This is a new one for me.  Discretionary PS with permitted disparity allocation formula using $22,900 as integration level.  How do the Max Disparity Rates come into play, e.g., 5.7%, 5.4%, etc.?   TYIA. 

What would happen to someone's funds who passes away, has no spouse nor children and no other designated beneficiary?  We assume the plan (not our plan) and state laws of Indiana would say the account goes into the estate.  It is $1.5 mil.  She does have 2 brothers (one is our 1040 client.)  We believe a court will decide the brothers will get the money.  And if so, the question then becomes, can they roll to an IRA?  Doubtful.  If they can when would it have to be distributed?  The decedent was not RMD age. We don't know the terms of the decendent's plan.  She worked for the VA and so it is a govt plan.

Any comments are appreciated.  We are not offering our 1040 client any specific advise.  This is mostly just for our general education.  Of course the main lesson is - have a designated beneficiary and a will.

Peter:  This is a belated response to your post in March, 2024: See attached Memo dealing the courts that have found plans who did not believe they were ERISA qualified were in fact qualified.  Other workarounds are also discussed. 

David 

PRELIMINARY ISSUES.pdf

I think I need a sanity check on this one.  I was referred a plan to review for a possible vcp or self-correction due to missed top heavy contributions going back for several years.  One out of 3 key employees made a small deferral contribution of 1.6%.  There are no employer non-elective or match contributions.  The plan document states that all participants (key and non-key) receive top heavy contributions.  The TPA has calculated a top heavy contribution amount of 1.6% for all participants including the key employee who had a deferral contribution of 1.6%.  

Should this key employee receive the additional 1.6% top heavy allocation, or is this key employee's deferral contribution deemed to satisfy the minimum required allocation of 1.6%?  If the additional allocation is required, does that then mean that there is one key employee with at least a combined 3% allocation and now all other participants must be increased to 3%? 

Also, what is your opinion on whether this can be self-corrected pursuant to Notice 2023-43 or a vcp application should be filed?

Thanks for any and all input.

I know much has likely been said about this already.  We have a new client plan that uses the part-time exclusion (those scheduled to work <1000 hours).  But are those who worked 500+ for 2 consecutive years still eligible to defer? Or does the PT exclusion trump the LTPT rules?

Thank you, Tom

I think I know the answer but I’m not 100% sure.

I recently had my job moved to Mexico. My severance date is in August when I’ll be 66, 8 months old. (Born in 12/1958).  My wife is 72 and collecting Medicare. She is not on my HDHP nor the HSA. My name only as an individual. I am fully planning to continue working till I’m 70. I am probably not going to file for SS so we can maximize our payments. 

I have an HSA I’ve been contributing the max to for a number of years.  My HDHP is via my employer. So I was planning to contribute the max to my HSA until Dec, 2028.  We planned to use it for long term healthcare if we ever needed it. So we really wanted to max it out and we never draw down from it.

But I know I can’t contribute now once my employment is over.  BUT….. as part of my package, the company pays 6 months of COBRA of my HDHP.  And then I can choose to pay COBRA for another 12 months if I want.  I will be working as an independent consultant, most likely as a 1099.

Would I still be considered qualified to contribute to my HSA during the company paid COBRA period? Even though I could sign up for Medicare?

What about when I take over the COBRA payments?  Can I still not sign up for Medicare and contribute to the HSA?

if I wasn’t eligible for Medicare, I’m pretty sure I can contribute to the HSA while on COBRA.  I’ve found some articles on that.
But would the IRS consider me covered by an employer’s HDHP or disallow it since I could apply for Medicare?

I know I’d pay a lot for the COBRA but adding another 10+K to my HSA that can grow tax free a few more decades may be worth it.

Both my wife and I are healthy, we have no medical problems, are active, and have longevity with both our parents having lived well into their 90’s and one to 103.

Thanks in advance for any insights.

Craig

We administer a 20 participant 401(k) plan that restricts salary deferrals to no more than 25% of W-2 Salary. 

The plan made a mistake and allowed a participant to have salary deferrals of more than 25% of W-2 salary. I would think that this needs to be corrected by refunding the amount over 25% back to the participant as it is a violation of the terms of the document. In other words, the amount over 25% of W-2 salary should not have been contributed to or been in the plan in the first place.

Would this extra amount of salary deferrals be counted in the 401(a)4 test? I would think not since it does not belong in the plan per the terms of the document. Anyone agree or disagree?

Thank you.

Hi

If the plan document states tips are excluded, can the plan be amended retro to 2024 and include them, after all, increasing the benefit?

Curious.

Obligor has a Pension but he passed away. Pension has a beneficiary. Obligor left owing Child Support Arrears of 110k. He had no other Assets. The Attorney Generals Special Collection Unit has closed my case an won’t tell me why.. a Money Judgement was given to me by the Courts in 2007. I’ve reach out to : Family Law Attorneys, Estate Attorney, Congressman , Texas House of Rep never replied. Under the Family Code Chapter 157.3271- LEVY ON FINANCIAL INSTITUTION ACCOUNT OF DECEASED OBLIGOR. Why am I having so much trouble trying to find the help I need. I wouldn’t think it would be so complicated but what do I know.. I’m not an Attorney. Any help would be appreciated. 

Plan allows for immediate distributions, and participant K separates from service and takes her money out ASAP.  Now we're doing the annual admin, and she is due $40 in safe harbor nonelective.  If the sponsor puts it into her account, it will get eaten by distribution fees; K will never see any of it.  But I don't think that the sponsor should benefit from this situation.  Is there a best practice for doing something relatively meaningful with this $40?  Thanks.

I just learned that the 1099-Rs for a 2024 RMD and plan closing rollover to an IRA were not filed.  I created the forms but the 1096 needs to be signed.  What are my options?  Can I sign the form as a "paid preparer"?   Could I apply for a PTIN and file the return?

I'm exploring the feasibility of integrating PensionPro with a SharePoint spreadsheet to automate the tracking of workflows. I would appreciate a recommendation for a developer/programmer. Thank you.

3% SHNEC Safe Harbor Plan.  Client wants to discontinue the SHNEC but a) the keys have already made substantial 401k, and b) they are top-heavy.

Can we discontinue the SHNEC as of April 30th (after providing the 30 days notice of course) and coincidentally create a short plan year ending 4/30/2025, and remain on a 4/30 plan year end for the foreseeable future?

I'll be darned if that doesn't work.  I think it does...  Otherwise he has to terminate the plan and everyone loses (because terminating is the only way to stop the top-heavy minimum). Of course all keys would be told to stop doing 401k (in fact I have made it my practice to exclude keys from the plan by design (I called it a top-heavy inoculation).

We have a client that would like to provide “concierge medical benefits” to all of its employees that have elected any level of medical plan coverage, which is provided under a fully-insured high deductible plan.  There are no actual medical benefits being provided via the concierge program.  Instead, the client has contracted with two geographically convenient general practitioners that will give “high” or “immediate” scheduling priority to participants, as well as much quicker response to requests for refills, etc. Actual medical expenses associated with the services will be run through the group medical plan as usual (e.g., cost of the visit, medical tests, etc.).  From the client’s description, it seems like the concierge service is merely a program to provide priority scheduling and refills. The projected cost for each employee is $2,000/year.  I am not sure if there is a different cost if the employee has elected family coverage, but in any event, it will all be employer paid.

Our practice is primarily focused on qualified and nonqualified plans, so this is out of the box for us.  At first blush, this program does not seem to be a welfare benefit plan, and I am thinking that the cost would be includable in the employee’s income.

Hoping someone has some experience with this type of program and can point us in the right direction.

403b plan  - calendar plan year has a payroll based match but the plan document allows a discretionary true up at year end. Question -  can we amend the plan at this point in 2025 to add a last day requirement? Or does the last day need to be added 1/1/26? 😊 Thank you!

Any advice for an employer/plan sponsor that says they don’t have records for certain rehires of a company they acquired a few years ago. So for example they hire an employee who says I used to work here - but employer cannot find records of prior work history to determine if they completed service for vesting - they have a 5 year schedule.The HR contact did mention there are boxes of hard copy data that I guess would be very hard to sort through. Employee does not have a current account balance in the plan. Can the employer be required to provide W2 or information of prior employment or any plan benefit information? Thanks!

We have a new 1 person plan who failed to file a Form 5500 despite crossing the $250k threshold that requires it.  I was looking at the DFVCP program, but one-person plans don't qualify for it.  Is there a correction program for plans that file Form 5500-EZ?  Trying to figure out how to get them back in compliance.

Thanks in advance!

When a participant seeks one’s spouse’s consent to name a primary beneficiary other than the spouse (or to elect against a survivor annuity), a consent has no effect unless “the spouse’s consent is witnessed by a plan representative or a notary public[.]” ERISA § 205(c)(2)(A)(iii).

Although ERISA does not preclude a notary from using electronic means to furnish the notary’s certificate of a notarial act, a notary must witness the spouse signing the consent. 26 C.F.R. § 1.401(a)-21(d)(6). Until recently, most service providers advised plan administrators that this calls for a spouse to sign a consent in the notary’s physical presence.

Under a proposed interpretation of the statute, a notary may witness the spouse’s signing with physical presence, or by using live audio-video technology and meeting all requirements and conditions under the proposed rule and the State law that applies to the notary. Use of an Electronic Medium to Make Participant Elections and Spousal Consents [notice of proposed rulemaking], 87 Federal Register 80501–80509 (Dec. 30, 2022).

That notice states: “Prior to the applicability date of the final regulation, taxpayers may rely on the rules set forth in this notice of proposed rulemaking.” Id., at 80506.

BenefitsLink neighbors, in your experience:

Are plans’ fiduciaries accepting a notary’s certificate if the certificate shows the notary did the witnessing not by physical presence but rather by audio-video technology?

Can one of you fine folks tell me how to DM someone who posts a message that I cannot respond to online? 

I assume DM means direct message? 

Thanks, 

David

A customer has had a defined contribution plan for a while, participation is open to all employees if they work the threshold 1000 hours. Now, the customer wants to cut back on who can participate based on their job types. The customer understands it can't change the rules for present employees. But for John Doe who is hired next year in a job classification that will be cut, I'm not sure how the plan can be revised to maintain the present participants and prospectively cut job classes. I've drafted a web of the 1,000 Hour Rule and its implications if not followed; I've looked at non-discrimination rules; I've looked at the general plan amendment rules. 

I'm stumped. What other rules should I read to figure out this goal? So far it looks like the plan cannot be amended to prohibit future participants based on their job classification, but I have to imagine there is some mechanism that allows it.