TPApril

Yes the vested balance is under the force out limit, when considered by itself. However, intent is to do a final rollover of vested balance of top heavy contribution since we are still within 180 days of Special Tax Notice.

Indeed, if the terminated participant had not taken their vested distribution, the forfeited amounts would not be available and the Plan Sponsor would need to make the actual cotnribution.

Is it common to send COBRA participants as of prior eoy who no longer have COBRA a copy of the prior year SAR? One client is resistant.

She quit, was not laid off or terminated by employer.

Terminated participant took final distribution. Nonvested portion has been forfeited. As this was the only non-key participant, the full forfeiture account balance is from this participant. Plan has since decided to make a PS contribution for the prior plan year, and this participant is due a top heavy min 3% contribution. Plan doc allows forfeitures to be used towards top heavy minimum contributions. Doesn't seem to feel right, but any reason the top heavy minimum contribution cannot come from participant's own forfeitures?

The recordkeeper has put the money back into the plan in an Unallocated Account that we are now reconciling in addition to the plan's regular accounts. Preference is to get the participant out of the plan entirely.

Intent is to avoid politics here. The situation goes back to 2018. Missing participant who was not cashing RMD checks has been found and turns out was never missing, just doesn't want to cash a check for fear of being located by the government. Unknown whether participant is legal or illegal but there is an SSNO (Sorry I don't know details about all that). Yes 1099-R's are sent annually. Just trying to be creative here on how to get them their money. One idea - has anyone ever managed to get cash from a Plan to give out the RMD rather than in check form? Total account balance is < $20,000. Total outstanding uncashed RMD's < $1,000.

Okay - got it, forfeiting nonforfeitable balances is a no-no. And yet, what I struggle with is the 'reasonable fee' concept. Collecting a fee for a distribution that may not have happened because the participant never received a distribution, just doesn't feel reasonable, even though I get what you all are saying - the first transactional step in such a distribution is to pay the fee, and lo and behold there is nothing left for payment to participant, ie an actual distribution, but these are the steps of a distribution. Yes there is time spent on the participant, but it is generally far less time because there is no review of the distribution (pmt to participant) itself since it never occurs.

I'm thinking for Form 5500-SF purposes, the distribution has to be included in distribution total and the assets are not included in EOY balance. I'm debating this because the Plan Administrator wants to include it in the year end assets without the distribution seemingly having occurred because their interpretation is that it is being returned and they want no 1099-R's issued. We've stressed they cannot hide it and they understand that that is not their intent. (This is a 'good client' in general who fully understands through much repetition that none of these corrections may be acceptable under audit. They are trying to choose their approach to what they see as cleanest.) All of this will be documented in their year end reporting.

I might add that the TPA firm is not taking any specific fee for these tiny balances that are sent to the Forfeiture account. Nor is there an invoice with a line item for these specific (non)distributions. But it almost sounds like the cleaner approach is for the full balance to be paid directly to TPA and/or recordkeeper for a distribution that does not happen?

When terminated participant account balances are under the net fee their distribution would pay to be distributed, their accounts are forfeited. Example - account balance = $90 but distribution fees = $100. I'm curious what kind of notification these terminated participants get? Also, what if it's a Roth account balance?

Artie - thank you for taking so much time to respond. So the employee at hand is returning the moneys to the Plan, that is not an issue. They have asked to not issue any 1099-R's for last year and current year since they will essentially zero each other out and none of it is taxable and the plan is being made whole. I have informed them that I cannot guarantee that under an audit that would be acceptable.

Partner who is Active and not eligible to take an inservice went ahead and rolled over his account to an IRA without informing Plan Administrator. No 1099-R ever issued. (Reason was to get more control over his assets.) Looks like under Self Correction it needs to be returned to the plan with earnings. Questions: Does a 1099-R need to be issued at all for either transaction? The first one was in prior year. Can a 'Rollover IRA' that holds only this account be re-stated as a Plan account?

Plan has never ever had an employer contribution. Only 401(k). Changing pay definition would only affect test results. Revisiting 2024 (2 plan years ago). Reason for thinking about it - Changing Definition of Comp might benefit the 2025 ADP Test based on Prior Year ADP.

Owner of a 401(k) plan with over 20 ee's fails ADP Test every year. They refuse to set up a Safe Harbor plan and annually takes about $15,000 in excess contributions returned to them. I just started wondering if this is some kind of tax strategy on their part to delay some taxes? Anyone ever seen that?