Should Accrued Interest be included in actuarial asset?

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Hypothetical question.

Law/IRS says as long as the account is cleared prior to 3/31/2025, you do not need to restate the DB plan (required amendments aside).

Plan DOT 12/31/2024, all assets distributed by 2/28/2025.

On 4/2/2025, a dividend shows up in the account, amount not relevant. Rolled out sometime in April/May - not informed timely.

Is restatement now required?

A client needs to bring his father over to live with him due to his age and health.  There is a rollover account with plenty of money in it but the client is only 57.  The renovations needed to make the house usable I guess is a lot ($100K+... I didn't ask why so much).  There is already a personal loan in place and I don't know if you can call pulling that much out of a plan a hardship.  I've looked and there is no exception to the 10% early distribution penalty.  

Is it as cut and dry as that?  There is nothing he can do or say to be spared that added 10% for his noble effort caring for his elderly dad?  Roll out some of his rollover account to  somewhere and then pull what he needs without an early dist penalty from there?  Trying to think outside the box at this point.

Thanks

Plan currently provides that all participants receive a SHNEC.  The 100% owner wants to make a PS contribution but the test results are destroyed because her participating daughters are getting a SHNEC - would there be any BRF issues if the plan is amended to just give the NHCEs a SHNEC?  I can't recall if BRFs are ever an issue if it's just the HCEs that would ever get affected by an amendment.  Thanks in advance for any assistance.

After-tax employee contributions in this DB plan stopped in 1969, well before the 1986 changes to IRC 72(d). The 1986 law eliminated the 3 year basis recovery rule for pensions starting after 1986 enactment.

I have heard, but cannot find, a rule that employee contributions prior to 1986 will still have the benefit of the 3 year rule, even if the pension starts after 1986. 

Does anyone have that reference? Do these pre-1986 after-tax contributions still have the benefit of the 3 year basis recovery rule if the pension starts AFTER 1986?

We have a client who over-funded profit sharing for 2022 and 2023.  The "over-funding" is not relating to testing or 415 limits.  The TPA calculations provided a uniform profit sharing rate for all HCEs.  The plan was funded accordingly.   In providing the funding summary for 2024, the new CFO reviewed and indicated certain HCEs (non-owners) were not to receive PS at the same rate as owners and raised the question of prior years.  The 2024 year can be fixed of course since not yet funded but 2022 and 2023 are an issue.

One alternative is to short them going forward to make up for this but it is a large amount and will take several years.  Another alternative would be to remove the excess from their accounts.  Reduction of PS  for 2022 and 2023 would not be an issue since they are HCEs and they are getting the top heavy.  The 5500s would have to be amended as well as the corporate tax return.  

Comments about prior year "claw-back"?

Thankyou

I have a unique case where there was a separation agreement that stated the husband would receive 50% of the wife’s IRA by QDRO. No QDRO was written. The husband died a few weeks after the divorce. This is in Ohio. Can a QDRO still be written with the estate receiving the funds? It has been a year since the death. Would the amount be based on the amount in the account at the time of the writing of the separation agreement, or at the time of the writing of the QDRO? Thank you. 

I just received a final accounting on a terminated plan, from the fund holder for the period 1/1/24-7/1/24 (not 6/30/24)

I’m assuming the plan year for the final return would then run 1/1/24-7/31/24, therefore the final return would be due 2/28/25?

Saved from a late filing for 6/30/24?

I started working at a TPA/Recordkeeping firm this past fall, I'm completely new to this industry as a whole so it's been quite a process. One thing I found very quickly was that the firm I work for was doing lot of manual data entry, as well as other things manually. I've spent a good portion of the last few months learning all the ins and outs of the system with things like automating things in Job queue, setting up file imports / exports for balancing, distributions, ACH Pulls, etc, and custom reports. It's such a small industry I really have no reference online for what other people are doing, so I'm curious, how many of the extensive features of Relius do you actually use?

Pretty much as the title says. 

While filling out a VFCP, I discovered that lost earnings were paid out of that year's forfeitures. Ok by IRS, not so much under VFCP.

Does anybody have any experience with this or how to correct?  My thought is to make an additional employer contribution to plan participants for that year in the amount used but will the DOL accept that and still accept the VFCP application?

We could then show that the lost earnings were funded by the forfeitures but this was corrected (to include lost earnings on that amount as well) and the costs ultimately came out of employer funds and not plan assets.

I'm (attempting) to create a kind of decision tree / flowchart to easily figure out what tests need to be run on a given plan. That said, it's quite nuanced and I'm by no means an expert. I've added a picture of my progress so far. My company works exclusively with DC plans, over half of which are safe harbor. This is my first year doing testing so I very well could be mistaken about some things. Generally I've had my boss looking over things with me and helping me with what plans need what tests on a kind of case-by-case basis, but I'd love to just have a nice algorithmic way to figure it out. Any thoughts? Things I have wrong or need to add?

I've run into an issue testing one of the plans that came on with us this year. I don't know who wrote their plan document but they absolutely should be a safe harbor, but they aren't. It's just 5 people , three of which are owners (one of them is the owner's son who didn't actually work at all or make anything though). Anyway, the ADP/ACP is... bad. The two owners deferred 23k and 12k (40% and 23% respectively I believe) and as such the ADP is roughly 17.5% vs 1.06% for the NHCEs. The options are either a QNEC, which would be roughly 7.5k in order to pass, or returning almost all their deferrals to them. 

So here's our proposed creative solution: The only HCEs who need money returned are both owners of the company who choose their own pay, and as such the line between their money and the business's money is really just up to how they want to receive it. Because it's only the two owners, we want to do a "corrective distribution" on paper so they pass ADP/ACP, then use that money to do a profit sharing contribution to give both the owners that exact amount back (obviously, we'd discuss this with the owners before actually doing it). As the plan is new comp / cross tested and there's only 2 NHCEs, the cost they'd need to give to them would be far less than a QNEC and the owners would still get to keep the money they put in.

So, my questions: From a legal standpoint, is this iffy? It seems fine to me as it's no different than distributing that money back and then the employer "deciding" to do a year end profit sharing, except we don't actually buy and sell those assets. Second: One of the two owners is over 50. The IRS page on ADP ACP corrections says that "If the Plan provides for catch-up contributions, the refund may be recharacterized as a catch-up contribution (up to the catch-up limit)". How would this rule factor in / be utilized to solve this?

And yes, we're already in the process of writing an amendment to make them a Safe Harbor NE for this year, we just can't retroactively do that. 

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?