AlbanyConsultant

I've got a 403b plan that tried to move from recordkeeper A to recordkeeper B several years ago. Despite numerous plan documents saying it is an ERISA plan, RKA is insisting that the accounts they hold are non-ERISA accounts and therefore the plan sponsor can't move the accounts. The financial advisor did a bunch of presentations showing that RKB has lower fees and this convinced about 90% of the people to move, but there are ~15 who just haven't, for whatever reason. They are all terminated, and all have $7K+ vested balances. We're launching a new attempt to reason with RKA, but we are expecting it to fail. One of the directors asked if they could incentivize the participants to either take a distribution or authorize the transfer to RKB. $100 cash, say. Since the financial advisor didn't immediately shoot it down, I said that I'd look into it. How insane and/or illegal is this idea? More importantly, are there any other good ideas? Thanks.

I've got two 403b plans where there is definitely no controlled group and no ASG. However, they do operate closely together, to the point where employees are shared. Over the years I've made the plans identical, but now I'm thinking about a 403b MEP. The main consideration is that the want to continue to not have automatic enrollment. Both plans are pre-2022, so they are currently not required to offer it, but the way I'm reading the IRS clarifications, if Plan A becomes a MEP by Plan B merging into it, they will be subject to the SECURE auto enrollment rules. Is that correct? Thanks.

IIRC, this was the consensus of the "Ask the Experts" panel at ASPPA Annual.

I've got this auditor on a couple of my large plans who insists on pro rating the final payroll and including that accrual on the 5500 Schedule H and audit report. Example: weekly payroll, final week included on 2024 W-2 is the payroll of 12/28/24. He will prorate the 1/4/25 payroll as 3/7 belonging to 2024, so therefore 3/7 of the deferrals on the 1/4/25 payroll must be counted as 2024 receivables and added to the 2024 reporting. I refuse to add them to my administration, so we've got a reconciling item for that. This is insane, right? I'm no CPA, but I can't find any justification for this. And it adds a bunch of extra work, which is even worse. I'm meeting with the auditor next week, and I'm looking for something I can use to convince him to back off on this. Any suggestions? Thanks.

Dad owns 100% of Dad's company. He did a full asset sale to Son (his son, age 21+), who has created a new company for this. The employees are terminating with Dad's Company and are being hired by Son's Company. Dad is terminating his plan effective 1/1/24. Son is looking to start up a plan in early 2025. Are we (they) going to run into the successor plan rules because of the relationship between Dad and Son? There was no direct ownership by Son in Dad's Company, and there is no direct ownership by Dad in Son's company. Thanks.

Their mortgage woes could qualify. A hardship can be taken to prevent foreclosure and/or eviction. While that is usually a little more severe than just "being late", maybe the loan holder can issue a statement that $X is overdue and foreclosure proceedings are imminent. The plan sponsor may feel that is enough to allow a hardship for $X. Unfortunately, the $Y needed for car payments and daycare won't satisfy the IRS safe harbor hardship rules. As an aside, these are the situations that Congress thinks it is solving by adding in the Employee Emergency Distribution and the PLESA. EEP, maybe, but if they really think that participants are going to fund a 'rainy day account'...

We give them an authorization form that explains that they have options and they have to choose to either do their whole signing dance, or they can authorize us to efile it for them. it discloses that their signature will be posted to the EBSA if we efile. You can Google it - some TPAs have their forms online. Procedure-wise, we send it with the 5500, they sign both and send them back to us, and we file them. I like that it makes it easier for us to track - it's worth the little extra work on our end. And now the important part: Are we taking the NLDS over Philly?

Small plan is top heavy. This year, the net s/e income for each partner was zero (or a small negative)... and of course they already deposited their deferrals during the plan year. Of course deferrals have to be refunded. But what about TH? Does this kick in, and a what rate (since I can't calculate $5,000 divided by zero compensation)? Or do they get a pass because it's all being refunded? I remember threads here that discuss deferrals refunded for ADP refunds are still counted, but I think this is a little different. Thanks.

I see that we've discussed several issues relating to "overpayments" in this forum, but they seem to be focusing on employer contributions and incorrect allocations. What about where the plan sponsor deposits too much into the deferral bucket (bad math, or whatever), and the participant takes their immediate distribution. No other participants were harmed, and I'd argue that the plan doesn't have to be "made whole" because that money shouldn't have been in there in the first place. Is this just a 'send a letter and if you get the money back, that's great' situation? Thanks.

I've been wrestling with this as well, and we going down the same road - your wording is much more direct and succinct than mine was (I'm approaching a half-page, probably explaining way too much). I've been thinking about the plans with payroll bridges and things like that. The RK handles the initial notice, and then if the participant doesn't log in within 30 days they send a file to payroll somehow to turn on the deferrals at the automatic rate. While I agree that getting a tree-pulp piece of paper into someone's hands is a great way to try and circumvent getting AE'd, when it gets returned it somehow has to become an interruption to a process that is becoming increasingly computerized. For the ones where it's going back to the ER and they are making changes to payroll manually, this is a lot more workable.

Thanks, everyone!

One-person plan that at one point had some assets - never enough to need to file a 5500-EZ. All the money was invested in two limited partnerships... that went bankrupt. So the two assets are literally worth zero. Now he's terminating the plan, and I've got to file a 5500-EZ for the final year. But it's going to start with $0 BOY; that seems like we're just asking for trouble. Any suggestions other than to wait for the inevitable letter from the IRS? Thanks.

My go-to when I need a refresher is this article: https://www.nfp.com/insights/what-is-the-real-deadline-for-making-plan-contributions/

I'd think the intent was for auto enroll to apply starting with the first paycheck after DOP. It feels incongruous to say "we will take your non-action as an implied election to defer zero during the notice period... but once the notice period is up, we will instead translate your non-action to a default deferral rate." The employee has done nothing differently, and this is kicking in later. I understand that this might be the only functional* interpretation of the reg; it just feels strange. * "functional" being a relative term; I am not optimistic about a plan sponsor handling this correctly.

I do have some very generous plans that allow deferrals immediately. Most concernedly, I have a MEP that allows it - and now we're bringing on our first 10+ employee employer post-12/28/22, so welcome to automatic enrollment. Amongst all the other issues is timing for the automatic enrollment notices. Obviously, it's going to be difficult to give the notice before they are eligible. What is the best solution for implementing it? It seems counter to the intent to say "Welcome to Company X. Since we are part of Y's MEP with immediate eligibility, you can elect to defer starting today, your date of hire. But if you don't make an election, then in 30 days you will be subject to the plans' automatic enrollment provisions as outlined on this notice I'm giving you today." Is that really the way to go? Thanks in advance...

I've broached the topic of an ASG with a client, and of course they want more information before deciding to engage an ERISA attorney. DWC has a good article on their website about ASG; is there anything else that you've found that is relatively understandable that can be sent to accounants (and/or plan sponsors)? Thanks.

The MEP is sponsored by an HR-type entity, and all of the other adopting employers are businesses that they provide services for. I don't *think* it's a PEO plan, so I'd say it's the last kind (unless that doesn't sound right and I'm totally wrong). Historically, the MEP sponsor has only allowed new companies to bring in cash when they come in... but there have been very few in the past couple of years (we're TPA #3 in four years!), as most of the new adopters have not had a plan before and/or are new businesses, so this is generally not an issue. Potential adopters are told that the plan provisions are X, Y, and Z, and you don't get to make any changes when you join (though I have told MEP sponsor that new adopters can waive the YOS eligibility requirements one-time when they sign up as long as that is in the adoption resolution). I checked with the MEP sponsor, and they have never told anyone they had to freeze an old plan. Not that I completely trust the prior TPAs (there's a reason they're gone!), but I'd like to advise them correctly going forward.

I am in fact scheduled to review their Powerpoint presentation to potential new MEP members after 10/16, and this was near the top of my list to make sure was in there.

Merging presents different problems, right? Maybe some assets aren't allowed (SDBA in F's plan, all on a RK product for the MEP), different money types... Seems easier, if we can get the F people on board, to just terminate, liquidate, and move cash.

Company F sponsors a 401k PS plan and wants to join a MEP. Can they terminate their current plan and roll the money into the MEP as a rollover contribution (I don't think they can take it out due to successor plan rules)? Of course, they want to do this immediately... and both plans are SHNEC. I figure as long as they give each person 3% of total comp for 2024 (probably all into the MEP), that's what counts. Any other pitfalls? Thanks.

I knew I had seen this before, but couldn't find it! Thanks!

Never mind - it's old person brain. EOB confirms that it is without earnings.

I must lead a charmed life; it has been a long time since I've had a 401k plan not refund within 2.5 months (that I can recall; I'm also getting older). Now I've got one, and I was positive that the earnings on the refund were included in the amount reported on the 5330... but that's not what the instructions seem to say. It says the tax is on the excess contributions and are the amounts "actually paid" over what was allowed... and doesn't mention earnings. Am I just mis-remembering this rule? Is it really just the base amount of the refund that gets taxed? If the earnings are included, is there a cite for that? Thanks.

It's 1,000. I don't like this whole concept, so as part of our takeover-restatement, I'm going to tell them that they have to change it. They've never had more than four employees - I can't imagine this is a significant issue for them.

Thanks. I was mis-remembering how the maximum worked. I thought it was six months after meeting the elig criteria.