TPApril

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?

I don't know why but it seems for one plan they don't know how to obtain the Section 125 pay to provide with the annual census. Shouldn't that be an easy request from Payroll?

Can W-2 Compensation ever include Section 125 pre tax medical/cafeteria contributions? If I understand correctly, Sec125 Comp is exempt from Fed/FICA taxes so is not reported at all in Box 1, 3, 5. However, a plan doc I'm looking at says in the definition of Total Comp that Total Comp = W-2 Comp, which includes elective deferrals and Sec 125 pretax contributions. Mid day confusion here.

2 separate one-person calendar year plans terminated and distributed assets in 2025. Both plans received interest/dividends at the last moment that were not able to be distributed by 12/31/25 and ended up with balances. Plan 1 was $0.50. Plan 2 was $3,500.00. Both plans managed to zero out by 1/31/26. Both plans have asked to incorporate those amounts into 2025 distributions with the following implications: Form 1099-R's would be amended 2025 Form 5500 would be Final I think we can live with doing that for Plan 1, but Plan 2 is more questionable. We are more comfortable with a 2026 Final 5500 but the client was promised (by the Advisor) that would not be necessary. Just looking for thoughts on whether there is a de minimis for this situation of when to combine it for prior year?

New solo 401(k) Plan was signed/adopted 5 years ago. No contributions have ever been made. Only filing ever done was to create a Trust EIN. 'Plan Sponsor' would like to "disappear" the plan and start a SEP this year. I'm just processing what steps to take.

Is there a particular advantage to signing a new Cash Balance Plan for the current plan year by end of the plan year, typically 12/31. Or is it just as well to wait until prior to the tax filing deadline of the next year and signing retroactively?

Auto enrollment is set to 3%. Participant who had opted out and never deferred is rehired. I can't seem to find this in the Plan Doc. Would they need to opt out again, or would the original opt out still stand? Not sure to what extend number of breaks in service would affect this.

Is there any reason a participant who has been 'temporarily laid off" is eligible for a distribution? I don't know the company's definition of 'temporarily' but he was apparently told he can take a distribution, but I feel like employee is not truly terminated.

Slightly related. Plan sponsor requested the transmission of their contribution on the funding deadline of 9/15. Trust reporting recorded it on 9/16. I'm thinking we can still treat it as having been deposited timely, ie by 9/15?

Good question, but it would seem that EZ's are private in part because they indicate an eoy balance wholly attributable to the owner, which would be the case here.

Beginning of Plan Year had 2 participants, 1 owner, and 1 terminated employee. Terminated employee took a full distribution during the year, so that.. End of the Year has owner only and can now file Form 5500-EZ, except.. Assets are under $250,000. I think better off the plan files 5500-ez anyway but never encountered this situation before.

I'm just curious if anyone has had a 5500-EZ filer who was required to file electronically because they have at least 10 electronic returns (as my understanding effective 1/1/24)? Does the IRS actually check this?

I simply cannot remember my resource as it is a number of years, or maybe it's just the 5500 instructions themselves, but I had understood that the Characteristic Code 4L was for Business Travel Death Benefits and that AD&D uses 4Q for Other Benefits. I'm curious how other professionals record that?

For some reason, a plan has allowed a lower paid participant to contribute Voluntary After Tax instead of as Roth 401(k). Annual contributions are around $1,000. I can't seem to think of a reason why this would be better for the participant. Aside from that, Voluntary After Tax Contributions are not even in the Plan Document, so I'm wondering if it's an oversight and they can be reclassified at the recordkeeper as Roth Contributions.

Thank you very much! To answer your question of why the DOL Calculator was not used - the calculations were performed by the bundled recordkeeper a few years ago, and only recently presented to an outside consultant to have a VFCP prepared for the plan.

I'm curious how much detail EBSA requires on a VFCP application for Lost Earnings? Whereas we have individual amounts that were calculated by the recordkeeper for each period, the recordkeeper will not provide their actual calculation, ie how they calculated it. Per application requirements, is it sufficient to just submit the individual lost earnings amounts that were deposited for each late contribution, or do we need more than that?