Lou S.

1 - 402(g) I think now stays in because it was not corrected by 4/15 following the failure. Employee should have picked up the income on 2022 tax return and requested refund. Unless the deposit was wrong and the W-2 shows no excess. Given the other issues you raise might be worth double checking this. 2-415 is qualification issue and needs correction. Probably a refund with earnings but possibly a forfeiture. Read the document. 3 -The incorrect match should be forfeited and used to fund future contributions with an explanation to employees. This might also help reduce or eliminate your 415 issue depending on the magnitude of the match failure and 415 excess. 4 - Check the current Rev-Proc on EPCRS for the acceptable corrections and time frame for self correction v VCP. With expanded IRS guidance you may still be in a widow to self correct. 5 - Refunds if any would be reported on 1099-R and taxable in the year received. 6 - I don't see any failures that would require a 5330 but I might be missing something.

DR245 you raise good questions but due to the issues involved, the Plan may not be able to certify a timely AFTAP which might also preclude the plan being able to make lumpsum distributions, but that also triggers additional participant notices which it sounds like you have not received. And I don't know if that's on the sponsor, the old actuarial firm or the new actuarial firm or some combination of all 3. As to you turning 55, there is nothing really magic about that age unless it is the Early Retirement or Normal Retirement Age in the Plan which you won't know until you get the SPD. It's possible but not likely that the Plan is setup to only allow distributions at NRA which might not be until age 65 in which case there is no delay right now because you're not yet entitled to benefit. That would be unusual in a small plan such as this, especially one they thought only covered the owner but not impossible. Based on the industry, it does look like the Plan would be PBGC covered so they may also be dealing with past filings for that as well. Also, if they are a PBGC plan that is termination, that will bring up a whole additional set of forms notices and timing requirements they need to make. I do sympathize with the owner who does seem to have gotten some poor or at least incomplete advice on plan startup but he may also be to blame for not supplying the right data. As to why they might switch midstream, maybe contact with the IRS clued him in to the fact that maybe the prior firm was in over their head and he should switch. I don't know, but from the owner's standpoint I'm sure it is stressful and he probably doesn't have a full handle on what the correction costs will be yet that could be substantial. And lastly, because they are in a VCP situation they may not even know what your benefit is until the IRS approves whatever corrections they submit and sometimes the IRS can be quite slow. And yeah, if they thought they only had to fund for one participant and found out several years later than a bunch of participants should have been accruing benefits, it's quite possible the Plan is underfunded, and the sponsor may be trying to figure out how it can stay in business and still fund the plan.

More than 12 months might indicate the Plan is going through the IRS Voluntary Correction Process or less likely but still possible the IRS Determination letter program upon plan termination and they are awaiting IRS approval before processing benefits. If you are eligible for benefits, file a claim for benefits and save any paper trail. Request a copy of the Plan's Summary Plan Description if you don't already have it with you claim. If they remain unresponsive consider contacting your local Department of Labor branch for their assistance.

I think it depends on whether you want the Plan to be a loan collection and processing agent for ex-employees or you want that loan off the books ASAP when a participant terminates.

Ive seen it done both ways as a receivable and payable on the prior 5500 making that one zeroed out on an accrual basis and a final return, and I've seen a short year final return filed for year the money came in and out. Which ever one you and the client are most comfortable with defending from a potential audit stand point and who is paying the cost of the final year 5500 if you decide there an additional one required should be agreed upon upfront. It's probably also been completely ignored by some though that's not the correct way to handle it.

They failing even when testing otherwise excludable separately? That's without getting into the question of whether or not "part-time" is a reasonable classification for exclusion.

Just test it on an allocation basis instead of a benefits one. Everyone will get the same percentage and be in the same rate group. Unless you have a ton of turnover and fail the ration percentage test due to last day requirement or some other odd scenario.

You are going to need to define burden a bit better. Affects would be a better term since it's hard to see some who is able to afford to defer more than $23K into a retirement account as being burdened that their deferral beyond be designated ROTH and the future earnings on that not subject to income taxation.

One is an on going formula that the IRS deems overly back loaded, the other is a fresh start amendment that is treated differently. But Effen's reference is what it relevant.

That sounds workable, even under the long term part time (LTPT) rules. You are just bringing in the LTPT employees earlier than the statutory limit of how long you can exclude them for 401k. The IRS doesn't generally have any problem when you are being less restrictive. Just need to have the document and your LTPT amendment match what you want it to for eligibility.

I think it might depend on the nature of the merge and whether or not the sponsor of Plan A was acquired in a stock or asset transaction or if the Sponsor of Plan A and Sponsor of Plan B are part of a controlled group or not.

That's a good question that I don't know the answer to but since they are separate programs I think you have two separate batches to file but would probably want to do them concurrently and under the cover letters probably want to note which years you are filing under which programs.

I don't see any problem with the hours of service rule for the participants starting 1/1/2026 for the Plan A participants merged into Plan B. You state that Plan participants are immediately 100% vested and Plan B are subject to graduated schedule. I'd make sure you are in compliance with any change of vesting schedule rules for Plan A participants merged in to Plan B to avoid any potential cutbacks.

To my knowledge the IRS has never had a restriction on taking a hardship after loan. The IRS used to have a requirement that you had to take all available loans before a hardship but that went away in 2018(?) maybe. It was one of the hardship rewrites. But as CuseFan notes, the plan can have more restrictive provisions so always good to check.

I'm with Peter, read the fabulous document. Which I'm guessing "probably" allocates them up to the 415 limit. If that doesn't eat them all up, you probably have a lot of forfeitures. I haven't heard being able to allocate forfeitures to past employees, but just because I haven't heard it, doesn't mean it can't be done. I have seen excess assets in a DB plan allocated to former employees who still have accrued benefits but I have not seen the same thing done in DC plan that had unallocated forfeitures.

I've only done it on takeover plans when both the administration firm and actuary and actuarial firm are changing. I believe that is another exception that gets automatic approval I think it's in the same rev proc as the BOY change auto approval but it's been a while since I looked it up. Otherwise I believe you need to submit to the IRS for a change in funding method to switch the val date to EOY which is often cost and time prohibitive. I believe automatic approvals are in Rec Proc. 2017-56 and other changes that require submission are in Rev Porc 2017-57.

I believe you are generally "safe" if you have the current benefit structure in place for 5 years but that doesn't mean you can't change it sooner. A repeated pattern of amendments is a facts and circumstances determination. Is two a pattern? In addition to Effen's questions, I think you'd want to look at more than just the history of the 2023 restatement and possible 2025 amendment. There may be valid business reasons for increasing benefits now.

Participant Direction is not required. You can still be a pooled Trustee Directed plan as far as I know.

I've done it before. I don't see any issue.

Unless they have a time machine, too late for 2024. For 2025 if they haven't met the accrual condition for 2025, you can assuming you do any amendments and notices timely but given that we're already in September unless they haven't been paying themselves any salary you might have a tough time justifying no accrual.

Does the Plan Document currently not allow for match or has the company simply not made matching contributions in the past? Because I think the two may lead to different results. If the plan currently allows for a discretionary match but they haven't made one, the plan probably already has a testing method (current or prior) and I don't think you can used the assumed 3% prior year rule. If the plan doesn't currently allow for matching contributions and you are amending that in with the after tax, then I agree if you elect prior year testing, the first year NHCE ACP is assumed to be 3%.

You might check out this old thread that seems close to your fact pattern and look at the reg that is quoted in the last post, but it's an older posts and some cites may have changed. Treas. Reg. Section 1.404-3(a)

From a plan perspective it doesn't change the characteristic of the funds in the Plan for participants. As for what happens to the nondeductible contribution that was not deductible because minimum required contribution was larger than self-employment income , I believe the excise tax is waived and you can carry forward the deduction to future years but I'm not a CPA and not 100% sure on how that works or what would need to be filed with the IRS and maintained by the client.

I guess it depends on your engagement and your scope of services but you could clarify that before hand with your client as to who is responsible for what with respect to plan documents, IRS testing, employee notices, blackout periods and government filings along with any other issues that may crop up.

I don't see it as an IRS failure. But the PBGC could be very sticky or they could choose to be very helpful. That is if everyone got the proper payout the PBGC might "just" want the missed premium filings with penalties and interest, and a late Form 500 and 501 along with all the paperwork that goes with that. Or they could say the termination is void and have you go back and do a lot which might also crate some IRS issues in addition to the PBGC ones. It sounds like a good time to get ERISA counsel, especially one who works with PBGC issues, involved and review potential options.