Bri

I don't recall any discussion about it, but why would a higher ICR for NHCEs be a BRF that fails? Tongue-in-cheek, I can't imagine the IRS position is "Oh no, not enough NHCEs get a crappy ICR"... Was it a way the plan was trying to "justify" a larger principal credit?

Right - do right by the plan first, since that's your client. If the plan does what IT is supposed to, the rest is on the participant.

I agree there - PS and SH are in the same disaggregated "plan" for purposes of determining who's benefiting (and therefore in the 404 calculation)

Husband/wife (only) CB plan. Terminated last March. Plan was sufficiently funded, and the plan document allowed for a pro-rata increase to plan benefits up to the 415 limits. (Neither was reached, even.) IRA rollovers processed a year ago for MORE than the actual accrued benefits under the formula. Problem is - there was a $200K residual balance stuck in a gated hedge fund. It still exists a year later because they can't seem to liquidate it. So the "get all assets out in 12 months" has now been broken. Technically the employees (not old enough for an in-service) both got more than they were required to. At this point I'm just wondering who's seen this kind of fact pattern before and what became of it. I wouldn't think the original rollovers would draw IRS scrutiny, but would finally moving any further excess to IRAs at this point, even with re-papering the participants, be problematic? Could the IRS deem any amounts at this point just a reversion to the sponsor? (Hiding behind the idea that the participants are technically fully "paid enough" at this point.) I wish I knew the limitations on changing the named investor on that hedge fund - whether or not it could be "transferred" between plans or to an IRA directly, since it's apparently not liquid enough to sell. (I enjoyed 4-5 years of hell a decade ago due to a gated hedge fund in a DC plan.)

thanks folks. Sometimes the situation sounds more intellectually stimulating/intriguing than it actually ends up being.

I'm hearing 6/1 as the sale date (so the DOT for staff). Freeze can go through in May. After a little more thinking, I realized they likely would not want to keep the DC plan around long enough to find out if the CB plan will have any excess assets. Participation is mostly identical between the plans (a couple of HCEs might have no CB balance) so the same folks would benefit, alluding to your 95% consideration. But I also have no idea yet if the selling company is going to have a short final tax year, either (or anything that would push "profit sharing considerations" too far into 2024). thanks!

Thinking with my typing fingers here.... CB plan expected to terminate with an asset sale pending. With PBGC timeline, probably early 2024 we get everyone (about 35-40 folks) paid out. IF there are any excess assets (and we're thinking at worst case, 50-100K), was thinking about a QRP transfer to their profit sharing plan. 1) Gotta cover 95% of active employees. If everyone's terminating employment with the seller, then do I need to cover 95% of zero employees? There are 3 partners selling, so they could certainly still be potentially "active" in their hollowed-out shell. Is that an appropriate interpretation? 95% of either just the 3 former owners, or 95% of just totally zero active participants? Anyway, the extra 50-100K would be allocated completely for the final 2023 profit sharing plan year, since although I only gotta worry about the DB shutting down, there will still be allocations due (it's a DB/DC combo) for the PS plan. Eliminates the need to come up with a higher PS amount for its short year. And could use it all up for 2023, since I wouldn't expect there to be six more years to release it from suspense. Thanks... --bri

Hey, who can't appreciate THAT kind of flexibility in the drafting of their document, though...

Does she qualify for any sort of in-service withdrawal under the terms of the plan? And if it's only her account balance in the plan, I'm at least curious as to why she'd prefer the IRA over the plan trust.

https://www.irs.gov/retirement-plans/how-to-obtain-or-re-establish-an-ein-for-a-retirement-plan-or-an-ira-trust

I peeked at the EOB - SIMPLEs can't use partial year pay. Here's a quote: This is true even if the SIMPLE-IRA plan is in effect for only part of the calendar year.

I wonder if it was just that their recordkeeping software was coded as "source hierarchical / funds pro rata" or something like that for the repayments.

Is it that they're not deductible for the prior year? Or is that they don't ADD to the deduction limit? What if my 404 limit had been 200,000 (before expanding the number of benefiting participants and the compensation total) and my original failing allocations totaled 180,000, and the new -11g extra benefits are 5,000? Is that last 5,000 still deductible even though it gets allocated to folks who weren't benefiting originally as of 12/31? The plan could have deducted 185 readily enough all along.

The trade-off is the bunch of extra 0% people in your ACP test possibly making that result worse.

Hang on, though - if 1/5 HCEs is getting an extra 3% more, and 2/6 NHCEs are getting 3.75% more than the normal allocation, then I don't think the increase in benefits is discriminatory. Those extra amounts would pass 410b and you wouldn't even have to try cross-testing them.

I haven't heard of running your ACP test if the underlying match component hasn't passed 410b yet.

If it's allocation conditions as the cause of the failure, why isn't the "coverage fix" then just to expand the actual match contribution for these folks, as opposed to allocating a QNEC? And then you'd calculate your refunds based on this expanded ACP test with those folks (terms/under 1000 hours?) brought back in

Hey it could be worse, you could be hiding "this is a safe harbor 401k plan" from us.... (HCEs don't get gateway but might still need some extra top heavy minimum, if they're in both plans.)

I'll obviously recommend checking for sure with an ERISA lawyer, but I'm at least hopeful for you, knowing that the first plan hasn't actually gone away.

I am getting concerned that "we just won't have Roth" is sounding impermissible. Plans aren't required to have Roth, plans aren't required to have catch-ups, but some of the legal discourse (articles in the daily newsletter, for instance) seems to sound as though the IRS is mandating sponsors shoehorn them in nevertheless.

Isn't that the original definition of the cycle, so keep adding multiples of 3 years to it? My SSN ends in a 2, so my enrollment cycles have begun each of April 1 of 2013, 2016, 2019, and 2022. And so when I re-upped in spring 2022 last year I entered in my CE amounts from 2019, 2020, 2021.

Sounds like the intention was there but did Plan 1 actually formally terminate? Or did they just kinda switch everyone's new contributions to Plan 2 (the PEP) while Plan 1 stayed in a sort of limbo state?

Are these just plans merging and spinning off, rather than terminating?

Wouldn't you it think might not count as an account towards the audit threshold, if the guy is deemed to be only a "limited participant" as someone making a rollover before the regular eligibility kicks in? And hey, if the plan has forceout language which disregards rollover balances, easy enough to get him right back out, too.

The only time I ever got a "hey this 5330 is late, pay us more" notice was when it was late 401k deposits from 2-3 years prior, and the original 5330 amount was around $500. The penalty amount was around $90. Since most of the 5330s I would prepare were usually more like the $1 to $50 range, that's when any penalty amount would be extra dinky, and maybe that's why the IRS never seemed to care to send a penalty notice.