Lou S.

Assuming he is an officer and his compensation is over the $ limit I'm not sure how he is NOT a Key employee in 2023. §416(i)(1)(A) says "at any time during the year". I agree he was not a key for 2022 and would be a non-key as of the determination date of 12/31/2022 for determining if the Plan is top heavy for the 2023 plan year.

If you can show the residuals that are paid out on in 2024 as payables as of 12/31/2023 and a $0 ending balance as of 12/31/2023 you may be able to get a way with a final 5500 for 2023, otherwise you're in the situation bzorc describes above with a short year filing.

In additional to what EBP says above, you will also lose safe harbor status for the year unless you meet certain conditions - there is an IRS notice pr Rev Proc on this, I forget which one. I think the conditions to still be SH are one of operating at a economic loss, business transaction like merger or acquisition, or dissolution of the company but I haven't reviewed it in a while so double check. But if the Owner & his wife are the only eligible participants you won't have to worry about testing issues even if you lose SH status. Also if your current safe-harbor formula in the document excludes HCEs, or at least makes it optional for HCEs, you may have no contribution requirement. Both of the above assume the owner and his wife are the only eligible, and not just the only contributing 401(k).

I don't think he's eligible for PS so unless he's getting pulled in under gateway language that is causing him to go from 3 -> 5 which would be fine then I think you might need an amendment to bring him in retroactively.

Sure, but she should also start with a basis equal to the rollover. And money coming out of the ROTH is basis recovery first so as long as she doesn't withdraw more than the initial rollover in the first 5 year, no taxes. At least as I understand it, assuming she doesn't already have a ROTH IRA which I don't believe she does.

Eligibility is not a protected benefit but you can grandfather it for folks who already met the old eligibility but not the new, or for folks employed as of a certain date. As long as it's not discriminatory, like bringing in the just the owners kid or a newly hire partner to the firm you have a lot of flexibility, it all depends on how the amendment language is drafted.

A participant starts making ROTH-401(k) contributions. Participant is over 59.5 but not yet age 73. Before he reached the 5 year aging rule he dies also before reaching age 73. Are the earnings taxable to the beneficiary? Can the beneficiary rollover to an Inherited ROTH-IRA? if yes how quickly must the beneficiary exhaust the ROTH? Does the answer change if the beneficiary is a spouse v non spouse? Beneficiary is spouse and is over age 73. Can she roll to regular ROTH IRA and treat as her own thus escaping all RMD requirements while alive? Beneficiary and Participant were married less than 1 year at time of death but she was beneficiary for many years before they were married and I assume for IRS purposes the fact that they were married at time of death is the only relevant piece to the tax questions and ability or inability to stretch the distribution as long as possible.

To be honest I had not given it much thought. I suppose the rollout to IRA approach has some planning benefits with respect to the 5 year clock and basis recovery first should the funds be required before 59.5 where as in the plan a future in-service that's not qualified would be be prorated between basis and earnings.

Nothing. It's just another term to describe it, though I usually hear it described as "a mega back door roth" The "mega" is in reference to being able to essentially make a ROTH contribution equal to the 415c limit through VAT and immediate conversion to ROTH instead of the non-mega? IRA limit you could get by contributing the IRA limit and converting that to ROTH (assumes you don't have pro-ration problem with other taxable IRAs)

I think you are always allowed to change to BOY, it's changing to EOY where you need to meet certain conditions to get automatic approval. See Rev. Proc. 2017-56 which I don't think has been superceeded but you can double check. I think Section 3.02 is the relevant one.

Sure you can have an effective date of January 1, 2023. You just cant start the deferrals until after the plan is signed and you'll only be able to defer on pay earned after the 401(k) component was put in. But no problem having an effective date of 1/1 to get full 401(a)(17) and 415 limits, especially if they are also making a PS contribution. If you have NHCEs and/or non-Keys testing and top heavy are both issues you'll need to consider. And too late to do a safe harbor plan for 2023.

I think there are some complexities with converting traditional DB to cash balance and if you are using a pre-approved document you may want to read the fine print on whether or not your opinion letter covers the conversion. But like FTW, Relius Doc also has a spot in the checklist to convert from DB to CB. You might also want to double check with your software that it is able to handle the conversion from DB to CB. Not that that is an IRS code requirement, but something you might want to know before you take on the client.

I think this seems reasonable. Though if you freeze Company B, you should be able to merge it into Company A at any time in 2024 no need to wait until 2025. I think you'll want to get the SH match notice out to Company B ASAP and document why it isn't be distributed 30 days before the plan year. Document why you think the notice was given in a a reasonable time and let sponsor A make the call since the IRS could take a different position based on facts and circumstance. I think to the extent that most of the employees in Company B contribute in 2024 and get the full SH Match the better your argument that the notice was reasonable and timely is likely to be accepted by the IRS should the issue come up.

I don't think there is anything magical about the first of the month. But you do have some prorated limits if you run a short plan year. Though i think those limits are prorated on month with any partial month treated as full month with 1/12th the limit. Is there some reason you don't want a retro effective date to get the full 415 and 401(a)(17) limits? Like trying to keep out terminated employees so you pass coverage?

I don't work with 403(b)s so if the rules are different then this isn't applicable. But my understanding is the 11g amendment has to have a tangible economic benefit for it to be valid. One approach of the 11g amendment might be to give a QMAC to the the newly included group equal to the ACP percentage of the NHCEs in the plan.

I don't see why this would not apply to this situation assuming the amendment/merger documents are drafted accordingly.

What does the Plan document say?

This is such a great question that highlights the absurdity of the the RMD rules in that the answer is not immediately obvious. It also has the bonus of the the plan being adopted no only after the PYE but after a potential 4/1 RBD date! I really don't know what the answer to the question is but best guess is he would have an RMD for 2023 by 12/31 and future ones going forward. But the rules seem so opaque that no reasonable answer would surprise. @michael burkow, if this thread doesn't yield an answer and you find out elsewhere, please share your results here.

A roth conversion source of an after tax account account that is converted is not the same as a roth 401(k) contribution account and the two should be account for separately.

I'm not sure I understand. The conversion will be to a sources that mirror's the characteristics of the original source. So if he could take in-service withdrawals of after tax contribution source, he can take in service withdrawals of roth converted after tax contribution source. That is you might need a separate ROTH source for each type of money that a participant may convert to roth. As for the taxation I think if he takes a later distribution from the roth source before age 59.5 you'll have some recovery of roth basis and some taxable piece based on the protated potion that is earnings. Unlike an IRA where you recover the ROTH basis on a FIFO basis, I think in qualified retirement plans you still have the protata method you need to use. Unless there was a change I missed.

It's a pooled contribution to the plan until it's allocated to participant accounts so standard prudent fiduciary rules would apply.

Purchase an annuity with a J&S benefit? I don't think the other options are acceptable for a DB plan unless you'd like to be on the hook for a claim from the spouse.

If they are no longer due a benefit, I don't think there is a time limit on reporting them as "D". Now how well that gets translated to removing them from the government data base so they don't get the "you may have a benefit" letter I can't say. I also don't know if reporting a large number of "D", possibly in excess of the current participant count(?) would be viewed by the programs that filter for potential additional attention.

Have you asked FIS/PPD? IMO, I think rolling over to default IRA is the "best" of the allowable options available in these situations and personally I would not have any problem with sending the funds to a rollover IRA if good faith effort to get these non-responsive participants out of the Plan to facilitate the final distribution of assets in conjunction with the Plan termination. What are your other options? Send to PBGC program? Send them a taxable check less federal withholding and tell them they have 60 days to rollover? I think it's clear you're not required to keep the trust open for non-responsive participants just like you're not required for missing ones.

I think that all sounds correct. I think in 2024 is where you are going report the sponsor change from A -> D on the 5500.