A potential client wants to offer health insurance for the first time. While they already have employees, most are covered by either spouses or COBRA at this time. The company wants to offer a traditional HRA for any employees who want to continue their current plans until the end of the year (so as not to incur a new accumulator with the new plan). Can an employer offer a traditional HRA selectively to these employees who choose NOT to participate in the newly offered employer-sponsored plan?

I have a plan sponsor who received a request for plan documents for the attorney (looking for plan mis-management) on behalf of a former participant - she was paid out in 2022 and has no account balance. Is a sponsor required to provide plan documents for the period of time the former participant was in the plan - for example documents covering 2019-2022 plan years when they were an active participant? In my reading of ERISA and DOL regulations I only see references to "participant" or beneficiary, which I interpret to mean an individual with an account balance.

Thank you.

ERISA 104(b)(4)

(4) The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. The Secretary may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence.

DOL Reg. 2510.3-3(d) -

(ii) An individual is not a participant covered under an employee pension plan or a beneficiary receiving benefits under an employee pension plan if-

(A) The entire benefit rights of the individual-

(1) Are fully guaranteed by an insurance company, insurance service or insurance organization licensed to do business in a State, and are legally enforceable by the sole choice of the individual against the insurance company, insurance service or insurance organization; and

(2) A contract, policy or certificate describing the benefits to which the individual is entitled under the plan has been issued to the individual; or

(B) The individual has received from the plan a lump-sum distribution or a series of distributions of cash or other property which represents the balance of his or her credit under the plan.

Plan sponsor fails ADP/ACP testing for the 1/1/2024 to 12/31/2024 plan year and refunds are issued to HCEs on 3/1/2025 (refunds issued by the plan's recordkeeper).

On 4/1/2025, the plan sponsor realizes that they mistakenly approved the wrong test and intended to rely on a permissively disaggregated ADP/ACP test (disaggregating otherwise excludable employees). The permissively disaggregated test still failed, but had better results and less refunds to HCEs.

Any idea how the plan sponsor goes about this given that refunds have already been issued and cashed? If they intend on relying on the permissively disaggregated results, then are the original refunds deemed impermissible distributions? Do they try to collect the overpayments from the HCEs by following the EPCRS/Secure 2.0 overpayment guidance?

For example - assume HCE Jane received an ADP refund on 3/1/2025 in the amount of $1,500 and cashed the check. But, based on the results of the permissively disaggregated test, her ADP refund was only $800. Does the plan sponsor follow the overpayment guidance in terms of dealing with the $700 "overpayment"?

I have a Nevada client that has had a 401k plan for a few decades. They are concerned that they may have to amend their 401k to incorporate all the provision of the new Nevada state program (e.g. auto enroll). I think they are exempt since they already have a plan. But the way they read it, the exemption is only valid if their plan meets all the provisions of the Nevada state plan.

Can anyone confirm the proper interpretation?

Thanks, Greg

A TSP transfer can be implemented with a RBCO even though the parties are not yet divorced.  A "legal separation" is sufficient - see 5 CFR Part 1653, Subpart A, Sections 1653.1(b) and 1653.5(i).  

The following laws and regulations make it clear that a FERS COAP can be entered based on "legal separation”:  5 USC Sections 8467(a), 8445(f), 8424(b)(1)(B), 5 CFR 838.101(a)(1), 828.103, 8382.201(a), 838.236(b), 838,401(a), and 838.701(a).

Pursuant to 26 USC 408(6):

(6)Transfer of account incident to divorce
The transfer of an individual’s interest in an individual retirement account or an individual retirement annuity to his spouse or former spouse under a divorce or separation instrument described in clause (i) of section 121(d)(3)(C) is not to be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest at the time of the transfer is to be treated as an individual retirement account of such spouse, and not of such individual. Thereafter such account or annuity for purposes of this subtitle is to be treated as maintained for the benefit of such spouse."

Section 121(d)(3)(C)(i) provides: 

"C) Divorce or separation instrument
For purposes of this paragraph, the term “divorce or separation instrument” means—
(i) a decree of divorce or separate maintenance or a written instrument incident to such a decree,"

Under ERISA the question seems to be addressed only at 26 USC 414(p)(1)(B):

"(B) Domestic relations order
The term “domestic relations order” means any judgment, decree, or order (including approval of a property settlement agreement) which —
(i)relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and
(ii)is made pursuant to a State or Tribal domestic relations law (including a community property law)."

Since 1842 a grounds in Maryland for what we later called a "limited divorce" was a divorce a mensa et throro (from bed and board).  It was a document that would have met the definition above and would have have supported the entry of a QDRO prior to the final divorce. 

Maryland recently did away with a "limited divorce" and the State law provides that only in connection with an absolute divorce or an annulment can the court determine what is "marital property", the value of such marital property, and make an equitable adjustment by a monetary award that include the entry of a QDRO. 

I have been apoplectic since there are so many negative consequences of delaying the entry of a QDRO.  See attached.   

In South Carolina, they have what they call a "Decree of Separate Support and Maintenance" that will be entered by the Court adopting, ratifying and incorporating a "Complete Support and Property Settlement Agreement" executed by the parties.  It is a "legal separation" accordance with South Carolina case law.  The parties must still remain apart to some statutory period of time before they are eligible for a Final Decree of Divorce. 

So my question is:  Do you know of any other ERISA or IRS statutory authority that addresses the interplay between "legal separation" and the entry of a QDRO, or case law addressing the issue.

Thanks,  

David  

CONSEQUENCES OF DELAY 02-14-2025.pdf

We have a spinoff of a grandfathered PE from a grandfathered plan into a new spinoff plan.  I don't think MEP/PEP/SEP matters here but help me if that's not right.

That spinoff plan will be 001 for the EIN with a 1/1/2025 original effective date.  Assuming that’s the right original effective date for the spinoff plan (as compared to the original adoption date of the PE into the grandfathered plan…)

Where/how does the document distinguish this grandfathered 1/1/2025 plan from a new non-grandfathered 1/1/2025 plan?  In other words, where/how do we inform the participants/IRS/the world that this plan is NOT subject to the EACA mandate?

I have a 401k plan where the investments were ppt directed until October 2024. The plan switched to "pooled" account and is now owner only.  Do I include the 5500 codes (2G) for ppt directed on the 5500SF since the plan was ppt directed for a portion of the year?  

Participant terminates in 2025. Plan provides termination distributions following the close of plan year in which termination occurs (and no partial withdrawals for termination distributions). Therefore termination distribution can occur in 2026.

Participant has a Participant Loan balance at termination.  Loan Programs states it is due and payable upon termination of service.

Q: Since the Participant is not yet eligible for a termination distribution, and further the plan does not permit partial withdrawals for Termination, is the loan balance a 2025 "deemed distribution" due to default (end of calendar quarter following quarter first payment is missed), which must be carried on the plan's books with (phantom) accrued interest until such time the Participant requests a termination distribution presumably in 2026? Or is it a 2025 "plan loan offset" since the Participant is terminated even though the Plan does not permit a termination withdrawal at this time, or partial withdrawals for terminated participants?  Concern with the latter: Treas. Reg. Section 1.72(p)-1, Q&A-13(b) provides that, in the event of a "plan loan offset", the amount of the account balance that is offset against the loan is an actual distribution for purposes of the Internal Revenue Code (IRC), not a deemed distribution under IRC Section 72(p). The concern being an actual distribution is not yet payable by the plan - it is not clear to me if this would (inadvertently) be an operational failure.

Thank you.

Client sponsors a standalone profit-sharing plan, family only; six individual accounts with Vanguard.

Spouse thinks she know all, saw something online that allows a rollover to Roth IRA, gets husband, over 59-1/2, and plan allows for "in service” to rollover all his Vanguard accounts to individual Roth IRAs, without paying any taxes.

To my knowledge you can’t rollover unless taxes paid, but of course, could be wrong.

Employee enters the CB Plan on 1/1/2021. Plan requires 1,000 hours to earn a Pay Credit. Works 1,100 hours in 2021, 1,100 hours in 2022, 900 hours in 2023 and 900 hours in 2024.  12/31/2024 accrued benefit is $100/month, his average comp is $60,000.  I think he would pass the 401(a)(26) on accrued-to-date method.  The system (Datair) calculates his accrual rate correctly but marks him as "non-benefiting".  What am I missing here?

I see this code applies to 414(m) which relates to affiliated service groups.  So 3H must be used for an ASG.  It's just odd that the instructions description mention "controlled group" but not ASG by name.   So 3H applies for an ASG.  No need to comment unless someone thinks I'm wrong.

Thanks

Have client with a matching formula that states: 

On a payroll basis, you get 6% match if you contribute 2% or more.  If you contribute less than 2%, no match. (Long history behind how this formula came about.)   Obviously most participants contribute 2% or more.  Recently the plan was amended to also require that a true-up be made at year end based on annualized wages / deferrals.  This was generally to help those who front-loaded their salary deferral contributions. 

However, based on this formula, what do you do in the case of a participant, who has been eligible for years but not contributing, suddenly starts contributing mid-year at 2% - getting the 6% match each payroll period.  When you annualize the formula, this participant's deferral percentage will be less than 2%.  This means he is NOT eligible for any match for the year per the formula.  I don't think this was the intent when they elected the true-up option.  If the formula was dollar for dollar up to 6%, I don't think it would present a problem.

I think the client will want to do whatever is the easiest to administer which I believe would be to eliminate the true-up option (and tell participants to not front-load their contributions) - assuming they stick to the formula as is.  Taking money out of the participants account is rarely the desired outcome if preventable. 

Question:  Can you apply the "true-up" feature only in situations where you are adding funds, not taking away funds (regardless of HCE / NHCE status)?   Although that initially strikes me as problematic  - not operating in accordance with the terms of your plan.  I do think that most participants who would fall into this situation would more than likely be NHCEs.  I think we in the industry generally view the true-up feature as a situation where the employer is always ADDING additional contributions to a participant's account by the employer. 

Hello,

My divorce decree states that ex-wife will receive XX dollars -  plus investment experience (earnings, gains and losses) on such amount based upon investment performance from the Plan valuation date immediately preceding the date of the parties' Judgment of Absolute Divorce until the Plan valuation date immediately preceding the date of distribution.

My ex-wife never submitted a QDRO.  It's been 7 years.  How are earnings, gains and losses calculated?  who would do that?  does she have a time limit to submit the QDRO?  I'm just nervous because I would like to know what my retirement balance is going to be.

Thanks!

We've been using Relius and know that it will be winding down and transitioning over to the new FIS Omni platform. Its been delayed so many times and since its still built on top of their old omni I don't feel super confident in how actually new and different it will be. But the biggest concern is cost, does anyone have an idea of how much its going to be? Relius is already on the high end. Trying to plan for the right solution. 

I am more than a bit surprised that there is no message board devoted primarily to ERISA fiduciary and/or prohibited transaction issues. Our client, a multiemployer 401(k) profit sharing plan (Plan A) is contemplating a merger with another multiemployer 401(k) plan (Plan B). Under Plan A, legal services have been provided to and invoiced by the firm providing them. However, the firm has foregone any efforts to enforce their collection. Isn't the law firm's forebearance in collecting its billed fees an extension of credit and therefore a prohibited transaction? If so, is there an applicable class exemption that might exempt it from constituting a prohibited transaction? Thanks!

Hello,

I have a gov't client that under withheld employee deductions for a 457 and 414h plan in 3 prior years.  The employee's retirement system received all the correct funds at the correct times but what was under withheld came from the agencies funds instead of the employee's deductions.  When the employee's payback the deductions to the agency, how is this handled for tax purposes?

thank you

I have an employer from a small company who didn't withhold any 401k deferral and match for a large bonus paid to employees. Employees missed out on a few thousand dollars in match, as well as deferral. 

Question: 

1. Can an employer go off a verbal consent to not withhold money from this pay? (Their deferral forms don't have an election for bonuses, thus all pay would include an ee's deferral election) 

Solution: 

1. A 50% QNEC for missed deferral (plus earnings), and a 100% QMAC based on missed deferral (plus earnings)? 

In a BenefitsLink discussion yesterday, neighbors asked which service others like to search for a participant with an inoperable address.

If a search result includes what the search suggests now is a likely current address (postal or email, or even both) for the individual, what does a plan administrator or its service provider do with that information?

(Assume an account not yet nearing a § 401(a)(9) required beginning date and not subject to a small-balance involuntary distribution.)

Whether the found address is postal or email, an administrator might be reluctant to send a written communication there, fearing that a person other than the participant might receive the communication. That would invade the participant’s privacy. And a shrewd person might see that the retirement plan lacks enough control about the participant’s identity to detect a false claim.

Could efforts to find an inoperable-address participant help an impostor steal the participant’s account?

Are there ways of communicating to the found address without revealing anything about the name or identity of the retirement plan? Or might the communication omit the participant's name? If so, would either such a communication, if it reaches the participant, be effective in getting a response from the participant?

What steps would a plan’s administrator use to guard against a theft of an inoperable-address participant’s account?

12/31/2024 plan and it  failed the ADP test. The test (current year) was split into excludables and non-excludables and the non-excludable test failed.  Client wants to go with the QNEC. Basic  question I know, but I have never had a client choose this route.   How do I calculate the $10,000 plus QNEC? Based on compensation for the plan year?  Also, does it go to all eligibles or just the people on the failed non-excudable test? 

TYIA! 

Is there a company that everyone uses to help locate terminated participants who we can't locate?  The company we used to use seems to no longer be operating, so we needed a new one.

Thanks in advance!