Lou S.

It's unclear if a mistake was made from your post. What actually happened to the assets? Did some rollover to the new plan but they reported those as transfers and the money that went to participants that didn't go to the new plan reported as distributions? Did they actually get elections from everyone for distributions? As for ignoring, since they acquired the stock, they acquired any issues should the IRS ask. But if the only "error" is the money leaving was reported on the wrong line I'm not sure how much liability there would be. OTOH, if they double reported it and the asset flow doesn't balance, you'll probably need an amended return anyway.

Unless she's an eligible employee, I think you have an exclusive benefit rule problem if they roll it within the Plan from his name to her name.

Unlikely the IRS is targeting your firm specifically. Though you may be doing plans that the IRS are targeting at a higher rate in your area. You can always ask the auditor the reason for audit, they are usually pretty open about it in my experience. I had a couple audits about 2-3 years ago and both were audits of the non-union plan but they also had union employees. And both auditors told me they were targeted over coverage issues as they were checking number of W-2s v number of eligible employees reported on 5500. Both closed without issue. And the biggest thing they were looking for was a record that the union employees were covered by a CBA plan and the non-union plans passed testing.

I suppose the plan sponsor could treat it as a prohibited transaction, return all the funds to the trust with interest and file a 5330 for the prohibited transaction excises taxes for 2024 and 2025 and then decide if they want to go through VCP to get the IRS blessing on that correction. And then proceed with paying out everyone from the trust like they are supposed to do. Is this a PBGC plan, that could add additional complications.

It has to pass the test on BRF. If he's the only one who has the option then 0% of the NHCEs have the option it's not going pass since the ratio will be 0%.

assuming it is a DC plan and the participant died before RBD since the spouse is the beneficiary, the spouse should be able to roll to her IRA at treat it as her own and not an inherited IRA.

If you elect the 4% SF nonelective up to the last day of the following plan year, you are a SF for the year. So if that is the only employer contribution you are deemed not top-heavy. Though you would need to make it to all eligible (though I believe you can exclude HCEs still), not just the deferring because you can't add a retroactive SF match.

Yes. Just test it for BRF to make sure it does not favor HCEs and you should be fine if the amendment is drafted correctly.

If they are a controlled group, and it sounds like they probably are, one Plan would be the simple straight forward approach. You can do a 2nd plan but you'll need to test the whole group as one employer if they are a controlled group for both Non-discrimination and BRF.

I would disagree as failure to allocate the SF match is a failure to follow the terms of the Plan document is both plan qualification issue and calls into question whether you even satisfy the safe harbor rules for the year. While correction of 415 excess is address in the EPCRS procedures.

https://www.irs.gov/pub/irs-pdf/i1099r.pdf Look at the "Failed ADP Test After Total Distribution" on page 8 of the instructions. I would follow a similar approach for the failed 415 test in this situation mirroring IRS instructions. Though I think that would only apply if part of the prior distribution is recharaterized as not eligible for rollover. I think if the prior rollover did not include any amounts that were over the 415 limit and the excess is ONLY due to the additional safe harbor match, they I could do 100% of the 415 refund out of the new safe harbor match deposits. Those would be refunded to the participant as taxable, not eligible for rollover and with I believe Code E on Form 1099-R. It seems the cleanest and easiest. Though again I'm not sure if that is 100% technically correct, especially if conflicts with the Plan's operational ordering rules on which funds to refund first to satisfy 415.

I would fund the SHM, I don't see how you don't. I'm not sure if this correct solution but I would not have a problem refunding 100% this as an excess annual addition. Now if you are still over the 415 limit and there is no money left, looks the instructions to Form 1099-R under "Refund After Total Distribution", depending on when the withdrawal occurred you may have to do amended 1099-Rs and you will need to notify the participant that some will need to be withdrawn as an excess IRA contribution.

Read the Plan document to see if has ordering rules. Though if they already took all their money out and this will satisfy the refund I don't see why you couldn't use it? But I'd probably document as "administrative procedures" in case this comes up again you can do do the same documented fix.

Yes it needs to pass ACP on after tax that's why it doesn't typically work in the situation you are describing. The QNEC to the employees would be fully vested and be pre-tax employer contributions to the NHCE employees unless the plan has a ROTH employer contribution feature and the employees elect to be taxed on it and receive as ROTH. But if he's looking for ROTH contribution, why not just tell him about the option make the employer contribution as ROTH under Secure 2.0 and go with the original design and have him elect to take his employer portion as ROTH instead of pre-tax and the Plan sends him a 1099-R for the income? What you are describing would likely need something on the order of an 8% of pay fully vested QNEC to the NHCEs to pass ACP assuming his after tax is $35K on $350+K salary where he's the only HCE and no NHCE makes after tax contributions.

I don't see any problem with what you are saying. The SB will report the name of actuary and company signing the SB, which software you use to file the form doesn't matter.

I'd be more worried about the participants being made whole than where the funds come from. That seems like a tax deduction matter the accountant can handle. Is business A a corporation, partnership, sole-proprietor or other?

If they want to process it have the Trustee certify he's dead and release you from any liability for processing as a death benefit payment or provide a death certificate.

Do one VCP to cover both.

What does the DC plan say? Does DC plan give 5% or does it give leeway to do 3% if DB is frozen and no accruals?

Yeah that's how it works. You fresh start it and use the 133 1/3 accrual rule going forward.

You can do it, just know the plan (and that probably means you) will need to do the 1009-Rs for all those who elect.

It seems like you might have leeway for the Plan Administrator to make a reasonable judgment on conflicting plan provisions and treating the Loan as an offset would be the most reasonable in my opinion.

Typically it is done with a fresh start.

And if they want to reverse it because they found out it is a taxable conversion, they are out of luck because you are no longer allowed to unwind them. They are now irrevocable.

If it was done in 2025 you'll have a 1099-R at year end. If you are reconciling 2024 and they are just telling you about this now, they need late 2024, 1099-Rs and possible amended tax returns if they already filed. Gotta love clients that rely of Google for their plan advice instead of making a phone call to the consultant who probably knows the correct answer, even if it's not the one they want to hear.