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Peter, the plan doesn't, and it doesn't sound like it's possible to have such a provision even if you wanted to. I thought that may be the case, but I wanted to make sure there wasn't an out I was overlooking. Thank you for your response - thanks everyone.

The plan is using an FTW doc which doesn't address amounts >$5k regarding missing participants. There is nothing prohibiting a terminated participant from keeping their VAB in the plan until their NRA. However, over the years there has been quite a few missing participants accumulating to where they comprise about half of the 20 participants currently in the plan. The concern is that the IRS may notice this on the 5500, triggering an audit. Also, the trustee is aware that admin costs would decrease by paying out as many terms as possible. I have seen interpretations of 401(a)(31)(b) and 2550.404a where it's suggested that since those regs discuss safe harbor ROs for amts <$5k, it can be implied that ROs for >$5k, though they would be non-safe harbor, are permissible (if due diligence is used), and it has been established that the participant is missing. Seems like a stretch to me, but I would hope there was a way to not obligate a plan to carry a balance for a missing participant, perhaps for decades, even after the trustee has tried many different ways of finding them. BTW, none of the missing participants are near NRA.

Is there any way for the trustee of a 401(k) plan that is not terminating to legally roll over a large balance on behalf of a missing or unresponsive participant to an IRA?

We can offer assistance - our info has been sent via private message.

It seems to be an indicia of ownership issue. Although the owner cannot be a sole trustee because he's not a US citizen or resident alien, he's allowed to appoint both himself and a US citizen as co-trustees. I've seen instances where a foreign owner had his CPA or attorney, who were US citizens, be designated as a co-trustee to satisfy the requirement of having a trustee fall under the jurisdiction of US law. In addition, certain US financial institutions can be appointed as co-trustees (for a fee) which would also be acceptable.

The CARES Act says that minimum required contributions due in 2020 can be delayed until 1/1/21. If a calendar year DB plan has a 2019 MRC of $40k due and a maximum allowable contribution of $200k and the employer wants to contribute $100k, a literal interpretation of the Act could imply that $60k would still be due by 9/15/20 while only the $40k MRC can be delayed until 1/1/21. In other words, the seemingly unintended effect would be that an amount greater than the MRC would be due by 9/15. Should the new rules be taken to mean that the whole contribution can be deposited by 1/1/21 even if it exceeds the minimum required amount?

Thanks everyone. Ya got him pegged, Larry - he's an owner.

A participant has been repaying their plan loan as slowly as possible, i.e., relying on the IRS cure period for every payment - for example, any repayments due during the first quarter of 2020 wouldn't be paid until the end of June. With the passage of the CARES Act, could the repayments due during the first quarter (or at least prior to March 27, 2020) now be postponed for 1 year, or do you think the Act allows only postponement of repayments originally due after March 27th, without the application of the cure period?

Not sure there is a stated procedure, but I'm sure you've already considered amending the return to show the correct EIN (which certainly would be one way to go). When a 5500 is not filed for a plan, the IRS is usually pretty good about sending a letter asking why a return wasn't filed. If the IRS cross references EINs when they make such a determination, one could expect them to believe a filing wasn't made, prompting them to send such a letter. The letter would allow you to explain what happened and, upon providing them a return with the correct EIN, should end the issue without any consequences. Perhaps someone who is familiar with which variables the IRS uses to isolate non-filers can comment. Regardless, it wouldn't surprise me that most people in your position may choose to not take any action since even if IRS correspondence should arrive, it would appear to be a simple fix without further repercussions.

Thanks, Peter. I had a feeling there wouldn't be too many specifics, and if justification ever became an issue, facts and circumstances would weigh heavily. As with other gray or undefined areas, it seems the best way to proceed is with good-faith interpretation of the limited guidance and the prudent man rule. In other words, don't overdo it and use a little common sense.

I know quite a few years ago the rules were changed by getting rid of the 3-day rule regarding the length of some 80-26 loans, but I have not been able to find any guidance regarding how long such a loan can remain unpaid. Also, seemingly absent is anything addressing the amount of the loan in relation to the amount of ongoing expenses. For example, a large profit sharing plan is constantly making distributions to terminating participants. The plan's assets are held in two accounts, one with TD Ameritrade for all of the equity investments, and a bank account specifically for payouts. The trustees are reluctant to liquidate securities to make the payouts and would prefer to make 80-26 loans to the bank account. The trustees, who try to pay terminees asap, try to invest as many assets as possible in stocks, thereby sometimes leaving the plan cash poor. Would it be acceptable for the employer to loan the plan $40K so that terminees over the next few months can be paid out when the actual amount of cash needed is currently unknown (which could result in the cash just sitting there for months)? How long can the loan remain outstanding? I'm guessing there may not be any restrictions regarding how soon an expense must be paid after the plan receives the loan. In the absence of any guidelines, I would be curious to hear how such loans are typically handled, especially since loans lasting over 60 days must be in writing and I'm not sure how to word the promissory note. All help is greatly appreciated.

An employer recently decided to terminate their calendar year 401k asap and would prefer to have 2019 be the last year that admin is needed. The SH contribution is the 3% nonelective. I wanted to make sure I have the right procedure in mind after trying to read the regs but finding conflicting information on some of the threads here. If I understand, the soonest that the plan can be terminated is no earlier than 30 days after the issuance of a participant notice which says that the plan is terminating and how the employer's obligation to make SH contributions will end on the plan termination date. At this point it looks like 9/15/19 would be a likely plan termination date. A 'maybe' SH notice was not issued for 2019. The employer will need to not only contribute the 3% SHNEC based on compensation through the date of the plan termination, but also pass the ADP test if any deferrals are made by the HCEs. The plan also allows for cross-tested PS contributions, and if any are made the ACP test would need to also pass. The 415c, 402g and 401a17 limits would all be pro-rated for an 8.5 month short plan year. All contributions must be made during 2019 and all assets must be distributed by December 31, 2019. A 5310 will not be submitted. Is there anything that is being overlooked? Thanks in advance for all help.

The plan covers more than one participant, i.e,. both HCEs and NHCEs. Our initial reaction was that the TPA is OK in this case, but it seems we started to overthink things. Thanks everybody for all of your input. There is a signed service agreement that spells out that the TPA is not a fiduciary, data received will not be audited, and that there's no obligation re prior errors. I agree that lengthening the agreement to add every detail of the services provided and not provided would be prudent. The days of fitting such an agreement on one or two pages are long behind us, aren't they?

A TPA who is not responsible for providing payroll services sets up a 401k plan and instructs the employer more than once in writing that deferrals are taken from/come from participants' paychecks and are tax deductible. The employer, being a thrifty sort, does her payroll herself on Quickbooks and does not indicate such to the TPA. A few years down the line, after making deferrals most years, she figures out that they were incorrectly contributed from her corporate account rather than from her paychecks and her accountant never deducted them on the business returns. She also paid federal and state income taxes on her unreduced W-2s. Now she is blaming the TPA for just assuming that she was using a professional payroll service and not specifically instructing her how to process the deferrals on Quickbooks. The accountant, who probably put her up to this since he must now charge her to make it right, is also taking the same stance. The TPA believes the accusations are inappropriate for various reasons, including the belief that it's on her since she decided to do her own payroll without realizing all that's involved. I am curious as to what TPAs think about all of this and what details they usually provide on this matter during the installation process. Thanks in advance for any assistance.

Unless the plan document specifically defines 'Year of Participation' or contains anything to the contrary, I think it would be acceptable to use either method as long it's done consistently. If the elapsed time info you have found is in the doc, however, then the requirement wouldn't be satisfied until 7/1/20.

An employer that is fully owned by one individual sponsors a qualified plan in which several employees participate. This individual has also set up a separate shell LLC (in which she also has 100% ownership) that does not perform any business transactions, and for which no business tax returns are ever filed. She does not receive any income from the shell company, and it does not have any other employees. I'm trying to determine whether I should indicate that the plan sponsor is a member of a controlled group on the 5500-SF. Is just signing a document establishing the shell company the only thing needed for it to be considered a controlled group member? Or would it also need to first have an EIN issued?

What is the procedure for an employer to remit federal taxes withheld from a 401(k) distribution during the year? Must the employer enroll with EFTPS and do it electronically or can a physical form be filed with the payment attached? We realize that Form 945 can be filed at the end of the year with the payment if the total amount withheld throughout the year is less than $2,500, but it's very likely that amount will be exceeded, so we'd like to pay the withheld amount from the current distribution at this time. Also, is there a deadline for when such a payment must be made? All help is greatly appreciated.

I don't think it is but wanted to make sure, as I couldn't find a thread on this. Company A, which sponsors a 401k plan, is owned 80% by Joe and 20% by Mike - only Joe is employed by A. Mike also owns 100% of company B, and although both companies frequently work together for a common client, they would not be considered ASG members as they are in the construction biz., and therefore, not service orgs. Would an ASG situation exist if Mike were to become an employee of A without anything else changing?

There are quite a few details involved in answering your questions - the best approach may be to refer to IRC sections 414(b) and 414(c), with definitions found in IRC section 1563(a).

A profit sharing plan accepts rollovers on behalf of employees who haven't met the plan's eligibility requirements. I would image such employees would technically be considered participants and included in the participant count for Form 5500 purposes. Would you include them in the annual testing before they meet the eligibility requirements?

I also agree that the NHCE would not get either a TH or gateway allocation, however, wouldn't he have to be included in the discrimination testing since he worked over 500 hours?

Perhaps I'm misinterpreting the ASG rules, but since 1) both companies are working together to provide a service to a common client, 2) the 100% owner of A now owns more than 10% of B, and 3) at least one company refers an amount of business to the other presumably equal to at least 5% of their revenue, wouldn't this be an ASG?

I've seen final 5500s filed showing the assets being netted out to $0 by listing a benefit payable, but I'm sure not everyone agrees with that method.

No doubt this is a tricky area, but it would seem that 408(e) would provide the exemption as long as you meet the adequate consideration requirement and no commissions are paid, or I am just missing a cross-reference?

Thank you all. The trustees are now asking about whether the employer (who is a fiduciary, a disqualified person) can buy back it's own stock from these self-directed RO accounts. Luke Bailey, I'll check to see if they have the appropriate voting power and dividend rights described in 409(l) to be considered qualifying employer securities. Reading through 4975(d), I was hoping to find an applicable exemption and the closest one seems to be (d)(7), though I wasn't able to find specific info regarding 'the exercise of a privilege' and the 'regulations of the Secretary' - they sound like very loaded terms. The stock is annually appraised by an independent third party. As for the setup, the employer stock was an investment choice offered, among several others, from which participants could choose from pursuant to the terms of the plan. Since it seems that it's not too uncommon for a plan to not only offer employer securities as an investment choice, but to also change (e.g., replace) the available choices offered from time to time, one would expect some kind of reasonable method to exist that would allow the plan to purge the stock (provided the participants holding the stock voluntarily agree to do so). Suppose the employer wants to do this because they fear the stock price will drop and wants to avoid the plan being affected? Is having the plan sell the stock to a third party the only way this could happen?