If an employer is a part of a control group, which benefit plans and test are pooled together for testing? I know 401(k) plans would be tested as one...what other benefit plans?

Our firm has used Relius for a very long time and we're... Unhappy, to say the least. I've heard a lot of good things here about Datair. Does anyone have any experience with both programs with any notable differences in your experience? Also, I really have no scale of how outdated and clunky Datair is, and Relius is incredibly outdated and hard to use. Would someone mind sending me just a screenshot or two of the general Datair interface (with any firm-specific details blanked out, obviously)? It'd be greatly appreciated. Thanks!

From § 411(a)(8)

For purposes of this section, the term "normal retirement age" means the earlier of-

(A) the time a plan participant attains normal retirement age under the plan, or

(B) the later of-

(i) the time a plan participant attains age 65, or

(ii) the 5th anniversary of the time a plan participant commenced participation in the plan.

____________________________________________________________________________________________________________________________________________________________________

The reference to the "5th anniversary" might seem ambiguous as to whether the accumulation or providing of five (5) years of vesting service/service otherwise might affect the situation. Guidance would seem to suggest the anniversary applies unaffected by the providing of a particular metric of years of service, vesting or otherwise.

To consult extensive guidance on this situation: 

URL: https://www.ecfr.gov/current/title-26/part-1/section-1.411(a)-7#p-1.411(a)-7(b)(1)(ii)

Citation: 26 CFR § 1.411(a)-7(b)(1)(ii)

For purposes of paragraph (b)(1)(ii)(B) of this section, participation commences on the first day of the first year in which the participant commenced his participation in the plan, except that years which may be disregarded under section 410(a)(5)(D) may be disregarded in determining when participation commenced.

https://uscode.house.gov/view.xhtml?req=(title:26 section:410 edition:prelim) OR (granuleid:USC-prelim-title26-section410)&f=treesort&edition=prelim&num=0&jumpTo=true#substructure-location_a_5_D

[T]he number of consecutive 1-year breaks in service within such period equals or exceeds the greater of-

(I) 5, or

(II) the aggregate number of years of service before such period.

(ii) Years of service not taken into account
If any years of service are not required to be taken into account by reason of a period of breaks in service to which clause (i) applies, such years of service shall not be taken into account in applying clause (i) to a subsequent period of breaks in service.

_______________________________________________________________________________________________________________________________________________________________________

Revenue Ruling 84-69

Internal Revenue Service

1984-1 C.B. 125

26 CFR 1.411(a)-1: Minimum vesting stand­ards; general rules.

 
Qualification; effect of plan lan­guage on the vested accrued benefit at normal retirement age. A plan that limits an employee's right to nonforfeitable benefits to amounts in which the employee already has a nonforfeitable interest pursuant to the plan's vesting schedule does not satisfy the requirements of section 411 (a) of the Code.

Rev. Rul. 84-69

ISSUE

Does the retirement plan described below satisfy the minimum vesting provisions of section 411 of the Inter­nal Revenue Code?

FACTS

An employer maintains a noncon­tributory retirement plan which in­cludes a vesting schedule under which an employee who has at least 10 years of service has a nonforfeitable right to 100 percent of his accrued benefit. The vesting schedule satisfies the re­quirements of the section 411 (a)(2)(A) of the Code. In addition, the plan provides that an employee's right to the normal retirement benefit under the plan is nonforfeitable upon attainment of the normal retirement age (which the plan defines as age 65). Other plan language defines the term normal retirement benefit as the por­tion of the employee's accrued bene­fit determined under the plan's vest­ing schedule to be nonforfeitable. As a result, employees hired after age 55 who retire at normal retirement age are not entitled to any retirement benefit.

LAW AND ANALYSIS

Section 401(a)(7) of the Code pro­vides that a plan shall not be a quali­fied plan under section 401(a) unless it satisfies the requirements of section 411.

Section 411(a)(2)(A), (B), and (C) of the Code provide vesting sched­ules, one of which must be satisfied in order to satisfy the requirements of section 411. In addition, the introduc­tory language of section 411(a) re­quires that an employee's right to a normal retirement benefit be nonfor­feitable upon attainment of normal retirement age.

Section 411(a)(9) of the Code de­fines the term normal retirement benefit as the greater of the early re­tirement benefit or the benefit under the plan commencing at normal re­tirement age.

Section 411(a)(7) of the Code de­fines accrued benefit in general as (1) in the case of a defined benefit plan, the benefit determined under the plan expressed as an annual benefit com­mencing at normal retirement age or (2) in the case of any other plan, the balance of the employee's account.

For purposes of section 411 of the Code, the term normal retirement benefit means the individual's ac­crued benefit, determined without re­gard to whether such benefit is vested. Thus, for a plan to satisfy the requirements of section 411, an em­ployee participating in the plan at normal retirement age must have a nonforfeitable right to 100 percent of the employee's accrued benefit ir­respective of whether some portion of such accrued benefit would otherwise be forfeitable under the plan's vesting schedule. See Caterpillar Tractor Co. v. Commissioner , 72 T.C. 1088 (1979).

HOLDING

Because the plan in this case limits an employee's right to nonforfeitable benefits to amounts in which the em­ployee already has a nonforfeitable interest pursuant to the plan's vesting schedule, the plan does not satisfy the requirements of section 411 (a) of the Code.

_____________________________________________________________________________________________________________________________________________________________________________________

The Tax Court has reached the same conclusion in interpreting a substantially identical counterpart provision in the Internal Revenue Code, 26 U.S.C. § 411(a) (1976). See Trustees of the Taxicab Industry Pension Fund v. Commissioner, 1981 T.C.M. (CCH) P 651; Board of Trustees of New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund v. Commissioner, 1981 T.C.M. (CCH) P 597; Caterpillar Tractor Co. v. Commissioner, 72 T.C. 1088 (1979)

https://www.courtlistener.com/opinion/409644/clara-duchow-individually-and-as-administratrix-of-the-estate-of-herman/authorities/

https://www.upi.com/Archives/1983/05/02/The-Supreme-Court-refused-Monday-to-take-up-a/6200420696000/

This is a stupid situation so a stupid question.

One lifer, always had under 250k so never filed 5500. DC plan.

Terminated the plan, all assets distributed by 12/15/2024. On 12/31/24, 6 cents hit the account and then rolled out on 1/2/2025.

So, what to do here, any suggestions? Is there a deminimis for ignoring the 6 cents i.e. just do a first and final return for 2024?

or

Do a first and final return for 2025?

or

something else?

Cannot get my head around this as this is the first time ever happened.

A participant terminates employment and is automatically cashed out into an IRA by the recordkeeper.    The individual was less than 100% vested, so forfeited his unvested funds.    The individual is then re-employed and wants to repay the rollover in order to have his forfeited funds reinstated.    He rolls over most (but not all) of the distributed balance back into the Plan, but there is a catch.  Some of funds which were automatically distributed from the plan were Roth, but the plan does not accept rollovers from Roth IRAs.    So while the participant did not fully repay the distribution, he did repay all that was technically allowed to be repaid back into the plan.   

I'm leaning towards the position of reinstating the participant's forfeited amount since they did transfer back all that was allowed by the plan.   Any other thoughts?

Thanks.

https://www.cnn.com/2025/02/18/tech/internet-archives-deleted-websites-wayback-machine/index.html?utm_source=business_ribbon

I had never heard of the wayback machine until Lois Baker mentioned it in a response to someone back on 1/29 and this morning I see this article. Nothing earth-shattering, just found it interesting (eerie?) that something that has been around for a while, but which I never heard of before, now pops up to me twice in three weeks. Odd coincidence or message from the universe LOL?

Should Accrued Interest be included in actuarial asset?

.d

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