Bri

The worst part is telling the participant, no, you don't legally NEED a notary, but my bosses won't allow your withdrawal to be processed without it. But hey, that's better than, ""Your spouse didn't actually need to sign this, since the spousal consent rule didn't actually apply."

The 1 part of the 1099-r code indicates no known exception to the penalty for an early withdrawal exists.

The 1099 indicates the tax liability due. Repaying the loan afterwards creates basis, though, so they won't owe taxes again on the amount when it's later distributed out of the plan in some future year.

Well, since it's too late for SCP (and way too late for an 11g), you might be stuck with VCP. But then the issue is what the plan sponsor wants. Refunding the deferrals gets you out of the top heavy issue because the guy is never supposed to be in the plan. And it gets you out of the 5500 issue. Can't imagine the plan sponsor would want to provide a THM AND any ADP test QNEC AND have to file late 5500s to a guy who left. At that point you're then hoping the agent reviewing the submission doesn't think poorly of the fact pattern and not accept the submission to just Code-E the guy's refund!

ha. I basically have this: "Suspense accounts. The Plan’s investment procedures also may provide for special valuation procedures for suspense accounts that are properly established under the Plan."

I'm sure someone will know this of the top of their head - my EOB is on site in the office, and I am most definitely not. Sponsor deposits 100,000 early for 2020 to a "pre-allocation account" with a well known recordkeeper. That 100,000 then grows to 105,000 by the time it ends up being allocated the following January. For 415 purposes, is an individual limited to 57,000 as of the date it's allocated? Or can he get 57,000 plus 5% for his share of the earnings? Or 57,000 plus only the earnings after December 31, the plan's actual allocation date for contributions? And the similar question if the 100,000 drops to 95,000 by the time it's allocated....("Hey, favored employee, we'll max you out! Oops, we invested some of that for you early and lost you a chunk of it.") Thanks --bri

Of course, if you've got an adoption agreement, there might be separate options to exclude bonuses AND exclude taxable fringe benefits. Which would imply some attorney indicated (with IRS approval) they are indeed distinct items, no?

In a DC plan you can't self-annuitize, so as Andy mentions, the insurer you prudently choose gets to control those factors.

If I recall, one of the provisions of the SECURE Act was that plan sponsors could adopt a new 2020 plan up through the date of their tax filing deadline next year. (presume calendar year for the plan and client's tax filing, please) Some sponsors may want to freeze their plans now ahead of folks getting into 1000-hour range for benefit accrual. If there was no plan, I'd think the sponsor could start a new plan up at some point in 2021. But that's not the exact same fact pattern as the sponsor un-freezing an existing plan in 2021 for the 2020 year before their tax deadline. I wouldn't have to get a decision from clients by 12/31 to un-freeze, would I? (I hope the alternative isn't to adopt a new plan and merge them.) Thanks....

My guess is that document systems spit out an SMM relatively easily. Letters, not so much.

So if you stay disaggregated, then you have: Nonexcludable "plan": (18/24) divided by (4/5) for a coverage ratio of 94% Excludable "plan": (1/24) divided by (1/5) for a coverage ratio of like 21% that fails all the harbors and midpoints. Since the new HCE had zero-wait eligibility, then that's the lowest you can use and nobody can be ignored from the coverage tests for being recently hired. So I think you actually have to aggregate, unless you want to make QNECs to ineligible 2019 hires. With the usual caveat, if you aggregate for coverage you have to do so for nondiscrimination.

Yeah, this got confusing when you mentioned there were 25 other people. And to be clear, you're worried about passing 410b specifically, rather than your ADP/ACP tests. So you're not carving anyone out like you can for ADP. So basically, who do you have in your non-excludable group, and who's in your group of "statutory exclusions"? The statutory exclusion group sounds like 1 HCE out of 4 or 5 total HCEs now? In other words, who's in the plan? And who's in the plan ONLY because of the liberal eligibility? I think those give you the answers. Also, late-2018 hires should also be excludable, since 410(a) lets them stay ineligible until 1/1/2020.

I would have the date in the 204(h) notice reflect the date benefits are frozen as per the plan amendment. Is that really January 1, or is it March 15? With the only difference being nobody accrued anything additional between 1/1 and 3/15. I'd expect the amendment to have turned off benefits as of a FUTURE date, not retroactively applied to an earlier date even though no benefits accrued in that interim.

Right, no change there.

Are you suggesting the plan sponsor just unilaterally choose not to honor the deferral requests? Or is it a matter of having potential "post-severance compensation" coming up for a couple of weeks?

The instructions to Form 5330 don't indicate any exception. I suppose if you absolutely KNEW what the match formula would be, and there was already money in their accounts from prior years, you could withdraw from the hard assets rather than the receivable. And it's not like the sponsor could just pay the person the would-be-refunded amounts early, because that's not a payment from the plan itself.

(Although I've seen plan documents explicitly prohibit the QNEC in a prior-year testing situation, I always wanted one sponsor to finalize their payroll on 12/28 and figure out the QNEC in time to deposit it before the 31st.)

Larry's on it - I would just double-check your BPD to confirm that there isn't tiny print guaranteeing the gateway anyway, as an as-needed sort of override.

Is it not noon on the 16th? I may sound like I'm trying to be a wise guy, but does the Code define half a month legally? I honestly would think an 11/30 year end plan might have a 2/14 deadline (noon on the 15th this leap year)

I gotta dig some more, try to find out if the attorney is still practicing even. (Not finding a website for the firm, but do see a search result for her LinkedIn profile.) It looks like the former TPA owner mentioned the issue to her about the lump sum issue, but after he'd received a copy of the already-executed signed-by-the-judge order (which even has the word Qualified in it....sigh). But no sign of a revision to the Order.

Background: DB plan is terminating, I've just begun the PBGC application. Traditional DB plan was frozen 30+ years ago. Two participants, vested terminees, remain as they'd been awaiting age 65. Plan never had a lump sum option, only annuities. As part of the decision to terminate, the company that now administers the plan (bought the prior company, which is no longer in business) decides they should just offer a lump sum option, so it's been written into their final PPA restatement as of 1/1/2020. The lump sum option also helps so the plan doesn't end up with maybe 5,000 in residual assets, too. Now, one of the two participants immediately returned his form for a lump sum. (Although he hadn't asked for early retirement benefits, he's past the plan's ERA of 55 and so he's eligible to be paid now, independent of the PBGC review.) Anyway. he scanned over a QDRO for an unrelated plan. But that had me thinking, and I reviewed the prior TPA's distribution files which we have. I found a QDRO from 2006 signed by a judge. Or, at least it was meant to be a QDRO. I'm concerned when I read it, because the order assigns 50% of the participant's account balance as of some date in late 2005, with all the earnings thereon, to his ex-wife. Seems normal enough except that the plan did not offer a lump sum option at all, and so technically there's no account balance to speak of. Now that there is a lump sum option, there's at least some substance to the request to assign 50% of the lump sum value to the Alternate Payee. What's the actual legal rule for something like this - The order indicated a form not authorized by the plan. At the time. But now the plan does authorize such a payment. I am suspecting that a revised Order will be needed, if for no other reason that there never really has been an "account balance" to divide and assign. But I also want to learn the legal standing of something like that, where it's as if a would-be QDRO suddenly flips to being legitimate after the fact, so to speak. (In other words, the "account balance" terminology notwithstanding, would an order like this be acceptable, now that the plan was amended in such a way that the original order now is properly compliant with the terms of the plan as they now are. Something like, well, it wasn't Qualified when it was written, but it is now.) thanks. --Bri

Along CuseFan's line..... Could the plan run its allocation for the 50K in new money plus one-seventh the DB transfer? I don't recall the rules as to whether or not the whole suspense account gets used before any new money contributed can be.

Since plan contributions of Davis-Bacon amounts are only one way to meet the employer's obligation to meet the Prevailing Wage, I'd suggest reviewing whether or not the employer (in the future) might simply *opt* to provide the benefits to the HCE in any other manner besides a plan contribution. Unless it's spelled out somewhere else, why not pay the amounts to the HCE as additional wages instead of as a plan contribution? Sure, there are payroll taxes, but it sounds like those might be less than the contributions necessary to bring the plan into 401a4 compliance.

Hey, if the plan allows for 401(k) rate changes any time (rather than quarterly), then the move to make is to go in and alternate weeks between Roth and pre-tax. HR will love you, and the point will have been made. And, you'll have the amounts split the way you wanted the whole time.

This is where the phrase "coinciding with or next following" differs from straight-up "next following". At least we do all agree the YOS ends on 1/1, right?