We have an employee who has moved from a full-time position to a part-time position mid year.  Under the ACA, do we have to keep this employee on our benefits for the remainder of the stability period?  Or, can we terminate benefits because the employee is no longer in an eligible class?

• Sole-Prop, owner-only client comes in with a 401(k) Plan with a value of $70,000 as of 12/31/2023
• They also have a pre-existing SEP valued at $190,000 as of 12/31/2023.  Went "dormant," and 401(k) was adopted in a later year.
• 5500-EZ was not filed for 2023

If the SEP was established as a formal plan for the business at some prior date and was never formally terminated but simply went dormant, should the value be included in the asset total for determining the $250,000 threshold?  5500-EZ Instructions say the threshold determination includes "all other one-participant plans maintained by the employer."  

I realize we treat a SEP as no longer being "maintained" when it is no longer receiving contributions, but I'm concerned about the implications in a 5500-EZ situation . . . not that anybody would know there was a SEP because there has never been a formal filing, BUT . . . I am curious!

We are taking over for the 2024 plan year.  The concern is, should we also have the client file a 2023 Form 5500-EZ for the 401(k) under the Penalty Relief Program . . . ?

Looking to find any case law that concerns ERISA preemption of state legislation limiting the investment scope of pension plans concerning investments tied to China (or similar foreign adversaries). 

Note that last month 17 AGs gave notice to Blackrock, and similar providers, that inadequate disclosures (of material risks) for funds with Chinese investments potentially constituted a breach of fiduciary duty. 

https://www.asppa-net.org/news/2025/2/chinese-investments-evoke-concern-of-state-ags/

Similar federal legislation is also in the works: 

https://www.congress.gov/bill/118th-congress/house-bill/4008

Company A, Father owns 50%, Son own 50%.  Company also employs son's mother and son's wife.  Company B is 100% owns by mother, mother and father are not married.  This is a B/S CG, right?

Hi,

Thank you, as always, for the all your insights and informative responses. Our Pension reporting system (filing 5500 etc) is having technical issues. Until we resolve the issues:

1 . Are there alternate methods that we can use to file a few 5500s.

2. Does I file work similar to as when we file as third party signs and files for the client from our regular reporting program?

3.And is it easy to resgister and get started to use i file? 

4. Are there any other alternatives that we can use to get these 3 or 4 5500 filed?

Thank you very much.

Looking for some thoughts on this situation. Buyer company A is seeking to buy target company B. Company B is owned by a larger company and there are more than 2 401k plans in this controlled group.  Buyer company A sponsors a safe harbor plan and Target company B sponsors a safe harbor plan. Buyer A does not want to take over this plan they want it terminated before the sale, and then have participants roll over their balance to company plan A. Are there any options to terminate Company B safe harbor plan? The problem I see is that Seller B is part of a controlled group, and the successor alternative plan comes into play - if seller B terminates the plan, the termination is not a distributable event since there is another 401k in that controlled group. If they do not terminate the plan before the sale, and Buyer A takes over the plan, the successor 401k plan rule still comes into plan and if Buyer A terminates the plan it is not a distributable event. I see no clear guidance where you can merge a terminated safe harbor mid-year into another safe harbor plan (maybe this is ok?), or that you can distribute assets in a terminated safe harbor plan if there is a successor plan. Any thoughts?

Here in California, just discovered yesterday that an employee has been misrepresenting that his domestic partner was his spouse on his health insurance enrollment forms for the last four years. Found out because he just told me he was about to get married later this month! I don't believe it was malicious, he's just really clueless about this stuff.

Anyway, I don't believe she is a registered domestic partner (that would be uncharacteristic of him, although I could be wrong). Her premiums have been paid pre-tax through payroll deferrals and she also used his HRA last plan year. Regardless of whether or not she is registered, I know that the IRS does not generally allow pre-tax premium deferrals and HRA participation for domestic partners.

Any advice on what to do now? Go back and try to make four years of corrections or just move forward since they are about to get married in 3 weeks? 

And yes, going forward, we'll ask for marital status verification...

Thanks in advance!

An attorney changed status to "of counsel" in 2021 when he attained age 70.  He attained age 73 in 2024.  I think he needed to receive a RMD by April 1, 2025 since he is no longer considered an employee of the law firm.  Thoughts?

this is a take over one man plan with BOY val date, I'm wondering if we can change that to EOY val date assuming auto approved

We have a law firm client with 5 equity partners, 5 non-equity attorneys and about 50 employees. They sponsor a 401(k) Plan.

One of the 5 non-equity attorneys who was not even an HCE has now become an equity partner owning 20% of the firm. He incorporated so now his corporation is the 20% equity partner in the law firm. Apparently at about the same time his corporation adopted a SEP.

We believe there is an affiliated service group between his corporation in which he is the 100% shareholder and the Law Firm of which he has a 20% equity interest in.

We believe his SEP will need to consider all employees of the law firm to meet coverage under 410(b). This would mean his SEP would need to cover about 20 employees of the law firm.

Anyone agree or disagree with this?

Thanks.

I own company a 100% and had a DB plan which terminated.

I started a new company and now own only 50% and want to start a DB plan.

Same line of business.

Does my old DB offset my new DB?

I'm guessing that this has already come up on the forum.  I have a plan that is a SHMC plan.  The employer wants to terminate the SHMC plan and set up a SIMPLE IRA plan in 2025.  

Secure allows the employer go SIMPLE to SH, but I can't determine if they can go the other way.  

I'm concerned about the 12 month moratorium rule for the 401(k) plan. 

What is the correction if a plan uses a $1,000 cash-out threshold but the plan in operation has been involuntarily cashing out participants with account balances between $1-$5,000? And yes an IRA agreement was in place, however the plan document was not amended to permit these mandatory cash-outs/rollovers. It appears to have been going on for several years and has not been identified as an inadvertent failure. Thank you!

Another deferral timiing question that's not clear (to me)......

If a plan sponsor is offering a new executive the opportunity to defer a sign-on bonus (not performance-based) with a vesting schedule of 12-months or more, under what deferral election timing rule does this fall?

Would it be certain forfeitable rights (election w/i 30 days of the award)?

Would it be initial plan eligibility (within 30 days of becomeing eleigible, and the deferral applies to amounts unearned)?

Thanks!

How do you keep track of updates to mandatory state taxes? I've been searching for a service that we can subscribe to that will send notifications when changes are made by state with no positive results. I'm trying to make sure our system aligns with all those requirements.

I'm curious to hear others' thoughts on the interaction of the short-term deferral exemption with the earnout provisions of 409A. Say an employee has an agreement that pays out the full value (i.e., not a SAR) of 1,000 shares of company stock upon a change in control, but only if the employee is employed on the date of the CIC. Clearly a short-term deferral. 

What if the agreement also uses the earnout provision for transaction-based compensation, allowing the employee to receive contingent payments over the next five years as and when the selling shareholders receive them? The employee does not need to remain employed for the next five years.

This seems to add a deferred payment that would blow the short-term deferral exemption. (I'm not sure each separate earnout payment would be considered subject to a SROF on its own.) 

The earnout provisions, as I read them, do not exempt the arrangement entirely from 409A, but rather say that the payment timing will not violate the initial deferral election rules or the fixed time of payment rules. In other words, the series of earnout payments will be deemed to comply with 409A. 

The proposed regulations address this issue for stock rights and allow them to remain exempt from 409A even if they include an earnout provision.

But what about a short-term deferral?

Does anyone know when the updated segment rates will be available?  The last rates we have are January 2025.

Plan is a safe harbor plan meeting safe harbor a 100% match on the first 4% of deferrals.

Plan has a flexible discretionary match that would generally meet ACP safe harbor requirements except that plan sponsor only wants to match pre-tax deferrals. Two NHCEs make Roth contributions, no HCEs make Roth.  I think that is a problem because the ratio of matching would be higher for HCEs than NHCEs. Plan would pass ACP testing, but I still don't think they can exclude Roth deferrals from the discretionary because they specifically elected that both the "ADP and ACP test safe harbor" provisions will be used for any Plan Year in which any type of matching contribution is made.

Since they've elected that ACP safe harbor provisions will be used, I think that they have to use the safe harbor provisions and can't revert to ACP testing.

Am I missing something?  This is a takeover plan for us and in prior years the service provider did allow the discretionary match to be made only on pre-tax deferrals.

Thank you for any guidance.

I'm looking for contact info for the plan administrator(s) of Fedex portable pension, Fedex pension and Fedex 401k, specifically for QDRO purposes. Any info would be helpful.