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Hi

A plan of mine was picked by PBGC for audit and all information was provided 6 months ago. I have not heard from them at all since then. sometimes no news is good news but here I am getting a bit worried that I have not heard anything.

Between all governmental firings as well as shutdown, does anyone have an experience similar to mine?

Thanks

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We work with a large financial institution that has sent us a sample correspondence that they plan to send to their 401(k) clients.  It states that if a plan does not permit Roth deferrals, participants whose FICA wages were $150k of less in the prior year can continue to make catch-up contributions on a pre-tax basis, but those whose wages exceed this limt are not permitted to make any catch-ups.  The research we have done on this topic seems to suggest that though it's possible to have a plan operate in this manner, it's not recommended, as such an arrangement can create discrimination issues.  If this is true, we are surprised that an investment firm, which has a popular recordkeeping platform, would push this method without at least caveating the downside.  Do we have a correct understanding of the new rules in this regard? 

I was looking at the rules for when you can switch from the full 5500 to a 5500-SF.  It seems like, under the new rules, if the number of account balances is under 100 as of the first day of the plan year, the client can file a 5500-SF for that plan year.  Any input would be greatly appreciated.

Hi, 

One of the plans is scheduled for termination due to the stock sale, but it has come to our attention that the acquiring company does not offer a 401(k) plan. Typically, under such circumstances, the plan should terminate prior to the sale date, with all contributions ceasing accordingly. However, in this case, while the stock sale date is set for September 30, 2025, employee contributions are expected to continue until December 29, 2025. Could you please confirm whether these post-sale contributions can be accepted? Additionally, if there are any specific compliance considerations or steps we need to take in this scenario. 

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My current provider for both val and 5500 programs had informed me of a 10% jump in monthly fees which I find a bit too high (I have been using them for 30+ years).

I think I need to look into a more modern and 21st century system.

I use it primarily for CB/DB and combo plans and need simple DC as well (I do not deal with RKs) as good testing system.

I would appreciate your experiences with other systems (except for Relius).

Thank you.

A participant of a welfare benefit fund passed away. However, his primary beneficiary has been deported and the plan officials have been unsuccessful in attempt to locate her. Can the plan treat the beneficiary as having predeceased the participant and make the benefit payable to any contingent beneficiary or, if none, the plan's default beneficiary? Alternative, can the plan treat the beneficiary as a missing beneficiary and treat the death benefit as it would with respect to any other missing participant or beneficiary under the plan?

Someone is confused and I hope it's not me.

I was reading someone's post and i believe it read "you can't avoid LTPT.

I was also reading a few articles that one will never need to be concerned as long as the plan is amended, if need be, for eligibility to be eligible for plan entry to delete reference, by amendment, to elapsed time, 1 year for deferrals, safe harbor (of course) but leave the provision and any reference to 1 year/1,000 hours only to employer non-elective contribution.

I'd be curious how many have done this and if not, why not.

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Follow up to earlier thread

Hello @Brian Gilmore, thanks for sharing these details. We’ve found ourselves in a very similar situation and would appreciate your guidance.

During last year’s open enrollment for the current year (2025), I enrolled in a PPO plan with my employer and elected an FSA with a contribution of $1,100. I was the only one covered under that plan. At the same time, my wife enrolled in an HDHP through her employer, covered herself and our daughter, and opened an HSA. We didn’t realize then that an FSA and HSA can’t coexist between spouses.

I was laid off in mid-January. My employer had already opened the FSA and deposited the full $1,100, even though only $43 was deducted from my paycheck. I didn’t learn about the account until recently when I contacted the custodian to close an old HSA. After I lost my job in January 2025, I moved to my wife’s HDHP, and she increased her HSA contributions with the goal of reaching the family limit of $8,550. After reading your thread, she has now asked her HR team to stop contributions for December.

With that context, I’m hoping you can help confirm a few points:

1. Since I lost my job in mid-January but had an active FSA at that time, were my wife’s HSA contributions still allowed for the rest of the year?

2. If partial-year eligibility applies, is the maximum HSA contribution prorated to 11 months, meaning 11/12 of $8,550 ($7,837.50)?

3. I haven’t used any of the $1,100 in the FSA. The FSA provider shows the account as active and says I can still use the funds. Is that correct?

Thanks again for your insights, Brian. Your expertise is genuinely helpful.

I'd love the thinking of folks who are more well-versed in SIMPLEs.

Company A maintains a SIMPLE IRA in 2024 & 2025; several employees of Company A create their own Company B in 2025. Company A maintained a SIMPLE IRA (I'm not sure if the SIMPLE IRA is still active); Company B established a 06/01/25 effective date SH 401(k) Plan (short Plan Year). Company A & B have different EINS with no ownership crossover.

I understand that when an employer establishes a mid-year 401(k) Plan that the deferral limit is adjusted based on the # of days/365 of each arrangement. Because these are two unrelated employers, my thinking is that this does not apply to this scenario, so all EEs can contribute the total $23.5k between the two arrangements if they would like (a maximum of $16.5k being attributable to the SIMPLE IRA).

• Do you agree that the deferral limit for the Company B 401(k) Plan does not need to be pro-rated based on the number of days it was in existence vs. the SIMPLE IRA?
• Since catch-up contributions are separate to each Plan, can a 50+ participant who contributed $10k to the SIMPLE IRA under Company A defer an additional $24.5k to the Company B 401(k) Plan? ($6.5k SIMPLE deferrals, $3.5k SIMPLE catch-up, $17k 401(k) deferrals, $7.5k 401(k) catch-up)
• If the Company B employees are still employees of Company A and participating in the Company A SIMPLE IRA, does that matter? Or is it just a consideration in that both the non-catch up deferrals to each arrangement count towards their overall 402(g) limit?
• As I write this out, I imagine that a relevant consideration is whether Company B and Company A constitute an ASG. If they do, would their contributions be subject to the adjusted deferral limits based on the days/365 of each arrangement?

Hello,

A former employer offered an ESOP payout in lump sum. They will be diversifying the assets for anyone who does not take the lump sum, and the investment will be into a money market account. To reframe this more concisely, my shares will be purchased back by the company prior to 12/31/2025. I know the company is likely experienced more thanv a 3X increase in share value due to their rapid growth in the past year. The most recent valuation was at 12/31/2024. Will they need to perform an interim valuation, or will my shares be valued at the 12/31/2024 value, which is almost certainly 1/3 or less of the current value of shares? Anything I should do? Wondering if there are attorneys who specialize in this area whom I should consult with, or if this is a lost cause. Thank you!

The Treasury’s rule to implement § 414(v)(7)’s requirement that a higher-wage participant’s age-based catch-up deferrals must be Roth contributions includes this:

“Permitted correction on Form W–2. A plan may correct a section 414(v)(7) failure by transferring the catch-up contribution (adjusted for earnings and losses in accordance with § 1.402(g)–1(e)(5)) from the participant’s pre-tax account to the participant’s designated Roth account and reporting the contribution (not adjusted for earnings and losses) as an elective deferral that is a designated Roth contribution on the participant’s Form W–2 for the year in which the elective deferral was originally excluded from the participant’s gross income. However, this correction method may be used only if the participant’s Form W–2 for that year has not been filed or furnished to the participant.” 26 C.F.R. § 1.414 (v)–2(c)(2)(ii) (final and effective, but not yet compiled).

I’m wondering whether a plan’s administration may do the converse: for deferrals that need not have been processed as Roth contributions, transfer that amount (adjusted for investment gain or loss) to the participant’s non-Roth subaccount and wage-report deferral amounts accordingly (if all steps are complete before W-2s run).

The Treasury’s rule doesn’t explicitly say so. Yet, it seems logical and within proper plan accounting. But I hope BenefitsLink neighbors would spot weaknesses in my logic.

Here’s my hypo:

A plan has only elective deferrals, no nonelective or matching contribution. The plan excludes key employees and highly-compensated employees. The plan provides no limit on elective deferrals beyond what’s needed for the plan to tax-qualify.

Suppose a 62-year-old § 414(v)(7)-affected participant has specified non-Roth for all her deferrals (and, despite the employer/administrator’s efforts, has not communicated anything about her preference regarding 2026’s Roth catch-up constraint). Her instruction for deferrals—specified by dollar amount, not a percentage of any measure of compensation—is $1,375 each pay.

Her deferrals for the year’s first 17 (of 26) pays are within the without-catch-up limit. The 18th pay would have most of its deferral allocated to the normal limit, but some to catch-up. And pays 19-26 would be wholly allocated to catch-up.

Imagine the employer, fearing a § 414(v)(7) failure, mistakenly stops this participant’s non-Roth deferrals sooner than is necessary and, applying what the administrator assumes is a deemed election, treats as Roth contributions some of what could properly be non-Roth deferrals. The participant, still inattentive, ignores the employer/administrator’s communications.

On Friday, January 1, 2027, the participant (following her New Year’s Day custom) checks, online, her plan account, and sees the unrequested amounts in Roth subaccounts. On Saturday, she asks her friend, an associate in a law firm’s employee-benefits practice, about this. After hearing him explain the essence of § 414(v)(7), she explains she prefers non-Roth, and wants to tolerate Roth only for a deferral that can’t be made as non-Roth. He suggests, cautiously, that she ask her employer whether it will adjust amounts between the Roth and non-Roth subaccounts. On Monday, the participant calls her employer.

The payroll and human-resources managers both are willing to do adjustments and complete them before W-2s are run, but only if the retirement plan’s third-party administrator says it would be proper.

BenefitsLink neighbors, would you suggest allowing such a Roth to non-Roth transfer?

What issues am I missing?

We have discovered that, due to a payroll setup issue, employee deferrals to our SIMPLE IRA plan were calculated on an after-tax basis instead of a pre-tax basis from January to July 2025. Can we fix this by adjusting the remaining payrolls in 2025 to ensure each participant's total annual deferral matches their elected percentage of compensation for the remainder of the year? What would be the appropriate correction method?

During a review of payroll deductions and benefits records, I discovered that one of our employees had a missed HCFSA deduction earlier this the year (system/timing issue from when the employee started his employment).  If no corrective action is taken, the employee will be about $120 short of his elected annual goal.

When I reached out to the employee to make him aware of the situation, he stated he does not want additional money to be taken out of an upcoming paycheck as a correction - he wants to leave things alone.

What are my options?  Are we required to take the additional $120 before the end of year to ensure that money deferred equals his annual election?  If the employee objects, what regulation/statute/article am I pointing him to so that he understands that this is required?

Related but separate, If someone misses FSA contributions because they are on unpaid medical leave (not FMLA, but state mandated leave) and underfunds an FSA for the annually elected amount, how should that be addressed?

TIA

I hope you all have a great Thanksgiving, unsullied by productive thought. (We are having our meal on Saturday, as many family members can't make it tomorrow, so I'll be working tomorrow - great time to catch up on stuff with no phone/e-mails!)