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. 

I am an Orange County California employee and I plan to retire in 3 years with 25 years of service. I have a defined pension plan where I can retire after a certain number of years of service, at a certain age, with a certain income history and I'm eligible for a lifetime annuity (2.7% of my top 3 earning years times each year of service). I started this job 3 years into marriage (2001) and we divorced 10 years later (2011). My top 3 earning years were long after the divorce. 

I remember being told by my attorney that we needed to hire a QDRO attorney but that was never done. I also remember calling the County retirement and being told the divorce had been reported to them and that I would not be able to collect my pension until the QDRO was complete. 

I have read online that my ex may not be entitled to any portion of my pension if I remarry, or if I remarry before I retire, or if I retire before the QDRO is complete. I'll be engaged next month and I do plan on remarrying before I retire. Can anyone please confirm any of this for me, is it true, and that simple?

If not true or that simple, can someone please explain what I can expect or should do in this situation (never did a QDRO, it's been 14 years since the divorce, and I plan to remarry)? She will not need any portion of my pension as she has done very well for herself these past 14 years, 17 years when I retire, and I will need it all. She has not remarried, if that matters. 

Thank you 

The firm that I work for can't really decide how this adjustment should be made so I'll appeal to a larger audience and hope the flaming isn't too intense.

2024 calendar year plan, EOY valuation. 12/31/2024 assets $2,209,224.

Before the amendment, the total maximum liability at 12/31/2024 is $2,095,478 ($1,911,601 FT + $183,877 TNC). After the amendment, the total maximum liability at 12/31/2024 is $3,465,035 ($1,911,601 FT + $1,553,434 TNC). The increased maximum liability due to the amendment is $1,369,557.

After the amendment, the required minimum as of 12/31/2024 is $1,438,375, so this amount plus any interest discount as of the date of deposit is fully deductible, even if the adjusted deduction limit is smaller. Please correct me if that's wrong.

If we pretend there is no reduction, the 2024 deduction limit would be $1,911,601 FT + (1,911,601 * 0.5) cushion + 1,553,434 TNC - 2,209,224 assets = 2,211,612.

What we can't agree on is where the increased liability is subtracted. Our software suggests that we'd subtract the increased liability from the max FT before calculating the 50% cushion: ($1,911,601 FT + ((1,911,601 - 1,369,557) * 0.5) cushion + 1,553,434 TNC - 2,209,224 assets = $1,526,833. Discussions have suggested that the increase liability should simply be subtracted from the unadjusted deduction limit, so $2,211,612 - 1,369,557 = $842,055 (ignored since required minimum is higher). Some have even argued that there is no reduction since the FT does not increase due to the amendment, but that seems unreasonable.

Would love any feedback you all can provide. 

Let me explain what I mean by that, not being a Cafeteria plan guru. As I understand it, if testing is failed, then the NHC's have no consequences - their benefits are still excluded from income. The HCE's will have their benefits included in income. So isn't this just the same position they would be in anyway? They (the HCE's) are no WORSE off than they would be otherwise without the plan - what's the real downside?

I feel like I'm maybe missing something - I'd be interested in any thoughts you may have. Thanks!

Parent Company is in Korea. US Company is part of the controlled group.  They have some Korean Employees who soley worked in Korea for 2024.  They are now in the US working and getting paid US dollars.  For 2024 HCE determination, do we consider 2023 Korean income?

I was reviewing Form W-4P to determine if the payer is to withhold differently for annuities that started, for example, in 2017 vs. 2025 when there is no W-4P on file. 

2025 Form W-4P states: 
"If you don’t give Form W-4P to your payer..., then the payer will withhold tax from your payments as if your filing status is single with no adjustments in Steps 2 through 4. For payments that began before 2025, your current withholding election (or your default rate) remains in effect unless you submit a new Form W-4P.  

Client A, who annuitized in 2017 and never submitted a withholding certificate, had an original "default withholding rate" of "married with 3 allowances". 

Client B, who annuitized in 2025 and has not submitted a withholding certificate, has a default withholding rate of "single with no adjustments".

Am I understanding correctly that in 2025, in the continued absence of a Form W-4P, Client A's default withholding remains "married with 3 allowances"?

We just want to know if in the absence of a W-4P, whether or not Client A's withholding must conform to the newer default of "single with no adjustments" or if it remains with the original default of "married with 3 allowances".

TIA

Company A sponsors a 401(k) plan and there are two participating employers who are currently a part of the same controlled group with Company A.  Buyer is purchasing Company A only.  The participating employers are not being purchased and Buyer / Seller do not want to create a multiple employer plan by allowing the employers to continue participation post-closing.  Can the current plan be spun off into two plans and if so, are there any concerns that the assets are and will continue to be comingled post-closing considering that the participating employers will no longer be a part of Company A's controlled group?

We have a client with a 401(k).  The client does not want to hire an investment consultant.  Instead, they are looking for a resource for where to get a report of metrics for the investments in the Plan so they can do this work themselves.

Does anyone know of a good resource for this?

I understand the benefits of an investment consultant and they have been communicated to the client, but this is their decision.