Santo Gold

Wow, thank you all for that information. It is a D profit sharing plan, not a DB.

I realize that the answer to this question is "in the plan document", but I've read it and still am unsure how to proceed. Any basic guidance on this is appreciated. A 1 life plan has life insurance in it as well as other investments. The owner is getting close to retiring. He would like to terminate the plan but maintain the policy outside of the plan. In this case, is it common for him to pay the cash surrender value of the policy into the plan and then have the policy moved out of the plan and retitled as a personal life insurance policy, which would avoid any taxation on the policy at the time of the transfer? Is there any other way for him to continue the policy outside the plan, not pay the CSV into the plan and not be taxed on the CSV at the time of transfer? If he just took ownership of the policy and did not pay the CSV to the plan, he would be taxed on the CSV of the policy at the time of transfer, is that correct? FWIW, its the insurance guy who sold him the policy that is asking this questions :)!!! Thank you

Any advice is appreciated. This may be loan administration 101 but I am not clear on what happens when a participant stops making loan repayments, mostly centered on what happens after a loan is deemed to have been distributed. Example: A participant has $100,000 account balance and takes a loan for $20,000. She repays $5,000 but then stops payments. The loan goes into default and triggers a deemed distribution. The participant is still employed. The outstanding balance (lets say that is $16,000) is taxable in the year of the deemed distribution. But there is accrued interest of $2,000 remaining on the loan at the time of default. I keep reading that the deemed distribution amount plus accrued interest must still be accounted for after the deemed distribution. But when a distributable event does occur, the accrued interest is used to offset the participant's non-loan account balance. Is that correct? So if a few years after the deemed distribution, the participant terminates and now has $200,000 non-loan account balance. She also has an additional $2,000 in accrued interest from the loan. Is it the case that the participant is paid $198,000? Thank you for any advice.

We submitted a VCP correction back in February, 2023 for a 401k plan that had about 60 missed deferral opportunities. We followed the recommended calculations to determine the MDO amount, the corresponding match and then the lost earnings. We deposited these amounts into individual participant accounts where the plan account balances are held. Its been 4 months and we have not heard back from the IRS. These affected participants are getting antsy, some of whom are terminated and want to take their money out now. We'd prefer to wait until the IRS says everything looks good. Checking whether everyone would wait until that final OK or would anyone move ahead with allowing distributions from these deposits (for terminees) since we feel we did an accurate job with the calculations. Thanks

Any thoughts are appreciated: A participant in a 401k is a US citizen. Her spouse is not a US citizen and does not live in the US. She wants to name her 2 children as beneficiaries for her 401k account. Would spousal consent be required to do so in this case? Thank you

At least the problem was discovered very early on....... This is a new start up solo 401k plan eff 1/1/23, only 2 months ago. The owner is a sole prop. While his compensation to be used for the plan was supposed to come from his sole prop business, a miscommunication somewhere resulted in him believing he could use income from other sources that would not be eligible for use in the plan. He already made a few deposits in 2023 (not sure whether they were to be 401k, roth or after-tax). But at this point, all parties involved just want to "walk away from the plan". IE, take the money back out of the plan account and pretend it never happened. Given that he is the only participant and there have been no government filings, is this acceptable or is there a better way to handle this? What about earnings in the account? If there is no tax deduction being used for any of the deposits, I would assume any earnings that were associated with the deposits would just be non-retirement earnings, just like it came from savings account or something similar. Any comments are appreciated.

Thank you. The replies are very helpful.

Is it permissible for match contributions to be structured in a way so that different groups receive different match? This is a non-profit and there will not be any HCEs. The organization would like to give a match 100% match up to 6% of pay for Group A. For Group B, in year 1 they get 0%; year 2 50% match, and year 3 100% match. Is that acceptable? Thank you

Appreciate the replies.

In a plan merger, are the balances of prior terminees also transferred into the new 401k plan? These terminees can take their money out of the original plan at any time. but if they do not and their balance is over $5,000, they have to be rolled into the new plan, is that correct? Thank you

The plan does not have QJSA or QPSA. Lump sum only distribution option. The plan does require spousal consent to name a beneficiary other than the spouse. Benefits had not commenced at time of death. I looked at ERISA 205. Am I correct then that the reasoning behind the new spouse being beneficiary is that he never waived his right to the benefit, even though he was never named as beneficiary (and even though the ex spouse still has a beneficiary form on file)?

A participant in an ERISA 403b plan passes away. She named her spouse as beneficiary and son as contingent beneficiary. Years before her passing, she divorced then remarried, but never changed the beneficiary form. Is the beneficiary form with the ex-spouse still applicable under ERISA? This is taking place in New York, which has a divorce revocation statute, which would seem to no longer permit the ex-spouse to be a beneficiary. But would NY state law take precedent over ERISA if ERISA would call for the ex-spouse to be the beneficiary, since the form was never changed? And if the ex-spouse is not the beneficiary, would the contigent beneficiary (the son) now be the beneficiary would the current spouse be the beneficiary? I am not sure if a QDRO was ever produced after the divorce. We are having an attorney look into this but I was hoping for any comments on this as we go along. Thank you

Thank you very much. Appreciate the replies

Its January, 2023 and we realized that there was a minor mistake on the 2018 5500-S/F filing. The client would like to file an amended 5500-S/F. EFAST will only allow back to 2020. Can we still file an amended return for 2018 on a 2020 form, or is there no way to file an amended return at this late date? Thank you

We have that in the plan document, distributions from after-tax at any time. So if they want this to go outside of the plan, it would seem like a conversion to a Roth IRA would be allowable. Conversion takes place, its out of the plan which is what he wants.

We have an owner-only 401k/PS plan. He has the after-tax employee contributions and will be converting to Roth for 2022. Is it recommended that he keep the converted $$$ in an plan account, or after the conversion move the $$$ to a Roth-IRA outside of the plan (plan allows for withdrawal of after-tax at any time)? Thank you

That is interesting, but do those amounts stay in forfeiture or once in forfeiture, they can be used to offset future contributions? Also, if the plan terminates, can those amounts be used to offset employer contributions or pay expenses? Thank you

The problem that the plan sponsor has pertains to the confidentiality of providing individual SS#s to the mutual fund company/recordkeeper without the consent of the individual, in order to set up a default account for them. That they could run into legal problems by doing this.

Thank you; I will look into PBI. A related question: If the plan sponsor does not have an address for a former participant and if PBI cannot assist, can the plan sponsor send the balance directly to the state as unclaimed property or in this type of situation, does it still have to first go to a plan account before passing this on to the state?

We have a plan that missed providing deferral opportunities for quite a few employees over the years. They are going to go back and make good on calculating and depositing what is required for these individuals. However, several individuals have left the company years ago and they may not be able to locate them on their own. Any recommendations on a public or private services that can be used to search for lost participants? Thank you

Just to draw a distinction, these would not be leased employees, as those would have to actually be employed through a leasing agency. With a leasing agency or leasing company, they are independent contractors and the issues discussed above make this a bad idea to try to include them in the employer's 401k plan.

I have not run into this previously, but I have a potential start up 401k that would be pretty routine in many ways, but the owner wants to include most sub-contractors in the plan. He started his career as a sub-contractor and feels strongly that he wants to offer a 401k to them as well. He is considering a safe harbor 401k match plan. But how would that work in regard to withholding pay for individuals who are not on payroll but are paid without any tax withholding? Would the SubCs indicate that only a portion of their income be paid to them while $X.XX goes into the 401k? Can they employer provide the match on a payroll basis if they are included? This seems like it could get messy...... Thanks

Thank you; I think I understand.

Sorry for asking so many basic questions, I just do not work many auto-enroll plans. Since this is a 403b with a QACA and we have immediate entry for employee contributions. Can we still have a year of service plan entry eligibility for the employer match and still satisfy the QACA requirements?

Thank you for those replies. This non-profit is very generous and wants to maintain its match formula of 50% up to 10% of pay contributed. But, they were failing ACP frequently with the match. So they want to consider an auto-enrollment feature but keep the same match (the match already is 100% vested). Could they do auto-enroll with the employee contributions with up to 6% of pay after year 3, but still have the match at 50% up to 10% of employee contributions, or does the auto enroll have to go up to 10% for the employee contribution as well? Thanks