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AlbanyConsultant last won the day on March 16

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About AlbanyConsultant

  • Birthday 10/02/1972

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  1. If we have an option to force these balances out, then that's a better play than hoping to keep updated information on two never-employees. The document provider said that we can treat "beneficiaries" as "participants" in this instance and force them out. I guess that gives the plan sponsor something to stand on.
  2. Exactly what you pointed out - the basic plan document says that a participant can be forced out... but doesn't say anything about a beneficiary getting treated the same. However... this is the definition of "participant": Hmmm. Seems that I can treat the unpaid beneficiaries ass participants for this purpose... ?
  3. Had a participant in RMD status die in 2023, and her account was to be split amongst her five daughter beneficiaries (which, ugh, but at least there was a valid beneficiary form!). Three of the beneficiaries took their distribution in 2023. Each share of the account is <$3K, and the plan has a $5,000 (I guess $7K now) forceout limit. Presuming the remaining two don't elect to take their distribution in 2024, do we have any options? Of course, we need an RMD based on the 12/31/23 balance, fine. But can we force these amounts out of the plan? The recordkeeper is ready to do so - they don't have any problem sending it to an IRA custodian. Just not sure that I'm 100% comfortable going along with that. Thanks!
  4. I think we're all getting to the same point... while you COULD do this, if you do it carefully, there's no real benefit to doing it. At least, none worth the headaches if something gets messed up along the way. One person I mentioned it to suggested that maybe the two brothers had separate companies when the plans were created and then merged their businesses, and no one thought about how that might affect the plans. Of course, he's an optimist and likes to assume the best in people. LOL
  5. Asked to consult on this, and it is certainly something I've never heard of before... Business (don't know yet if it's a partnership or an S-corp) is owned by two brothers. Maybe 50/50. They have no other employees. The financial advisor set each one of them up with an "owner only 401k plan" from a brokerage house, each in one brother's individual name. My first thought was "Hey, that's not right." And, sure, it isn't. But... is there a way that it COULD have been done correctly? A business can sponsor more than one plan. Each plan excludes... the other brother, an HCE. If they had set up the plans as Business Plan One and Business Plan Two, there's no coverage issue, no matter what kind of [defined contribution] contributions are done. And then you have... two legit one-person plans? This sounds crazy. Sure, you'd have to start filing two 5500-EZs when the combined total is $250K+, but can you really get away with this for a few years? Is it worth it? Whoa. Of course, it wasn't set up correctly, and each brother has $400K+ in their "own plan" and no 5500-EZs (or -SFs) have ever been filed, so we've got a bunch of things to look at and fix, but... is this a legit strategy if done correctly? I know, if you think you've got a brilliant new idea, just ask the people who have been filed/gone to jail before you, but...
  6. In this MEP, eligibility for deferrals is immediate and for SH/PS it's 1 YOS and semi-annual. I know, yuck. But all the members follow it. A new company (a partnership, if that matters) wants to join 7/1/24. The entity was established 3/31/24. Presuming there is no prior service to count: Deferrals - this is an individual calendar year determination. The only thing that might cause an issue here is if I have to pro rate comp and someone ends up with a pro rated amount less than they defer. SH/PS - typically, this wouldn't be an issue (however, see TH discussion below). Let's say that they want to do an immediate entry waiver for all those employed on 7/1/24 so they are eligible for the SH/PS on 7/1/24. Again, no short plan year, with the only possible issue if someone defers so close to a pro rated 415 limit that any ER contribution puts them over the top. And PS has no last day or hours requirements, so if I have to allocate something to pass cross-testing, that's fine. Plus it's 100% vested, so no vesting service counting potential issue. TH - many of the smaller companies in the MEP have it where the owner(s) defer the max in the initial year and the regular employees don't defer much, so it's TH and the nonkeys have to get 3% even though they aren't otherwise eligible. Fine, granting immediate entry would cover that. Based on the no "short plan year", my gut says that I get to use full-year numbers for everything. Could it be that nice and simple? 😁
  7. Because clients don't understand things and some advisors won't listen to reason? I agree that's the better solution. My best guess is that they want to get out of the safe harbor nonelective as fast as possible and go to the SIMPLE IRA with match because almost no one defers. It's SECURE 2.0 Section 332. The name of the section is "employers allowed to replace simple retirement accounts with safe harbor 401(k) plans during a year", but not vice-versa.
  8. I know that SECURE 2.0 allows you to terminate a SIMPLE IRA and start a 401k/SH plan in the same year after 1/1/24 (got to love those pro ration calculations!), but what about the other way around? The fact that I'm not finding that you CAN do it makes me think it's not allowed. Thanks.
  9. [I know the answer is it SHOULDN'T be done, but I'm looking for CAN.] Got a pooled 401k plan that is transitioning to individual accounts. There are enough people such SDBAs for all of them would be horribly inefficient, so they decided to go with a fund platform. However, the FA just told me that they will do SDBAs for the owners. This immediately set off all the alarm bells. Of course it's a bad idea, but what is the latest and greatest about how it can be done with some degree of confidence that it will pass the sniff test? I'm thinking: 1. No minimums allowed to open one. Note sure about minimums on any particular investment. 2. All participants must be given the option to do so. We've got a few plans that have had this set up for years (and keep resisting change), and on those we already have a boilerplate participant election form. 3. 404a5 fee disclosure notice. I was thinking about a set fee for the SDBAs each year to represent the additional time spent reconciling them; I'm not sure I could easily get the SDBAs to send me the fee from the account each year, but I think would be OK. Ideally, there's some kind of citation that I can use to argue against this, but failing that, I at least want to put this on as solid ground as possible. Any thoughts? Thanks.
  10. Taking over a plan, and the plan sponsor mentions the profit sharing allocation. "I usually contribute $60K to be split among the participants at location A, and $50K to be split among the participants at location B." Oh, must be a class-based allocation, right? I look at the plan document, and the AA language says: OK, I guess this supports a separate integrated allocation for each location (though a review for top heavy is plan-wide, not location-specific). My real questions are: 1. What about someone who is getting comp in both locations. I suppose it's not a big deal if the total is less than the SSTWB (or whatever lower amount the integration is based on), but let's say one has $110K in each location? 2. Does this have to be tested in any other way? Normally, integrated tests are all good if they follow the formula... but since all participants aren't party to the same allocation, it seems additional testing is needed. I intend on restating this to a class-based individual-level plan ASAP, but that doesn't help me for the Plan Year I'm inheriting. Thanks.
  11. Hmmm. Reading further, that says: We're not considering any of the items in (i). Is a participant who is not earning a regular paycheck (from the plan sponsor) a good credit risk? Or isn't it at least a relevant F&C? But maybe then we're delving into "does the Plan Administrator have to factor in the participant's entire financial situation"... and no one wants that. Or even going back to this in (a)(3)(i): I read this as if the participant or the Plan Administrator suspect that the loan will not be repaid according to the terms, then it's not a valid loan from the jump. Proving that, of course, is the hard part. I get that this is mostly me playing Devil's Advocate. I'm just trying to advise in the most comprehensive matter (and I know that their board is a bunch of lawyers who will parse things down to the micro-level!). I don't think we'll pass BRF; there are a lot of per diems. How this issue never came up before, I'll never know. I totally agree that switching to PD will still be a problem, but I'm at least trying to limit the potential problems. That's an interesting idea to limit the non-payroll repayments to PD participants. Thanks!
  12. Can a plan loan policy have a provision that per diem employees are not eligible to take a loan? I've got a plan where they often move employees to per diem (I don't know the mechanisms or legality behind that, but let's assume it's kosher), so participants who are still considered active will want to access their money. So they take a loan... and then don't work again for three months, so the loan gets behind and eventually far enough behind to need to be defaulted. Defaulting a loan is a process, and something that no one wants to deal with. Plus, there's the question of was it really a valid loan in the first place (the situation that brought this to light is one where the participant was told she was being changed to per diem and then requested a loan immediately) if the Loan Administrator know that it couldn't be paid back through regular payroll deductions. Maybe it was a fiduciary breach by the plan sponsor, maybe it was an intent to get around the distribution rules by the participant. So that's what led to the question. My gut reaction is no, but then is it OK for the plan administrator to continually deny loans to per diem employees and therefore create a de facto exclusion? [If it matters, we are in New York State, where participants have the right to request that their loan stop being paid through payroll deduction, regardless of what the loan policy says. This is not something that we recommend our clients make known.] Thanks.
  13. Thanks, Bill. I think I've got two plans left with LI, both with the same advisor. Any time I mention getting rid of the policies, he tells me I don't understand insurance (this is true) and that I'm not seeing the bigger picture (which is probably something like "they pay the FA higher fees!"). So I've given up. I had always treated LI as an option like a self directed brokerage account - if you offer it to one, you have to offer it to all. Am I not looking at that properly? Because I have a bunch of plans (unfortunately) where the owner is in a SDBA and the participants are on a platform, and I handle it like I've been handling LI; each participant has to sign an acknowledgement that they do not want a SDBA. But if I can amend the plan to stop offering those in and say that the ones already extant are grandfathered, that would be great.
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