Belgarath

Special deluxe a la Peter T. Hooper.

I agree with Cuse. We tell them to keep everything forever, and if they want to do otherwise, (with or without their lawyer's advice) it is up to them.

Thanks for the info. (In this particular case, since they are all >5% owners, the top 20% election wouldn't help.)

I don't think you need to bother with IRS regulations. A plan must operate according to its terms, and this specific language does not appear to allow such an allocation, absent some additional "notes" in the AA or overriding language in the body of the document. Most of these HCE SH exclusions that I've seen have a short additional bit of language to the effect the discretionary contribution is for "any or all HCE's" or something like that. P.S. are you certain that you are looking at a Cycle 3 document? The slightly less flexible language in your excerpt, or similar language, was present in some Cycle 2 documents that I've seen. Then updated for Cycle 3.

Thanks Gentlemen. Very interesting.

We don't handle cafeteria plans, and I'm going to refer this client to a local outfit who does, but I'm curious. A PC with NO NHCE's wants to establish a 125 plan for the purpose of having HSA's. Since there are no NHCE's, and they are paid salaries as W-2 employees, I don't see any problem with this. I don't see how any coverage/nondiscrimination could apply. Am I missing anything?

Thanks ESOP.

Thanks Lois - I had looked at this before asking the question. Didn't seem to answer my specific question.

Interesting situation here. A new plan in 2025. Long story short, they withheld deferrals from many payrolls and did not submit. They have since submitted, using DOL calculator for interest, and will file with the DOL under VFC program. As part of the VFC filing, they will submit a copy of the 5330 proving payment of the interest. So, must this 2025 5330 filing, for the 2025 year, be submitted electronically? In July of 2025, the IRS said this: Treas. Reg. 54.6011-3(a) requires a taxpayer to file Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, electronically for taxable years ending on or after December 31, 2023, if the filer is required to file at least 10 returns of any type during the calendar year that the Form 5330 is due. Treas. Reg. 54.6011-3 (b) and Instructions for Form 5330 also provide, on an annual basis, exclusions from electronic filing requirements in cases of undue hardship. Form 5330 can be filed electronically using the IRS Modernized e-File (MeF) System through an IRS authorized Form 5330 e-file provider. Currently, IRS has only one authorized e-filing provider for the Form 5330. As a result of the lack of authorized e-file providers for the Form 5330, the IRS has determined that a filer is permitted to file a paper Form 5330 for the 2024 taxable year. The filer should document that the reason for not filing electronically and filing a paper Form 5330 is the lack of authorized vendors. Seems to me that since this 5330 is being filed under the same timeframe and basic circumstances, that this waiver should prove valid and allow paper filing. Thoughts? Thanks.

I'm an outsider looking in, as I'm not an EA, so I don't know what EA codes of conduct might dictate. Having said that, I don't like any of those options. I assume you have contacted the TPA and discussed the situation with no satisfaction? I'd consider getting a lawyer to write a letter, suggesting that they explore ways to resolve the situation without initiating litigation, etc. - quite often, such a letter produces results. While you are at it, perhaps the lawyer can suggest other non-litigation strategies that won't potentially get you into trouble. Good luck! I suspect that others on this board can give you better suggestions.

Normally, for 2026, the plan would need to be amended to allow the increased limit by 12/31/2025? Has there been any guidance on allowing a later amendment date, due to the fact that the legislation only passed this Summer? I haven't seen anything. Doesn't really matter to me, as I don't do cafeteria plan amendments, but just curious.

All excellent points.

Mojo - I speculate that such a provision wasn't mandated in the 403(b) document(s) due to the fact that there are about a gazillion existing individual annuity contracts issued under state laws/regulations in these plans, with some wildly different provisions, and it would be pretty nearly impossible to make this workable. Just a random thought that crossed my mind.

I agree. But depending upon how one interprets things, I don't see this situation as excusing the borrower from her obligation? I'm assuming the loan is secured by the account balance. There's a legally enforceable obligation to repay, and the level amortization requirement is overridden under Q&A-9. Peter, have you ever seen this come up, one way or the other? With what result/interpretation? Your objectivity in analysis of statutes/regulations/etc. is always unparalleled, but to put you on the spot here, (if you are willing), if you were a Plan Administrator, would you allow such a loan? If you'd rather not answer that, I fully understand! This is a matter of personal curiosity only, as I've never seen this, nor do I expect to ever see such a request. Thanks!!

I'm guessing that perhaps it is in an administrative procedures addendum, if your document has one? If it truly isn't addressed anywhere, I would just make sure they opt out again. No harm, no foul - even if it is hidden in the document so well that it is impossible to find, can't hurt to have them opt out again, even if isn't strictly necessary.

Interesting question. I'd say yes - there's an enforceable agreement to repay the loan, which is properly suspended as permitted under 1.72(p)-1, Q&A-9 - and it will be reamortized to remain withing the 5-year period. Although I haven't heard of anyone doing this, it seems valid to me.

Thanks Cuse. Interesting, because upon further digging, I found an unofficial opinion from a big name that opined that the regulation permits counting the fractional month as a whole month, for 415 purposes. This is one of those issues where I have a hard time getting worked up over it...but maybe I should.

First, pardon my typo on the fraction - I meant to say 6/12 or 6.226/12. When counting months on my fingers, I think I counted my extra thumbs twice...And thank you for the valid points you raised! In this particular case, all compensation ceased in April of 2025. So the 401(a)(17) limit wouldn't have to consider paid vs. accrued for the 1 week in July, right? But upon further reflection, I'm thinking that for a reasonable and consistent approach, perhaps it would actually be more correct to just use 7/12 for both 401(a)(17) and 415? It seems like there is some room for interpretation here? This one is messy for many reasons, not least because unbeknownst to us, the owner (but not employees) took a full distribution of his/her account, which included deferrals, match, and safe harbor, which they contributed for 2025 based on unreduced compensation which resulted in an excess allocation and 415 violation. Sheesh...

Suppose a calendar year plan terminates 7/7/2025. A question has arisen as to the proper 415(c) reduced limit. According to treasury regulation 1.415(j)-1(d)(3) (emphasis is mine) fractional parts of a month are included. So the proper fraction is 7/12, not 7.226/12, correct? (d) Change of limitation year - (1) In general. Once established, the limitation year may be changed only by amending the plan. Any change in the limitation year must be a change to a 12-month period commencing with any day within the current limitation year. For purposes of this section, the limitations of section 415 are to be applied in the normal manner to the new limitation year. (2) Application to short limitation period. Where there is a change of limitation year, the limitations of section 415 are to be separately applied to a limitation period which begins with the first day of the current limitation year and which ends on the day before the first day of the first limitation year for which the change is effective. In the case of a defined contribution plan, the dollar limitation with respect to this limitation period is determined by multiplying the applicable dollar limitation for the calendar year in which the limitation period ends by a fraction, the numerator of which is the number of months (including any fractional parts of a month) in the limitation period, and the denominator of which is 12. In the case of a defined benefit plan, no adjustment is made to the section 415(b) limitations to reflect a short limitation period. (3) Deemed change of limitation year. If a defined contribution plan is terminated effective as of a date other than the last day of the plan's limitation year, the plan is treated for purposes of this section as if the plan was amended to change its limitation year. Thus, the rules of this paragraph (d) apply to the terminating plan's final limitation year.

Use the form for the year in which the plan year begins.

Maybe things have changed, but I thought that an EZ isn't eligible for the DOL's program. Instead, you have to use the IRS program under Rev. Proc. (2015-32?) and it is a paper filing - can't file electronically. You might want to check on that.

I was going to do a new question post on this, until I saw yours. We've had mixed results - a couple of 8955-SSA forms filed earlier last week show a status of received, but they haven't been processed, whereas some others filed AFTER that have been processed. Anyone else finding such inconsistencies?

Anyone else having trouble accessing this page? Format has changed, and I can't get any forms when I enter a form number in the search box. Maybe just screwed up due to the shutdown?

YES!!!!!! Sadly, in my world, they rarely do.

I have to say, ignoring the possible deleterious effects on long-term fiscal or social policy, as a TPA, I LOVE self-certification.