Lou S.

I don't know if we have enough info to fully comment on this but it sounds to my non attorney ears that this individual has become a Plan Fiduciary, exercising control over plan assets, whether they wanted to be or not.

Invoice them for 2022. You can threaten collections or not if they don't pay, your choice. You can resign from the client for 2023 or know you'll probably be going through this with them next year. Lesson learned, some folks are just not worth having as a client. If they are on your preapproved document kindly remind them they can no longer rely upon your opinion letter and will be considered an individually designed plan and that you are not responsible for timely amending their document.

If he's been in pay status, that is this is not his first RMD, it will need to be made by 12/31 this year. As to who it is made to, there are some other threads on here if you search that tend to have 2 different conflicting answers. The first answer is that it is payable to the participant's estate as it was owed to the participant as an RMD. The 2nd answer is it is payable to the beneficiaries in proportion to their beneficiary percentage as it is a payment due from the Plan. Which is the correct answer, I'm not really sure. Either way it is not eligible for rollover. Now if he has not reached his RBD, I think you are looking at a different set of rules under the 401(a)(9) regs.

https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-plan-loan-failures-and-deemed-distributions I believe the IRS fix would be to default the loan now, issue a 1099-R for the loan amount plus accrued interest. I'm not sure if it can be self corrected or requires VCP. It used to require VCP but it seems like now it may be eligible for self correction though if it's more than 2 years old or to an former HCE VCP may still be required.

If it's an NHCE bringing him by corrective amendment is fine. You should be fine if you test on an otherwise excludable basis for safe harbor. However, I think you will blow the TH exemption if he's not getting the safe harbor. Though Secure 2.0 might change that but I don't think it changes it until 2024. At least that was my understanding last time I looked at the issue but it's been a while.

CuseFan has it. If he gets a PS allocation of $47,000 then you would reclassify $6,500 of his deferral as catch-up. Might impact what other EEs have to get to pass testing depending on plan design and employee demographics but it works just fine from a catch-up standpoint.

Yes. That's seems like their options.

Since he had a 2022 RMD that was not made due to 0% vesting, I believe he will need to take his 2023 RMD by 12/31/2023. To use the DC method for CB Plan I think he needs to elect a lump sum in which case you can use the DC method on the amount being distributed which is not eligible for rollover. But you might get different opinions from different people as I don't believe this specific fact pattern is covered perfectly in the regs and could be open to other interpretations.

I'm not so sure I agree. I do dislike off calendar 401(k) plan years for some the sticky questions surrounding catch-ups but under current rules if you recharacterize contributions as Catch-up in an off calendar year plan to pass ADP testing (as opposed to exceeding the 402(g) limit which is always the calendar year occurring) then that recharaterization is considered a cacthup as of the last day of the Plan year which would be for the calendar year in which the plan year ends. As such a non calendar year plan that ends after 12/31/2023 would seem to require making that catchup recharacterization as ROTH to remain in the Plan. Absent additional guidance from the IRS on the subject. Just one of a number of things where we need additional guidance.

The "deemed not Top Heavy" is a year by year determination. Get rid of the policy or the premiums driving a contribution and you get rid of the problem in the future. Doesn't help for 2022 but if the premium hasn't been paid already by the company in 2023 there may be time to fix it.

My understanding is once you have $1 dollar allocated that doesn't meet the exemption, the Plan loses the "deemed not top-heavy status", there is no distinction in the code as to whether that allocation goes to key employees or non key employees. A work around though possibly not practical is to set up a 2nd plan profit sharing only that covers only the participant getting the allocation and spin his policy into that newly created plan. That only works if the participant is an NHCE or you'll violate BRF but I'm hoping he is an NHCE already or you might have the same problem within the current plan.

I would talk to a CPA who is familiar with the issue. My limited understanding since it's not my area of expertise is to take advantage of the NUA rules the shares need to leave the qualified Plan via distributable event into a taxable account of the individual in which case (again my understanding) is you are only taxed on the basis that is transferred and when you later sell the stock would pay the long term capital gains on the appreciation at the time of the sale.

Yes

This is what distribution Code E was made for on the 1099-R.

I doubt they have something in technical corrections that would allow you to add ROTH catch-up only for those that have to do ROTH catch-up but not allow any other ROTH. It would seem to go counter to their budgeting of now seemingly wanting to encourage ROTH to make 10 year forecasting of revenue look better. Also if a Plan allows ROTH I believe it has to universally allow ROTH, likewise if a plan allows CATCH-UPS it has to universally allow catch-ups. So it would seem odd that congress would allow a plan to add ROTH only for CATCH-UPS. But then the both Congress and the IRS have done stranger things in the past so I wouldn't put it past them, I just don't think it is likely.

Yes. You either need to add ROTH for everyone or remove all CATCH-UPS for everyone.

I would think the gains would be allocated to the participants in proportion to their employer match.

From your post I'm assuming plan counts vesting years of service as (calendar years / plan years) with 1000+ hours. Looks like he has 1000+ in: 2014, 2017, 2020, 2021, 2022 & 2023 from the wording in your post so 6 years. Doesn't look like he has any 5 year Break in Service so even if you are using the BIS rules there doesn't look like any service to toss.

Remember if the only contributions are safe harbor, you are deemed not top-heavy. Otherwise Belgarath has the right cite.

Either have the client declare a PS contribution (or match if the plan allows for discretionary match) equal to the amount of forfeitures and off set the contribution by the reallocated forfeitures while following the terms of the document?

I would not lose sleep over a plan with no non-key employees that did not make an employer contribution.

Yes the Plan is top-heavy at 100%. Since you have no non-key ees I don't believe you have any required contribution but you can check with your document provider if it's a concern.

1st - talk to big DC separate record keeper and see if they will re open. 2nd - if they say no, can you open a checking account in the name of the plan? Make the contributions there than pay out the folks who need a distribution assuming you can do the withholding and 1099-Rs or run it through some one who can.

I don't use the FIS/IDP but in the pre-approved doc, which we do use, you could use the short amendment system to check the box to allow ROTH and enter the effective date. Have you tried asking FIS document language support? I've found their ticket system isn't as good as it used to be but they still do respond.

Disability might work too. It could just be problematic if he does return to work.