A contributing employer enrolls a new employee into a multiemployer money purchase and health & welfare funds. Assumne further that we are referring to two individuals: one of whom is an undocumented alien and one who is an American citizen. After contributions have been made by the employer and allocated to or for the benefit of the employee, it is discovered that the individual supplied a false Social Security number. Frpm the perspective of the two funds, what should be done in this instance regarding the following: (a) the amounts that have already been contributed; and (b) the payment to the fund of future contributions? At the outset, it is important to note that the contributing employer, and not the fund, is responsible for complying with the I-9 requirement.

In my view, for (a) and (b), an employee's citizenship or immigration status should not matter for purposes of answering this question. With respect to the amounts already contributed to the qualified plan, unless the plan document has been amended to take advantage of therecovery of overpayments, in accordance with Section 414(aa) of the Code, nothing can be done to theamount already allocated to the employee's account because it would run afoul of tIn my view, with respect to the amounts already contributed to the qualified plan, nothing can be done to theamount already allocated to the employee's account because it would run afoufloyhe antialienation requirement. If the employee terminates employment, the account could be forfeited subject to thevesting schedule and the timing of the distribution would be dependent upon whether the account is less than the cash-out threshold. For the health and welfare fund, there are no individual account balances and no accrued benefits under a welfare plan and contributions to the fund would be pooled, similar to a defined benefit plan. Unless the plan or trust includes a provision protecting amounts contributed by the employer on behalf of its employees, an argument can be made that the amount could be applied to satisfy administrative expenses under the fund or as acredit to future contributing employer contributions. If the individual's right to benefits is otherwise protected by the fund's plan and/or trust, and the individual incurs a claim for the period to which the contributions apply, then the individual could obtain coverage and/or obtain reimbursement of a medical or dental claim incurred during that period.re

With respect to future contributions, for both the money purchase fund and the health and welfare fund, the contributing employer should be notified that no future contributions on behalf of the individual will be accepted by the funds. My reasoning is that the funds were not aware of the validity of the Social Security number issue when the previous contributions were made. However, once the funds became aware of these facts, continuing to accept such contributions could make the funds complicit in the fraud.

Now forthe real heart of my question: considering the implications of ejecting the "employee" from the plans and their impact upon the plan's qualification and eligibility for income tax exclusions, does anyone have any suggestions or other thoughts concerning the adoption of an amendment containing pro-active language which would (i) enable the funds to revoke contributions allocated (or benefits accued in the case of a defined benefit plan) prior to the fund's discovery that the employee supplied a false Social Security number, (ii) if (i) is not permissible, prevent the allocation of future contributions to the employee's account, (iii) to the extent amounts previosly contributed to the fund on behalf of the employee cannot be revoked, to prevent vesting of such contributions; or (iv) to provide a blanket exclusion of such employees from participation in the plan without causing havoc or negative results for coverage testing? In a sense, this is something that plans should be able to do since Social Security numbers are integral to proper tax withholding and reporting from both a payrolll and plan administration perspective.

Thanks in advance!

We have a plan with about 1000 active employees. About 300 were moved to a leasing corporation in 2025. The plan excludes leased employees. Would this be considered a partial plan termination?

Suppose you have a professional employer who has sponsored a Defined Benefit Plan and a Profit Sharing Plan, both with a December 31 plan year. There are eight participants in each plan. The arrangement has worked well for over 10 years.

The defined benefit plan is becoming over funded so they should terminate that plan as soon as possible. If the Defined Benefit Plan is terminated effective 7/15/2026 all participants would have accrued a benefit in 2026 because they all would have worked more than 1,000 hours by that time. Not a problem. However, I believe the Defined Benefit Plan would then be deemed to have a short year for 2026 (1/1/2026 - 7/15/2026). Can the 7/15/2026 Defined Benefit Plan be cross-tested with the 12/31/2026 Profit Sharing Plan?

We can wait to terminate the Defined Benefit Plan until year end but then we may be waiting around just watching that plan becoming more and more over-funded.

Unless there is some prohibition in doing so, it should be easy enough to test the 7/15/2026 DB with the 12/31/2026 PSP. After all, participants have already accrued 2026 benefits in the DB plan and most will receive at least 7.5% of salary contributions in the PSP.

Thanks.

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Have not dealt with this 10+ years so memory not good. Hopefully some DB gurus out there are still using/remembering.

May be looking into taking over plan a db plan which has a good amount of prefunding balance. The sponsor wants to use portion of it for MRC for 2025.

I do not see an election signed by 12/31/2025 - are they late of they have till 9/15/2026 to make the election?

Does FTAP need to be over 80% or 100%?

Does prior year funding % need to be over 80% or 100%? I recall being 80%+

Thank you for the reminder before I decide what to do.

A nongovernmental, nonchurch higher-education employer established, and maintains, a § 403(b) plan. The plan always has provided nonelective contributions.

In the beginning, the only vendor was TIAA-CREF. Later, the plan allowed Fidelity and Vanguard. More recently, the employer discontinued contributions to anything beyond TIAA-CREF. But participants with a Fidelity or Vanguard contract may keep it.

The plan administrator’s Form 5500 report and audited financial statements for every year have consistently included the Fidelity and Vanguard amounts in reported-on plan assets.

For a plan restatement this year, someone instructed a plan-documents technician, who is not associated with me, to add a mainstream small-balance cash-out provision.

The employer/administrator has only a fraction of one employee looking in on all employee benefits, with little attention on the retirement plan. Unless they can rely on TIAA, they’ll be unable to administer the cash-out provision.

Whatever service TIAA might offer to help implement a cash-out provision, I worry that TIAA would apply it looking only to TIAA-CREF’s records, without records of account balances at Fidelity or Vanguard. If it matters, the plan now is on TIAA’s RetirePlus Pro service. Am I right to worry?

If my hunch is right, following TIAA’s cues on who gets a cash-out would result in some involuntary distributions contrary to the documents governing the plan and contrary to ERISA.

Although my scope excludes plan design, I feel I should warn my client that it’s unwise to adopt an optional plan provision if the employer/administrator is not confident about its ability to administer the provision.

Am I on the right track? Or is there some bit of legal or practical knowledge I’m missing?

This is an AFN related question as I am not sure the info is correct for calendar 2025.

My valuation program provider generated an AFN with 2025 PBGC maximum benefit however payable in 2026 and they think this is the right way to reflect on the AFN with the new changes.

In the past, before they changed their programming for 2025, it would have given me 2026 PBGC limit and payable 2026.

I have it checked it with another valuation program provider and it provided 2026 PBGC limit and payable in 2026.

Anyone checked this?

I recently took over a plan that was begun in 2024 in UGH!!  brokerage accounts.  It is moving to a platform in 2026.  They are asking about "when was the last "annual participant fee disclosure notice" sent to the participants.   I have no idea, but not sure how one prepares that when all participants are in separate brokerage accounts and the broker is not helpful at all.  (Fidelity brokerage for reference).  Any feedback or suggestions appreciated. 

Division A employees are covered under Plan A.  Division B employees are covered under Plan B.  Employee E transfers from Division A to Division B on January 1, but continues to participate in Division A plan till May 31 before the error is discovered.  It only affected one out of about 25 employees.  The plans have the same provisions.

Does EPCRS provide any guidance on fixing this type of failure?  Our thoughts in order of preference are:

1.  Move the contributions for the five month period to the Division B plan from Division A plan. 

2.  Do a retroactive amendment stating employee E is excluded from the Division B plan and included in the Division A plan for January through May, or

3.  this does not make sense but - treat it as a missed deferral opportunity in Division B plan and impermissible contributions in the Division A plan?

Thank you.

I am posting this message for my boss.  He is the one who normally reviews QDRO for our clients and advises if they can be implemented.  Attached is a summary of sections from the Divorce Decree and the QDRO draft.

Also included are comments made to the attorney regarding the QDRO along with the attorney's response.  We have some real issues with the attorney's response and wanted to reach out to the Benefit Links community for any insights.

Thanks in advance for all comments.

Not sure if it makes any difference but the participant stated to us that his spouse was entitled to the exact amount listed in the divorce decree, not a penny more or less.

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Some § 403(b) plans provide a participant’s contribution that, although made by salary reduction, is not an elective deferral because the contribution is made as a condition of employment. (Some IRS-preapproved documents set up a specially defined term for such a Mandatory Contribution.)

Internal Revenue Code § 414(v)(7)’s constraint that a higher-wage participant’s “additional elective deferrals” must be non-Roth contributions applies only regarding elective deferrals.

If an employer’s information feed to a recordkeeper carefully shows distinct amounts for each of Mandatory Contributions and elective deferrals, does a recordkeeper record these in distinct subaccounts?

Or, should an employer worry that a recordkeeper might flag as § 414(v)(7)-burdened many participants whose elective deferrals did not exceed the without-catch-up limit?

About this, are some recordkeepers better than others? For example, does TIAA—because of its wide experience with higher-education employers, many of which provide these condition-of-employment contributions—handle this more capably than other big recordkeepers?

Hello-

I'm hoping some of you could point me in the right direction with regard to the Retiree Safe Harbor provision under 26 C.F.R. § 1.105-11(c)(3)(iii). My understanding is that an HRA provided to retired or retiring employees are not subject to Section 105(h)'s nondiscrimination rules, unless one of the retired/retiring employees is a participant, where the plan must then provide the same "type of benefits" and "dollar limitations" for all other retired participants.

What if the HRA plan is provided exclusively to highly compensated individuals (i.e., only retired HCIs are "participants")? My understanding of 26 C.F.R. § 1.105-11(c)(3)(iii) indicates that this would be permissible so long as the same type of benefits and dollar limitations are provided to all other retired participants, even if the plan's participants are made up exclusively of HCIs.

Is there any IRS/Treasury guidance discussing the scope of 26 C.F.R. § 1.105-11(c)(3)(iii)? Is there any reason to think that the above interpretation is wrong? I understand that this is inconsistent with most, if not all, other nondiscrimination rules for self-insured plans, but I'm hung up on the "retired participants" language under 26 C.F.R. § 1.105-11(c)(3)(iii).

Thank you!

We have a 401k safe harbor plan that was referred to us however they have no plan document in place.  2 participants, they started making deferrals and 3% safe harbor into the plan in 2024 and in 2025 had a rollover contribution of $500k+.  Has anyone ever dealt with having no plan document?  In my research, I can only find corrections for correcting missed restatements and none for entirely not having a plan document.

Plan with safe harbor match is going to be amended mid-year to exclude bonus from definition of compensation.  Safe Harbor notice currently refers to SPD for definition of compensation.  Is an updated safe harbor notice required to be distributed since no change is being made to the notice?  I don't think SMM notice timing is impacted, but curious what others think.  
 

Thanks for your thoughts and help!

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Does someone here have insight or experience into whether the IRS would require full vesting for participants who incurred 5-BIS but the unvested amounts were not forfeited?  i.e. the unvested amounts were eligible to be forfeited but were not actually forfeited.

Thank you for your thoughts!!

I have a 401(k) Plan (for Co. A) that provides the Safe Harbor Basic Match.  No problem until I found out about another company, (Co. B) that the Plan Sponsor owns 100%.  Co. B does not sponsor a Plan.  The owner of both Companies takes wages from both.  Not an issue with my tests on Co. A but a major issue if I test Co. B on a stand alone basis due to the Owner's deferrals to the Co. A Plan.  

Co. B was purchased in 2022 so I am not worried about 2022 or 2023.  The testing failures come into plan for 2024 and 2025.  I am testing the entire controlled group as a single Plan as I do not think there is any other option unless the Owner's full deferral is returned for both of those years. We can pass 410(b) without an issue due to the number of HCE's in Co. B.

My big question... unless someone out there thinks my summary above is flawed, is regarding the one to one QNEC to be provided to Co. A's NHCE's.  Is that allocated to those eligible for the year of the failure, 2024?  Or, do I have the option of allocating the QNEC based on wages and eligibility for 2025?

Also, eligibility for Profit Sharing is 1000 hours and EOY.  My understanding is that the same would apply to the corrective contribution.

Thank you in advance for your assistance.  I thankfully deal with failed ADP tests very infrequently.

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