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A participant is requesting a $5,000 withdrawal related to the birth of a child under the SECURE Act - The plan allows for this type of withdrawal. The question is whether the participant can "gross-up" the withdrawal so as to net $5,000? I truly have no idea. Thanks for any replies.

How about a plan that has been existence since 2012 and has never had a contribution? A 0 Form 5500-SF has been filed every year since inception. Could you not say this plan is terminated by operation of law?

An auditor friend of mine was reviewing an audit report for an ERISA 403(b) plan. The assets are held by VOYA and Equitable, and are listed on the audited financial statements as Pooled Separate Accounts. His question was that he was of the belief that 403(b) plans cannot invest in PSA's; the investments must be in mutual funds or annuity contracts. Researching this over the weekend led me to believe him. In reviewing the Equitable report, it appears that each participant has their own unique "contract number". Therefore his and my question is whether the investments with Equitable are appropriate for a 403(b) plan. Thanks for any replies.

I head the Illinois CPA Society Employee Benefit Plan committee and this very topic came up in our July meeting. A committee member actually performs 3 zero asset audits each year. They contacted Marcus Aron of DOL directly and he informed them that the audit had to be performed, pretty much following the guidelines that Peter outlined above.

It was a large investment provider who also provides TPA and recordkeeping services. Their software stopped the filing and they won't budge off the position.

I have an auditor friend who has brought up the following issue: Plan subject to audit terminated and all assets were distributed during the month of June, 2022. The auditor inferred to the plan sponsor that they could defer the attachment of the 12/31/21 audit, and include it with the 6/30/22 short year filing (audit will be prepared for the short year), utilizing the answering of Schedule H, Line 3d(2), indicating that the plan "has elected to defer attaching the IQPA's opinion for the first of 2 consecutive plan years, one of which is a short plan year of 7 months or fewer". The sponsor tried to submit the 2021 Form 5500 without the audit, and the software vendor would not accept the return, citing the lack of the auditor's report being attached to the return. In all my years I have always applied the language of Line 3d(2) of Schedule H to an initial plan year of less than 7 months. In the scenario above, we would insure that the 12/31/21 5500 filing had the audit report attached, and then again for the final short plan year. Has anyone seen the scenario above, where the auditor tried to attach both audits to the final short year filing? Thanks for any replies.

Company establishes Profit Sharing Plan (not a 401k) in 2020. 90 participants beginning of year. Makes no contribution for 2020, so 0 assets. No 5500 filed. As of 1/1/21, there are now 130 participants. No contribution to be made for 2021, so still 0 Assets. If they were to file a 5500, they are subject to audit. Doesn't want to file a 5500 since there are no assets. Comments? What would the auditor audit?

The attorney's response to Peter's reply above was: Practically speaking, for various reasons relating to corporate law, the current distribution of shares would be difficult or impossible. Therefore, would buyback of the shares held in the plan by the plan sponsor be an option?

Here is a question from an ERISA attorney that I have discussions with from time to time. He isn't sure of where to go here, and, after reading it, neither do I. Any opinions would be appreciated, thanks. The only thing I could think of here would be for the employer to buy back the stock from the plan, but don't know if that would fly. Private employer has for a number of years permitted employees to elect to invest in employer stock through the 401k. The employer stock is darn-near illiquid from a trading perspective – there just isn’t any real market for it. But, the employer stock regularly pays a pretty decent cash dividend. A lot of the employee population is approaching retirement age. People are starting to request distributions that can’t be processed because the stock is illiquid. If this was an ESOP, I’d say the trustee should have been managing the stock/cash mix for this. In this case, I think there is still a fiduciary responsibility to act but I’m sort of stuck on what that responsibility might be. I’m also concerned that we’d be violating distribution rules if we just say “sorry, illiquid stock.”

No malfeasance by the trustees; all monies are where they belong.

They would be in accordance with plan terms, as both trustees are now terminated from the company.

A plan that we administer has 2 trustees and has a major mutual fund company as its recordkeeper. Both trustees have left the company (acrimoniously) for reasons that are not relevant here, but both of them have put in online requests for distributions from the plan. At this point, the company has not yet named new trustees, and the old trustees remain on the recordkeeper contract, and would be the ones responsible for "approving" the withdrawals on the recordkeeper website. Trying to figure out whether, as the TPA, to approve the withdrawals, and let the now terminated trustees approve them. Would there be some legal recourse from the plan sponsor as to why we allowed these funds to be distributed, even though they cannot be assigned? Thanks for any replies.

It is under the control of the Catholic church, so it is indeed a Non-ERISA 403(b)(9) plan.

I don't do a lot of 403(b) work, and I have had another question proposed to me. A Non-ERISA 403(b) for a private high school provides a "Profit Sharing" contribution based on the following: 0-9 years of service - 6% of gross salary 10-14 years of service - 7% of gross salary 15+ years of service - 8% of gross salary However, the principal of the school, no matter how many years of service that they have, receives an 8% of gross salary contribution; this is written into the contract of the principal. The principal by definition is an HCE, and at this point, the principal has less than 9 years of service, and, per the document, should be receiving a 6% allocation, save for the provision in the contract. Our firm, who is the auditor of this plan, is concerned that the higher percentage given to the HCE principal is a discriminatory allocation, and the 2% over the document prescribed allocation should be forfeited. As I have no clue as to the answer, I thought I'd throw this out here and see what opinions you have have. Thanks for any replies!

Want me to complicate this even further? The 5% match was not capped at the $285,000 compensation limit. So one person made $495,000 and deferred $25,500. Match allocated: $24,750. And to go back to BeachBums comment, there was a true up contribution for 2020, made in January 2021, to get this person to the $24,750. How I wish the partner had passed on this audit......

So our firm took over the audit of a 403(b) Plan, YE 12/31/20 (yes, 2020, don't ask). The plan document we have shows that it is written as a "Safe-Harbor" 403(b) Plan, with a match equal to 100% of deferrals on the first 3% of compensation and then 50% of deferrals on the next 2%. However, in going into the participant testing, the first person picked for testing had $19,500 of deferrals, ok. When the match was tested, the matching contribution was equal to 5% of compensation, not 4%. Anomaly? No, anybody with greater than 5% of deferrals received a 5% match. We noted that the document does allow for a matching contribution, and it's defined as discretionary. Question brought up is whether the extra 1% can be considered a discretionary match, and, what, if any, ACP testing would have to be performed? To complicate matters, there is no TPA retained by this employer, so it is a big old mess. Thanks for any replies.

I have previously prepared a Form 5500 for a Master Trust, which held assets for two plans of a plan sponsor. As of the end of 2021, the Master Trust no longer exists, as one plan merged into the other and the master trust was no longer necessary. In preparing the Schedule D, Page 3, would you list the two plans that were in the Master Trust during 2021, or would you leave it blank, since there's no Master Trust at the end of the year? Thanks for any replies.

Our firm looks at the current year and the past 2 years, when a small plan becomes a large plan.

Thank you!

I have just inherited a new client, and, in looking at their documents, there was never a PPA restatement filed before April 30, 2016; the last document that I was provided was the EGTRRA restatement. The client searched their records and they agree that the PPA restatement was never prepared, and have authorized the preparation of the PPA document and the VCP filing. In 35 years in this business, I've never had to do a VCP filing, thankfully. My only question on this is: What should be the effective date of the PPA restatement? Is it something before 4/30/2016 (like 1/1/16), or should it be current, say 1/1/2022? Thanks for any replies.

Agreed, thanks for the response. Looks like it could be VCP time......

Here is a question that I have regarding a plan document. I took over a couple of plans as the TPA from a partner who retired back in 2016 from our firm. When the partner retired, they provided me the documents for the plans. They are all EGTRRA documents, with dates in 2009. The partner utilized the Relius volume submitter document for the restatement. They were filed as individually designed plans, and have a determination letter from the IRS, under the company name. I also have executed 415 and PPA amendments. One of the companies is in the process of being sold, and the purchasing company is looking for a copy of the PPA restatement for the plan. I have searched our company archives and can find no mention of a PPA restatement. I have reached out to Relius to see if there is a PPA restatement completed before the 4/30/2016 deadline. My question is was a PPA restatement necessary, as the plan was submitted as individually designed? I only work with Prototype plans, and have never utilized a volume submitter plan that was submitted to the IRS as an individually designed plan. Sorry for this really dumb question, but I truly have no idea. Thanks for any replies.

Anybody's opinion change after this? The plan Trust Agreement states the following: 3.09 Combining Trusts. At the employer's direction, the Trustee, for collective investment purposes, may combine into one trust fund the Trust created under this Plan with the trust created under any other qualified retirement plan the employer maintains. However, the Trustee must maintain separate records of account for the assets of each Trust in order to reflect properly each Participant's Account Balance under the qualified plans in which he/she is a participant.

Patricia, I just said 70/70 for the split for illustrative purposes; there is logic as to how they propose splitting the participants between the two plans. And there, in the sponsor's logic, is no chance that a participant will have assets both in Plan A and Plan B; their account will "move" from one to the other.

Current 401(k) Plan will have around 140 participants as of 12/31/2021, thus making it subject to a certified audit. The plan sponsor, to avoid the cost of an audit, desires to split the plan into two (plans are identical), effective 1/1/2022, so that each plan has 70 participants, making them not subject to audit. The assets of the plan will not be split, but, rather, will remain in the current trust, and will be administered and "record-kept" by the current TPA. Questions: As the old plan will technically have 140 participants on 1/1/22, and then, later in the day, will be at 70/70, is the old plan subject to a one day audit? Second, is it allowable for the assets of both plans to be in the same trust? I would say yes if the trust were designated a Master Trust, but the TPA has no idea as to what a Master Trust is. I did some reading and came upon a Group Trust, but this appears to cover plans of different employers. Any comments would be appreciated, thank you!