Lou S.

I think the bigger question is how were these assets treated 20 years ago when the Plan was terminated and why are they being returned now from unclaimed property? And if you you are treating them as qualified plan assets eligible for rollover to an IRA, how are you doing so now if the Plan terminated 20 years ago and has never been updated for current law nor filed any 5500 (presumably) during that 20 year period.

I believe the attributable match has the same deadline as ADP refund though I'm not sure I can find a cite to affirmatively support that.

Don't make his problem your problem. He has a 401(k) plan that seems to have been validly executed, a trust established, and deposits have even been made. It sounds like he has a 401(k) Plan. If he wants to terminate it sure, you can help him with that along with the distribution, 1099-R and final Form 5500-EZ filing.

ATM? do you mean ADP/ACP refunds? if so the deadline is 2 1/2 months assuming no extension for auto enrollment to avoid the 10% excise tax on late refunds. I believe the IRS position on that is 2 months plus 15 days so I think if the PYE is 1/1 (as opposed to 12/31) you would technically have until 3/16.

The limit is the lessor of 2 numbers which are "1/2 vested account balance" or "$50,000 reduced by highest balance in the last 12 months". So if his vested balance is over $100,000 the $50,000 reduced by the highest outstanding balance in the last 12 months should always be the smaller number.

Next Plan Year.

Excellent question. It's one of those things I've heard "within 12 months of the end of the Plan Year" but I'm not sure where that authority comes from as I don't see it spelled out in the Code or Regs but maybe I'm missing it. Possibly some other IRS guidance? It's one of those things I'm confident in but can't seem to point to the correct citation.

The funds are in an IRA, they are subject to RMDs. Now if the owner can show a basis then the basis can be recovered tax free but I believe a proration is required. I mean this person has had an IRA account for 38 years and is just now figuring that out? If the funds were erroneously put in an IRA you likely have bigger tax problems like the the annual excise tax on excess IRA contributions. And I'm unfamiliar with the term "rolled over to a taxable account" a rollover is usually associated with a distribution to an IRA or other tax qualified account a distribution to a taxable account is usually just called a taxable distribution.

Something sounds off. But assuming (and possible a faulty assumption on my part) that this is a calendar year plan, that the plan was not TH in the past and that 12/31/2022 determination date is the first time they are TH then yes the 2023 TH minimum will be due in 2024 based on 2023 data. If they want to deduct it for 2023 it would be the due date of the 2023 tax return, with extensions. If they wanted to push it out to the latest date allowed in the regs then that would be 12/31/2024 and you can have deduction and 415 fun with the timing.

It's address in the IRS instructions to Form 1099-R. I think the section called something like "Corrective distribution after total withdrawal". I'm pretty sure the correction is to issue amended 1099-Rs, one for the refund and one the balance of the distribution.

Since the first distribution is supposed to be the RMD, why not take the whole 2023 RMD from the platform? Or is it the pooled potion hasn't yet been reconciled?

Sounds like a TPA limitation and not a Plan or Code limitation.

Assuming calendar year plan and taxpayer if they go on extension to file taxes they might be able to make the match as late as October 15th, though that might be cutting it close.

Thoughts? It's about time? Good change. I've had a plan for years on the edge of 120 that has like 35 people actually participating so nice to see they won't be pushing into audit territory anytime soon with this change. I was a bit worried since I think they have just enough long time part times who might push them over 120 but the chances that those will actually participate is quite small.

Unlike the current year / prior year testing options that must be stated in your document, you can change your testing for otherwise exludable from year to year and use which ever results give you the best case scenario. Though we usually find throwing out the folks who have not met the statutory exclusions tends to give the best results as there are often a lot of NHCEs at 0% in the that group.

With the expanded eligibility have you tested otherwise excludeable employees separately? If not it may help your testing results. Or you may have already tried and it still fails.

I think you would probably be fine with the correction you propose as fixing a data entry error. Though you'd probably be on even stronger ground if you simply removed the erroneous deposit from participant, left it in plan, and used it to offset the next deposit. Same result, but the money never leaves the plan to go back to the employer.

I believe it creates problems for the SIMPLE-IRA that would need to be corrected as you are not allowed to maintain another plan if you sponsor a SIMPLE-IRA for the year. I'm pretty sure that extends to all members of a controlled group. There is a transition rule but I think that applies to M&A and might not apply to a startup. I don't deal with SIMPLE-IRAs so I'm not 100% sure on the correction but I think it involves disgorging the IRA contributions for the year of failure. There are number of similar threads about wanting to start a plan to replace a SIMPLE-IRA (though I don't know if your exact fact pattern) so you might search the site for threads on SIMPLE-IRA.

Assuming he had an election for 2022 to do that in the 401(k) plan, no I don't see an issue with what you are describing assuming that's the whole tax picture for the individual.

As I understand it his comp is "earned" on 12/31 and his "payroll period" for lack of a better term is the plan year, so his "per payroll" match would be the same as and annual match and not technically a true up..

I would assume so as well, but you know what they say when you assume...so I would read the document on the definition of compensation for top-heavy but I would be surprised if that wasn't the result.

Perhaps I misunderstood the question but my assumption was the plan allows in Roth conversion, the participant has existing SH matching funds, and would like to know if he can convert those to roth. It's possible he has only ROTH 401(k) and Pre-tax SH Match and would simply like all ROTH, but that's simply a guess on my part. I didn't contemplate this in the context of Secure 2.0 ROTH Employer contributions for which we have scant or no guidance at this point.

Unless the IRS issues further guidance I would agree with you.

But their deferral rate is not 0% it is undefined as "$0 deferral / $0 414(s) compensation" is not 0. At least not in any math class I took.

And matching contribution are not used in the gateway test which why we typically see the SHNEC used as opposed to SHM since the SHNEC can be used as the floor to start top heavy, gateway, and 401(a)(4) testing. Though the SHNEC approach can present it's own set of issues sometimes trigger a gateway for terminated employees.