Bri

That feels like chopping off your nose to spite your face - have him put it back in a Roth IRA? (Put the plan back in the position it would have been if the error hadn't happened.)

The problem is that if he asked for a full distribution, that should include the loan as of that date, not when it would have gone into default, like if he'd only asked for a partial withdrawal of his vested benefit.

Won't the annual additions deadline still matter?

Plus, DB plans aren't individual account plans even though in a one-man shop, it might feel obviously "allocable" to just the owner.

You can exclude a term with under 501 hours if - they don't benefit, and - the reason they don't benefit is specifically because the plan explicitly doesn't allocate benefits to people T<501 (in other words, not because of a class/division exclusion, and not because their allocation group would get zero anyway) If your plan has no allocation conditions (and note you used a double-negative so I'm not sure which way you meant) then the folks would have only not benefited at the employer's discretion.

And anyway, if there really was a withdrawal due from the ACP test, and the HCE's already been paid, then the Plan Administrator needs to adjust the Forms 1099-R to indicate one amount paid as a corrective distribution, separate from the rest. And the usual "gotta get it out of the IRA if that's where it's already gone" caveats.

No double attribution

I think that's in the language of your particular plan, rather than a blanket rule.

I would think you make the SEP correct by increasing the HCE. Does the HCE have to get EXACTLY 40,000 or can it be inferred to provide her AT LEAST 40,000 ?

And if you have a way to access things like past ASPPA conference session slides on 415 limits, they tend to contain practical examples where you can actually see the text in action with actual numbers.

Another potential primary reason to include the staff in the plan is whether or not you want it subject to the PBGC (depending on industry) to get higher deductions for the combo.

It's not unreasonable that it may happen, but your actuary will still need to verify that the 70K wouldn't exceed the individual's 415(b) limit, which of course then brings in your high-3 (presumably prior years from the past) average and age into the calculations.

That's one of the gotchas in the maximum deduction calculation. Another variable that might be causing variance could be the interest crediting rate you're using versus the other firm.

We have contribution credit formulas for older HCEs that routinely are defined along the lines of "140% of compensation up to a maximum of 200,000". Both would look wacky when compared to the 415(c) limit, but since prior pay should have established a nice 415(b) limit, this will often not only work, the client will love it and the 401a4 testing doesn't hurt as much as you might think, too. (Not testing on a contributions basis, though - that's for certain...practically!)

Yes, that's absolutely fine. HCE can fail the test by 7500 and that's what you're planning to recharacterize, so good to go.

You would still have the run the 401(k) test and see how much of a refund would be due - if it's 7500 or less, then you could do it that way where the "refund" instead gets recharacterized. An issue could arise if you have multiple HCEs at varying rates/amounts, because of the way the refunds are determined - they come down to a level dollar amount for all HCEs before considering whether anything could then be converted to catchups. In other words, if he's the only HCE, then 12,500 would work. If he's one of many, then it's not as clear-cut because it's dependent on the other HCEs. If there's another HCE at 200,000 doing something similar then the math does not come out the way you'd want.

I would think this would be okay when viewed as an in-service distribution rather than a loan default. He can request a 40,000 distribution of his account since he's past 59½ and the specific investment being "liquidated" to pay the benefit is the loan note itself. But I'd have to think about the withholding obligation there.....

Thanks - I was thinking along those lines, too - favoring an interpretation of "in the year" to mean "for the year" 2024 in this case since DC plan will allocate as of 12/31. There's probably enough coming over to do their whole 2024 PS allocation, but the actuary thought they might be required to start folks out at least towards their 3% THM (or eventual DC gateway) as a partial allocation before the calendar flips over now that those remaining funds have been transferred over from the DB. (And do the rest of the allocations based on full census after year-end.)

Had an actuary ask me about Code 4980's text of: (I) allocated under the plan to the accounts of participants in the plan year in which the transfer occurs, or (II) credited to a suspense account and allocated from such account to accounts of participants no less rapidly than ratably over the 7-plan-year period beginning with the year of the transfer. and whether or not that means if the final transfer of excess assets occurs today in mid December, that at least one-seventh of the money has to be posted to accounts by 12/31. I suggested that the allocation date is going to be 12/31 even if that means waiting until the 2024 census is ready and the PS allocations determined some time over the winter. As opposed to actually being posted to accounts for participants in the DC plan by 12/31. I think (II) covers the issue, even if (I) didn't. But "allocation" includes as a receivable, no? (Whether or not (I) would be enough argument....) --bri

Generally each vesting schedule is a benefit, right, or feature that would be subject to coverage testing. So you may have it, if you pass. (And consider how union employees typically are considered in coverage testing)

Naaah, the receivable rules are laid out clearly enough.

for the 5330, my guess is it's when you've fixed the prohibited transaction, so (2) for the 5500/DOL and fiduciary liability, I'd suspect it's (3)

Imagine how joyful things will be here if the "tribe of Guardians" comes through in October just one time, too!

Why wouldn't you want the participant to know what they're in for ahead of time, unless you're worried about a one-time irrevocable waiver of plan participation prior to becoming eligible for any company plan?

I think you should check exactly when those "forfeitable" amounts are supposed to be forfeited. If that date hasn't occurred, then your amendment could then fully vest those previously not-yet-vested amounts. I'd be more concerned if you tried to un-do forfeitures processed before the effective date of the change.