AlbanyConsultant

That's what I was thinking, but I just got inside my own head, I guess. Thanks!

Oh - I wasn't clear. I'm talking about for a pooled plan where they are being distributed annually. And, yes, I know there's a whole debate as to when the first ones need to be given out. This is a theoretical discussion here, so I'm not looking at that. Let's pretend this is next year, and we're not having any "within a year" issues.

Maybe I'm just realizing this later than everyone else, but since the rates are changing monthly, are we in for a bunch of timing headaches? Specifically... 1. My efficient assistant prepared the report and statements in April... and I'm just now getting to reviewing them. It used to not be a big deal because no numbers changed. But now I have to re-run the lifetime income disclosures because the interest rates aren't the same now as they were three months ago (or they might be, maybe... better not take the chance!). 2. Let's say I actually did send the statements with disclosures back in April. Plan sponsors being plan sponsors, the package sat on their desk until I reminded them that they actually need to open it and do something, so they don't hand the statements and disclosures out until July. Are the disclosures that we prepared back in April no good? Would the participants ever know or care? 3. The interest rates update near the end of the month (according to the updates I get from my recordkeeping software provider). Does that mean I'm on hold with sending out reports near the end of the month so I don't accidentally force a client to hand out a disclosure notice that is 'behind' by the time they hand it out? These sound ridiculous... but that doesn't mean they're not how the rule was written. Of course, then there's "written" vs. "interpreted"... anyway, am I working myself up over nothing? Thanks.

This seems to comes up periodically... some of the threads end up trailing off, and some don't seem to come to the same conclusions (though that might be me misreading them!) because this is not particularly intuitive, so let me try and ask this with a concrete example that was just presented to me. I'll even link some of the previous threads that I thought were good ones. Doctor D is doing the max 403b deferrals and getting a match in the hospital's 403b plan. He is now about to start a practice of his own (100% owner) and wants to start up a 401k plan - deferrals, 3% SH, class based profit sharing. He does not control the hospital or sit on its board. He is 55 years old. I don't have exact numbers, but let's make the math easy and say he's getting $200K compensation from the hospital and expecting $300K from his S-corp practice. The hospital's 403b match is capped at 2%. He can't double-dip on deferrals between both plans, so he will do those in the 403b plan to get the match (if the CPA can find a tax angle for him to do deferrals from the private practice in 2023 that is worth giving up the match, he can make that change in January 2023). But let's assume that he keeps deferring into the 403b plan. Do I have to include the 403b deferrals in any testing that I do? It appears "yes": $67,500 max including catch-up less $27,000 403b deferrals = $40,500 that he can get as employer (i.e., non-401k) contributions in the 401k plan. Does the match he is getting affect this at all? I'm thinking "no", since it is an unrelated employer, even though there is all that stuff about the 403b 'belonging' to him. That's actually another question: the 1.415(f)-1 regs refer to a 403b "annuity contract"... but what if the 403b plan is not held in annuity contracts, but it's instead on a mutual fund recordkeeping platform? Is that splitting hairs? Admittedly, it might be... If Doctor D was establishing this as an equal partnership with Doctors E and F 1/3 apiece, since D's ownership would be less than 50%, would he not have to count his 403b deferrals against his $67,000 limit and/or $27,000 limit, in effect getting two separate limits? Is there anything else that needs to be considered? Any of this incorrect? Thanks. November 2016 thread July 2017 thread March 2018 thread November 2021 thread Also reference your favorite site for 415(c) and 1.415(f)-1(f) (see especially Examples 6 and 7).

In all instances, it's determined as of the end of the year of separation, even in cases of death, disability, or retirement. So the people who are being paid now separated in 2021 (or before). Anyone who left now would have their balance determined as of 12/31/22 - it's coded as anniversary date, not valuation date. So I think this interim val date will have no effect on anyone currently active... other than to show them that their account balance is tumbling just like pretty much everyone else's.

I've got a calendar-year pooled 401k/PS plan where the trustee has asked for an interim valuation because the assets have (of course) dropped by a significant percentage since 12/31/21 and participants with a significant total of the plan's assets are looking to take a distribution. I've already gone over the pros and cons, the "if you do it when it's down, you should make sure you consider doing it when it's up" speech, etc. My Q is... obviously, the terminated participants who are looking for a distribution should get updated statements to reflect the updated amounts that are going to be distributed to them. But what about the active participants (who are not eligible for a termination distribution)? Is there any reason to give them statements as of 5/31/22 that show this ~20% drop in value? Since it's not EOY, do they need to get this interim valuation statement? The plan allows no ISWs or hardships (except RMDs, which wouldn't be affected by this interim valuation). Thanks.

Just had an initial call with the financial advisor, so some of this is subject to change as I get more details, but it sounds like: > NFP has a 403b with a large insurance co and is tired of bad service, high fees, etc. > NFP is looking into a new recordkeeper and wants to move the plan, but the insurance co says that the accounts are individual annuities (though they are the only provider and there is a company contribution, so this should be an ERISA plan with all that entails) so the plan sponsor does not have the right to pick up all the accounts and move them - each participant would have to agree to do so. Is there anything legally preventing the opening of a new 403b plan and saying that effective 7/1/22, all deferrals go to New Plan at New Recordkeeper, and all participants have to complete a new deferral election form? Any participant who wants to make a transfer from Old Plan to New Plan may do so, but not vice-versa. Old Plan would still exist separately for document, 5500 and whatever other purposes; if someone wanted a plan loan, for example, they would only be eligible for the balance in the plan they are applying in. The real problem is that the extra expense of two plans will likely offset the savings the New Recordkeeper is offering. But at this point, I'm just trying to figure out options. I know this isn't a perfect solution, but we've been burned several times with trying to manage a plan where there are still accounts in the old recordkeeping platform and trying to get information from them each year is a complete hassle. You think "oh, the balances will just decline each year, it won't be that bad"... five to seven years later, and they're still going strong!

Al, the owner of the company which sponsors the PS-only plan, was taking RMDs and then passed away in 2017. His two sons, who were his 50/50 beneficiaries and who were participants and now became the 50/50 company owners chose to not take Dad's money out of the plan. An RMD is being calculated on Al's balance each year and paid to each of the sons (split evenly between the two of them). The plan does have the 5-year-rule selected (though I thought that was only applicable if the participant died before RBD). Is there any limit as to how long the sons can keep this going inside the plan? Is there something that will require them to take Al's money out at some point? The sons are just over 60 themselves, so they have a few years before they hit RMD status on their own accounts. Thanks.

I'm having a meeting with my cybersecurity consultants on Monday, and I figured I'd bring them the latest guidance we have to try and follow. Are those 3 pdfs from the DOL in April 2021 (news release here) pretty much what we have officially (or semi-officially)? Thanks.

Years ago, three participants in this non-ERISA 403b plan opened up accounts at Equitable. They all terminated in the early 2000's. After that, the plan started making employer contributions and took more control of the plan (moving all employees to one RK), moving the plan firmly into ERISA 403b territory, which is when we got involved. So only these accounts were still 'outside', and we've not been reporting them on the 5500 under the 2009 rules. Now the NFP is terminating the plan. We asked Equitable for options, and they told the plan sponsor that they have no authority over those accounts because they are individual tax-sheltered annuities. The plan sponsor spoke to the participants who have agreed in theory to take the money from the plan... but haven't. Does the 2020 IRS guidance apply here? Can they just consider these accounts as not part of the plan any more and say the plan is done? Thanks.

A little confused on how the timing works on what Datair is providing as additional PPA document amendments (Expanded Hardship, Qualified Plan Loan Offset, Forfeiture Allocation, and Disability Claims Procedure) that need to be in place by 12/31/21 (though only Expanded Hardship and QPLO need to be signed by the plan sponsor; the rest are adopted at our level or above). We're restating our plans effective 1/1/22, signed (hopefully!) in December 2021. We're getting unclear information from Datair themselves as to whether this means that these amendments need to be executed separately in 2021 because they belong to the PPA document, or if they are considered 'wrapped up' in the restatement because the restatement is executed prior to 12/31/21. Any thoughts from other Datair users? Or in general? Thanks. For a post-PPA restatement not signed by 12/31/21, I believe they would need these amendments executed separately.

A non-profit client of mine with a 403b absorbed a smaller NFP with a 401k plan. I told them that the two plans couldn't merge. The participants are all being retained as employees, but obviously under the surviving employer NFP. I've still got nightmares of the same-desk rule swimming in my head - are these people considered "terminated" and therefore can roll their 401k money into the 403b plan as rollovers? Or is an IRA their only option? Thanks.

That's an interesting distinction, @shERPA. I just got a call from a financial advisor representing a client who has a SIMPLE and they are projecting to go over 100 employees early next year... so my immediate thought was "have they already terminated their SIMPLE for 2022?" But is that not as necessary if they establish a 401k plan effective 1/1/22 and tell the participants that the SIMPLE elections are therefore invalid starting on 1/1/22 (so here, defer into this 401k plan instead)?

This is the problem - I believe the plan sponsor does not have the estate's TIN. Thank you both.

A participant in RMD pay status passed away this year, and her plan beneficiary is her estate. However, the estate is not responding to the plan paperwork to have the RMD processed. What can be done? I know there's generally a 50% penalty to the participant if the RMD isn't paid by 12/31/21, but I don't think the participant herself cares at this point - would the penalty pass through to the estate? Thanks.

I've already written off the bad debt - I stopped fighting it over a year ago. I'm now in the "casually wondering what's going to happen when the IRS realizes that there's a missing 5500" phase. They are going to send a letter that will never get responded to... eventually they may track down the next of kin. Is there any responsibility on that person?

We were the TPA on this one person plan, and the owner stopped paying our invoices. We went back and forth a couple of times over it, he rolled his money out, we told him we wouldn't prepare the final 5500 until he paid us per our client service agreement, and then he never responded. Just found out that he recently passed away. So, clearly, we're not getting paid. But... just wondering... what is going to happen with the 5500? At some point, they'll figure out that a filing is missing and send a letter to the business that is no longer there. The guy is dead. Does the IRS have the authority to levy any penalties against a spouse, estate, heirs, etc.? It's more of a morbid curiosity at this point.

Thankfully, none of my clients ever seem to be in a disaster area where they need disaster relief, but this time, one of my audited plans is in NYC and wants to take advantage of the 1/3/22 deadline. From what I'm reading, there's nothing special to do - just file before the new deadline, and the IRS is supposed to know by the address that the plan sponsor is eligible for the relief. For those who unfortunately have to deal with this on a more regular basis, does that sound right? Doesn't the box on Line D usually have to be completed? I don't want to add a $2,000 late filing penalty to this company's other issues...

We have a pooled plan that had the standard 'after the end of year valuation is completed', but the plan sponsor wanted to be nicer to the participants, so over our objections amended the plan to allow for immediate distributions. Here we are, just getting the data for 2020, and there's a 2021 terminee who is demanding a payout Right Now because that is what the plan allows. And she doesn't want to wait the couple of weeks until we get 2020 done. Our first instinct was to go with the 12/31/19 balance and pay that out and deal with any residual later, but then maybe a percentage of that is better in case there's a loss in 2020 (OK, there probably isn't, but we're setting precedence and administrative policy here). The timing makes this extreme, but I suppose this really goes for any distribution request we're going to encounter once the next plan year is completed. Any thoughts or guidance or best practices out there that we can be following on this? Besides being better at saying "no" to our clients? Thanks.

Ignoring the fact that there are eligible employees in all three entities... sometimes, the same employees are in multiple entities! I think that's a later step in the process...

This might actually be a more general question, but since the plan I'm working on is looking to allocate just a safe harbor, I figured it went here... A doctor owns 100% of three businesses: Sole Prop A, Sole Prop B, and S-corp C. They are all part of the plan. For the first time, I've got an issue with the compensation. Sole Prop A has a net Schedule C (before pension expense) of $34K. Sole Prop B has a net loss (before pension expense) of -$127K. And the S-corp paid him a W-2 of $278K, including $18K of 2% shareholder health insurance premium. Normally, all the numbers are positive and combine to be way over the compensation limit (even after the safe harbor expense for the participants), so this is nothing to worry about. But 2020 was, well, 2020. I'm sure it isn't as simple as combining the three numbers. I thought I remembered hearing that you combine the self-employed amounts, and if that is less than zero, you can treat that as zero... but I can't find that in writing at the moment, so I'm reluctant to go with that until I've got something to hang my hat on. Any thoughts or directions to point me in? Thanks.

I didn't even notice that! Thanks.

414(n) gets into all the rules about leased employees, and the code sections it applies to... and doesn't mention 403(b). So I was thinking that the time that an employee worked for a leasing agency would never be considered for the plan sponsor's 403(b) plan because the leased employee rules wouldn't apply. And this article from Plan Sponsor magazine seems to support that theory: https://www.plansponsor.com/blines-ask-the-experts-leased-employees-and-403b-plans/ But then I happened to come across IRS Pub 7003 (revised June 2021). On page 2, it specifically says... well, let me quote it: Am I getting twisted up in the legalese, or is this being contradictory? It sounds like this is saying that the 403(b) plan has to comply with 414(n)... but 414(n) itself doesn't reference that 403(b) plans have to subject to it. Thanks for any help setting me straight...

I've re-read ERISA 105, and we're debating if it's necessary to send annual participant statements (from our recordkeeping system) to participants who are fully invested in self-directed brokerage accounts. What they are not getting from those accounts are (a) vesting by money type and (b) information about their loan balance (where applicable). At the moment, that's all that they are functionally missing - while it might be nice to know how much of their balance might be in the deferral money source vs. the profit sharing, if it's all vested, it doesn't matter as much. So we're thinking that if a plan is by design fully vested, then we can skip the statements; we'd still provide statements if the plan has sources subject to vesting, even if all participants are fully vested due to accruing enough years of vesting service. As for loans... I don't see that as being a requirement anywhere, so we're on the fence about it. Any comments, ideas, etc.? And I know that this could or will or may change once we get new rules on lifetime income wording, as I suspect that the brokerage accounts won't put that on their statements (I will be happy to be wrong about this, though) - since many of them aren't even set up as "retirement plan accounts", why would they follow retirement plan rules? Thanks for your thoughts.

In this plan where all the assets are in self-directed brokerage accounts, the deferrals are sent in one check to the financial advisor, who deposits them to a holding account titled in the name of the plan. A breakdown is sent with the check, and once the check clears (I assume that has to happen first?), the money is moved from the holding account to the participant accounts. The checks often arrive in approximately five business days... so we're already getting close the the safe harbor timing. While this may be outdated these days, we might be able to make the argument that this mailing time and waiting for the funds to clear and then +1 day for the split is "reasonable" for this set up. Mmmmmaybe. But what about the times where there is a delay at the financial institution? The money has been segregated from the employer and is deposited to the plan - check. So it's not really late to the plan. Where's the exposure that it didn't get to the participant's account timely... because I assume there has to be some, right? This happened a couple of times last year, so I want to warn them about this, and being able to hang my hat on something would be nice, but all I'm finding is "must be deposited to the plan", which it was. I know, get them to a product platform. Maybe one day. LOL Thanks.