okay maybe it's a silly question.  Terminated participant receiving RMD's passed away with no surviving spouse.  His daughter is handling his affairs but was never specifically set up as a beneficiary.  Can she be treated as a Designated Beneficiary?

fwiw, the account balance is under $1,000.

Merger documents says Plan B merged into Plan A as of 12/1st 2024.  The money from Plan B's provider was wired over to Plan A on January 15th.

A) My personal "best" interpretation here is that Plan B no longer exists on 12/1/2024.  The merger agreements say that Plan B is now a part of Plan A.  To me that means the money held by the Plan B provider is now a part of Plan A. 

B) The other interpretation is that in spite of the fact that the merger agreements indicate that Plan B is now part of Plan A, that that's not really so because the assets have not yet moved.  So I continue to file 5500's (and in my case get an audit) for Plan B until the assets are down to zero.

What do you guys think?

I recall a post regarding a DB Plan short plan year, mentioning that if the amendment for the short plan year did not mention anything re prorating or giving an accrual for the short plan year than there are no benefit accruals for the short plan year.

1. Is this correct. Or must the amendment state clearly whether  there are or that there are no benfit accruals f93r the short year?

2. If there are no accruals must a 204(h) notice be provided to the participants, as the plan is not frozen?

3. Can one plan amendment include two amendments to For plan or must a separate amendment be drafted for each plan change. Foir example in the amendment that changed the plan year, it will also include a second amendment to the plan that the retirement age will be amended for the following plan year, and that the benfit formula will be changed for the next plan year. Or must these 3 plan changes have a separate amendment drawn up for each change? Seems no problem...but would like to double check.   Thank you.

We have a client with a participant who wanted to start contributing Roth contributions at the beginning of the year, but there was a payroll error and they never started.  Now the participant is asking how they can make up the missed contributions, since they are looking to make sure they get the Safe Harbor Match.

The question is, how can the participant makeup any missed contributions?  They are asking if they can fund them themselves and send a check.  I didn't think this was possible, and that it should have to be done through payroll (even though it's Roth).

I just wanted to make sure that I wasn't missing something.

Thanks in advance!

Wow. So, non-profit 457 plan. A participant wants to donate a large sum of money from their 457 account back to the non-profit. Assuming the plan does not specifically provide for this (I haven't read the document, but I don't see how it could) it seems like a taxable distribution to the participant would have to be made, and then donated to the non-profit. I have no opinion on the possible charitable deduction side of things for doing so. Any thoughts on this one?

I have recently connected to a new financial advisor (sinigle member RIA).  This advisor actually has 2 businesses... lets call them Store-Front Advisors (SFA) and Store-Front Investments (SFI).  I was just told right now that SFA sponsors a Simple.  I already knew SFI sponsored the 401(k).  Since the advisor owns both businesses that means it's a control group.   My question is... is it possible for this advisor to fund the Simple through SFA and fund the 401(k) through SFI for the same year?  If there was only one business I wouild advise that it is not possible to fund both plans.  But there are 2 separate businesses (owned by the same person).  

If so I assume we combine both plan contributions to ensure 415 limits are not exceeded.

Thanks for any insight.

I know ISOs are exempt from 409A.  In an ISO, you have to be an employee and you only have a limited time post-employment to exercise the ISO.  Under 409A there are specific rules for what it means to have a termination of employment / separation from service.  Is there a similar rule for an ISO?

In other words, can a company continue to employ someone at a very low level (e.g. 10% of previous service level) and still let them vest/exercise the ISO during that period (i.e. treat them as still an employee)?  I know under 409A, that would be a separation (below 20% previous service level), but I can't find any similar guideline for ISOs.

When running the ADP test, I recall it's easier to switch from prior to current year testing than vice versa. I also recall that it must be done by end of the plan year.

I'm curious if there are options to change it from prior to current after the end of the plan year?

A PSP that was set up many years ago is now being amended into a 401(k) plan.  Once this occurs, does it have to include LTPT employees or is it excluded from this requirement by virtue of the fact that the plan has existed for a long time?

An attorney & participant in a governmental 457(b) plan sent a vague email inquiry of statements related to distribution rules. The one that has me stumped is, "The SECURE Act of 2019 permitted in-service distributions from governmental 457(b) plans if the plan fails to offer a specific in-plan annuity option." My experience is mostly in the ERISA space, but I cannot find anything specific surrounding this statement in the original SECURE Act or other legislation. Ultimately, I believe he's fishing to take an in-service distribution.

The NRA is 65 and in-service distribution age is 70.5. (This individual is 58 and married.) The Adoption Agreement allows for life and joint life annuitization, so I believe it nullifies an in-service distribution "mandate," if you will, from any legislation. That said, the document language does not state if the annuitization option is available pre-70.5 for active employees.

If allowed, it also does not specify if he chooses to annuitize, could he:

1. Do a partial annuitization? (As he has a sizeable balance, over $500k.)
2. Continue to make elective deferrals?

If anyone has any insight or experience with similar scenarios, I'd love to hear some thoughts.
 

Client wants to set up a separate plan from its current existing 401(k) plan, in order to cover separately a new group of employees whose employer they'd purchased.

Twin plans, so to speak, they'll have all the same contributions options/investments, etc.

But, as a new plan, this one's going to be subject to mandatory enrollment, right?  The other plan's grandfathered as not to have it, and they don't plan to change that.

I don't recall auto-enrollment being something subject to BRF testing.  

But can anyone confirm/refute that for me?  (Leaving aside for now what would actually be tested - there could be new owner HCEs right away, before we suggest these will all be NHCEs off the jump.)

Thanks.

-bri

hi - had an HSA account with ~$3k. employer changed providers. looks like employer opened FSA not HSA. i never rec'd cards, didn't realize this. i've been paying med exp and saving receipts. saw today that the 'old' HSA ~$3k balance is not reflected in the FSA account. i have an HSA medical plan, is this a rectifiable error that will restore my prior HSA $3k, plus last years payroll deposits?  or, is all the money gone because they started an FSA in error instead of an HSA? thanks.  also, if employer HR is not helpful, do i have any recourse?

We have an overfunded DB plan that is being randomly audited by IRS.  TPA fees to respond to the audit are pretty substantial, but are actually less than 0.1% of the total overfunding amount.

This is a H&W plan but they also occasionally have 1 non-owner Employee.  For the year being audited (2022), no rank and file employees accrued any benefits, but for 2025, the year in which the fees will be paid, there will be 1 or 2 eligible NHCEs.

Do we think the client can pay the TPA fees as they relate to 2022 from the overfunded plan assets?

An employer has the standard eligibility requirement of 1 Year of Service (12-month wait with 1000 hours) and age 21. And there are semi-annual entry dates. 

An employee is hired July 20, 2024 and completes a Year of Service on July 20, 2025 but they do not turn 21 until Sept 15, 2025.

Does this person entry the plan on January 1, 2026 or September 15, 2025.  SPD language is below.  It seems to imply January 1, 2026 but we want to be conservative if there is any ambiguity.

Thank you!

Tom

Working with a start-up 401(k) with the new auto-enrollment feature. Client asked if an email or a text message is an acceptable form of an opt-out. Would this type of election hold up in a DOL audit?

My ex was a teacher who did not contribute during that time into SS. Now with the Social Security Fairness Act she will get that. Am I due a portion of that now? 

What options, if any, are there for a company that fell upon hard times very recently.  They have a basic safe harbor match in the plan and the owner is asking is there any way to get out of that for 2025 (calendar year plan)?  No HCEs have made a 401k contribution for 2025 and have no plans to do so.  Just the NHCEs.  

Any ideas are appreciated.

So, employer resolution (timely made) clearly stated that the money purchase plan was being frozen. The amendment itself (timely made) did not specifically state that the plan was frozen, but it reduced the formula to zero. 204(h) notice/SMM (timely given) specified that the plan was frozen. Question - although no one could accrue a benefit after the freeze date, do new employees become eligible, even though they will be eligible for a zero contribution? No coverage or nondiscrimination issues. Would you count these people as "eligible participants" on the 5500 form line 6a 1 and 2?? Plan is large enough that an audit is required whether they are counted as participants or not.

This is actually a 2 part question for me:

1. I have a client in which a certain class of employees earn regular wages from the company as well as prevailing wages from the contract company. I know that since prevailing wages and the regular wages are part of the W-2 income, the plan cannot exclude prevailing wages. However, prevailing wages can be used to offset employer contributions. Will the prevailing wages used to reduce employer contributions also reduce the total reported income on the W-2?

2. When combining the regular wages and prevailing wages, some of these employees will be classified as HCEs (solely based on compensation) when their YTD total wages are prorated. Is there a way for these people to remain NHCEs? I'm trying to reduce/eliminate as many issues so that the plan can operate smoothly.

The prevailing wages was quite the bombshell when I found out about it.

I've seen all sorts of different rules and such regarding accrued participant loan interest, so I just want to see if my interpretation is correct in the situation below:

Profit Sharing Plan is pooled, so it not a directed investment of the participant.

Participant has an account balance of $50,000.

Participant has an outstanding loan of $10,000, terminates employment and accrues $500 of loan interest by the time he elects to rollover his entire account balance.

Would this be correct:

Taxable offset distribution of $10,500, consisting of loan balance plus accrued interest.

Rollover would be for $39,500 -- $50,000 less the $10,500.

Thanks!