We have a MDO for a 401k plan for 2024.  All affected individuals are NonHCE.  The MDO is to be calculated on the Average deferral rate of the NHCEs.  But no NHCEs deferred in 2024, so our Average deferral rate is 0%.  Is there a floor of what the MDO should be since I do not think $0 is the correct answer.

Thank you

HSA/Cafeteria Plan Design Question - Company currently has a HDHP and HSA for all employees after 90 days (company contributes max amount each year -- very $ to them with employee population of lower paid hourly getting medical benefits often exceeding their pay).  Company wishes to change to funding HSA through a cafeteria plan.  Then,  no comparability testing of HSA and only 125 testing applies.  At the same time, Company wants to narrow eligibility to apply a year lookback period to limit plan participation to full-time employees (those with on average 130 hours per month over a 12-month measurement period).  Is this ok?

Still ok if in addition, different contribution bands are established for hourly and salaried employees?

Thank you!

Back in 2021 we terminated our service to a Plan because (1) they were not paying our bills, and (2) they were not responding to our call, emails and letters.  Apparently, in 2022 this client did something improper with participant accounts, and they also issue erroneous W-2 Forms for 2021 and 2022.  Back in 2024 the DoL contacted us on behalf of several participants who were not properly paid benefits due.  We sent the DoL our complete file on the last year (2021) that we serviced the Plan.  We even included a copy of our service agreement with this client that in addition to services we provided, it also defined that provision of data was the client's responsibility.  It further went on to define our role as not being a fiduciary since we are not the Sponsor, Administrator, Trustee, Custodian, etc...  Our role was specifically defined to be purely ministerial in that we reconciled operations based upon data submitted.  It was also stated that we have no authority on any issue of the Plan.  After much discussion it was agreed that we are not responsible for items like W-2 Forms!  Fast forward to the present, the DoL is contacting us again since they think we can do something about the Plan's operation.  Again, after detailed discussion it was agreed that our role does not process the client's payroll (like duh).  It was also stated that the only reason the DoL is calling us is because no one else will answer their phone calls!  We, on the other hand, answer our phones.  The agent assigned to the case actually stated that she agrees that we are not the party they should be calling!  But they are calling us because WE ANSWER THE PHONE.  Now they want to do a conference call to discuss how WE MIGHT BE ABLE TO CORRECT THE ERRORS THAT OCCURRED AFTER OUR SERVICE ENDED!  The fact that we don't have any responsibility (per the agent), and we have no access to any data, are being ignored!  Has anyone else been in a situation like this?  Any words of wisdom are greatly appreciate.  Unfortunately, they insisted I do a conference call with the agent and her supervisor tomorrow, even though as agreed to by the agent, we have no responsibility or even ability to address problem related to operations after our service ended.  If there some "bill of rights" related to situations like this?

I have a question on filing an amended Form 5500 to include the audit report with the following facts:

The Form 5500 for 2022 was initially field without the required audit report. The plan sponsor has received and paid a penalty notice from the IRS regarding the incomplete filing, but has not received anything from the DOL. The audit is now complete and they ready to file an amended 5500 with the audit report. Do they do this through the DFVCP? 

Husband's IRA was kept at a bank. Unfortunately, no beneficiary was designated. There is a will, which says that upon his passing everything goes to the wife.

The bank says it cannot do a direct spousal rollover. Instead, they want to roll over to an account for the Estate, and then the spouse can get it.

Would she then be able to roll the proceeds into her own account? Would it be considered an inherited IRA or would it become hers as a spousal rollover? Obviously there are significant tax and RMD implications, etc.

Thank you

Client maintains safe harbor 401k profit sharing plan.
Participant's first wife died. New Beneficiary designations were completed, naming his children as beneficiaries.
The participant also has IRA's, which has his children as named beneficiaries.

Participant recently remarried. Pre-nup agreements were prepared, agreeing that she does not have any rights to his retirement plan or IRA's.

Would the new wife automatically become beneficiary of his retirement plan upon being married 1 year, unless the participant obtains a spousal waiver?
Is a spouse the automatic beneficiary of his IRA's as well?

The husband would rather not broach this less-than-romantic topic with his new spouse if he doesn't have to! 😉 

Thanks

Closely held company. PSP Trustee, who is also the key person in company and a participant in plan, purchases universal individual life insurance policy naming plan as owner and beneficiary. For unknown reasons, annual premiums for policy charged to Trustee's individual account. Thoughts on plan self-correcting by crediting him the premiums paid with interest?

Hi. We have a 457f Plan. A participant recently received distribution of the vested portion of his account. $0.02 was mistakenly not distributed. What are our options for this? Distributing would be cost prohibitive. Our plan document does not discuss de minimis amounts. The plan does have constant 3 year vesting cycles. So this participant will be due another distribution next year. But I don't see how we can add this to his account balance that will vest next year. Can we just forfeit this amount as a de minimis amount? 

I appreciate any thoughts.

Control group A & B has a PSP with individual allocation groups. I know that if AB files consolidated tax return that the 25% deduction limit is applied to eligible payroll for the CG, and if separate returns I believe the 25% is applied separately to each.

Assuming that, my question concerns the situation where the owner (both A & B are S-corps) gets a much smaller W2 from A than B but still gets maximum PS in total. There is an NHCE in A that requires a large contribution such that the total PS for A would exceed 25% of A's payroll if the owner's total PS% was applied to each of his W2s (equally pro-rated). My question is, can A say the owner's PS is 5% of pay while B determines the owner will get 40% of pay? That is, skewing the owner's PS toward the company with the higher payroll so that each company's deduction does not exceed 25%.

I think that is OK, but looking for additional expert opinions - thanks in advance. 

Client has a 10% automatic enrollment feature, and the trustee wants to reduce the automatic enrollment rate to 5% and add an automatic escalation feature with 30 day notice now. Can they amend now or do they need to wait until 1/1/26. Plan is a calendar year Plan and no new hires at this time.

I have always thought that gross compensation for contribution calculations would be Box 5 of the W-2... Medicare Wages.  Med taxes are on your gross wages.  

Box 1 would be less if a pe-tax deferral was taken, but we want gross wages earned so Box 5 would be the number to use.

What box would be used to calculate a SH Match contribution?

I'm doing testing right now and a plan of ours fails the top-heavy test. Normally, my understanding is that the correction is a 3% employer contribution to all employees eligible for salary deferrals. However, I've run into an interesting scenario: This plan is not a safe harbor plan, and they don't allow salary deferrals at all under the plan document, it's only profit sharing, with eligibility of 1 year and 21. It's pro-rata. Essentially, everyone who is eligible for for profit sharing (and therefore the plan as a whole technically) has gotten a 3% employer contribution. Do they need to make a corrective 3% contribution to the employees not eligible for profit sharing?

While I am aware that in order to permissively aggregate 401(k) plans that must have the same plan year, same HCE definition and use same testing methods for ADP/ACP, what I am wondering is if anyone has experience in 401(k) plans with different plan years (one runs on a CY basis and the other is a 6/30).  

How is the coverage tested - as a snap shot at each plan year end?

Of course, we found out well beyond the transition period.  And, am referring to outside counsel but for my own edification was curious as to others experience? Like, assuming it fails - how do they correct coverage with QNECs?

TYIA!

This may be more of an annoyance than a real problem. Let's say a plan merges (into a PEP) on October 2, 2024. But the assets aren't liquidated until October 12, and not actually "transferred" until 3 days later - October 15..

Now, my understanding has always been that the technical "last day" of the plan year is the effective date of the merger agreement. That is (arguably, depending upon who you are dealing with) the day that the assets "belong" to the new plan, even though the technical transfer doesn't take place until somewhat later. But the auditor wants to see the date of the "final" as being the date of the physical transfer of the fund, therefore showing a balance of zero as of (in this example) October 15th.

Is there really any problem with just showing the final date of the form as October 15th? Seems like it'll keep everyone happy and have no real effect on anything?  

Will the compensation threshold of $145,000 be increased?  In other words, do we know what the indexed amount will be at that date or will it be $145,000 and indexed moving forward after 1/1/2026

If a 401k plan is terminating for example as of 5/31/25, all account balances are required to become 100% vested. But when do the remaining forfeitures have to be reallocated - is it as of 5/31 or can forfeitures remain after this date to pay expenses such as mailing fees, etc. It seems like they should go to participant accounts as of the termination date? Thank you!

Originally posted in 457b forum but so far no responses so I thought I would try it here:

Participant in a non-governmental 457(b) plan incurred a severance from employment and elected to defer distribution of his account (as allowed under the plan document).  The participant was subsequently rehired a few weeks later and continued his participation in the plan.  When the deferred distribution date arrived (2 years later) the recordkeeper failed to segregate the participant's contributions (based on first period of employment and second period of employment) and distributed his entire account, including deferrals made after he was rehired.  Participant is still employed.  Was the participant entitled to receive the distribution of his account attributable to deferrals in his first period of employment (because he did have a severance from employment and elected a deferred distribution date)?  If so, can we treat the distribution of the deferrals made during his subsequent re-employment as an "overpayment" and apply the correction method for overpayments in EPCRS to correct (knowing that 457(b) plans are not included in EPCRS)?  Any thoughts?

The NHCE elected to make a $5,000 Roth deferral. Pay was not reduced and no deferral (Roth or pre-tax) was made at all. The only EPCRS correction I see is for the employer to make a 40% pretax contribution, with earnings, to a QNEC. The employer and employee would like to do more.  (1) contribute the 40%, with earnings, to an employee Roth account (2) and amend the 2024 W-2 to include the 40% with earnings.

The IRS website (not EPCRS) allows retroactive characterization if a deferral had been made but incorrectly designated as non-Roth. https://www.irs.gov/retirement-plans/fixing-common-mistakes-correcting-a-roth-contribution-failure  However, I don't see anything in EPCRS that would allow this for an employer QNEC. 

I'm inclined to tell the client to act in good faith but it would be nice to know if there is more creative guidance for this issue than making a 40% pre-tax QNEC.

A prospective client wants to adopt 401K/PS/Cash Balance combo for the 2024 plan year. However, they already made the SEP contributions for the 2024 plan year. Is it possible for them to adopt the combo strategy? If so, how does the NDT work with the SEP contributions? Where can I find more information on this?

TIA

I assume that when an employee makes repayments on their 401k loan, the employer doesn't match those repayments because it's not a contribution. I haven't seen anywhere that an employer couldn't match those repayments, but my gut feeling tells me an employer doesn't and shouldn't match 401(k) loan repayments.