Lou S.

@Peter, I'm a aware of multiple providers who will take cashout IRAs under the dollar limit or will take cashout rollover IRAs of any dollar amount if the Plan is terminated, but I don't know of any who take cashout rollover IRAs over the cashout limit because the participant is at the later of age 62 or Plan's Normal Retirement Age and the Plan calls for them to be cashed out. These providers may exist and if they do, I'd be interested in them. As to the OP question whether it is correct or not, our Plans will pay the RMD, if the participant is terminated and if they want more then the IRA we tell them the plan requires they take a full distribution either taxable, rollover or split between the two but the Plan does not make ad hoc payments.

No, the DB won't be OK if you have 2 and excluded one of them, even if one of them is an HCE.

Make sure you're billing time and expense? If you have account numbers a letter signed by the Plan Trustee requesting duplicate copies off all statements from X/X/XX -> Date of Account closure might help. Can't guarantee it but it might be a starting point.

Paul while I generally agree, it sounds like the funds were sent to the record keeper and thus segregated from the assets of the employer, just not invested in the employee specific account, unless I'm missing something. I agree with Bill's comment by "back dating" I think they mean "invested as if it had been invested on the original receipt date".

Doesn't sound correct. It sounds like the funds were segregated from the employer and held in suspense until an allocation could be made. At least if I understand it correctly.

If it is a DC Plan you can exclude non-onwer HCEs by some classification. But they need to be excluded, not just not participating. If it's a DB you'll fail 401(a)(26) if they are the only two. If there are any non-keys in the Plan, they will need to get a required TH minimum if any key has a non-zero allocation rate and if there are and NHCE eligible, like the guy becomes a NHCE in the future but is still employed, you'd need to bring them in for coverage.

What does the document say?

Refer them to their legal counsel for any such questions unless you are an attorney. Tell them it is outside the scope or your services or expertise.

If it was paid to the participant then the participant will receive the 1099-R. If it paid to the spouse as beneficiary then the spouse will receive the 1099-R. Not exactly your situation but close enough to illustrate - participant who is in RMD status dies during the year - Example 1, participant received full RMD before dying then spouse rolls over remained before 12/31. Two 1099-R one to the participant for the RMD with code 7 under their SSN and one to the beneficiary under their SSN with code 4G for the death benefit rollover. Example 2, participant does not receive RMD before death. Spouse beneficiary takes RMD then rolls over remainder to IRA. Two 1099-R both to the beneficiary under their SSN with one with code 4 for the RMD and one with code 4G for the death benefit rollover.

See Peter's answer in post #2. I think that is as clear as you are likely to get.

That is my recollection as well. No additional taxable income at time of offset. Which brings up an interesting question that I've never had to deal with in real life since I have not had a participant default and then later pay back. The previously defaulted loan amount is clearly after tax basis . If the additional accrue interest is also paid, as required to retire the loan, is that also after tax basis or is that portion considered pretax earnings subject to income tax when distributed?

You have to give the Special Tax Notice for distributions eligible for rollover no less than 30 days and not more than 90 days before a distribution. Participants can waive the 30 day period in writing and get a distribution earlier but you're not supposed to force them out without the waiting period. Maybe that's what your thinking of?

We'll if it's an EZ you don't actually attach the SB at all. But you do have to send a signed SB annually to the client for their records. Maybe propose a smaller formula for a few years then terminate?

Plan is "supposed to be permanent" but maybe facts and circumstances have changed. Advise of potential Plan disqualification, tell them they may want to consult with their ERISA counsel. When you say "nothing in the second year" was that the required minimum contribution or did they just say, nope don't want to? Because those might be two different situations. And by no EZ filed I'm presuming because assets are under $250K at least hoping that's the case.

It is still counted as a loan and still accrues "phantom interest" until such such time as the loan can be offset under a distributable event of some sort.

Yes, 100x projected monthly benefit is max as a CB Plan is a type of DB Plan. Purchase of Life Insurance must follow terms of the Plan Document and must be done in a non-discriminatory manner.

I believe yes you are correct.

I think this does change the answer because they are no longer excluded. They are an active participant, just getting $0 principal credit. It's dumb because mathematically it is the same but I'm pretty sure that is the result if you just put them in a $0 allocation group instead of excluding them from the plan.

I would think the fiduciaries would have a duty to monitor the investments. Is it possible to have self directed brokerage window or mutual fund window that might allow such participants the opportunity to invest in funds that meet their Religious desires while still limiting the fiduciaries legal exposure should those investment be shall we say "sub par performers"?

In order to recognized the ROTH conversion for 2023 they would need an election to make after tax, a deposit of said contribution, and an election and conversion all completed on or before 12/31/2023. You would then need to issue a 2023, 1099-R for the conversion. If the election is made in December but the deposit is not made until January, then the earliest you could do a conversion is in 2024 since I do not believe you are allowed to "convert a receivable".

You can try FORM 945-X. Also IRS Publication 15," Employer's Tax Guide" may have some relevant information.

Because the way you value liabilities and assets for the 5500, might not be the same as if you terminated the Plan and had to pay out all participants. The IRS mandated interest rates for valuing the Funding Target might produce a number that is higher or lower than the sum of all hypothetical balances in plan which might be different still form the actual assets in the Plan. Also if the Plan is using Actuarial Value of Assets instead of Market Value of Assets to smooth out losses, the Assets reported on the 5500 for calculating that "overfunding" might be more that what is currently in the Plan. That is a long winded way of saying, it's complicated.

I think you need the change before the end of the plan year. I think the rule on time limit Bird mentions was maintaining the current method for 5 years before you can switch. Though I think that was if you wanted to switch to "prior year", I don't think the same restriction applied to changing to "current year".

I think truphao is correct. But I'd also check the document language that coordinates 416 and confirm that it only gives him 3% and not 5%.

The owner should sign a form electing an in-plan conversion of $x and indicate which source is being converted if there are multiple. It's possible your document provider has model forms you can use, ours does. A 1099-R should be issues for the transaction. Ideally I'd like to have it transferred to another sub account at Schwab so it's clear, but you can "lump it one in account" if your on paper tracking is excellent and beyond IRS audit reproach.