considered a mistake of fact? I would argue that it is not because they did not violate terms of the plan and no clerical or mathematical mistake was made. The sponsor decided to fund based on preliminary numbers.

Interested to hear thoughts from others.