Bird

Nobody knows what that means. Are you a TPA, advisor...?

No, you're right about the end result. I do think it might work out better, cleaner to pay back to the plan if funds are available.

This seems like a lot of fancy dancin' for an innocent mistake. The sponsor should consider just saying "look we didn't mean this to happen, sorry" and maybe throw a few extra bucks into a bonus. Yes, it's probably possible to make additional PS contributions, and yes, it might be possible to reimburse expenses (but that seems like a long shot to me). But it's likely to be a big hassle.

Well, you can't make him pay it back at all, but you can make him pay it back within a certain time frame if he wants to avoid a default. Which he might want to do in order to avoid the taxable event.

The loan policy should specify if terminated employees can repay loans and on what terms. It should also specify when the loan defaults - typically the grace period is the end of the quarter following a missed payment.

What was your role in this - "assisted with?"

So the PS is less than the TH minimum for others? I'm curious about the percentages; something doesn't sound right unless we are talking very low % contributions. Maybe it's a formula, remember them?

Now that you have an answer and you agree...I'm not so sure. Our plans (FTW) have an option to include pay paid after the end of the year in the current year's calcs. We don't need that hassle and don't use it, but by implication if not selected, it is the next year's pay, and if there are no hours, then it shouldn't count. I know I've considered it more than once and reached that conclusion. The ugly part is where you exclude it but there are deferrals.

It's a good question. We generally include post-severance pay paid during the year, but exclude it if paid after the end of the year, primarily to avoid this kind of angels-on-a-pin question. My thoughts - just off the top of my head with no legal knowledge or research*: In all cases, where severance pay is included in a final paycheck, whether it is before, after or on the date of severance, I believe it could (should) be considered "post-severance" pay and could (should) be excluded, if the plan says it is excluded. I would not want to have to defend that though, especially if on or before the severance date, hence the coward's way out approach in general. *(I am now reading the FTW definition and it seems to say what you say; if paid before the actual term date it counts...but it also is narrowly defined as sick and vacation time, NOT "we feel bad and want to give you extra money." Which reinforces my attitude of generally including it in the document provisions.) Sorry for the stream of consciousness answer.

Amen. Applies to more than Secure 2.0.

FWIW my recollection of the "mistake in fact" determination is that it is very narrow - the example given by the IRS was having a wrong DOB. I could be wrong but I thought they even said something like overestimating comp was not a mistake in fact. The narrow definition is a typographical or mathematical error. That is, if the comp was off by a decimal point, that is a mistake in fact, but putting money in for someone who is not eligible is "a screw up" to quote someone who posted on this in 2007.

I think you need to consider the intent of the rule, which is to avoid issues relating to valuation and capital gains taxes. So I don't think it is a problem. Frankly, it's probably harder to transfer shares than it is to redeem them and send a check, so it's a bit puzzling why someone would bother. It raises a small red flag about the titling. (I don't believe you can ACAT shares to and from accounts that are titled differently, at least not without a lot of paperwork.) [edit for typo]

If no one is hurt, that is, the minor children get the money from the IRA someway/somehow, does it make sense to ignore the error and let it play out?

I get the idea these are self-directed accounts? If so, you have an overdeposit error to one person's account and we would typically "forfeit" it (using that term loosely) and apply it to the next contribution for someone else. If deposits are made after the end of each month it should not be an overage for the whole year although I guess it is possible. One way or another, the money should stay in the plan and be used against a future contribution. I'm honestly not sure about excise taxes when having what essentially becomes a "pre-deposit" when there is no deduction problem. If you had too much money in the plan before the end of the year on a plan-wide basis, I think I'd be inclined to carry it as a liability, use it up the next year, and move on.

Be careful here. Does the plan say the allocation period is per payroll, or is it funded each payroll as a cash flow consideration? FWIW I can't imagine setting up a PS plan with a fixed formula and no allocation conditions.

Again/still, I'm not sure what that means, although I'm pretty sure it means that 1/29 is when everything gets set in stone. As I see it, you have 3 options: Say that nothing can be withheld from the 1/31 check because it is after the term date. I don't think that is what anyone wants. Fix it right as Bill suggests; just change the friggin' term date to what it should have been and move on. Ignore the documentation and let the money be withheld anyway and hope you can talk your way out of it, if necessary. #2 is the way to go, because it is simple and easy. If it were hard, then, well, I imagine I'll get the side eye from some, but #3 is not such a big deal for me, as long as no one is being hurt. If it came up, it would be years later, and uncorrectable, and no one would care. But seriously, find out what the goal is and then make the docs fit that.

I think I would have made the term date 1/31 to eliminate these Qs. Having said that, I think I would include the 1/31 pay. "The pay period is until 01/31/2024, the Plan sponsor will deduct the employee contribution on 01/29/2024 which will include the 01/31/2024 contribution," Do you mean "the pay period ends 1/29 but the pay date is 1/31"? Otherwise I can't make sense of that statement.

Lou S, I agree with everything else you said, but I don't think this is true. kcarter430, the communication says that you had a benefit in the plan. The way the system works is this - a plan "has to" (it isn't always done) report to the Social Security Administration if you leave a vested benefit behind after you terminate. There is a corresponding way to delete that notification if you are subsequently paid, but that isn't always done and I'm not sure the system works 100% when it is done, so receiving the notice is not definitive proof that you have a benefit in the plan. The idea is that SSA can provide this info when you go to claim SS as something that might be out there. As Paul I notes, you may have been paid a small amount in cash, or your account may have been rolled into an IRA that you know nothing about. There is a slim chance that they improperly forfeited (took away) the money. It's worth trying to follow up through the methods noted by Lou S and Paul I, and through the plan itself (to the extent you can follow that trail since it was terminated.)

I'm not sure what your role is here but personally, I would let it play out - that is, don't waste much time on it, and let the sponsor (is this the new sponsor or the old) try to get the money. I seriously doubt the IRA provider will cooperate and it goes away. Any idea why this is even a "thing"? ...just saw ESOP guys response; we are in agreement on this.

I have too much time on my hands and will rant a bit here. My thoughts on doing the 5310 are completely contrary. My viewpoint is that of someone who works mostly on micro plans. I've been doing this long enough to remember when there was no fee for the 5310, and you got an FDL within a few months. Then they started charging for it, and taking longer and longer. It used to be something that we insisted on, then gradually became a client option, and now we barely mention it. The main thing that triggered my policy change was that we had a plan that was audited, after we received a FDL. I said "but but but but we have an FDL" and the agent said "yeah but we "just" need to review some operational things, and the FDL doesn't cover that." So they did the audit, and it was a major PITA because the company had shut down; fortunately they had some stuff in a warehouse. Of course they found nothing. Unless you have an individually designed plan and need the FDL to cover the document, I do not think it is worth it. Basically you have a choice of 1) getting the FDL and spending a decent amount of money and waiting an interminably long time for an answer, and still being subject to an audit of the plan's operation, or 2) not getting the FDL and being subject to an audit of the plan's operation. You really should not have a document issue if you are using a pre-approved document. I don't believe the ADPs and Paychex of the world are submitting 5310s, and they have way more plans.

Your goal should be compliance. See Paul I's comments, especially about making sure they are aware of the rules before they establish the plan. Having said that, I don't think the IRS cares. We generally tell folks they need 3-5 years, and maybe that is enough because we have never ever been challenged on the permanency issue. I'm not aware of any enforcement in this area, and frankly, think that's a shame.

It's all computerized so what's the big deal, right? I remember when I first started my boss had a cartoon-y series of 3 pictures in the office. The first said "TEFRA" and it showed someone sitting at their desk, all bright-eyed and eager to have at it. The second was "DEFRA" and the guy was a little less confident, sort of slumped over. And the third said "REA" and the guy had face=planted on his desk amidst a pile of papers. Yeah it's annoying to say the least. The behavioral economists have taken over.

I'm not a lawyer but I don't think that "telling" them of their allocation means anything in terms of locking in numbers. IMO the whole issue boils down to "is it worth the potential hassle?" If someone sics a lawyer on you then you've both lost, no matter the actual outcome.

4 years in HS. My dad pushed me and said it would help my vocab. If I had spent that time reading an English dictionary it would have done me more good. I've forgotten most of it, but everyone once in a while something gets triggered. There might have been two or three things I learned that were...interesting, but not necessarily useful. e.g. coagere means "to come together" (as in troops massing for battle). So coagulate comes from that. But it's not like I didn't know what coagulate means so...shrug.

Last time I checked, 500 was less than 1000, and 500 hours in 12 months is roughly equivalent to 10 hours a week. If you don't have anyone in the 500-1000 group, then why bother? I can't say I paid too much attention to the details so I'm probably missing something...