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?

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