Seeing how popular the standard safe-harbor match was in the past and now the QACA, I was shocked when a client told me that Gusto Payroll cannot incorporate a tiered match formula into its system, and that the client (or we, as the TPA) would need to do it manually. Has anyone encountered this limitation with Gusto before? What is common among payroll companies/software?

for Compass (Remote / Stratham NH / Hybrid)

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Greetings All!

This is my first post, but I've been using Benefitslink since 2001--and I love it!

I’ve worked in the retirement industry for over 25 years with 401(k) providers and a TPA firm that was later acquired by a recordkeeper. My experience includes onboarding, client account management, reconciling plan records, and handling 5500s and compliance testing. I understand the business from sales through servicing.

I’m interested in starting a TPA at some point, and I want to know the actual steps to get started. For those who’ve done it, what does the beginning really look like and where should someone start?

Thank you,

For decades OPM has required that when a Former Spouse submits a certified copy of a FERS Court Order Acceptable for Processing ("COAP") for approval, they must also submit a certified copy of the Judgment of Absolute Divorce ("JAD") and a copy of the Marital Settlement Agreement ("MSA") by whatever name it may be called, if there is one.

I have a client pushing back on providing the MSA, even a redacted one, for privacy reasons. So I opened my CFR website and have spent HOURS looking for the regulation that required that the MSA be provided. I cannot find it.  I contacted a few other COAP preparers that send in the MSA like me, but they don't know the source of that mandate, or any other Plan Administrators that want a certified copy of the JAD, let alone the MSA.

Yes, I know that many Plans permit the transfer of pension and/or retirement benefits that are based on a "legal separation" where there is no JAD and will not be until the expiration of some period of time in the future (ex: South Carolina), so the Plan must base its decision on the MSA.  But that's not my situation.  

Ideas?  Thanks, 

David

I have a client with a solo 401(k) plan. Upon the recommendation of his CPA, he converted about $400,000 of pre-tax plan monies to Roth. The problem is that instead of moving the funds to a Roth account within the 401(k) Plan the funds were moved to a traditional IRA, then converted to a Roth IRA, where the funds currently are being held. The taxation for 2025 is correct and the funds are still invested. We explained to the client that this was an ineligible distribution and the funds need to be returned to the Plan, adjusted for earnings. When they reached out to the Custodian to request that they needed to "undo" it all, they stated that they can't move the Roth IRA funds to a Roth 401(k) account because Roth IRAs can only roll into Roth IRAs. Any suggestions or insight on how to get the Custodian to correct the error? Outside of "undoing" it, what corrective options do they have?

The question I am asking relates to the divorce of the plan administrator and their former spouse, this case takes place in Wisconsin.

A brief overview of people involved:

• Person A: employee of company X, where they are not only the plan administrator but they are a partial owner (the other owners are family members as well)
• Person B: ex-spouse
• Lawyer A: Lawyer for Person A
• Fiduciary

Divorced was finalized in May of 2021.

In January of 2022, the QDRO was filed and signed off by the judge with a May 2021 valuation date (this is key point for later on). The QDRO was signed by Lawyer A, with a December 2022 date, however, court records show that they had withdrawn from the case in June of 2022.

• Does the dates above invalidate the QDRO? Since the signature date of Lawyer A doesn't make sense?

As of August 2025 the QDRO was never executed and the assets in Person A's 401k were never split, Person A has been contributing to the plan since the divorce was finalized. In order to get things finished and complete the QDRO, person B asked for plan documents to understand what they were entitled to do with the money owed to them (like rollover, cash out etc) as they had not been given ANY documents prior to this.

• Person A supplied a SPD dated August 2021 and claimed that was enough information and that was all they had.
  • Under Miscellaneous: Domestic Relations Orders - "You may obtain, without charge, a copy of the Plan's QDRO procedures from the Plan Administrator". If this document exists it hasn't been provided
• Person B spent weeks asking for more plan documents and then received a Adoption Agreement with the same effective date as the SPD (August 2021), Person A then stated again that they have provided everything they have and everything that Person B needs.
  • Only relevant information in this is that the valuation date is "Each Business Day"
• More correspondence over another few weeks led to Person A sending Person B a Basic Plan Document and again stating that is all they had and is everything Person B needed.
  • this document says copyright 2002-2020 through ftwilliam.com

ISSUE: The QDRO filed, signed by Lawyer A and the judge has a valuation date that is 99 days prior to the Adoption Agreement passed in August 2021. During the correspondence outlined above, Person A, has suggested to the fiduciary and Person A that the valuation date should actually be a different day in May 2021. This new valuation date conveniently falls within 90 days prior to the Adoption Agreement in August 2021.

Person A has repeatedly denied having any documents prior to the ones effective August 2021 and even asked the Fiduciary if they had any documents to try and avoid responsibility.

The question then is. With the dates and timelines given, what, if any, legal actions can Person B take? Is an ERISA lawyer the best way to handle this? Or is another kind of lawyer that is versed in small/family business better?

My client created an LLC last year and purchased an existing nursing and rehab facility which employs about 40 people. There was no plan in place with the previous employer.

Now they want to adopt a safe harbor 401k to benefit employees this year. Eligibility is one year of service (no credit for service with predecessor employer).

Would this qualify as a 'new business' and thereby be exempt from auto enrollment for 3 years?

Can a safe harbor match be added to an existing discretionary profit sharing plan mid year (i.e., after January 1?)

for FuturePlan, by Ascensus (Remote)

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for Ameritas (Remote)

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I know the ACA "good faith" reporting relief ended in 2020, but I'm wondering if anyone knows it the IRS is actually assessing penalties for errors on a 1094-C or 1095-C filed after the relief ended? 

Looking for guidance. We have a spin off plan effective 4/1/26 with the EACA mandate. The prior RK drafted the EACA to use the first day of the following Plan Year as the date of the first increase. New RK can only use the initial period - 2nd plan year. My question is how to administer for the employees auto enrolled in 2026. Can the new intial period be applied for any of the 2026 auto enrolled participants? 4/1, or could it be retro to employees hired on or after 1/1/26 as long as they get an upddated advanced notice letting them know the first increase will not occur until 1/1/28? I know the conservative approach is to apply the change 1/1/27 in the plan document. Thanks for your help!

Plan provides for a discretionary match ( no safe harbor). Match funded payroll basis but is based on year end - so a true up may be required

April 1, 2025 employer stopped the match - participants were notified the match would cease as of 4/1/2025.

1. TPA never amended the document to remove the plan year calculation so....

(i) the match for Jan 1 to March 31st would need to be calculated based on annual compensation - correct?

(ii)  Auditors doing the 5500 audit and stated the participants who entered after 4/1 need to get the match. According to them this is a discrimination issue - Here is where I am looking for some assistance.

Discretionary means it can stop/change at any time.  

 Participants who entered after 4/1 do not get a match - this would not be a benefits rights and feature issue - do you agree.

ACP Testing would be for the full year, but those that entered after 4/1 are not included in the ACP Test - do you agree

Thoughts

 

I have a plan... all employees are HCEs (1 owner... everyone else earns megabucks).  It's just a 401(k) plan.... none of the employees get an ER Cont

One of the employees has asked about contributing a VAT contribution.  Can this employee still max out 2025 to $70K ($23,500 deferral + $46,500 Voluntary) at this point?  Or would any VAT Cont made now be for 2026?

Hello everyone. I'm looking for an automated method to extract financial account activity data from a *.txt file and import it into an Excel file so we can import it into ASC. I'm sure it can be done via AI. I've tried to use Copilot with limited success. Python seems to be a possible solution. Thank you.

We requested ownership information for a client that onboarded with us this year. Most of our plans are fairly simple with ownership as we specialize in small plans (I don't think we have a single plan that's large enough for a large plan audit), so it's nearly always just some split between a few employees. 

This company sent over a cap table, showing columns for common & preferred stock ownership, outstanding and diluted shares, etc for ~60 lines, some of them being employees holding stock, but also a large number of them (40+ or so) being holding firms or other entities that aren't individuals. A few questions.

1. When calculating ownership for 401(k) purposes, is ownership specifically voting stock? Their preferred shares don't have voting rights, so that would impact how ownership % is calculated (CS / total CS vs common & preferred / all stock). 
2. How should we handle the potential of control groups? While unlikely, if a combination of those holding firms all held interest in another company that added up to 80%, couldn't we run into a control group issue that we'd have no way to know about?
   1. In this case, I believe the 80% ownership for controlled groups is specifically between 5 or fewer individuals/entities. If the 5 largest stakeholders don't add up to more than 80%, would it be safe to assume we're safe in this regard, as no combination of 5 firms could hit 80% anyways?
3. If someone who held stock at this company also was an owner of any of the holding firms, would they then need attributed ownership from that? E.g if John Doe owned 5% of the shares of this company, but also held 50% of ABC Holdings, which held 10% of this company, would John's ownership be 5% (direct) + 50% * 10% = a total of 10% ownership for plan purposes?

While the odds of any of this being particularly relevant is fairly low, especially in the small plan world, I'd prefer to have a solid understanding of their plan ownership; any input would be appreciated. Thanks!

 

I have a situation with an application for 5500-EZ penalty relief program and I would very greatly appreciate any comments, suggestions, or advice from anyone who can help:

My wife and I both opened separate solo 401(k) accounts for our respective sole proprietorship businesses. Mine in 2011, hers in 2016. We were each the only participants ever in the respective 401(k) plans. We were each the only participants in the respective businesses. There was no overlap and no involvement of one spouse in the other spouse's business or 401(k) plan. We both recently terminated our sole proprietorships, terminated our respective 401(k) plans, and zeroed out the balanced.  My wife took a distribution of about $16,000 (she is over 65)  and I rolled my 401(k) balance into my individual rollover IRA.

My wife had a total of about $16,000.00 and I had a total of about $760,000.00. We both terminated our respective plans prior to the rollovers and we both have recently filed Final Form 5500-EZs in early 2026 on a short plan year. It was my wife's first-ever ("first and final") 5500-EZ filing because she always had a low balance, but I have been filing them since 2018, since I have been over $250,000 since then. 

·     Only after the closures did we learn that we may have run afoul of IRS regulations because for several years while we were operating our 401(k) plans, we had minor children under the age of 21.  Therefore, we were actually part of a "controlled group" and my wife was obligated to file 5500-EZs for her plan for 2018, 2019, 2020, 2021, and 2022.  (I have filed every year as required once over $250,000 from 2018 through to my final short year return zeroing the plan out in 2026.)

·      As soon as we realized this, we also learned of the Rev. Proc. 2015-32 Penalty Relief program and put together a package including the $1,500 check to the U.S. treasury; transmittal form 14704; and her delinquent 5500-EZ returns for those years.

·       She also included returns for 2023 and 2024 due to an oversight/fatigue as we no longer had minor children under 21 as of 2023, so neither 2023 nor 2024 were actually necessary.  But she included "3H" in the plan characteristics section, "controlled group," even though for those years, we were no longer a "controlled group."

·        My wife's first and final 5500-EZ short year filing was filed on Efast on February 10, 2026.   The penalty relief application was sent by certified mail return receipt requested to the Ogden Utah location on Feb. 13, expected delivery date February 17 2026.

·         She has never been contacted by the IRS about any delinquent returns--no CP 403, no CP 406, definitely no CP 283.

·         So, after reviewing copies of the submission dozens of times, over the past couple of days, everything looks properly completed, all forms signed, the red ink legend prominently displayed over the form title on each of the EZ-5500 forms.

·          But then today I noticed for the first time that the $1500 check was post dated 3/13/2026 rather than 2/13/2026.  Again, fatigure, stress, and just a mistake.

·Our questions are: 

·       1.  What is the implication or possible impact, including any penalties or disqualifications, of including returns for 2023 and 2024 which were not actually required, and incorrectly including the 3H controlled group description code?

·       2.  Will the IRS reject her application due to inadvertently post dating the check?  She has plenty of funds in her checking account and the check will not bounce IF it is deposited by the IRS.  Also, her checking account is with Chase and the internet indicates they don't care what the date is on the check, they will honor it even if post-dated.

·       3.  What is the likely timeline on getting a CP 283?  Will we at least get the CP 406 and 403 first?   About how long will the penalty relief process take?

·       4.   If the application is sent back to her for having a post-dated check and she has to re-submit, what are the odds an intervening CP 283 will be generated based on her filing of a first and final return and/or the penalty relief request?  I.E. will that trigger an automatic, quick CP 283 before her penalty relief application can be processed and approved, skipping the 403 and 406?

·       5.  Is there anything we should do about the post-dated check?  Should we try to call the IRS office in Ogden Utah and explain the check is good and should be deposited and that the post-dating was a mistake?

·       6.  Anything else she/we should be doing, or just sit tight for now?  Any other advice or suggestions any of you have will be greatly appreciated.

for Employee Benefits Security Administration [EBSA] (CA / FL / GA / IL / KY / MA / MD / MO / NY / PA / TX / WA)

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Participant wants taxes withheld on a 2025 excess deferral.  The excess will be Code P. Is tax withholding applied to 2025 or 2026 tax return?  Any citation would be helpful.

This issue is the bane of my existence. A plan participant terminates on 12/26/2025 and receives a final paycheck on 1/3/2026.  The paycheck is for hours worked in 2025.  They don't work any hours in 2026.  The plan is a safe harbor 3% non-elective plan.  Are they an employee in 2026 who is includable and should receive contributions or because they aren't actively employed in 2026, do you treat them as not existing in 2026 for Plan purposes?  

The paycheck is $50.   

Do you allocate the $1.50 or do you just ignore it?  What if the plan doesn't allocate contributions until into the next plan year (2027) and the participant already took their distribution.  Do you actually have the Plan Sponsor fund that $1.50?

Do you ask your plan sponsors to provide you any compensation someone in this scenario earned and pick it up in 2025?

I believe the technically correct to the penny answer is they get the $1.50 in 2026, but what are you doing in actual practice?  Do you have a threshold for what you pass on providing?  

Same scenario, but the plan is an ADP testing plan.  Would you pull that person into your testing?  

I realize that common sense isn't all that common, but this is an area where it should be applied, IMO.  This is just such a pain to administer and am curious what others do.