Lou S.

It needs to run through the trust and he needs to receive a 1099-R. Ask the broker to put it in writing that he'll personally indemnify the Plan Sponsor for any all penalties that may arise from the Plan Sponsor Paying the participant directly outside the Plan. I'm not sure why it's a problem reopening the account but you can open an account in the name of the Plan anywhere and pay it out from there.

Company B has had a 401(k) Plan since October 1, 2019 when they took over sponsorship of Company A Plan.

If Company B did not want a top heavy 401(k) plan it should not have assumed sponsorship of company A's plan, I would have thought that would be part of the due diligence. Rather it should have started a new 401(k) and let Company A wind down the old 401(k) plan. I'm not sure how you get around the successor 401(k) plan rules if you terminate the Plan now.

$38,500 in ADP test as as he exceed his 402(g) limit for the 2019 and 2020 calendar years during the single plan year ending 6/30/2020 and catch-up contributions are not included in the ADP test. He has also used all of his catch-up for 2019 and 2020 so if the plan fails the ADP test there in nothing left to recharacterize.

#1 - When the employee terminates in August he creates an RMD for 2019. A portion of his rollover equal to the RMD is now no longer eligible for rollover. #2 - First distribution must satisfy RMD; RMD must be processed before rollover of balance. It would be nice if the IRS wrote the rules in such a way that the RMD is not requires in #1 since at the time of the rollover no RMD was required at that point, but the IRS has rarely been about what is easy. Even their SIMPLE plan is not.

It is on the Trustee to invest the funds prudently if the participant can't or won't make an investment election. I do not believe you can condition a contribution on the participant providing investment direction. The DOL has set up provisions for default investments with just this situation in mind for Trustees who would like to limit or reduce their exposure to investing the funds on behalf of the participant. I don't think the Trustee can refuse the funds for a participant who does not provide direction and I don't think "must provide investment direction" will be seen as a reasonable business classification by the IRS for receiving an allocation. But if you want to submit a plan with that condition for a DL to the IRS, I guess you could try.

Have you discussed it with the people who helped you set up the Plan?

When did the cure period end and they go into default? 1099-Rs should be prepared and sent for those tax years, late at this point, if for 2017 or 2018. And participant may have to file amended tax returns if they didn't claim the income. If the payments stopped late in 2018 on the second loan it's possible the default occurred in 2019 in which case you are fine on that one if you send the 1099-R in January 2020.

From a nondiscrimination stand point if you pass ACP hard to see where that would fail the BRF test. As long as you can write it into your document you should be fine. Though you might need amendments from time to time as the HCE comp limit changes. One thing to think about is how you will handle a conflict if an HCE terminates early in the year and makes say $30K are they in Tier 1 based on comp or Tier 4 based on being HCE due to prior year comp? It might be moot if you have last day requirement on the match though that is also the one area where 410(b) testing could come into play if you have high turnover. You're allowed to discriminate in favor of one NHCE over another NHCE and you are always allowed to discriminate against HCEs.

The IRS published some lengthy rules on refinancing and consolidation if I remember correctly. When you do refinance and or consolidate you need to be careful that you don't extend any of the loan you are consolidating or refinancing past the original 5 year period of the loan that is being rolled into the new loan.

In DC Plan TH minimum is only allocated to participants employed on the last day of the year, unless your Plan document has language that makes it more generous.

Without getting into the wisdom of whether or not you should do this or if Pencecks is a good solution for this, the answer should be in your plan document. That is if payment of Plan expenses is allowed from Plan Forfeitures, then yes this would very likley be considered a legitimate reasonable expense that could be paid from Plan Forfeitures.

It would be unusual for someone to have enough income to be able to make a max ROTH-401(K) contribution and a max ROTH-IRA contribution but also have low enough income to qualify to make ROTH-IRA contributions. However, if you have someone who fits that specific fact pattern there is no prohibition against it.

The best way would be to return the RMD plus earnings to the participant's IRA and have them take the RMD from the IRA where the funds are deposited. It doesn't necessarily have to be the same IRA that sent the funds for rollover. I'm assuming the participant doesn't have a separate IRA they could take the RMD from but it wouldn't hurt to ask.

That would be my understanding.

Well which year it goes in the ADP test is one and if there is a match which year you get the deduction would be another. But yes for calendar year deferral limit it wouldn't matter much.

My guess in 10/31 is this Thursday, 2 days from now and if they want to defer the 402(g) limit in the year ending 10/31/2019 instead of the year ending 10/31/2020 there is some time pressure regarding payroll.

I often make typos like that. But they are two very different questions. Didn't want folks giving you advice on how to correct excess deferral if that wasn't the problem.

Yes it needs to run through payroll and has the same deposit timing requirements as the other employees. I assume the thread title is a typo and refers to 401(k) deferral and not a $40K deferral.

I agree with you 100%. I was just throwing out an idea she could run by competent QDRO counsel to see if that might be an option that makes all parties happy. It seems to me her 2 biggest concerns are preserving the 100% survivor option with popup while also avoiding the concern that her ex might delay benefits as long as possible to keep her from receiving them. But maybe I misunderstood the OPs question.

Does the Plan allow for benefits to commence at NRA even if the participant is still working? If so perhaps a compromise might be to have your soon to be ex-husband agree in the QDRO that benefits will not be delayed past his NRA even if he continues to work. QDROs are not my area of expertise so I'm not sure this is possible. I know the QDRO can't force benefits that are otherwise not payable so it may not be an option.

If you mean can you use unused deduction in year X and bring them forward to year X+1, the answer is no. I think that used to be a possibility long ago but don't think it's been a thing for over 30 years. That is your max deduction in 2018 was say $1M but you only contributed $600K Your max deduction in 2019 is say $1M again you can't add the $400K from 2018 and say your max deduction is now $1.4M if that is what you are asking.

#1 resigning with a letter why is certainly one option. #2 completing the Form 5500 accurately and to the best of your knowledge would seem to be a requirement, regardless of whether or not you suspect it will trigger an audit, which it likely will. Since I think you would have to report party-in-interest transactions, failure to pay benefits when due, a reversion of assets to the employer, and possibly other transgressions. #3 I don't know what the legal rules are regarding this, though Peter G seems to have it covered better that I could. Though I don't think there is a prohibition on directing participants to the DOL should they call your office.

I'd look at this way. The SH Notice is an IRS requirement and potential qualification issue so unless you are amending out the SH for next year I'd do the SH Notice for sure. Whether or not he distributes it to himself and his wife is between him and God. The QDIA notice is a DOL requirement, since the Plan is no longer subject to Title I pretty sure you don't have to do this one, though as Bird notes might not be that difficult to crank one out and send with SH Notice. The final question is, if he closed his practice is there some reason to not terminate the Plan and distribute to IRAs? Is he going to have some trailing income he wants to defer?

The way Relius explained it to me in the past was that "In-Plan ROTH Transfer" are for monies that are not currently distributable and "In-Plan Rollovers" are for monies the participant could elect to receive as a distribution. So if you want to allow for maximum flexibility, select both options.