David D

5500 EZ's must always be filed in the year the plan is terminated and distributed, so you would be filing both a first return and a final return in one filing

I believe the issue here is the limitation year. You cannot have a limitation year that precedes the date of incorporation, so that first year would be pro rated.

Absolutely. My guess is that somewhere in the doc it would address self employed individuals, but not certain

You also need to check how the plan document defines After Tax Contributions. Many I have seen say that After Tax Contributions are made from Gross Wages paid to the employee during that tax year and withheld from pay, not submitted from other funds the participant may have access to.

I have found it most practical to create the document closer to the time the client is ready to fund. I can't tell you how many plans were created in December when the client had tons of money, only to find out later when it was time to fund in September that circumstances had changed, and they did not have the needed funds.

Keep in mind with FICA taxes, Gross Wages of $23,000 will result in a deferral amount less than that, so that is where there is a little room for a PS allocation.

The extension applies for the deduction and the PBGC premium payment deadlines, but does not apply to the minimum funding deadline.

This would definitely be the employers decision. And it would seem you would need to have the 2023 Form 5500 amended if you want to reflect participants with account balances to be less than 120 at the end of the year.

The Discretionary Match notice requirement was part of the Cycle 3 Pre-Approved language. IRS originally wanted to eliminate the discretionary match altogether as they felt it did not satisfy the definitely determinable requirement under Treasury Regulation §1.401-1(b)(1)(ii). They compromised and allowed it with two parts 1) The Plan Sponsor communicate in writing to the Plan Administrator/Trustee, and 2) The Plan Sponsor/Plan Administrator communicate the match to the participants so that the match is definitely determinable to participants. I believe that language is in all Cycle 3 documents.

A word of caution, only because I have seen this misunderstanding before (more than once) - just because a person takes a hardship that does not mean they stop making loan payments.

I seem to remember that if a participant has 402g excess from 2 unrelated employers, once the April 15 deadline is missed the money cannot be returned. That's the double taxation of being taxed in the year it was made, then taxed again when it it ultimately distributed once a distributable event occurs. I am not aware if that rule was recently changed. I am not clear if the medical K plan and the hospital 403b plan represent unrelated employers from the original post.

@truphao Same here. We often are forced to set up a new PS just to accommodate what the client desires for the current year (which is almost always after the year end). We typically then merge the new plan we created into the existing one in the following year. The client then pays administrative fees for 3 plans for 2 years, but the benefit of the combined plan testing results outweigh the cost, especially when running the disaggregated testing if the existing plan has earlier entry dates than we prefer for the CB plan.

@Peter Gulia I imagine it runs from one extreme to another with what a TPA tells their client on the plan(s) they have designed. For me I am mostly working with DB/DC combo's and I have found it is best to explain to the client as much as possible how the Cash Balance plan works - who gets a meaningful benefit, who gets a flat dollar amount or percentage, who gets nothing, etc.. Of course, if I ever take what I feel is an aggressive position on something I do bring that to their attention and give them the choice on which way they want to go, but not sure what others do.

@John Feldt ERPA CPC QPA I definitely see more of the adoption of a PS only plan in the last few years as many more employers have 401k plans than they did back when I first encountered this. So it seems the position you are taking is that while you are granting service for vesting based on the predecessor plan rules, you can use a different vesting schedule in the new plan to count that service towards. I have not seen this approach personally. As I said, I didn't realize I and others were taking the conservative approach.

@John Feldt ERPA CPC QPA@truphao My apologies, I never saw notifications that either of you had replied to me. This issue first came up for me more than 15 years ago when I was working with a firm that would often get CB plan referrals from an ERISA counsel firm that was hired to “correct” many DC plans that had been administered by a “bundled” provider. From what I remember their opinion was that if essentially the only change from the existing plan to the new plan was the allocation method, then it in effect was an “amendment” to the “Plan” and that the vested percentages were protected until IRC 411(a)(10). Obviously, any new participants going forward could have the new vesting schedule, but those already vested in the existing plan would be grandfathered. I have not worked for that firm since 2017, but the 3 actuarial firms I currently work with have taken the same position. In reading the comments now it seems that this is a very conservative position and perhaps not the norm in the business? For me I think I will continue in the approach I have been accustomed to so that in the event of audit, I don’t have to defend the vesting position. It was also their opinion that a new plan of a different type does not need to protect vested percentages as the new plan type does not have anybody previously vested in that plan type.