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Lou, thanks for the reply. Can you point me to any published guidance on this?

The discrimination is evident when you have an HCE who has not satisfied mas age and service and has a high ADP, while there are enough NHCE's that are carved out whose ADP's if included would cause the plan to fail. There is also what I would call discrimination, when an HCE who has not satisfied max age and service and has a very low ADP is used to pass testing while similarly situated NHCE's are carved out. The ADP and ACP tests are the only tests for which this selective exclusion of only NHCE's is permitted.

I agree that Bri is correct. However, I still don't understand why the "carve out" is allowed as it allows for discrimination in favor of HCE's that normally would not be allowed in any other testing.

An amendment to correct a 401(a)(26) failure, still has to pass 401(a)(4) on a stand alone basis. In other words, the corrective amendment cannot discriminate in favor of HCE's. Of course, the entire plan must still pass 401(a)(4) taking the corrective amendment into consideration.

No, if you exclude the NHCE's who have not met the max age and service, you must test them with the HCE's who have not met max age and service. You either exclude all who have not met age and service or include all who have not met age and service.

I have a client with both a cash balance and 401(k) that would like to invest part of each plan's assets in I bonds. Is this a permitted investment for a qualified plan?

We provide back room actuarial services to over half a dozen TPAs that don't have enrolled actuaries. We have several levels of service from certification only ti complete valuation and government reporting. We have 3 enrolled actuaries which each have over 10 years of experience. If you would like to discuss how our firms could work together to service your growing defined benefit business, please let me know a good time to contact you. Steve J Persons, MAAA, MSEA Creative Benefit Strategies, Inc. spersons@creben.com

Participant in her 40's terminated in 2017 with an outstanding loan in an ongoing 401(k) Plan. She continued to make loan payments and was current with repayments when she elected to receive a distribution from the plan in the form of rollover to her traditional IRA in October 2020. The total amount of her distribution, i.e., her total account balance, was offset by the outstanding loan balance, and the remaining amount was rolled over to her IRA. Two 2020 Forms 1099-R were issued in January 2021. The rolled over amount was reported on one 1099-R with $0 taxable in Box 2 and distribution code "G" in Box 7. The other 1099-R reported the loan offset amount as taxable in Box 2 and used distribution code "1L" in Box 7. The participant is now asking for the plan sponsor to issue a corrected 1099-R for the loan offset using distribution code "1M" to indicate that the offset was a Qualified Plan Loan Offset (QPLO). She wants to avoid the early distribution penalty on her tax return. No withholding was deposited for either the loan offset amount or the rollover amount. Side note: the 401(k) Plan did not allow for Coronavirus Related Distributions (CRD) or Coronavirus Related Loans (CRL) in 2020. I read up on QPLO requirements, but have not seen an example similar to this situation. Yes, the participant was current with the terms of the loan, but the offset occurred well after 12 months from her severance from employment date. Did this loan offset qualify to be a QPLO and reported using the "1M" distribution code?

Thanks for confirming this, Bill. I could not find the need for separate 1099-R forms clearly stated in the examples I came across, but it seemed logical, given the different distribution codes. Also, thank you for sharing your approach to processing and fees.

401(k) plan has terminated participant, age 28 with two years of participation, who elected a lump sum distribution. Monies are Roth, safe harbor match and discretionary profit sharing. Will two 1099-R forms be needed to report her distribution because of the distribution codes? First 1099-R for the Roth portion of the distribution: Gross Distribution = Roth deferrals plus earnings Taxable Distribution = Earnings only Federal Income Tax = 20% on Earnings (Taxable Distribution) Box 5 = Roth deferrals only Distribution code = 1B Box 11 = first yr of Roth deferrals Second 1099-R for Employer monies (SH Match and Disc PS) Gross Distribution = SH Match plus Disc PS plus earnings on both Taxable Distribution = Gross Distribution Federal Income Tax = 20% of Taxable Distribution Distribution code = 1 Or should the reporting of this distribution be handled on one 1099-R? I appreciate any comments.

Were government plans required to adopt good faith interim amendments for either PPA or IRC 436?

After leaving about three messages, I stopped holding my breath (lol!). That actually worked, because I finally got a response from the DOL representative today. First, the Chief Accountant, who I was told was going to call me, never did and the DOL rep now says, he never will. Way to make a taxpayer feel special! Next, the DOL rep questionned how I knew that there was a reversion. Honestly, did she think I was calling for my health? Sorry - that was maybe too snarky. Anyways, after the DOL rep acknowledged that both the directions for 2009 and 2010 were completely silent as to how a reversion should be reported in the Financial Information section of the 5500-SF, I suggested the ever-popular slot of 8g - Other Expenses might be the right spot. Her reply was, "You have to follow the directions." What?!?! When I again pointed out that there were no directions, she agreed that 8g was probably the best place. I ended the call with the suggestion that perhaps the next set of 5500 directions could address this issue, since to the best of my 15-year experience, the directions have always been silent. Her response was that the directions for 2011, and maybe 2012, were already written, but she would pass along the request. Well, this whole affair was an exercise in futility. If the DOL or IRS come back with questions about this 5500-SF filing, I'm going to point them to this message board. At least it'll prove I tried to find the right answer for the Plan Sponsor. I still find it hard to believe that I'm the only preparer to have ever had this question, but it's time to move on. Thanks for your interest in this topic. If I ever get an answer, I'll try to post it here.

Quick update - DOL/EFAST2 representative said she would call me back Tuesday to respond to my question then. 1/20/2011 Quick Update - The rep referred the question to the Chief Accountant who is supposed to call me tomorrow. Should I hold my breath?

On Form 5500-SF, Line 8, how do you report assets that have been reverted to the employer as part of a defined benefit plan termination? URGENT: 5500-SF due 1/18/2011 I understand that Line 13a will need to be answered "Yes" and the full amount of the reverted assets will need to be reported. Form 5330 has already been filed and the excise tax paid. What I don't understand is how to report the reversion in Line 8 to wind up with zero ($0) assets at the end of the year and no error message. The instructions don't seem to address this issue, and 8j doesn't seem right since only 25% of the reverted assets were then contributed to a qualified replacement plan.

That could be a possibility. However, the client would rather use it for current employees than a group of employees that was terminated over 10 years ago. Also, the terminated participants were union employees and the current employees are not. It seems to me that they satisfy the requirements of 4980(d)(2) since the new plan covers all of the current employees that were in the terminating plan. There just aren't any current employees that were in the terminating plan. But 95% of 0 = 0 so they satisfy the requirement.