AlbanyConsultant

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.

I've got the EOB in front of me (both hardcopy AND online) and this still makes no sense. I took over a plan that says eligibility is no age, 6 months with 500 hours (reverts to YOS if not satisfied), entry date is January 1 following satisfaction. What?* EOB says that there is a way to design the plan so that this is OK, and it discusses using more-lenient-than-statutory requirements, which is what I've got. But the example shows someone hired in the first half of the year with 6 month eligibility - that's the easy situation! So if I'm hired in June 2024, I'm eligible 1/1/25, and if I'm hired in July 2024, I'm eligible 1/1/26. People hired in the second half of the year are getting the shaft, right? What am I missing here? Why does this look so shady? And, more importantly, is this plan OK as is (the prior TPA has done other questionable things, so I'm not taking anything they produced as good unless I can prove it)? Is there something that explains is differently that I can check out? Thanks. * I love that, 30 years in, I still find things I've never seen before. Yeah, "love"...

You will be shocked to find that the doc is not happy that be might be part of an ASG. "I read up on it this weekend" - great; I've been reading about it for 30 years and it's still really complicated. "I'll open a SIMPLE IRA instead and forget this!" Buzz! Sorry, also subject to ASG rules. I don't think I'm getting this business.

Got a call today from an eye doc who owns 100% of his practice (which will be an LLC taxed as a sole prop starting in 2024; previously it was an S-corp where he owned 100%), looking to put in a new plan. He also owns ~21% of a surgery center where he performs all his surgeries (so I would say that, yes, he refers his business there). This immediately made me think of ASG. Doc is convinced that this isn't a problem. "The other doctors/owners of the surgery center have plans that cover only their practices and not the surgery center employees, so I'm sure it's fine." Without meaning to disparage any other potential TPAs working on those plans, I think I'll look at it with fresh eyes... So, we don't have a management ASG. Good. For a B-Org, I don't know the relative revenue numbers, but I'll assume that if my doc owns 20%+, it means his revenue is at least 10% of the practice. I suppose you could argue if the surgery center employees perform services that were 'historically' done by a doctor's office; I might argue they were historically done at a hospital. I think the A-Org argument is even stronger, as they are definitely 'regularly associated'. Oh - and of course doc owns his building as a R/E LLC... and his brother owns a lens shop in the building. "I don't specifically refer people there; they can go anywhere... but I tell them it's easy to go right across the hall to get their prescription filled." I think that is separated enough to not be a problem. I know that the best answer is "consult with an ERISA attorney", and that will be my ultimate recommendation. But I want to at least see if it can be ruled out so we don't waste our efforts and resources going down that direction if it's clearly NOT one. Is that what I've got here? Thanks.

I've got a pooled plan where the plan sponsor doesn't want to show the investment fees separately from other gains/losses. He says that it's net gains that matters - if the net is better than 'average', then the participants are fine. He is fine with it showing on the SAR, and he is happy to tell his participants that the fees on the SAR are net against the total gains on their statement. That isn't sitting well with me. I'd think that in a pooled plan, the disclosure standard is even higher since all the assets are controlled by the trustee. The fact that there are lawsuits about fees seems to indicate that disclosing fees so they can be monitored is the right thing to do. So my question is, is there something in black and white that supports either side? If it's a gray area, then that's fine, too, as long as I can present as such and tell the plan sponsor that this decision is on them. Thanks.

This is been the sticking point.

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.

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... ?