Santo Gold

We have a 401k plan that started in 2023 and is large enough that it uses the automatic enrollment procedures. Now this smaller company is considering purchasing a larger business that has their own 401k plan, that was created at least 20 years ago. If the 2023 plan is merged into the larger plan, does the automatic enrollment feature have to carry over? Is that considered a protected benefit? Or, if the smaller plan is terminated and the smaller plan's employees become eligible for the larger plan, and that larger plan does not have auto enroll? Is that a problem? Thank you

The ownership of ABC is by non-related individuals, no connection to John and Joe

I should know this, but...... John owns 13% of company A; 0% of company B Joe owns 13% of company A; 0% of company B ABC company owns 74% of company A; 100% of company B Does a controlled group exist between Company A and B. More specifically, can the 401k plans for A and B operate independently of each other? Thank you

If a participant takes a loan out of their 401k plan account and they take the maximum amount available - 50% of their vested account balance (they are 100% vested). A few months later, they have a hardship and would like to take a hardship withdrawal that would remove most of their balance in the plan. Is this permitted? If so, it would drop their investment balance and the outstanding loan balance would now be well over 50% of their total account balance. Thank you for any comments.

If an individual opts out of auto-enroll right from the start, do they still need to be informed about auto-enroll annually?

Just curious if this sounds correct. If we have a plan with auto-enrollment, we are using our "normal" enrollment forms, normal meaning no auto-enroll language on them. The individual elects to participate or not. If the plan sponsor has a newly eligible employee complete this form (yes/no) for enrollment, the auto-enrollment is really a non-issue, correct? It seems simple to me: We have the auto-enroll language in the document and SPD, but if we have a clear yes/no from the participant on the form whether they want to participate or not, auto-enrollment is avoided altogether. Are we missing anything here? Thank you

Thank you all for the great replies. I do not believe that this is a bankruptcy matter, just a drastic turn of events that makes the ongoing operation of the company not viable (small company ~ 8-10 EEs). The owner does have a large enough plan account balance that would more than cover the YTD match, so they have not hit rock bottom and the owner is decent enough that he would likely not hesitate to use personal assets to fund the shortfall. So, there may be a way out. As for the TPA fees, I will address that up front before doing anything further.

What options, if any, are there for a company that fell upon hard times very recently. They have a basic safe harbor match in the plan and the owner is asking is there any way to get out of that for 2025 (calendar year plan)? No HCEs have made a 401k contribution for 2025 and have no plans to do so. Just the NHCEs. Any ideas are appreciated.

Most recordkeepers we work with (we are a TPA) allow for online loans. Their procedure does not appear to have a separate online Promisssory Note for the participant to complete. Curious if anyone else still prepares the promissory note in these situations or not. Thank you

I'll try to be brief: Doctor owned a small medical practice for many years and has a 401k. His wife worked for him. Both have balances in their 401k plan. Doctor now has a serious medical condition and closed the practice. The doctor also has an outside relationship with another individual for many years and continues to have that now. The wife is beside herself and may have had a mental breakdown. Family members have taken his side on this. Wife is still married to him. If the daughter now has a power of attorney for both doctor and wife, can any 401k distributions proceed via the POA signing by the daughter, as employer, trustee, and participant (Wife)?

Thanks very much. This is a great starting point

First time for everything, but our TPA firm just had a 401k plan sponsor non-profit "disappear"; It appears the organization is shutdown. Website no longer valid, emails bounced back as undeliverable, and phone calls disconnected. We would like to have a QTA involved but am not sure how to go about reaching one. Is there a government approved list to use or other procedure to follow to move this forward? Plan assets are held in individual accounts and are with Voya. Thanks for any ideas.

We have a MDO for a 401k plan for 2024. All affected individuals are NonHCE. The MDO is to be calculated on the Average deferral rate of the NHCEs. But no NHCEs deferred in 2024, so our Average deferral rate is 0%. Is there a floor of what the MDO should be since I do not think $0 is the correct answer. Thank you

I'm sure that will not go over well with the employees and I don't know why he wants such a drastic change. But would this impact 404(c) compliance if they can only change deferral percentages annually?

The 401k Plan Sponsor wants to change when participants can make deferral changes from monthly to annually. The plan document allows for it. Are there any consequences if they make that change?

I should have added that the employer has not filed a 945 but the service provider has for this plan. They had distributions in 2020 and 2022, but none for 2021 and 2023.

I am only familiar with Form 945 being used to reconcile taxes withheld and paid from retirement plans during the year. Is there another purpose for this form that an employer may need it for outside of retirement plan taxes? A client received a rather odd call from the IRS ( I was not on the calls but I believe the phone number is legit and it was the IRS). They are telling her that she has not filed form 945 for years 2020-2023 and that even if no taxes are reported on it, it is still due and that if not filed, a $2,500 penalty will be incurred for each year. Even odder, they are saying there is no letter or correspondence that they can send. The plan utilizes a national retirement plan distribution service which accepts the 401k distribution, remits the taxes electronically, issues the 1099-Rs and also files a 945. But the 945 is filed under the service providers name and EIN, which is submits along with presumably hundreds of other non-related clients. The IRS caller was made aware of that and insisted that they need a separate 945 for my client, using their name and their EIN. Has anybody come across this before? Any thoughts? Thank you

A 401k participant passed away leaving his wife as his 401k account beneficiary. The account has stayed in the plan and has been re-titled to be in her name at this time. Are there are restrictions on who she can name as her beneficiary for this account? She has no kids and does not want to leave it to her brothers. Can she name a non-profit or other entity? Thank you

Theres also the question on the 5500, whether a blackout notice was provided. They would have to answer "no" and that could catch someones attention. Which has to be factored in as well.

A 401k plan has a year of service requirement to enter the plan. However, employees can roll money into the plan before they hit that year of service. Can an individual who does that, rolls money into the plan before their YOS, take a loan from that rollover? I would think they could not since they are "participant" loans and the individual is not a participant yet. Or is s/he? Thank you

Peter thank you for that lengthy explanation. This is more serious than the Plan Sponsor would expect. ERISA attorney time seems needed. The individual who noticed and lost money made it known in an employee meeting so everyone will be checking now. This is going to get messy.

A 401k plan sponsor was changing investments and recordkeepers and overlooked distributing the blackout notice. The plan is now out of the blackout period. Is there a correction vehicle in EPCRS for this? Is self-correction an option? At least one of the participants lost significant $$$ due to not knowing about the blackout as well as the mapping of his investments from old to new not aligning the way he wanted. If the Plan Sponsor makes the individual(s) whole and documents everything from start to finish, would that be a sufficient fix? Do you think this is something that would be covered by the plan sponsor's E&O policy? Thank you

Thanks everyone. Great replies and information.

An owner is selling his business. He will be paid in equal annual installments over the next 10 years, well over 6 figures each year. He will not be working for the new owners and will likely be retired. Would the income he receives from the sale over the next 10 years be considered passive income? He is asking whether he can set up a solo 401k for himself, create a sole prop business entity for himself and use the annual payment to him as a basis for funding a solo 401k plan. Is proceeds from a business sale considered passive income and prohibit him from using it for retirement plan purposes? Thank you

We have several 401k plans with Schawb and Fidelity all in brokerage accounts. Neither prepares the 404(a)(5) disclosure notice. Should they? If not Fidelity or Schwab, who would prepare that? The financial company that set up the accounts? The TPA? Someone else? Thank you