In House Counsel

We have inadvertently allowed employees to make pre-tax contributions to a SEP-IRA. Is there a way to correct this problem without requiring distributions of the deferrals?

Very helpful - thanks!

We have a DB plan that inadvertently paid a lump sum to a "restricted employee" (i.e. one of highest 25 paid) without first meeting the conditions of Rev Rul 92-76 (eg putting money in escrow, pledging additional property, securing a letter of credit). Any ideas what an acceptable correction method would be?

My thinking is that this really isn't an "overpayment," since the participant is entitled to the accrued benefit, just not in the lump sum form at the time they wanted it. Since the 110% test is part of the 401(a)(4) regs, this is a non-discrimination failure. I'm thinking the best way to correct this is to try to comply with 92-76 retroactively. Putting the money in escrow probably wouldn't work after the distribution is made, but securing a letter of credit to repay if needed might work. What do you think?

Wondering if you ever got feedback on this, as I have the same question.

Thanks for the confirmation!

In 2023 the DOL revised the methodology for counting participants for the small plan audit waiver so that only account balances must be counted. Does anyone know if there has been guidance as to whether that new "small plan" definition would extend to the safe harbor for remitting elective deferrals?