ESOP Guy

For what it is worth I am with the others. I don't understand the desire to fight the bank. They are treating their customer awfully. Why does your client want to reward such bad behavior by still doing business with such a bank?

It is pretty low in the "normal" DC plan world (under 10%). In the ESOP world it is the norm. Outside ESOPs the only plans I typically see that balance forward is because the client wants something daily value won't do/allow for. Examples would be: The client wants a very specific investment manager to run the investments. I had a client like this. Along with quarterly certificates for their employees they wanted me to complete a detail spreadsheet to help them track the return their investment managers had gotten the plan. If a manager didn't hit their benchmark too many quarters the client got a new investment manager. They were brutal to the investment managers. It wasn't the many quarters. But if you saw the participant's balances you would be amazed. The client put in almost 25% of pay and they got really good returns. They want the certificates to show and record things that they can''t find from a daily platform. I had a client that wanted all kinds of historical data on the certificates that no daily platform would agree to do. The preferred distribution method wasn't common. It is that kind of stuff. Most of the examples I am thinking of are Profit Sharing Plans with a few Money Purchase Plans. I can't remember the last time I saw a 401(k) done balance forward. The expectation of the employees is they get daily values and control of the money coming from their paycheck. But pure employer money will now and then be different. The thing is this is all part of a package of desires by the client that costs more typically and they are willing to pay for what they want. All of the examples I have worked on over the decades were very high demanding in what they wanted from their TPA but they were also willing to pay for top of the line service. So you didn't mind giving them that service. Hope that helps.

I have worked with PBI for over 10 years. https://www.pbinfo.com/locate-missing-participants/ The thing I like about them is if you get the correct service the client will get a letter at the end describing the search and that people weren't found. It gives you something hard to point to if the DOL asks did the plan do its due diligence to find these people before forfeiting or forcing a lost participant out of the plan.

What is the cause of the new found paranoid thinking?

I agree I am not aware of any kind of relief if the 5500 was filed. We typically report them on the next 8955-SSA and plan on arguing good faith compliance. Not sure but about as good as it gets. I would add I don't think I have ever seen anyone actually fined for failing to file this form. I also agree if a person has to wait 5 years to get paid they should be reported on the 8955-SSA and taken off once payments start. Hope that helps.

You might want to do the following before you write the letter. (Full disclosure I don't work on government plans So some of this might not apply. I fully admit I am a CPA not a lawyer) But in many private sector plans they have a provision that revokes all prior beneficiary election upon divorce. If this plan has such a provision you need to ask why they paid the former spouse. I wouldn't be optimistic. The plan paid the money and they tend to make sure they are paying the person that ought to be paid per their records. You can write any letter you want but as a general rule you are on the losing end of this situation if you go to court. Judges are going to be very hesitate to overturn something written for claims of intent regarding a dead person from people who stand to gain financially from the conflict. I am not trying to be mean here. I am being realistic here. Anyone who works in this industry long enough sees this and you are most likely correct. You late sister most likely didn't intend for her former spouse to get the money but there is a written direct verse other people's word. Courts aren't willing to over turn the written directive. Add to it he has the money already. Sorry, for your loss.

There isn't much you can do. Sorry, I know that isn't the answer you were looking for. You can't really even say this person is lost and forfeit the balance assuming the document allows for that. The person isn't really lost. I have my share of these and they are a pain.

This group, myself included, can be a bit of retirement plan geeks so let us know if our academic discussions aren't answering your questions. We will focus on your specific questions more in that case.

We aren't helping the poor person who asked the original question now but.... The no later provision is pretty common and when you get into the document and/or distribution policy it is pretty clear the sponsor gets to decide when the first election will be offered. Once the offer is made the employee then elects. You seem to understand the installment provision correctly. Your example of a $266,000 balance is correct. The reason it says greater is because until you get to the very large balances you must pay within 5 years. So if an balance is $1,350,000 you would get 5 installments of $270,000 and that would be paid instead of the $265,000. In the extreme if a person had for example a $10,000,000 balance you could pay $1,000,000 over 10 years. It meets the law and is greater than $265,000.

Did they do a formal board resolution declaring the contribution? I believe that can make a difference but a lawyer could clarify that more if needed. Did they allocate it or deduct it? But most likely if it isn't required by the document my understanding they can change their mind. But given how angry people might be it might be better to talk to the plan lawyer and not count on free advice here.

Also note if the account's vested balance is >$265,000 the payment will be in the form of installments. But ESOPMomma nailed it.

I have never seen in done with compensation in the same year. I think the problem with the same year could be do you have a bonafide termination. There is a rule out there (don't have cite off top of my head) that says a termination isn't bonafide if a person terminates with an agreement they will come back. If it isn't bonafide the first termination doesn't count. This came up first in a plan where people were quitting to get a distribution and as soon as they got the check got rehired. There is an IRS rule that stops that kind of arraignment. They key to this rule is if there is a firm agreement to rehire the person or if they are at risk of never being rehired. A bit facts driven. I have a number of plans (all DC plans) that have rules that say the following about people rehired after they retire for on call work: If the plan pays via installments (typically my ESOPs) the person can come back and do some on call work and still get their installment for that year. Normally you don't get paid until the year after your termination. No retiree is going to give up their annual installment for a few days of work. The work doesn't pay enough to make up for the lost installment. If they do no work >1,000 hours and are employed on the last day they do not get an allocation. This is designed to allow only one bite of the apple regarding the provision that give an allocation in the year of retirement even if you work <1,000 hours and not employed on the last day. Check your plan. In subsequent years such a person might get an allocation as the allocation provision merely says if they terminate after normal retirement age they don't have to have 1,000 hours and be employed on the last day. If there isn't language that specifically says you that can only happen once it can happen over and over again. I have some clients that don't care and the person "retires" several times over a few year span of time as they come and go. They earn so little the subsequent contributions is too small to worry about and if they are asking the person to come back they tend to like them. Like I said those only apply to the year after the 1st retirement termination. I haven't seen it in the same year.

That is too plan specific to be answered on a general answer board like this. You need to read the plan documents and speak to your former HR or the 401(k) record keeper.

WE tell clients to set a policy on this based on factors Paul I and David said and document it. Be consistent is key. Most of my client what determines it is if there are regular working hours on the weekend the last day is the day of the month. If no one works on the weekend as a rule they set the policy if you work the last Friday of the plan year that is the last day. I have never seen the IRS or DOL challenge either way as long as it is done consistently.

Understand also it is hard to tell you exactly what is happening on a comment board. But someone at the company that helps your employer run the 401(k) plan should be able to give you an explanation.

Has your non-loan balance experienced an investment loss during 2024? A vested balance is simply your total balance times your vested percentage for any given source. Your deferrals are always 100% vested but match money could be subject to vesting. So don't study what is happening with your vested balance study what is happening with your total balance and then apply the vesting to that to get your vested balance.

You need to go talk to a tax advisor who can look at your total financial situation. It is very hard to give good advice online. It is worth what you pay for it: nothing. This is one of the cases where a good tax person is worth the cost. They might see a way to make plans that save you more in taxes than you pay them.

Personally the times we have done used an employee number it was an all or nothing. Everyone came with the EE Num and when it was distribution time they had to give us SSN or people didn't get paid.

We have a few clients that refuse to give us SSNs unless we are doing distribution work. They however all agreed to give us an Employee ID number that was unique to just that person with each census across time. They were responsible to assign the number and make sure it is only used for one person. We loaded it to the SSN field in the software. In the end the reason you want SSN is you need a unique and consistent number to match up data over time for and from the client. As long as they can give you a number that does that I am not sure why you should keep objecting.

Yup I worked for a bank's trust department doing the recordkeeping for the plans the trust department had the investments. It was common back then for the bank to pretty much make it a condition of giving the company a badly needed loan to move the 401(k) assets to their trust department and we did the recordkeeping. I was 100% convinced this was a breach but the bank was pretty open about how the deal needed to happen in their mind.

The IRS has all your answers here: https://www.irs.gov/individuals/international-taxpayers/pensions-and-annuity-withholding

At risk of telling you something you already know but I would stress to your client while sending the new rules that the determination of who is an employee or independent contractor is (and always been) an objective determination. It isn't always easy to make the determination but it is always been about objective tests. It isn't something you get to decide or negotiate with the people who you do business with.

We don't put plan name on any of our tax notices. I am not the person who has the authority to decide if we can share or not but someone here played with the fonts and so forth and it is down to landscape 2 pages. You print it back to back obviously 1 sheet of paper. We do have a Roth vs non-Roth version but can be printed on 1 sheet of paper.

I am happy to be told I am wrong but wasn't there a recent changed announced that is like this? https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/changes-for-the-2023-form-5500-and-form-5500-sf-annual-return-reports I quote (bold mine): Change in Participant-Count Methodology for Small Plan Simplified Reporting Options Phase III revises the counting methodology for determining the 100-participant threshold for certain small plan simplified reporting alternatives, including the conditional waiver of the IQPA annual audit. The counting methodology for defined contribution retirement plans will be based on the number of participants with account balances, rather than the current method that counts individuals who are eligible to participate even if they have not elected to participate and do not have an account in the plan. This change is intended to reduce expenses for small plans and encourage more small employers to offer workplace retirement savings plans to their employees. Once again feel free to tell me I am wrong. I have NOT studied this at all. I just remember seeing something in my email box mentioning this so I did a quick search. Hope this helps.

My reaction to this are as follows: 1) Why are you involved? It sounds like you did your job and helped terminate the plan per their instructions. 2) I don't see how the plan sponsor has legal authority over the IRAs to direct anything. The IRA isn't part of any plan of theirs. That is the point of doing the force out to an IRA. They trustee no longer is responsible for the funds becasue they no long have any authority. I really question of the plan sponsor has a legal right to direct someone's IRA. You might want to ask a lawyer if you could be legally liable if you help them do this. I am shocked the IRA custodian is agreeing to do this. 3) I would not put any assets back into the old plan's trust if the old one has been fully paid out and the final 5500 was filed. The plan is gone. This sounds like a mess I would not want any part of if it were me.