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.

Can anyone recommend firm to help cancel our QDRO. My edifies and I separated very amicably. At time of divorce, we had a QDRO submitted, giving her 1 % of my federal pension so she could maintain fed health benefits. She subsequently got a job w NYS , negating the need for the QDRO. For several reasons, we want to cancel/negate it. No one seems to know how, some even say it cant be done.  Any advice ? 

I have participant who would like to name his daughter as his primary beneficiary on all retirement plan related accounts. The participant's wife is so impaired she is unable to execute a spousal consent on the beneficiary designation. The participant has Power of Attorney for all purposes regrading his wife. Is this sufficient for the spousal consent section of his beneficiary designation?

Where can I get a copy of the current ERISA, updated currently?

I'd like to do some research on something and I want to use the primary source.  And NOT the 1974 version, lol

What are the consequences if a plan allows self-certification of hardships and participants either lie or just don't understand the rules and take withdrawals that are not covered under the Safe Harbor rules?

Does the participant get in trouble?  Does the plan sponsor?  What about a 3(16) Plan Administrator?

(And side note, are self-certifications relegate to only SH reasons?  Or can it be applied to a facts & circumstances provision?)

We've never had a client enhance the basic safe harbor match beyond 100% of deferrals up to 4%.  We now have a client who prefers to enhance the safe harbor match beyond that instead of adding a discretionary match.  It seems that the rules say deferrals over 6% cannot be matched under any safe harbor match option (and get a pass on ACP).  Is that right?   I think they will want something like 100% up to 3% plus 50% on the next 3%.  The maximum match likely could be 100% up to 6% as an option I believe.   I understand the rules for enhanced are that it must be at least as generous as the basic safe harbor match and the rate cannot increase with an increase in deferrals if it's a tiered match.

Thank you,

Tom

Assume a plan calculates the employer match on a plan year basis, but the employer funds per-pay period with a year-end true-up.  Could the plan be amended to provide that, if an employee hits the 401(a)(17) limit before the end of the year, the true-up amount for the employee will be funded at that time, rather than waiting until year-end?  I'm wondering if the timing of the true-up is potentially a BRF issue, given that it would be virtually all HCEs who would get the contribution early (and get the opportunity for additional earnings).  Of course, there's always the potential for additional losses as well. 

As always, I appreciate the collective wisdom of the group. 

I am posting this in several Benefitslink boards as I am not certain where it best belongs.  We have a retiree who worked for several years for us (a U.S. company) while living in the US.  She is a Canadian citizen and was here on an H-1B visa.  She has since returned to Canada and was receiving regular monthly installments from a 401(a) plan until her account was depleted in 2024.  When we changed recordkeepers the new recordkeeper did not receive a W-8BEN from the prior recordkeeper so they withheld 20% in Federal taxes.  Apparently this was an error and they should have withheld 15%.  Now the participant is unhappy and wants the new recordkeeper to refund her the additional 5%.  The new recordkeeper has declined to do so.  We recommended that she get assistance from a Canadian tax advisor, but she reports that the fees would be higher than the amount she would recover.  So we in HR are attempting to help her with the so-it-yourself route.

She now has 1040-S forms for the open tax years (2021-2024).  Is it as simple as filing a 1040-NR and requesting a refund?  I assume the income is "effectively connected with a US Trade or Business" because it was earned while she was a US resident employed by a US employer?  Can it really be that simple?

Hi, 

I am reviewing a profit sharing allocation and I have a question with regard to the four step SSI formula.  This allocation is not enough to go beyond step 1.  I feel it should just be pro-rata based on compensation, which is step 1 (3% of comp).  But the person who performed the calculation gave the owner pro-rata x comp + excess comp.  

Ex: comp 345,000 x 2.48% = 8,548 (excess comp is 210,119 (168,600 x .80 = 134,880 next dollar, then 345,000-134,881 = 210,119), so 345,000 + 210,119 = 555,119 x 1.54% = 8,548)

EEs: 27,000 x 1.54% = 415.80 

etc

I have an excerpt from the ERISA outline book but it only covers when you don't go past step 2 or 3, not 1.  But the example they give with not going past step 3 is you do pro-rata based on the comp for that step (which is comp + excess comp).  Step 1 is just comp. 

Thanks!

I have never had a participant defer the first distribution previously.

Participant turned 73 in 2024, deferring first RMD until 4/1/25.

4/1/25 based on 2023 account balance; 12/31/25 based on 12/31/24 account balance.

Which year does he get the 1099R for, 2024 or 2025?

Age for 4/1/25 distriubtion would be age in 2024?

This is a new one for me.  Discretionary PS with permitted disparity allocation formula using $22,900 as integration level.  How do the Max Disparity Rates come into play, e.g., 5.7%, 5.4%, etc.?   TYIA. 

What would happen to someone's funds who passes away, has no spouse nor children and no other designated beneficiary?  We assume the plan (not our plan) and state laws of Indiana would say the account goes into the estate.  It is $1.5 mil.  She does have 2 brothers (one is our 1040 client.)  We believe a court will decide the brothers will get the money.  And if so, the question then becomes, can they roll to an IRA?  Doubtful.  If they can when would it have to be distributed?  The decedent was not RMD age. We don't know the terms of the decendent's plan.  She worked for the VA and so it is a govt plan.

Any comments are appreciated.  We are not offering our 1040 client any specific advise.  This is mostly just for our general education.  Of course the main lesson is - have a designated beneficiary and a will.

Peter:  This is a belated response to your post in March, 2024: See attached Memo dealing the courts that have found plans who did not believe they were ERISA qualified were in fact qualified.  Other workarounds are also discussed. 

David 

PRELIMINARY ISSUES.pdf

I think I need a sanity check on this one.  I was referred a plan to review for a possible vcp or self-correction due to missed top heavy contributions going back for several years.  One out of 3 key employees made a small deferral contribution of 1.6%.  There are no employer non-elective or match contributions.  The plan document states that all participants (key and non-key) receive top heavy contributions.  The TPA has calculated a top heavy contribution amount of 1.6% for all participants including the key employee who had a deferral contribution of 1.6%.  

Should this key employee receive the additional 1.6% top heavy allocation, or is this key employee's deferral contribution deemed to satisfy the minimum required allocation of 1.6%?  If the additional allocation is required, does that then mean that there is one key employee with at least a combined 3% allocation and now all other participants must be increased to 3%? 

Also, what is your opinion on whether this can be self-corrected pursuant to Notice 2023-43 or a vcp application should be filed?

Thanks for any and all input.

I know much has likely been said about this already.  We have a new client plan that uses the part-time exclusion (those scheduled to work <1000 hours).  But are those who worked 500+ for 2 consecutive years still eligible to defer? Or does the PT exclusion trump the LTPT rules?

Thank you, Tom

I think I know the answer but I’m not 100% sure.

I recently had my job moved to Mexico. My severance date is in August when I’ll be 66, 8 months old. (Born in 12/1958).  My wife is 72 and collecting Medicare. She is not on my HDHP nor the HSA. My name only as an individual. I am fully planning to continue working till I’m 70. I am probably not going to file for SS so we can maximize our payments. 

I have an HSA I’ve been contributing the max to for a number of years.  My HDHP is via my employer. So I was planning to contribute the max to my HSA until Dec, 2028.  We planned to use it for long term healthcare if we ever needed it. So we really wanted to max it out and we never draw down from it.

But I know I can’t contribute now once my employment is over.  BUT….. as part of my package, the company pays 6 months of COBRA of my HDHP.  And then I can choose to pay COBRA for another 12 months if I want.  I will be working as an independent consultant, most likely as a 1099.

Would I still be considered qualified to contribute to my HSA during the company paid COBRA period? Even though I could sign up for Medicare?

What about when I take over the COBRA payments?  Can I still not sign up for Medicare and contribute to the HSA?

if I wasn’t eligible for Medicare, I’m pretty sure I can contribute to the HSA while on COBRA.  I’ve found some articles on that.
But would the IRS consider me covered by an employer’s HDHP or disallow it since I could apply for Medicare?

I know I’d pay a lot for the COBRA but adding another 10+K to my HSA that can grow tax free a few more decades may be worth it.

Both my wife and I are healthy, we have no medical problems, are active, and have longevity with both our parents having lived well into their 90’s and one to 103.

Thanks in advance for any insights.

Craig

We administer a 20 participant 401(k) plan that restricts salary deferrals to no more than 25% of W-2 Salary. 

The plan made a mistake and allowed a participant to have salary deferrals of more than 25% of W-2 salary. I would think that this needs to be corrected by refunding the amount over 25% back to the participant as it is a violation of the terms of the document. In other words, the amount over 25% of W-2 salary should not have been contributed to or been in the plan in the first place.

Would this extra amount of salary deferrals be counted in the 401(a)4 test? I would think not since it does not belong in the plan per the terms of the document. Anyone agree or disagree?

Thank you.

Hi

If the plan document states tips are excluded, can the plan be amended retro to 2024 and include them, after all, increasing the benefit?

Curious.

Obligor has a Pension but he passed away. Pension has a beneficiary. Obligor left owing Child Support Arrears of 110k. He had no other Assets. The Attorney Generals Special Collection Unit has closed my case an won’t tell me why.. a Money Judgement was given to me by the Courts in 2007. I’ve reach out to : Family Law Attorneys, Estate Attorney, Congressman , Texas House of Rep never replied. Under the Family Code Chapter 157.3271- LEVY ON FINANCIAL INSTITUTION ACCOUNT OF DECEASED OBLIGOR. Why am I having so much trouble trying to find the help I need. I wouldn’t think it would be so complicated but what do I know.. I’m not an Attorney. Any help would be appreciated.