Belgarath

"Infinite are the arguments of the mages." This discourse has been fascinating and educational, and reinforces my opinion (not that it needed reinforcing) that plan sponsors should seek competent ERISA counsel for so many things(and they rarely do)! I've seen a couple live to regret it. 

Other than asking a good CPA...

Perhaps this will help a bit? And I believe you can maybe deduct a theft loss on a Form 4684? But this is way out of my area of knowledge. My deepest sympathy to the poor lady with a loser of a Son.

Theft losses

A theft is the taking and removal of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and must have been done with criminal intent. The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.

Yes.

So, for the new compliance questions, 14a, 14b, 15. (5500-SF)

The DOL instructions seem a bit ambiguous to me. Is a 403(b) plan required to input the opinion letter # on line 15? 

For 14a, as unlikely as it probably is, a 403(b) plan may use a qualified plan to pass 410(b), although the reverse is not true. So this could be checked "no."

14b - seems like it shouldn't need to be checked at all, but perhaps "N/A" would be appropriate, even if unnecessary.

15 - the instructions seem to exclude an opinion letter on a 403(b) plan. 

What are y'all doing on these? P.S. the EBSA electronic filing system "accepts" the 5500 on a 403(b) whether you fill these out or not... don't know whether there will be a kickback/inquiry at some future date depending upon how you complete it, or not...

I didn't know Mike, but always respected and benefited from his knowledge and opinions. The Enrolled Actuary at my former place of employment was a PIX member, and Mike's opinions came up in discussion frequently. He'll be missed.

Separate penalties for each plan filed under the DFVCP program.

Agreed.

I'm not sure it is AUTOMATICALLY too late. If the participant satisfies one of the options in 401(k)(2)(B), then a current distribution should be allowable.

Check the QDRO procedure in your plan document. Many of them say something to the effect that the Plan Administrator "may" put a temporary hold on distributions/loans if they have reason to know that a divorce/QDRO is pending. This can be a tricky area - you may need to check with ERISA counsel depending upon facts and circumstances, timing, etc.

Example: Suspension of Participant distributions or loans. If the Administrator is on notice (verbal or written) regarding a pending domestic relations action (e.g., a divorce) and has a reasonable belief the Participant's account may become subject to a QDRO, the Administrator may suspend processing the Participant's distribution or loan requests pending resolution.

Wouldn't you just file a 1040-X, reduce your AGI, and explain the change in Part II (or III if electronic filing)? I've never done this, so I'm not certain, but it seems logical to me.

I'm a little grumpy about IRS tax filings about now...

But since this is MY daydream, I can choose to have it apply only to the items WE tell them to do. 😁 

It never rains on my parade in my daydreams...

Since there is no official guidance on the effective availability requirement under 1.404(a)(4)-4(c), I'm not sure what degree of confidence there is - depends on how aggressive you are (or more to the point, how aggressive your client is willing to be). Your proposed parameters seem pretty safe to me, although the minimum value to have a SDBA could be an issue. If, for example, the minimum is say, $5,000, and 90% of the NHCE's have $5,000 or more in their accounts, then it seems "reasonable" that this would qualify. I would tell them, if they wish to pursue this, that they need ERISA counsel opinion, etc. - the usual CYA stuff.

And of course, the plan fiduciary must determine that the fees are prudent and reasonable, etc., etc., and a flat fee for small brokerage accounts might not qualify.

As you said, potentially a bad idea on many levels. 

I'm sure Nike has this trademarked or something, but it would be fun to have this on our client engagement letters - the endless amounts of time we spend because the client is trying to "get around" something they have to do, or won't do what we tell them to, etc., etc. - wouldn't it be great if we could contractually point to "JUST DO IT!"

Just one of those pleasant daydreams...

Thanks!

C.B. - unfortunately, it is a 401(k) plan and deferrals were made.

Here's another laugher. Got a letter last week saying, "we need another 60 days to review." They then say you can call if you want to, but of course they don't list a number anywhere on the letter. I wouldn't bother calling anyway - that's a one-way ticket to Frustration Junction in Obfuscation Land.

And of course, they can decide, at the end of 60 days, to delay again, or ask for "more information" which they then have 45 days to review, etc., etc.

Our tax dollars at work!!! Gotta love it...

I agree.

P.S. - for the record, my answer assumed eligibility computation period switched to plan year, as per C.B.'s comment.

We've been asked to take over a plan that was effective 1/1/2023. Employer got mad at the TPA for reasons unknown, and wants us to do admin for 2023. The 2023 document that was adopted is the document sponsored by the prior TPA.

So - Employer A adopts a plan, effective 1/1/2023. Employer B's employees are allowed to participate in employer A's plan. Here's the problem.

The owners of A also have ownership in B, but NOT sufficient to constitute a Controlled Group. Nor are the businesses an Affiliated Services Group. And although A's plan provides for Multiple Employer Plan provisions, employer B did NOT sign any type of participation agreement/joinder agreement, etc., as required under the MEP provisions in A's plan.

In an ERISApedia webcast re IRS Notice 2023-43, this question came up in the context of a CG/ASG, where the related employer did not adopt the plan. The presenters' opinions were that although 2023-43 does not allow self-correction of failure to initially adopt a plan, because the plan had been adopted by the "employer" under the CG/ASG rules, that this is an operational failure that can be self-corrected.

Although it is a "no harm no foul" type of situation, I feel like extending this treatment to a situation where the employer *(B in this case) is not "related" under the CG/ASG rules may be stretching the point too far. Curious as to any thoughts you may have?

On 4/26/2024 at 2:37 PM, Peter Gulia said:

Rather than amending the plan to legitimate only the troublesome rollover contribution, might the plan sponsor consider widely allowing a rollover contribution even if the employee has not met the age, service, and other eligibility conditions for a nonelective contribution, matching contribution, or elective-deferral contribution?

Hi Peter - no, this is not an option. Or rather more accurately, it is an option, but the employer does NOT!!! want to allow this in their plan. Plan already subject to audit, so that isn't a consideration anyway.

I'm sure the corrective amendment will be the option chosen...

Thanks to you both. Bill, because they don't want to amend the plan to allow this provision if they don't have to - their board is difficult on such issues. But I would do the amendment to cover this one participant, as Paul suggests. This plan needs to be squeaky clean, which is why I wanted to make sure I wasn't missing something  else.

So, plan allows rollovers into the plan by participants only. Employee rolled money into the plan 2 weeks before entry date.

Operational violation. I would almost swear I saw something that essentially said, "don't worry about it" but I can't find anything like that. Maybe it was just a pleasant daydream...

This is an audited plan. If it weren't, I'd be very inclined to ignore it. Although I think it could be corrected via a retroactive corrective amendment, the plan sponsor obviously doesn't want to go that route.

Am I missing an acceptable alternative to the two choices above?

No, I don't think so. If, for example, a participant got fired on Friday, participant would not satisfy the last day of the plan year requirement. It would be very unusual for a document to specify the last pay date in the plan year for allocation requirement, although it could - I've certainly never seen it.

Ambiguously written? Nah, couldn't be...

Thanks all for the opinions. It's very reassuring to be able to see the informed discussion on such issues.

Section 101 modifies IRC 414 with the new 414A requirement. Specifically regarding paragraph(b)(3)(A)(ii), does the language require that the participant must make a new election each year, or if they make an election other than the auto enrollment percentage in 2025, does that election carry forward, if the plan so provides, until such time as the participants makes a new election? I believe it is the latter, but I'm not 100% certain.

Gracias. And Peter, this is for 2024, looking ahead. 

So there is both k-1 income and W-2 income for the former partner. There seems to be some gray in this area. It seems clear that the compensation for the former partner is the sum of k-1 income and W-2 income. But, how is the K-1 income calculated? Do you just take the k-1, taking into account a PROPORTIONATE share of the common law employees' contribution (let's say 6 months for sake of illustration) or use some other method? Or to put it another way, it appears that another method might be acceptable, but maybe not...?

Any opinions welcome! Thanks.