Bird

Agreed but FWIW, back when we filed 5310s, the IRS would ask about payouts within 5 years of termination and then make us confirm that said participants left voluntarily. I never understood the distinction but never had a problem so didn't have to argue it. I guess the idea is that they don't want a sponsor terminating people in order to use the forfeitures for reallocation just before plan termination but it seems that should be covered under partial termination rules.

Geez, just had this discussion - a "solo 401(k)" is a regular plan, just intended for one participant. It wouldn't surprise me if the 401(k) had something buried in it which says you can't sponsor another plan. Even if not, odds are pretty good that there is something crippling in there that ought to be changed. The cash balance TPA and/or actuary should really be running both plans, or at least coordinating very carefully.

Agreed, I don't think there are any specific penalties other than loss of fiduciary protection. Which means the risk is from a participant lawsuit, which is generally not going to be worthwhile.

I'm not sure I confirmed that, at least as something other than a marketing term. The conversation kind of bores me but I thought it was worthwhile to clarify for anyone following it. Anyone who isn't intimately familiar with qualified plans should understand that installing one of these plans can backfire big time if you don't know what you are doing, which applies to most of the people using or selling them. As a for instance, I can see a sponsor or broker checking a box for immediate eligibility ("of course - I want to be in this plan immediately") and not understanding that the second they hire someone to work even on a part time basis, not only do they have to make contributions for that person, but now have to file a 5500. The plan itself is a valid document and does not have to be rewritten, but other consequences are more severe.

Agreed. Sometime after posting I thought that was too simple, thanks.

We've had the forms and software and been able to file in early Jan for at least a few years.

Wait a sec, is this new info? Frankly it's hard to follow. Later you say "Apparently the prior TPA new [sic] nothing about this 401K plan, and since the asset value of the new DB plan was less than $250K, did nothing." I might be inclined to say "OK there was in fact a plan" but then that raises Qs about documents, etc. Without having my hands on statements and documents etc I am not able to figure out what is going on from your descriptions, which are inconsistent and confusing, sorry.

I think you meant "IRA" which was titled "401k." But whatever. I would not worry at all about the IRS looking for a 5500 based on assets, and if they did, just show them the paper trail (which of course you hope is clear, with accurate 1099-R reporting showing a rollover). The new brokerage firm will almost certainly send a 5498 to the IRS indicating they received monies in a rollover. Whether that will trigger a mismatch (the other way, showing a rollover but not an acknowledgement of receipt on a 5498, will almost certainly generate an inquiry) I'm not sure. But this was broken and not fixable with any kind of corrective reporting so I think I'd just wait and explain if necessary.

I think the subtle reference to a PT was about selling to a family member. Sometimes we get these innocent little Qs that are missing that kind of "oh by the way" info.

Just to make sure I'm clear, because I'm not familiar with this kind of document setup: it sounds like you're saying that the eligibility rules in the documents you're talking about are set up to exclude anybody who isn't an owner or an owner's spouse. If that's the case... what's the advantage to doing it that way? Aren't you just trading an improper exclusion failure for a coverage failure if the new employee is an NHCE? At least with a 'generic' document you don't also have to worry about retroactively amending to remove that exclusion. Actually I don't believe the first statement is true. I don't work with these plans (although I have a few plans that only cover an owner(s)) but my understanding is that they just have ultra-simple adoption agreements. I just looked at a T.Rowe Price doc and it has no special exclusions; anyone who is employed and meets eligibility would enter. At that point you simply have a plan with a marketing name "Solo" or "Uni" or whatever but it would cover others than just the owner. The owner might want to amend the plan (although it might be too late for certain purposes) but s/he wouldn't have to. Below is what the IRS says on their One-Participant 401(k) Plans page (I'd say they recognize the terminology but do not bless it, and for me the important text is "These plans have the same rules and requirements as any other 401(k) plan." Also note it says "It's a traditional 401(k) plan covering a business owner with no employees..." (my emphasis - it does not say "...covering a business owner and excluding any other employees.") A one-participant 401(k) plan is sometimes called a: Solo 401(k) Solo-k Uni-k One-participant k The one-participant 401(k) plan isn't a new type of 401(k) plan. It's a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) plan.

That looks like 20% in the second year and 100% in the 6th to me...

It sounds like there was a screw up in the noticing. It happens, and there is some potential liability, but my suggestion is to 1) stay on top of it, definitely try to find out when they open your Fidelity account, 2) make sure the investments are what you want, and if not, make changes...even if you are planning on taking the money out; if that is imminent, you might consider moving everything to a money market fund, 3) after the dust settles, figure out if you actually incurred losses as a result of the events. Odds are decent that, with the recent market gyrations, if the money was sitting in cash during the blackout, they saved you some money on losses. But maybe not, there are lots of ways to do a conversion. Ultimately this boils down to whether you were financially harmed and as Larry notes, it is likely to be expensive to do anything about it. Good luck and keep us posted.

We have an election on our forms, either "no withholding" or a % or amount, with a note that if nothing is elected it will be based on current tables. Rarely or never had to look it up...I think 10% is only up to a certain amount but since I rarely or never had to look it up, don't know for sure. ?

Agreed. This should not be a surprise; could be something that was discussed and forgotten, or a bad job by the administrator up front. We did it between the EGTRAA and PPA cycles, at least for DC plans, and found it worked great. We bill for a document maintenance fee that is roughly one sixth of what we would have charged for a restatement and get 0 complaints - of course it is discussed up front at the time of proposal/installation - versus just a bit of griping; it wasn't ever a huge problem. But smoothing out the fees is nice.

I don't see it as aggressive. Just normal operations.

Y'know, there is a possibility that this is harmless. Maybe not likely but possible. I mean, the guy's got two strikes on him already just for being a lawyer ? but he might not be the total jerk everyone seems to assume. It could be that there are tradeable assets like securities that he simply wants to transfer in kind to avoid transaction fees and he thinks that it would be a hassle if other people wanted to do that too. So I would explain to him that yes it is possible to do in-kind transfers, but everyone has to have the option...but it is unlikely anyone else would want to exercise it. If that doesn't work for him, well tough. As an aside, if there is an undervalued asset then the valuation itself is a problem.

I have no problem with it.

I agree. We do have some plans that are actually designed as "employee benefits" as opposed to "tax shelters for the owners" but in our clientele, I can't the former wanting to go elsewhere. I'd have to see how the questions were phrased (and I don't really care) but I have to believe the study is flawed.

I did it once or twice in a volume submitter plan; just kind of winged the language since it wasn't an option. It wasn't needed so I can't so for sure how it worked out, but I think it is valid.

Exactly. No RMD.

Assuming it is a plan that requires a spousal beneficiary for 100% of the benefits, then it is pretty clear. She's a spouse and has to be the beneficiary, unless she waives. I don't care if the trust is irrevocable and says she can do whatever she wants - she's still not the beneficiary.

Yes, that's what I understood the post-retirement contributions to be. Wow, that's how I read what I saw but I didn't believe it. I knew about the weird twist for self-employeds, that they don't get PS deductions, but this is...weird. I thought it might be a drafting error but living in NJ, it is not all that unbelievable. Sorry, I got nuthin'. Appears to be the same though.

I may be misreading it but maybe they are talking about post-retirement employer contributions? Frankly the text doesn't make 100% sense to me but that might be the source of confusion; I believe that regular 403(b) contributions are indeed deductible. https://www.state.nj.us/treasury/taxation/section403.shtml FWIW, NJ does not recognize contributions other than 401(k) for self-employeds. Someone might be conflating that. Or I could be wrong...

Mmm, I think the very concept that an employer could or should worry about allowing a participant to stop loan payments is not valid (except in the case where the loan is a sham*). I have no grasp whatsoever of why an employer would want to have a policy of mandatory loan withholding forever, even if it is permitted. On a legal level, I've heard that it goes to state law. I don't pretend to know much about state law in general, let alone the laws of all 50 states, but as I said earlier, I have yet to see someone prove that you can continue to force loan payments in XYZ state. On a practical level...no concerns whatsoever. If you or anyone torturing themselves by reading this is aware of a case where the IRS raised questions about the validity of a loan program because the sponsor allowed participants to stop their loan payments through the payroll system, please let me know. *Whether the loan program is a sham or not has nothing to do with whether payments are made by payroll deduction or otherwise, IMO.

Thanks for the comments. It's hard to say who, if anyone, controlled anything. I don't totally trust the participant, although he seems to want to fix it more-or-less properly, and the prior TPA really didn't do anything except prepare the tax return. Good point about the additional interest accruing being about limiting future loans, and not about the real value at time of default.