David D

Since Super Catch Ups first appear in the Secure 2.0 amendment, your plan is bound by how it was operationally administered for 2025 and up to now in 2026. If you did not allow Super Catch Ups in 2025 you would not be allowing them in 2026 and have or will adopt that amendment. If you did allow them in 2025 and want to stop them now, you would need to provide a 30 day notice and modify your Secure 2.0 Amendment to allow them for 2025 and most of 2026 before you did not allow them.

I believe the language in EPCRS requires the employer to make the deposit, but at time of payout you can either wipe it out with the distribution fee or forfeit it. It still needs to be made as far as I have understood that. I don't know how many total participants the plan has, but is making the required corrections, terminating and distributing by December 31 and waiting till the beginning of 2028 to start a new plan the best approach? Will those participants actively contributing be receptive to losing deferrals for all of 2027? Is the employer in a State that has a mandated state retirement plan they will need to join for 2027? Just some things to consider.

In reality, they do have a receivable so a final 5500 should not be filed. If they do not make the required safe harbor by 12-31 (assuming 12-31 PYE), then the plan must be tested for ADP. They should be directed to ERISA counsel as this is a plan disqualification issue. Maybe address with them the 1099's being filed as taxable distributions rather than rollovers and the 6% annual excise tax for ineligible IRA deposits. Also, DOL will pursue ERISA Fiduciary duty failure and will target named and De Facto Fiduciaries and collect the money via federal civil litigation most likely against all the former shareholders. IRS can also go after them under IRC 6901 - if a corporation dissolves and distributes its corporate assets before paying it's debts. I also believe filing for bankruptcy does not protect the shareholders. This is a mess. Wonder if any participants have questioned the lack of Safe Harbor to the DOL yet?

Last time I looked at their website they were only offering various IRA's, SEP's and 403(b) services. I don't recall seeing any minimums, but I did not think they were doing any other type of record keeping without going through Ascensus.

The latest possible funding date to be legally recognized for the prior plan year is governed by Treasury Regulation Section 1.415(c)-1(b)(6)(i)(B). Anything beyond the 30 days is an annual addition for the next plan year, so the plan will not pass testing. (I was using 11g as the timing of the 15th of 10th month in 401a4, but you technically can go 30 days beyond that. So 10-15 for partnership or S Corp, 11-14 for C Corp or Sole Prop. .

October 15 is the deadline (think 11g amendment). If not funded by October 15,then a VCP is needed as the self correction window expires 10-15.

For those TPA firms that only use the services of an enrolled actuary for doing the actuarial valuation, SB and PBGC if required, but your firm is responsible for the compliance testing, what software do you use? Is there any standalone testing software that you have found to work, or do you primarily do the testing in some variations of excel? Thanks!

@fmsincDavid - That is true with 401k plans that are primarily now on a record keeping platform where each participant can log in at anytime to see their account balance. But that was not true before 401kl plans became popular, nor true for those employers that have not added a 401k but simply have a trustee directed DC plan. In those plans, usually a TPA does the accounting once a year, or quarterly on paper, but the money is still all in one pool that everyone shares proportionately in the gains/losses of the trust. In those instances the interest is not credited back to the participant, but goes in to the trust and everyone shares proportionately. Currently in our office I would say about 25% of our plans still operate that way. If you prefer not to refer to it as loan, it is money that the participant was able to take out of the plan as a tax free distribution and pay it back over time. In the event the plan terminates, the loan becomes payable in full, and if not paid back, the tax free distribution now becomes taxable.

If the plan is frozen and zero accrual (meaning 401a26 is no longer an issue), the the 3% Safe Harbor becomes the minimum. If not a safe harbor, then the DC minimum becomes the minimum so it could be less than 3%. The "trap" that sometimes comes up is when the DB plan is a standalone, and it's "frozen" only applying the meaningful benefit to all to minimize future contribution requirements. In that case, the key employees get the 1/2 percent minimum accrual, but the non keys must get the 2% accrual. This is never a good result.

It does provide business opportunities for TPA's, but how does a TPA find out someone has one of these plans? As Bill mentioned, typically these plans come to a TPA when someone realizes there are issues that need to be corrected. "Free" 401k plans are really just a free document. They do not involve any compliance, including 5500EZ filing if needed, contribution limit monitoring, loan monitoring, etc. More often than not, those plans are brought to a TPA when either they are in need of a cash balance plan, or, if someone advising the client realizes there is an issue. Often it is at that time that these business owners learn that total business income does not equal plan compensation for contribution limits, that plan loans are not just you can take the money when you want to do something else with it, that you don't avoid the $250,000 limit by having 4 different plans each under that limit, or sometimes even as simple as "owner only" does not mean only the owner is the one contributing. Unfortunately to many, the free aspect outweighs compliance.

If you file the 1099-R electronically there is no need for a 1096. If you are not filing electronically I think you will only be able to get a 2019 1096 by requesting one from the IRS. Yes, the participant will owe taxes and penalties on the $75,000 (unless they actually reported it). I am certain the auditor is aware of the significant potential liability.

I think the Safe Harbor "Maybe" plans were much more prevalent prior to SECURE. Now that the retroactive amendment to 3% SH Non Elective if done by 12-1, or 4% if after 12-1 that is how most now operate. For those plans you issued the "maybe" notice by 12-2-2025 for the 2026 plan year and the definite notice by 12-1 -2026, then the next plan year notice was due by 12-2. Most document providers combined that into one notice that was due 12-1. I think most are no longer doing that as they can now choose to adopt a Safe Harbor for the plan year they are in as long as they do it by 12-1 for the 3%, or later for the 4%. SECURE also eliminated the notice requirement for the SH Non Elective, but in practice most still provide it because in that notice it says they have the right to remove the SH mid year. If you elect not to provide notices then you can't amend mid year to remove it (other than proving economic loss).

The client may want to get some legal counsel on this. I believe once the check has been written, you can not undo that. Revenue Ruling 2025-15 confirmed that once a check is written the distribution occurred. That re-iterated what an earlier RR said that simply not cashing a check does not undo the distribution. I think IRS has also opined that as long as it can be confirmed the check was sent to the correct address, that is constructive receipt.

When a plan terminates, the loan becomes due. Since the plan no longer exists, as it is an investment of the trust, all trust assets are distributed to close out the plan. The loan is an obligation of the participant and is non transferable, but I have seen on occasion that the QDRO attorney specifies how the split is determined when loans are involved.

I had the same reaction when I first came across it, but each line where you can make a choice starts out with: An Eligible Employee.... (which are defined earlier with Union, non resident and all the rest) Been too many years, I don't remember why the inconsistent language We wait on Albany Consultant to hopefully shed some light.