I'm a little bamboozled on this one. Schedule C income is, say, $2,000. Owner "defers" and deposits $19,000 in December of 2024. Accountant tells her she has to distribute it, and Fidelity transfers it to one of her personal accounts, and tells her there are no tax implications whatsoever.

Now, I don't see how this can be classified as anything other than a 415 excess, to be corrected under EPCRS. Excerpt from 2021-30, Section 6.06(2).

Excess Allocations that are attributable to elective deferrals or after-tax employee contributions (adjusted for Earnings) must be distributed to the participant. For qualification purposes, an Excess Allocation that is corrected pursuant to this paragraph is disregarded for purposes of §§ 402(g) and 415, the ADP test of § 401(k)(3), and the ACP test of § 401(m)(2). If an Excess Allocation resulting from a violation of § 415 consists of annual additions attributable to both employer contributions and elective deferrals or after-tax employee contributions, then the correction of the Excess Allocation is completed by first distributing the unmatched employee’s after-tax contributions (adjusted for Earnings) and then the unmatched employee’s elective deferrals (adjusted for Earnings).

Normally, this distribution adjusted for earnings would be taxable. But, since it isn't deductible in the first place, is she only taxed on the earnings, if any? 

100% owner died in 2017 at age 90 - he was obviously in RMD status.  His two sons (who became 50-50 owners of the business) were/are 50-50 beneficiaries of Dad's account.  Dad's money is still in the plan (it's a pooled profit sharing only plan).

The change in the SECURE rules is throwing me off.  How do we determine the RMD factor for, say, 2025?  It looks like the date of birth for the oldest son has been used, but I'm not sure that's correct.

Thanks.

If a plan makes haphazard profit sharing contributions to various people, relying on the "each participant is a separate allocation group" method, must it pass the ratio percentage test for coverage due to the nondiscriminatory classification test in the Average Benefits Test?

A few days ago, a question was asked on this board about issues that might be raised when the plan's investment advisor is approached by a participant for individual investment advice for the participant's personal (non-plan) portfolio.

Looks like this could become a hot issue for plan sponsors as advisors seek to "turn participants into lasting clients".  See this upcoming NAPA webcast:  Grow Beyond the Plan: How to Convert Participants into Lifelong Clients

What sorts of fiduciary issues does this raise for the plan sponsor -- and the investment advisor? What about contractual provisions that the plan sponsor should ensure are included in the advisor's service agreement?

 @Paul I@Peter Gulia

I have a client who was in the process of terminating their cash balance plan with their TPA. They got impatient and wanted to speed up the process. In 2024, they withdrew all the plan's funds from the plan's account and deposited the funds into their business bank account. They intended to distribute each participants' funds, in the proper amounts, from the operating account.

Does anyone have experience correcting an error like this with the DOL and IRS? Could this be corrected under VFCP as a below-market interest rate loan to a party in interest? What do you think the proposed correction under VCP should look like? We have already advised them to transfer the funds bank into a trust account for the plan. Thanks!

It is my understanding that the QDIA is required for affected plans (that employ more than 10 employees) that use the required EACA feature under the SECURE 2.0.

Is there a QDIA requirement for QACA plans also (assuming the plan employs more than 10 employees and must have an Automatic Contribution feature)?

Thanks!

From my quick search in House-passed H.R. 1 (the “One Big Beautiful Bill”):

I found no amendment to titles I, III, or IV of the Employee Retirement Income Security Act of 1974.

I found nothing that would amend the Internal Revenue Code’s conditions for a tax-qualified or eligible retirement plan.

Section 110016 would revise Internal Revenue Code § 25B’s credit to include contributions to a § 529A ABLE account in qualified retirement savings contributions.

Beyond ERISA and the tax Code, amendments of the Administrative Procedure Act, the Congressional Review Act, and other law would call for yet more elements of information to be included in rulemakings and reports to Congress. These could lengthen the work it takes to make a rule or regulation.

Section 112211: “The Secretary of the Treasury may not regulate, prohibit, or restrict the use of a contingent fee in connection with tax returns, claims for refund, or documents in connection with tax returns or claims for refund prepared on behalf of a taxpayer.”

I’m not counting changes to retirement plans for US government employees.

Did I miss anything retirement-plans practitioners care about?

We have an HSA where we make employer contributions at OE only.  Accordingly, mid-year hires do not get employer contributions during their first year.  I know employers have the ability to set their own contribution intervals (e.g. annually, monthly, etc.), so I think this is alright.  But are there any issues with nondiscrimination or comparability rules?

Has anyone started receiving audit request - I have had two of my clients audited in last 2 months

Ian Ayres and Quinn Curtis, in Retirement Guardrails: How Proactive Fiduciaries Can Improve Plan Outcomes (2023), suggest several ideas to improve participant-directed investment.

They suggest that a plan sponsor need not be limited to a binary choice of including an investment alternative, or leaving it out of the plan’s menu. If a goal is preventing some participants’ unwise use of an investment while not depriving participants of the availability of that investment, the professors suggest limiting a participant’s allocations to such an investment.

I’ve seen percentage restraints applied to an employer-stock fund, but haven’t seen this for other funds.

Does any recordkeeper offer a service of limiting, according to the plan sponsor’s specifications, the percentage of a participant’s account that may be invested in a fund?

Imagine an employer believes it can’t or won’t, even with a nondiscretionary service provider’s help, administer an individual-account (defined-contribution) retirement plan. The employer prefers to engage a discretionary 3(16) service provider for as many responsibilities as it will take.

Are there some kinds of plans for which, considering size or some other fact or circumstance, a 3(16) provider won’t offer its services?

Two employers participate in a plan under one company. If a client is going to acquire one of those companies, what are the options for the 401(k)? They can't merge the whole plan into theirs since there is another employer, correct? Is the only option to terminate those employees from the sellers plan and let them roll over into the buyer' plan?

A literal reading of IRS Notice 2024-02 seems to suggest that each person needs to be told their own personal precise amount of 401(k) remaining for 2025 based on their own YTD SIMPLE IRA Contributions:

"Yes. Under § 1.401(k)-3(d)(2)(ii)(D), a notice must accurately describe the type and amount of compensation that may be deferred under the plan for the notice to satisfy the requirements of section 401(k)(12)(D), (13)(E), or (16)(B)(iii) of the Code."

1) the notice is due 30 days before the switch so this is not possible.

2) Nothing in this seems to really suggest that an individualized notice is required for every participant.  We are hearing some say that not only do you have to provide them an estimate of what remains for the year 30 days in advance of the switch, but that you also have to follow up after the switch to provide the exact amount available for the year.

While I can see the interpretation of the text, to me the spirit of the communication is to disclose the total limit available for the entire year between the SIMPLE and the 401(k).  If the above is in fact the requirement, it becomes almost prohibitive in terms of making a transition like this.  Small employers cant always get nice Excel exports, and fewer have the ability to do all of the mail merges needed.

Please tell me what you guys think!

Just got told that a client was purchased by a private equity firm.  Does this present any issues other than the usual ones when one company buys another?

And of course the impact on the safe harbor 401k plan was not discussed pre-transaction.  I mean, why would it be? *eyeroll*

We have a client that amended two previously timely 5500s in December of 2024 (we amended for a system error that caused the wrong plan number to appear on the filing (01 vs 02)). The original 5500s were both filed before their respective deadlines. The client has received letters on both filings with penalties totaling close to $150k. I'm am almost 100% sure that this is an error on the IRS/DOL side. Our solution is to give the clients the original confirm IDs and tell them to go back to the DOL/IRS and explain the situation. However, I wanted to confirm that an amended return is not considered "late" as long as the original filing was in good order and timely filed.

I need help with the issue of real estate in a profit sharing plan. I have a profit sharing plan and the only remaining asset in it is a property worth about $1.3m. I am 78 and am required to take RMD every year, however there is no more cash left in the plan, just the property. I don't want to have to sell the property if I can avoid it. Other than putting an equal amount of cash back into the plan to replace the property, is there any other way I can take the property out of the plan without incurring a heavy tax penalty? Can it be divided up into "slices" and then use that for the RMD? How does that work? Ideally however I would like to take the property out of the plan with as little tax burden as possible. Thank you.

I have a new plan that has elapsed time for vesting.  I just want to confirm that I am doing this correctly.

The participant would have to be employed on the anniversary date to received vesting credit, correct?

i.e.  date of hire 4/5/2023.  Terminated 12/31/2024.  Therefore, he had 4/5/2023-4/5/2024 = 1 year.  4/5/2024-12/31/2024 = 0

I appreciate your help!

Curious if anyone is doing distributions to participants via ACH and not using a large provider (like a Penchecks, American TCS, Broadridge/Matrix, etc) to facilitate. We are implementing this, in house, and are curious if anyone else does the same? Wondering what "tool" is being used as an ACH verification tool - to not only verify it is a legit ACH account number that was provided but also a name matching tool as well. So if a Joe Smoe sends ACH information to us - we run the account number and name through a system to verify that yes, this is a legit account number and the name matches Joe Smoe....and then we can send the funds. 

How does everyone handle outgoing ACH payments to participants? 

Small employer has sponsored a SIMPLE IRA for 8 years.

Small Employer now discovers/recognizes that it's part of a controlled group with thousands of employees and was never eligible to sponsor the SIMPLE IRA.

What's the fix?

It couldn't be as "simple" as stopping contributions and filing for a compliance statement under VCP?

Thanks.

Participant died in April 2025.  He was 74 but had not started RMDs because he was still working up until his death.  So he had not reached his RBD.  His wife is sole beneficiary.  She is in her 60s.  Account is invested with a large recordkeeper.  Does the wife have to start taking withdrawals, or can she wait until she turns 73 (or 75)?  Should the account be transferred into her name at the recordkeeper and does that make a difference regarding the timing of when the distributions start?  Thank you!!