AlbanyConsultant

If it was my plan from the jump, totally. But this is showing up at my door with this problem. I had intended on amending this provision out (and I still probably will), but this employee is kinda adamant.

Had three clients get these this week. All on plans fully on recordkeeping products that have never filed a 945 for plan purposes. Which makes me wonder if those plan sponsors have previously filed a 945 for some other non-plan related reason... It's always been our experience that whomever is doing the 1099-R should be doing the 945 as well. When we did 1099-Rs for non-product plans (remembering those days un-fondly), we prepared the 945s.

To answer some of the above questions... Yes, the plan allows for a one-time irrevocable election to opt out of the plan entirely. I'm referring here to "opting out" of the safe harbor nonelective and profit sharing allocations. "Opting out" of deferrals is trivial. I always forget this. I'll have to see if this works. Thanks!

Taking over a plan with an owner and two NHCEs. As NHCE#2 is becoming eligible, she says she wants to opt out of the plan entirely. But... then it fails 410b, and the correction is to give her allocations. I've explained this to the financial advisor, the plan sponsor, and the participant. She is adamant she wants nothing to do with the plan "and I've checked with the DOL and I am aware of my options." Sigh. I've had similar situations where someone wants to opt out entirely due to religious reasons... but fortunately, it's never caused a 410b failure. And she is not answering if her objection is along those lines - not that I'm sure that helps. What can we do? Thanks.

Some selected sections of the basic plan document... I bolded the part that I think makes this work.

I'm waiting for the day that casinos convince the government that allowing participants to "invest" in a spin on the roulette wheel is a prudent investment.

Small S-corp has come to me looking to install a plan. Husband and wife and two kids are the only employees. Simple, right? They mention that Western Employee Services is the EIN on their W-2s and also handles all their other benefits. This isn't a problem, is it? I'm not entirely sure what to ask who next. Kind of sounds like a PEO situation, but that should still allow Small S-corp to have their own plan with no ties to the larger population, I think. Thanks.

Totally agree - not worth playing games over.

Thanks for the good information, @Peter Gulia and @fmsinc. I am definitely recommending that they run this past their attorney, but I'll bring up these points to them.

Thanks. It does clearly indicate it is for "... the full satisfaction of the outstanding restitution balance", though it does go on to say that a portion is actually for "Court-ordered interest" on the base restitution amount. It doesn't say anything about "criminal restitution"; do we need to be that detailed? It's neither of those.

100% - I am not advising them. I'm answering strictly that the rules say if FICA comp is over some number, then the rules kick in. I don't discuss how the W-2 compensation is determined. This is adorable.

An accountant is asking if he can just lower the W-2 compensation of the S-corp owner so that it's below the HPI threshold and that gets the owner out of the new Roth catchup rule. Can they shift more income to the dividend K-1 and avoid the issue that simply? Sure, it lowers their overall employer benefit, but I suspect some will find that a fair trade-off. Thanks.

A client just sent me a Final Order of Garnishment from a US District Judge, demanding $X from a participant account for restitution and court-ordered interest. The order names the Participant as Defendant and the recordkeeper/custodian as "Garnishee". Nowhere does it mention the plan name. Anyone have any experience with this? I get that it's not the same as a QDRO, but shouldn't there at least be some basic standards it has to meet? I don't want to do anything that will put the plan sponsor in a bad position, either by paying out without proper due diligence or by rejecting it without good reason. Thanks!

I don't think she is. I'm just wondering about the incorrect statement in the divorce paperwork (that we did NOT ask for!). I'm no actuary; I read the CB statements (yes, it's an ERISA plan) that say the person's "balance" is $X. I know that's not a 'real' number until it's time to pay out a benefit. The statement in 2015 said $3K, and his calculation as part of the plan termination distribution is... I don't remember exactly. $9K or $10K. I only bring the 401k plan into this because the section we were provided (I don't even know if what legal document that was provded - we got a half-page picture) specifically (and correctly) identifies the 401k plan and then specifically says there are no other plans that J is a partcipant in, and it clearly says that S is waiving her right to all benefits in the 401k plan. All your other questions are better answered by attorneys, which is why I suggested that's the route the plan sponsor take. In accordance with our client services agreement, I disagree that we are a fiduciary and that we are "more than ministerial" now, though I suppose a dogged attorney could attempt to prove otherwise.

This is for a cash balance plan, so QJ&S applies. Participant J and spouse S got divorced in 2016. There was no QDRO because as part of the divorce, S waived her rights to J's benefits (kind of...), so nothing was ever provided to the plan sponsor or us as TPA. We never knew or cared about this. Fast forward to now and we're terminating the CB plan. J calls us because the standard distribution package asks for the spouse to sign if married. J says that he was married, but now he's concerned because in the divorce paperwork, it clearly says that S waives her right to J's benefit in the 401k plan, and that J attests that he is a participant in no other retirement plans. Like many participants, J didn't understand what the CB plan really was. [It's not relevent, but at the time his balance in the 401k plan was $20K and his lump sum benefit in the CB plan was $3K.] Now J and the plan sponsor are wondering what to do. Obviously, the best answer is "check with an attorney". I told them without a legal opinion or a QDRO, we can't split J's CB payment. Any other suggestions? Thanks.

That would be very cool, and an excellent tool to teach new administrators how it works...

Believe me, this is where I started the argument against even considering this. This is what I was afraid of. I mean, not "afraid", since I'm glad to not have this as a recommended option.

403b Plan D was at Recordkeeper R about ten years ago. They had about 20 participants with defaulted loans. Recordkeeper R is an insurance company, so they treat the loans as loans from the vendor. The plan converted to a new recordkeeper, but R said that they have to maintain the defaulted loans. We came into the picture a couple of years later and weren't successful at getting them to change their mind. Now participants who have these old defaulted loans are looking to take a new loan - they call the new recordkeeper who of course has no information on these old defaulted loans and are told that they can certainly take a loan. Then all sorts of headaches ensue. Let's say that repaying the defaulted loans with accrued interest is not an option - almost all of them are for workers just above minimum wage. They're basically taking a loan to get access to the profit sharing while still employed. The plan currently doesn't allow age 59.5 ISW, but most are under that age anyway. Can we amend the plan to allow for a second loan ONLY to participants who have a defaulted loan at Recordkeeper R? There are no HCEs in that situation, so from a purely mathematical standpoint, it should be fine. Note that this is not what I'm suggesting they do. I'm just looking for options... and will gladly take any others. Thanks!

Yuck. The plan is a pooled 401k (yes, they still exist!) and now the owner needs do to Roth catchup deferrals. I really don't want to commingle the pre-tax and Roth in the same account. Is there a discrimination issue if only the HCE HPI has a self-directed account? I have been suggesting that they move to a participant-directed model for years and I was hoping that this would be the thing that clinched the decision... but the owner says that he's retiring in 2-3 years and doesn't want to go through all the changes for a short term, so I'm looking for a different solution. Part of me hopes there isn't one... Any other suggestions (other than "you can't always get what you want, even if you are a doctor")?

I've been presented with this situation: Two spouses own two S-corps - MS owned by J 51% and her husband O 49% OC owned 100% by O It's a controlled group because O owns part of MS. Each business has only one other employee, an NHCE. OC has a 401k plan (I don't have any other details yet). Of course, J wants a 401k plan to cover MS... and only MS. I want to say that as long as the populations are stable, then this is OK. No matter what feature I put into the MS plan, I'll either have: 1 HCE benefitting, 1 HCE nonbenefitting, 1 NHCE benefitting, and 1 NHCE nonbenefitting = 1/2 / 1/2= 100% or 2 HCE benefitting, 2 NHCE benefitting = 2/2 / 2/2= 100% This seems... simplistic? Like I'm missing something? What trap am I unwittingly walking into (other than the one where one of the NHCEs leaves and the testing fails and it's a disaster). Thanks!

We've known that our client NR is in a controlled group with RR (has their own plan but not our client) for several years, and we actually get the RR data every other year or so to prove that it passes 410b for all the various BRF, which it does. We've convinced the owners to let us take over the RR plan, and as part of the discussion they mentioned the RR plan includes union employees (they were included in the data we received, but not identified as such). NR's plan excludes union employees, and there are union employees that are excluded. They want to keep the two plans separate (getting close to the audit threshold, don't want a conversion, etc.). Is this union thing going to be a problem for coverage? I'd like to think that since we can exclude all union employees, it's OK to include some class of them. Thanks.

In a MEP, one of the adopting employers (AE) has said that they intend to leave the MEP soon - I don't know all of the details. This was an informal conversation, no official formal notice has been given. The owner of the AE followed-up by asking for some kind of trust report for the participants in that employer as of 12/31/25. I presume the intent is to use that to bring to a new recordkeeper for pricing, conversion discussion, etc. However, the trustee of the MEP has asked me to not provide this until we get a formal letter of the intent to separate from the MEP. I don't think that's a tenable position. Surely, the owner of the AE must have some rights to information? They're not officially a "trustee" since they haven't signed a trust agreement (though maybe they should?), but since they do handle plan money...? Obviously, it would be great if everyone would just play nice. But in the absence of that, any ideas as to what I can lean on? I'm perusing my basic plan document, but so far it's not that detailed. Thanks. UPDATE: I convinced the MEP sponsor to stop being difficult and I provided the data, so now this is just a theoretical issue.

I see. Those are good points. Thanks!

I'm definitely looking into the top paid group. I think the line will be north of $200K, but less than $500K. 2025 is literally the first plan year, so I don't have full data yet. What's the goal of your last question?

I have a large law firm client that recently asked about mega backdoor Roth and voluntary after-tax contributions in general. I explained the ACP test issue and after a slight pause, one of the partners said, "but that can be resolved by making a company contribution instead of refunds, right?" They are actually considering corrective QMACs to let their highly paid (and, coincidentally, HPI) participants do this. Sure, it works mathematically if they don't mind spending the money, but I have to wonder if it will really work out better than adjusting their class-based profit sharing.