justanotheradmin

I am sure. As of 12/31/2025 the forfeiture account does not have those dollars in it, not accrued or as actual cash. They are not available to be allocated as part of the benefits in the trust since they do not exist for the year in which you are accruing them for (using them for). If you don't believe me, I suggest you read the section of the plan's document that governs the use of forfeitures. If it addresses them clearly, it will say that forfeitures are to be used in the year in which they occur (2026) or the year following ( 2027) or some combination thereof, depending on that plan's specific provisions. This usage mirrors the various rules that apply to accruals in a trust, allocation of dollars, holding accounts, and the specific exception that grants forfeiture dollars a little more flexibility than regular assets in a trust, but there are still restrictions and rules that must be adhered to for the trust to maintain its tax-qualified status.

If they are keen on keeping the plan, I have seen successful VCP for instances where the initial plan document was missing completely. A lot of supporting documentation was required to satisfy the IRS, which those plans had. Such as asset statements, filed Form 5500s etc. Getting an ERISA attorney is the right step.

see the paragraphs about Safe Harbor Notices https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-plans-or-safe-harbor-notices I'm sure you've thought about these in relation to the compensation change - but in case not: will §414(s) compensation testing pass? is the cutback allowed? I know you asked questions on another post. so hopefully you were able to get the information you need to to do an analysis for the plan prior to any amendment being done

I don't know where that quote comes from. But changes in compensation that INCREASE safe harbor match aren't even generally allowed unless very specific parameters are met. I don't see how changes in the plan's definition of compensation to decrease the safe harbor match are permitted if they affect the NHCE. https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-plans-or-safe-harbor-notices " Prohibited mid-year changes The Notice provides the following list of “prohibited mid-year changes” that may not be made to a safe harbor plan, unless the change is required by applicable law or court decision. A mid-year change increasing the years of service for the vesting schedule for a safe harbor plan consisting of a Qualified Automatic Contribution Arrangement (QACA); A mid-year change to reduce or narrow the group of employees eligible to receive safe harbor contributions; however, this does not limit the ability of the employer to amend a plan mid-year to change eligibility service crediting rules or entry date rules for employees who have not yet become eligible to receive safe harbor contributions; A mid-year change to the type of safe harbor, for example, a change from a traditional safe harbor to a QACA, or vice versa; A mid-year change to modify (or add) a formula used to determine matching contributions (or the definition of compensation used to determine matching contributions) if the change increases the amount of matching contributions, or to permit discretionary matching contributions. However, a plan may make such a mid-year change if: the change is adopted at least 3 months before the end of the plan year, the change is made retroactive for the entire plan year, and the plan sponsor gives an updated safe harbor notice and additional election opportunities to each employee otherwise required to be provided a safe harbor notice at least 3 months prior to the end of the plan year. Other applicable law also may affect the permissibility of mid-year changes, including, for example, IRC Section 411(d)(6) (anti-cutback restrictions), IRC Section 401(a)(4) (nondiscrimination restrictions), and Reg. Section 1.401(k)-1(b)(3) (anti-abuse provisions)."

https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-failure-to-limit-contributions-for-a-participant Step 1: Distribute unmatched elective salary deferral contributions (adjusted for earnings) to the affected participant. If any excess remains, proceed to Step 2. Step 2: Distribute elective salary deferral contributions (adjusted for earnings) that are matched, and forfeit related employer matching contributions (adjusted for earnings). If any excess remains, proceed to Step 3. Step 3: Forfeit employer profit-sharing contributions until the annual additions longer exceed the 415(c) limits. The employer should report the corrective distribution made to the participant on Form 1099-R. The participant should include the distribution as income but does not have to pay the 10% additional tax on early distributions under IRC Section 72(t). The participant may not rollover the corrective distribution to another qualified plan or to an IRA. The plan sponsor should transfer the forfeited employer contributions (profit-sharing or matching) to an unallocated plan account. These amounts are used to reduce employer contributions in subsequent years.

Conceptually, think of the H/W as one person. Don't treat them as two separate individuals. New Combined Person owns 100% of Company A, and New Combined Person also owns 45% of Company B. Identical ownership is only 45%

Can you clarify the timeline? Is this right? Person terminates in 2026, take a distribution in 2026, non-vested portion of account forfeited in 2026. Employer contribution, including top heavy minimum being made for 2025. If that is the case - then I would say no. The plan can't allocate forfeiture or use forfeiture towards a year prior to the year in which the forfeiture occurs.

Sounds interesting! When it is available for public use, I'd definitely want to give it a whirl!

I agree it might be a BRF issue since often HCE have lower turnover than NHCE, though it varies by company size and industry. Instead of tying it to a date as you describe - how about making all accruals for plan years 12/31/2025 and prior 100% vested, and all future accruals subject to vesting. It will mean that some shorter service folks may have newer employer dollars that are only partially vested, but that is allowed and not a BRF issue. If it is a smaller plan - and not too cumbersome to do the analysis - how many people would be impacted doing it the way I describe versus your proposed method? Are there a lot of people who would be less than 100% vested if the vesting schedule is tied to year of accrual, that the sponsor DOES want to be 100% vested? Are those people NHCE? can you make them 100% vested some other way? If the actual impact is the same - then go with my method - which does not have a BRF issue.

yes, if Owner is the only HCE and the rank and file are NHCE, that fails 414(s). HCE has 100% of compensation included, NHCE only have 83.3%. That spread is too far apart.

he has catch-up due to being over the 415 limit, not the 402g. I don't think the amount above 18,800 is actually deductible though if there is no income to apply it against, but will leave that question to people who actually prepare tax returns for sole props.

sounds like the DRO was forwarded to Ascensus for processing before the plan sent the letter to the alternate payee. Maybe they didn't want to sit on it or though Ascensus would take some time getting the information out. Its perhaps like giving someone who is leaving a job a distribution form for their 401(k) account before they leave, even though they can't take the money out until after their last day. If Person B took out the money from Ascensus before all the other things occurred, that might be an issue. and doing things out of order isn't ideal. but in this case, sounds like Person B hasn't actually filled out any Ascensus forms or moved the money out. Ascensus probably didn't look at the QDRO. The employer probably just filled out a form saying there is one, here's the benefit formula, here's the Alternate Payees information etc. They are going to take direction from the Plan Administrator( in this case sounds like the employer) If a step gets missed - the main corrective action is generally to then do that step. and improve plan procedures so the error doesn't happen again. So if the Alt payee wasn't notified BEFORE ascensus, well, they were notified after. Failure to follow the terms of the plan is a common error, but unless person B was harmed, such as not getting the full benefit awarded by the QDRO, I'm not sure what else you want the plan to do. Forwarding the forms - that can be standard procedure depending on the particular service arrangement with the financial institution.

Why would there be? DRO gets written, submitted to the court, then someone forwards to the plan, plan determines if it is actually qualified or not (just having the word qualified on it doesn't make it qualified), If it is qualified - plan sends the alternate payee information about what they can do with their money that is in the plan. Which sounds like occurred when Ascensus sent the distribution forms. Nothing gets sent to the court again for QDROs. If there are issues about dates and representation - such as a posted dated item being filed with the court - that is something to take up with the court. As @QDROphile mentions, the things that you seem to take contention with, are not things the plan can resolve. A and B and their counsel need to work it out.

Person B's input isn't required, in fact some divorce agreements will specifically make drafting and filing a DRO the responsibility of a particular party so that the other party doesn't have to deal with it. The plan literally CANNOT make a DRO qualified until AFTER its been filed with the court. So either these are wrong, or out of order. Person B's signature is not required keep track in writing or every written request and response for the information. This is something to hope EBSA can help with. I don't know what this means. Are they asking Person B to sign something? asking them to take money out of the plan? There isn't anything for an alternate payee to accept or reject. If they think the DRO was written wrong that is typically something for them and their lawyer to work out with the other person's lawyer. Not the plan. I don't think this means what you think it means. for a DRO to be qualified - it literally just means that it has the appropriate information mandated by federal law, such as being able to identify the people involved, the plan involved, that the award isn't in a form that the plan doesn't allow etc. Qualified doesn't mean the order has a money split that is the same as what the parties agreed upon.

I think you might be conflating "legally qualified" and "aligns with an equitable agreed upon division of marital property" . they are Not the same. Legally qualified for a DRO - is just a checklist based on the rules in Federal Law. Has almost nothing to do with the amount, value, formula of the benefit awarded written into a DRO for the alternate payee. Q: Does person B have a copy of the DRO? It not, perhaps they can get one from the court records. If yes - Q: is the Plan Administrator saying the DRO is Qualified? Was that communicated in writing from the Plan Administrator to person B? The DRO is not a QDRO until the plan says it is. And then the plan is required to provide person B with all the things - the QDRO procedures, the acceptance of the plan that it is qualified, information about segregation of the money into a separate account, or distribution options, etc. If the plan administrator is not providing those things, then person B can ask EBSA to help. If the plan administrator is refusing the say if the DRO is qualified or not - and person B wants it to be qualified - then person B needs to submit the DRO to the plan and ask them to deny it or qualify it. In writing. Q: Does Person B believe the benefit awarded in the DRO is NOT what was agreed to in the property settlement agreement? If they think the DRO is drafted wrong, and doesn't align with the agreed upon split of marital assets - then it is something for a family law attorney to work on. The Plan Administrator has no say in the formula or benefit award in a DRO, qualified or not. Person B should take a copy of the DRO and a copy of their marital property agreement to a family law attorney and ask them to see if the two align. If the issue is the Marital Property agreement should be amended - then that has nothing to do with the plan either.