I should know the answer to this but...

Participant hired 7/26/2022, plan has 12 month/1000 hours, did not work 1,000 hours in 2022

Quarterly entry dates, wouldn't he enter 10/1/23?

Client completing application now, under the impression he'd be eligible 7/1/24

Can't the participant initially sign up for "x" % to in effect make up for 2023, then back down the %.

Plan calls for changes at any time.

And of course, he's be due the 3% safe harbor for 23.

Does anyone have a sample notice for the replacement of a SIMPLE IRA plan mid-year with a 401(k) plan? Is there one from the IRS?

Anyone have one they have worked up? 

1. SIMPLE is being terminated 

2. Safe Harbor Notice

3. Pro-rated deferral limits based on the effective date of the termination/replacement?

4. Anything else? 

I have samples of 1 and 2, but if someone else has a combination sample that includes item 3, I would love to see it. 

I know based on Secure an employer needs to allow long-term part-time employees to contribute into the 401(k) portion of the Plan.  I also know they can keep them out of the discretionary employer contributions.

The question that came up is if these participants are required to get the Safe Harbor Match?  I believe the answer is yes, but I'm second guessing myself now.

Client has a plan that runs from 10/1/2022  through 9/30/2023.  Do I use the 2022 compensation  of 305,000 or 2023 compensation of 330,000 to calculate the safe harbor for the owners?  I can't seem to find that anywhere quickly.  

Hi

I have not had one of these in years and just tried to research. I am not sure if the software is doing proration correctly (may it does - I am not sure)

CB plan and the company (sole-prop), both start 5/1/2024 with 12/31/2024 year end.

Owner is 60 years old.

Has 450k of net c income for 2024 (after 1/2 SE adjustment)

What do you pro-rate?

401a17 limit 345,000*8/12=230,000/12= 19,166.67/month

415(b) limit 275,000*8/12=183,333/12= 15,277.78/month - maximum 2024 accrual is 1/10= 1,527.78 so any cash balance pay credit equivalent cannot exceed this??

What am I missing?

Thanks

My husband worked for a company 2 years ago and has a 40% vested balance in said ESOP account. He hasn't been with the employer for 2 years and never go the option to withdraw or rollover the esop balance. I have read that you cannot do anything for 5 years with some places but per their plan document it doesn't state that. I have uploaded their plan summary. if you decide to look at it refer to page 11 and reference employee termination for balances exceeding 5,000 and before retirement age. As I know nothing about these types of accounts any insight would be appreciated. 

Summary Plan Description Randy.pdf

My attorney sent my case to a firm they sub QDRO’s to which has turned into a nightmare experience. It’s been 14 months since the judgement was signed and I’m now facing yet another problem with the qdro attorney. 

The court order stated that my ex and I were to split the fees for the QDRO. I paid both of our portions in April 2023 in order to get it started right away since my ex said he couldn’t afford it. This divorce is now on year 18 since I filed in 2006. It has been exhausting, stressful and expensive. 

My judgement states in two separate sections that I’m to be paid a lump sum of  $108,000 for spousal support arrears in addition to community property interest of my ex’s 457 deferred compensation plan.

The first problem I faced which took six months to resolve is the QDRO attorney said the judgement wasn’t clear. The writing of the judgement was very specific regarding what I was awarded so I don’t understand why they claimed it wasn’t clear that I had a community property interest in the 457 plan. I even have letters from the qdro attorney dating back to 2021 where they acknowledge that I have a community interest in the 457 plan. 

My ex agreed to pay the taxes for the $108,000 verbally to the LA City Attorney which was then put in writing of a stipulation for him to sign. The QDRO lawyer then wanted additional money to address the spousal support arrears which I paid in February.

Eleven months from the date of the judgement my ex called the qdro attorney and claimed that he paid me $8,000 in 2014 when he took out a loan from his 457 plan in the amount of $16,000. The qdro attorney asked him to submit proof to this claim and then he submitted a xerox copy of his March 2014 bank statement which showed he made a withdrawal of $7,000. It didn’t show a deposit to my bank account nor a check cashed by myself yet the qdro attorney decided to accept this as evidence of payment to me. 
 

Is this even legal for the qdro attorney to accept my ex’s claims and flimsy evidence? My understanding is that a qdro lawyer’s job is to follow the judgement exactly how it is written and complete the calculations and submit it to the city attorney for payment.
 

When I wrote the qdro attorney addressing my ex’s claims I was told that they are neutral in any matter and if I have a dispute I need to bring the matter back to court. If the qdro lawyer is neutral why wasn’t my ex told the same thing regarding his claim?
 

It’s bad enough that the qdro attorney entertained my ex’s claims and didn’t advise him to bring his disputes back to court. This qdro attorney has now accepted the bank statement as proof and completed calculations and a statement saying that I have zero interest in the 457 plan.
 

This bank statement would never hold up in a court of law as proof of payment. My ex didn’t even remember that he purchased a truck in cash from his nephew at the time the withdrawal was made from his bank account. I never received any money from my ex. His actions have shown repeatedly that he’s ignored every court order to pay me since 2008. He never would’ve offered me half of any money he received during the course of our divorce. 

And now the qdro lawyer put forth the wrong amount for the taxes on the stipulation for my ex to sign. My attorney brought this to the attention of the qdro lawyer along with highlighting that their job was to follow the court order without bias. The qdro lawyer hasn’t responded though.

What recourse do I have in regards to this QDRO lawyer’s actions? 

In addition, I have incurred $4,000 in lawyer fees to my attorney just to deal with the problems caused by this QDRO attorney since the date of the judgement on April 19,2023.
 

I truly appreciate any advise on this matter! I’m so frustrated and long to be done with this divorce. But, I also feel that it’s only right and fair that the court judgement is followed. 
 

Does it matter if performance-based compensation is substantially certain to be paid at the time of the deferral election?

I know the regulations only state that it cannot be considered performance-based compensation if the performance criteria are substantially certain to be met at the time the criteria is established.  Does it matter if the criteria is substantially certain be met at the time of the election?  For example, if the criteria is not substantially certain to be met at the time the criteria is established, but all the criteria is met by the time the election is made (i.e. 6 months prior to the end of the performance period), is the compensation still performance-based at that time?

I could swear I saw something about this in the past, but now I'm only seeing guidance talking about the time the criteria is set, not about the time of the election.

Thanks in advance!

As a resident physician of a NYS hospital, making only 75k per and loaded with 500k of debt, my son-in-law made a one-time only, irrevocable election on the 403(b) plan of just 5% during the first day of orientation, without realizing what the future consequences could be. Now 5 years later, after finishing a one year fellowship in Vanderbuilt Univ Hospital in TN, the same NYS Hospital has offered him a lucrative contract as a board certified physician. However, he didn’t even recall signing the original irrevocable 403(b) form on his first day 5 years before, nor did anyone explain what the loss consequence could be if he later took a full position after residency. (He was obviously very poor, struggling and loaded with debt at the time he signed.) Is there any way, or is there any precedent in altering this one-time only election. 

Hello All,

Yet another chapter in the ongoing saga of "Defined Benefit Issues". Question: Can a primary beneficiary, or for that matter ANY beneficiary have their right to a "benefit" voided/rescinded/revoked/etc. if said beneficiary makes a material misrepresentation ( signed written statement/assertion under penalty of perjury) to the Plan Administrator AFTER the original Plan Participant has passed(died) and before a  "payout" has been made by the Plan/Plan's Administrator  under the terms of said (ERISA-covered) Defined Benefit Plan ? Any thoughts and especially legal case citation would be IMMENSELY appreciated! Thanks! 

Long term permanently disabled since childhood, on SSI, full time worker for client company.  We just installed a new 401k plan at the company.  Should the disabled employee participate?  Our fear is that participation could end up costing the employee on his SSI benefits.  That would be a bad deal for the employee, even with a very generous match.   But I can't find anything saying that for sure.  Anyone ever deal with this before?  Thanks.

Asked to consult on this, and it is certainly something I've never heard of before...

Business (don't know yet if it's a partnership or an S-corp) is owned by two brothers.  Maybe 50/50.  They have no other employees.

The financial advisor set each one of them up with an "owner only 401k plan" from a brokerage house, each in one brother's individual name.

My first thought was "Hey, that's not right."  And, sure, it isn't.  But... is there a way that it COULD have been done correctly?

A business can sponsor more than one plan.  Each plan excludes... the other brother, an HCE.  If they had set up the plans as Business Plan One and Business Plan Two, there's no coverage issue, no matter what kind of [defined contribution] contributions are done.  And then you have... two legit one-person plans?  This sounds crazy.  Sure, you'd have to start filing two 5500-EZs when the combined total is $250K+, but can you really get away with this for a few years?  Is it worth it?

Whoa.

Of course, it wasn't set up correctly, and each brother has $400K+ in their "own plan" and no 5500-EZs (or -SFs) have ever been filed, so we've got a bunch of things to look at and fix, but... is this a legit strategy if done correctly?  I know, if you think you've got a brilliant new idea, just ask the people who have been filed/gone to jail before you, but...

Plan has been operating like an ESOP by issuing participants employer stock (not publicly traded) that is not funded.  When an employee terminates his / her employment, the stock is not returned to the company but is reallocated to remaining participants.  No written procedures on how the stock is managed.  Now having trouble paying distributions.  

Can such issues be corrected although not specifically contemplated under the VCP or DOL VFCP?  

We have a calendar year 401k plan that through 12/31/23 had a 1 YOS/1000 hours requirement to enter the plan, with immediate entry upon satisfaction.

Effective 1/1/2024, the eligibility was changed to 1 YOS/500 hours with monthly entry.

This is small plan and through 2023, several employees hired in 2021 and 2022 did not meet the 1 YOS/1000 hours in any year (or calculation period).  But they did have over 500 hours in those years.

Ignoring the LTPT aspect for now, would they be "regular" participants as of 1/1/2024 (since they previously met the new 1 YOS/500 hours requirement) or would they still have to meet the new requirement (1 YOS/500 hours) in 2024, and become eligible 1/1/2025?

I think it would be 1/1/2024 entry since they met the new requirements on 1/1/2024.  

Thank you for any replies

I'm having a brain cramp here.  Joe owns 100% of company A, which sponsors a DB plan - he is the only employee.  Joe also owns 79% of company B and the other 21% is held by Bob.  Joe is the only employee of company B.  A and B are not part of either a controlled group or an ASG.  Is Bob permitted to borrow from the DB plan sponsored by company A?

Here’s my friend’s situation:

She is her S corporation’s 100% shareholder. She is, and always has been, the corporation’s only employee. For many years, her § 401(a)-(k) plan has every year received her maximum (including age 50 catchup) elective deferrals as Roth contributions. Every year, she provided herself a nonelective contribution of 25% of compensation. These two subaccounts are a seven-figure sum.

She received Vanguard’s letter “Your small-business retirement account is moving to Ascensus[.]” She would prefer to keep her § 401(a)-(k) plan at Vanguard, but that’s impractical.

She would prefer no more than small accounts at Ascensus. Why? According to Vanguard, the Ascensus accounts will not be displayed in her Vanguard website. All her investments are with Vanguard. She likes using Vanguard’s website as a one-stop.

To get the desired display, she is considering a rollover (she’s distribution-eligible) of all but about $1,000 of her nonelective contributions subaccount to a new non-Roth IRA, and a rollover of all but about $1,000 of her elective-deferrals subaccount to a new Roth IRA.

She would do this before the mid-July transition to Ascensus.

The reason for leaving non-zero balances in her two § 401(a)-(k) subaccounts is so she’ll get recordkeeping on the terms Vanguard arranged with Ascensus. She intends to continue her business, and to continue the maximum elective-deferral and nonelective contributions.

After each year’s contributions, she would direct two partial rollovers into the two Vanguard IRAs, which would never get any contribution beyond rollovers from the § 401(a)-(k) plan. She would leave in the § 401(a)-(k) plan enough to pay Ascensus’ fees.

BenefitsLink neighbors, does this work?

Any reason my friend shouldn’t do this?

Any caution I should explain?

The employee (past NRA) retired in early 2024 and due to various business needs the employer reached out to rehire the employee on a part-time/on call basis.   The plan provides an allocation waiver for retirement for profit sharing allocations.   There is only 3 months between the retirement date and rehire date.   The employer wants to treat the compensation earned through the retirement date as eligible for profit sharing under the allocation waiver and all income earned upon rehire would be subject to the 1000 hour and last day allocation conditions. 

The plan is not top heavy and uses new comparability with each employee in individual allocation groups and combined tested with a Cash Balance plan. 

Assuming no other testing concerns, would that split allocation be allowed?  

And considering potential testing concerns, the only issue I am seeing is if the allocation based on compensation through retirement does not satisfy the gateway minimum based on full year compensation, the full year compensation gateway minimum would be required.    

A terminated participant in Michigan has an outstanding loan.  Michigan withholding is 4.25%.  Do I also apply the withholding percentage for the state to the loan balance when calculating the state withholding?

I was reading an article in today's newsletter about the topic and came across something that I wanted to double check.  In not so many words, it said that if a 401(k) plan offers a life annuity distribution option, a married participant must obtain spousal consent for that type of payout.  Is this everyone's understanding?  If this is the case, I imagine amending the plan to remove this option would be a BRF violation.