Bri

I can't help but laugh, I've just found I have a client who deposited their first CB amount 9/15 last year, but actually adopted their plan document 9/21 ahead of their 10/15 tax deadline.

Was the forfeiture supposed to be allocated in a prior year under the terms of the document? If so, that's your justification for going back and at least tying it to a year with compensation for at least someone.

If there's no plan, then there's no real plan account. So whatever they set up was probably technically still a corporate asset. But then when the plan is executed, that account somehow "officially becomes" plan assets one way or another. (I might simply say the official deposit date was June 3 rather than May 23, because that's when the funds first became plan assets, piggybacking on the establishment of the plan.)

Can the sponsor be deemed to have transferred the funds from some "clearly not a plan account because there's no plan adopted yet", still-a-corporate-asset, account into a brand new "this is definitely a plan account pursuant to our new document" as of June 3?

My thought had been, If you ran a short year from July 1 to December 1, the owner could get all 27,000 in deferrals and 4% of pay up to 152,500, and there'd be no staff employee to worry about at all. (Is the pay up at the 401a17 limit?)

If you're not adding in the guy via an -11g, but rather he shares under the normal allocation rules of the plan, then I think you could probably avoid anything other than the plan's normal vesting schedule. Another thought would be to run a short plan year starting after the guy's termination date so that he was never eligible anyway - you don't need 12 months to get the full deferrals in. Would a pro-rated compensation limit take a big chunk out of his intended employer contributions, though?

That's just a matter of your plan's specific provision/definition of compensation for all those. Compensation as a participant, versus full year pay, and then as of what date are they considered participants in the 401(k) arrangement. Sponsor choice, to an extent.

I think it depends on what sort of relief you want from the VCP application. (Definitely too long ago for SCP.) If you're trying to argue that a group of employees were never intended to be allowed into the plan, and you have some documentation/notes to the effect, you might have an argument to ask them to forgive the missed deferrals. You're telling the IRS where your sponsor messed up and how the sponsor proposes to fix it. It's on the Service to either accept the proposed fix, or make you go back as far as necessary for them to accept your proposal. But if you don't have any evidence as to why they were left out, you might indeed be faced with a mighty amount of makeups.

This feels like "negative 401k" like when a payroll adjustment of any sort has to be processed.

Isn't there something where it's even worse to try to contribute property to a pension plan (DB, MPP) compared to a PSP?

Have her set up a Roth IRA for the funds, new custodian sends funds there?

Vesting is typically granted under a DOL's regulation, where you end up with overlapping full 12-month measurement periods, rather than a proration of hours. Accrual requirement hours are usually pro-rated, though. And eligibility wouldn't typically prorate, but that could be addressed in the amendment creating the short plan year if the sponsor wants to cram more people in sooner than otherwise would be typical.

I just realized there's no "Wow!" emoji option for that one, ESOP Guy...

...and heck, if you're amending the plan to code the overdeposit as a QNEC, that amendment could have whatever other language it might need to "justify" the presence of such a QNEC under the plan if it wasn't permitted already. (I know Section 6D of an ASC checklist, for instance, allows you to indicate whether any "regular" QNECs beyond fix-the-ADP-test types will exist under the plan.)

The DC RMD is based on 12/31/21's account balance value, regardless of any subsequent gain/loss during 2022 being reflected in the final total distribution amount the person will have due.

My layman's opinion - I'd think the 401(a)(9) requires the PA to issue checks regardless of an election. I also think payments have not been pursuant to the participant's affirmative election, so he could make a formal election for "the rest of his benefits" at any subsequent time in his preferred form. And the plan issues a 1099-R for the checks written, even if they remain uncashed and show up on the balance sheet as a payable. The participant might need to cash a couple of those checks to cover the taxes due.

I read it as 2 actives had under 500 hours and only 1 of those actually got the contribution. So that would be the missing guy. (I might even confirm that the 500 hour requirement is specifically applicable for terminees rather than actives as well, since a "standardized" plan would typically be written that way.) Could also jump down the rabbit hole and ask if the PS allocation rate was higher than 3% to begin with. THM of only 3% can pass coverage but could be a 401(a)(4) problem especially if cross-testing not available.

I see it more often in micro plans, where even going to a mutual fund/insurance co. platform might appear pricier than reasonable, and so the sponsor's advisor buddy sets everyone else in his/her own investment account through their agency.

Is the guy under 67 years old? And as sponsor and possibly trustee can he readily view the employees' statements? Because couldn't the guy just apply the same "current account balance to eventual annuity amount" ratio on someone's mutual fund company statement, and write himself a note as the Plan Administrator to essentially serve as his LII? (That would be the napkin-note evidence to provide the DOL under the investigation which couldn't possibly arise over this....)

As Bird is alluding (I think) - Why not just liquidate the participant's "regular investment account" for the difference? That way, most of the premium ends up paid by the company's deposit (deemed a contribution), and the difference shows as a "transfer" from the mutual funds or whatever, into the policy value. A premium of 10,000 might be "covered" by the normal annual allocation of 9,000 and then you offset his other investments by the remaining 1,000. Meanwhile that 1,000 then goes toward funding everyone else's normal share of the allocation that got our guy 9,000 in the first place. Some accounting manipulation, but this way, the guy's actual annual additions are as intended, and the premiums count towards the plan's overall total amount to allocate.

Here's the blurb from the 5500 instructions: (2) Short Plan Year Rule: If the plan had a short plan year of seven (7) months or less for either the prior plan year or the plan year being reported on the 2021 Form 5500, an election can be made to defer filing the accountant’s report in accordance with 29 CFR 2520.104-50. If such an election was made for the prior plan year, the 2021 Form 5500 must be completed following the requirements for a large plan, including the attachment of the Schedule H and the accountant’s reports, regardless of the number of participants entered in Part II, line 5. As of 12/31/21, I don't think either 2021 or its prior year was the short year.

If the new document superseded the old one, and the prior trust provisions were in that document, did the trust provisions evaporate into the ether between July 31 at 11:59 and when the new trust document was signed?

I was just thinking, say you pay someone a thousand Euro a week. So maybe that's 1,132 dollars the first week of January, but with conversion rates changing, maybe for week 2 it's 1,129 dollars. You'd add them all up and that's their pay for the year for plan purposes. If you pay them in dollars it's obviously easier. But the 415 regs don't exclude compensation based on the location of the services. I don't know how the employee ends up taxed by either or both countries, though. Everything I peeked at started referencing the 800s and 900s of the Code, so I sorta bailed at that point.

What if you were to do a currency conversion on each paycheck the employees received? (Not just convert the year-end total as of 12/31's rate.)

Ha, and also watch out for TPAs whose forms insist on a spot for spousal consent to be notarized even when the plan doesn't require it!