erisageek1978

So even if I pass the ratio percentage test, if i'm only passing because I count the short service lower paid NHCEs and short service let's say have less than 1 yr of service, then this is problematic. But if the less than 20K guys are long term, then I'm ok?

Client has a plan that excludes the following from eligibility: highly compensated non-key employees, key employees making less than $100K and non-shareholders making more than $28,000. Everyone else is eligible and gets a 4% match. Is this discriminatory on its face? seems like anyone in the middle wouldn't get the match

Client filed for bankruptcy, has an underfunded plan, so PBGC is assuming administration/becoming trustee of the plan. A final IRS Form will need to be filed. Who files this? Is it the bankruptcy trustee? PBGC says they would not file, although they would file the final 5500. Thanks

Plan was proposed to be terminated in a standard termination but company since filed for a bankruptcy. Per applicable regs, lump sums of more than $7,000 are no longer permitted, but plan can pay out lump sum benefits of less than $7,000. If a participant has more than $7,000 in their benefit account, but requests a lump sum payment and is willing to forfeit anything in excess of $7,000, can the plan sponsor pay out that lesser amount?

Lou S. The plan trustee "froze" the assets so there would be no withdrawals during this interim period but he did so not on grounds of any legal advice, he just thought that was "best." The interim administrator (ADP) says they were told not to make distributions so they refuse to. Legally, I'm torn between the fiduciary obligation to administer the plan and the issue of fees having to be paid and how distributions now will shift the burden of those fees to any remaining participants (some of whom we told they could not withdraw at the moment). Then, there is the person's particular circumstance with this person's wife being terminally ill. And of course, we're waiting to get the QTA appointed.

justanotheradmin thanks. That was precisely my concern, that this person will withdraw and the other participants will bear the costs of the fees (QTA, legal etc) disproportionately. Unfortunately, this gentleman advised that his wife is terminally ill and he needs the money, and since the plan termination has not been initiated, is there a duty to continue to administer the plan and allow him to do the rollover?

I just had a participant call and ask for a full rollover to an IRA. Since we're pending appointment of a QTA and no termination has been initiated, can this rollover be done?

Hi Peter. It's chapter 7

Can distributions be made out of a 401(k) plan when the employer is in bankruptcy? QTA has not yet been appointed yet (hearing next week). All funds have been frozen pending appointment of the QTA.

@Patricia. Thank you. Yes, this is a pre-approved plan, and yes currently the allocation is 1000 hours of service in a plan year for the employer non-elective. So yes, I agree I believe they can do "last day of the plan year" but not what they're trying to do -- which is a requirement that the e/e be employed on date of contribution.

yes i meant defined benefit plan.

If I have an executive making $500 a year, and he participates in a 403b plan, isn’t the employer nonelective contribution (assume 5% of base) limited to the $340,000 401(a)(17) limit? In other words, he contributes $23K in employee contributions, plus $7500 catch-up, and the company does a quarterly nonelective of 5%. Currently, they’re contributing 5% of $500,000, but shouldn’t it be 5% of the $340,000 max?

Client initiated a standard termination of a 403b then filed for bankruptcy last week. NOPBs were sent out earlier and many participants chose lump sum payments. Some were paid out before the filing, others made requests (8 requests) but no payouts have been made on those yet prior to the bankruptcy filing. Do the lump sum payouts have to end on bankruptcy filing? or can the lump sum payouts still be made if over 80% funded?

If a bankruptcy trustee is involved in the abandoned plan termination (at the initial stage, until a QTA is chosen), can those fees be added to reasonable expenses to be paid out of the pension assets (under the abandoned plan regs) or does the trustee only get paid as "trustee time" paid through the bankruptcy proceeding (where comp is statutorily determined by a formula based upon money disbursed)?

Employer wants to limit contributions to situations only if employee is employed on date of contribution. Currently, employee vests in a contribution and then the contribution is made let's say 1 month after the vesting date. Employer wants to amend plan so that if the employee is not employed on date of contribution, then they don't get the contribution. Is that even permissible ?

Employer going out of business that has two plans: 403B and a pension plan (assume 100 participants or more). The 403B plan year is the calendar year. The pension plan year ends on June 30. Is the employer required to have an audit performed for each plan for the following time periods? 403B for CY2024 (plan terminated 7.31) ( I believe YES) and pension plan for plan year ending June 30,2025 (I assume also YES). Thanks.

Employer is winding down, and let go off an employee prior to termination of the plan. Employer wants to re-hire the former employee on a P/T or TEMP basis. The former e/e is a pension plan participant, is now a retiree and began monthly pension payments in July. If rehired and plan was in effect, benefit would be suspended. Can the employer re-hire this ex-employee without impacting his monthly pension payments, now that the plan is terminated?

@CuseFan can you clarify your statement: "If he has not yet returned forms and commenced then does this matter? Maybe, but most likely not - you mention "rolling out" which is only available if if a lump sum is paid, and again, since we're in July, whether he retired/terminated 4/22 or 5/18 doesn't matter for a lump sum (unless it also affects the actual calculation of the benefit)." In our case, forms were processed but not returned and benefits have not yet commenced. He would be taking a lump sum, but hasn't taken it yet. Why doesn't it matter for a lump sum when he is terminated (4/22 or 5/18). If paperwork was processed after 5/18, I'm told interest rates would affect the amount of his payout. Thanks

ok thank you

Hi Ken. It does affect the actual calculation of the benefit -- the pension amount would decrease due to different interest rates if new paperwork is issued. Does that change your answer in any way? if the one day he worked on 5/18 is enough to treat him as re-hired (thus no break in service) he's not considered terminated until after that date. Thoughts? Thank you

Employee is terminated on 4/22/24, his pension paperwork is produced with a Benefit Commencement Date of 5/1/2024. He is then asked to work on an “on-call” basis, so a job is opened for him, but he only works one day for 8 hours on 5/18/24. Plan is now terminating. Plan doc says in order to be considered rehired, e/e has to work 40 hours. Under this defn, 5/18 would not be considered re-employment and he could go and roll his money out. But then the plan doc is vague on how employment is defined (just say employee is any person in the employ of the Company). For vesting purposes, he has not incurred a break in service. The definition of "Eligible Employee" excludes temporary workers. Can he take action on his pension as of date of his termination (4/22) or not until he's done working (i.e., after 5/18?) Is he is considered re-employed on 5/18 because he's on the books with a job set up? Or does he actually have to work 40 hours a week? If the plan is vague do I apply common law principles to decide whether he's a temp or an employee?

Is plan administrator required to notify PBGC upon realizing that plan cannot be terminated using standard termination, because it is underfunded and will be filing for bankruptcy. Client is going out of business and we've been in talks with PBGC and on track to do a standard termination (per PBGC's suggestion and also because it was possible we could fund the plan), but now we know we will be underfunded. Do we have to let PBGC know that we know for certain now we're underfunded? Proposed termination date is 7/31.