justanotheradmin

I don't see why not - but - If they have access to a 401(k) plan wherever they are employed they could have accomplished the same thing even before SECURE. Are they making 401(k) deferrals there? 401(k) plans typically don't have any restrictions on participant age for contributions. At least I've never seen one restrict deferrals to participants based on age of participant. Edit to add: if the RMDs were required before - they continue to be required. So yes, the person should continue taking them. Unlike IRAs, a person's ability to make 401(k) deferrals does not end upon a certain age or because they have to take RMDs. I have seen employees in their 70s INCREASE their deferrals because they want to offset the tax impact of their RMDs.

The PTIN is free and simple to obtain. We require all of our admin staff who prepare Form 5330 (which is most) to have a PTIN. This includes assistants and support staff if they are preparing the Form 5330 (even though their work will be reviewed by a more senior person). Most of our clients hopefully will never need a Form 5330, but we do enough each season that we have the above PTIN requirement in place.

I'm sure it varies by plan document, I've seen it as you describe, as well as how our document uses it. We use a pre-approved document from a large vendor. The basic plan document has a variety of inter-related provisions (as all do). The Plan Compensation definition immediately references back to Total Compensation. Total Compensation definition references amounts from the Employer. The Employer is defined in part as "means the Employer that adopts this Plan and any Related Employer." Related Employer is defined as control, affiliated service, etc. group. All of that might be kind of hard to follow for the average reader - so the drafters included extra language to make it clearer: There is a section of the basic plan document that covers Participating Employers and it specifically addresses this issue: "Compensation of Related Employers. In applying the provisions of the Plan, Total Compensation (as defined in Section 1.141) includes amounts earned with a Related Employer, regardless of whether such Related Employer executes a Participating Employer Adoption Page." It goes on to mention how that default can be changed with elections in the adoption agreement. There is a separate portion of the basic plan document that addresses deductions, allocations of contributions, forfeitures, etc, for related and/ or participating employers.

If that type of compensation was excluded - would it have passed §414(s) testing? I would start by looking into a VCP submission. If the sponsor isn't comfortable 'fessing up so to speak, an anonymous submission is an option (though that comes with it's own pros and cons). In the submission you can propose a retroactive amendment that excludes bonus from deferrals. I'd think the VCP fee and submission cost would likely outweigh any corrective QNEC that would be due for a missed opportunity to defer or a failure to follow deferral election. Was anyone's ability to defer actually impacted? Or were participants able to reach their deferral goals? i.e. maximizing deferrals through regular pay? Can you make the argument that the NHCE weren't harmed? I know there are lots of folks with good ideas on these boards, hopefully some will chime in other options to consider.

Larry's answer discusses the coverage /non-discrimination testing issue. I think the original poster is more likely asking about a scenario in which the employees receive compensation from both entities. The person is eligible to defer from their Company A compensation, but not their Company B compensation. For the answer in that scenario - I would look to your plan's definition of compensation (it may be in a basic plan document). Ours says that all compensation from the controlled group counts as Plan Compensation, even if a specific entity is not a participating employer and isn't otherwise included in the plan. This is separate from an employee who only receives compensation from Company B - and who might be included in non-discrimination testing - but isn't eligible for the plan.

Yes, we were aware. I'm not sure what other folks are doing, but anytime a client gives us an address change (or entity change etc) file 8822-B is on our checklist to see if it is needed or not. If it is, we prepare it and get it filed. It's a PITA in my opinion, but I'm sure it helps the IRS somehow. I think it is just one more possible thing to get missed, that doesn't seem to serve much purpose.

I think you are correct. You aren't a shareholder - so you don't benefit from the sale. It just happens that the shares are held by the ESOP. I suppose you could ask for a bonus if you were instrumental in the sale of the company, but I don't have any ideas. I think when small companies are bought or sold the employees don't typically have an expectation that they will benefit monetarily from the transaction. It just happens that a number of them will because of their shares in the ESOP. You aren't one of the lucky ones.

@Linda Wilkins Thank you! I KNEW there had to be some sort of exception related to the fact that the control group is ending. I just couldn't remember or put my finger on it. If the control group wasn't ending, I think the result would be different, but that's not my particular fact pattern. We will give the business the information and they can decide what they want to do (or not do). Thanks again! And Happy Holidays everyone!

How many participants would be affected? Is it practical to get everyone to complete a distribution election in time? Is the concern that the notice isn't being provided at least 30 days in advance? Or will the notice not be provided at all? If the participants elect a distribution ( as opposed to being forced out) then usually the distribution forms have language in them that the participant acknowledged receipt of the notice, and any 30 day requirement is waived. If the participants are affirmatively electing some sort of distribution with their waiver, i don't see an issue with the Notice date and the Distribution process date being less than 30 days apart.

@Larry Starr If all it took was being a separate employer in a plan to allow for distributions upon discontinuance, MEPs wouldn't have to go through the exercise of spinning off employers into single employer plans to then terminate them every time an employer ceased participation in the MEP. I'm not aware of a partial plan termination - in and of itself - being enough to allow distributions. Nor am I aware of an exception to that where a possible partial plan term is caused by the discontinued participation of an employer. Hence my question / hope that there was some exception or rule that WOULD allow distributions to those affected employees. More typically I see a partial plan termination occur because a number of employees have a severance event. They are then typically eligible for distributions because they are terminated. Not because they are 100% vested or because there was a plan termination. In my fact pattern - the employees are still employed. By the same employer as before.

Thank you, that's the confirmation I was looking for. I was wondering if my memory was correct or if something had changed. Usually the documents I see have a mandatory spinoff in which case it is easy to formally terminate the plan and distribute. This document does not have such a provision. And I've been in this industry long enough to see the laws change many times on most everything, so I figured I should ask before I assumed these rules were the same as when I learned them at the start of my career. If anyone else has some other insight that differs from my and Luke's understanding, please share. @Larry Starr? @Kevin C?

No, it doesn't quite answer my question. Neither company has a problem with the 100% vesting, I should have mentioned that in my original post. My question is - what is the distributable event for the Employees of Company B? They are still employed. What support does Company A have to allow distributions for Company B employees? I think the example I am relating it to is a company that has a plan that covers several different divisions of employees, but not divisions. If an employee switches divisions, or alternatively the plan is amended to no longer allow a particular division's employees to participate, I don't recall any way for those participants to take a distribution (unless otherwise eligible for an in-service withdrawal). Is this somehow different because it is a separate employer? Company B will not be part of the control group as of 1/1/2020

A two company control group is ending as of 12/31/2019. Both participate in a 401(k) plan together. The main sponsor would like to kick out the participating ER at the end of the year. The Participating ER will likely voluntarily end it's participation in the plan anyhow. They aren't ready to have a new plan of their own. The plan document (yes I read it) is silent on this exact scenario. The participating ER MAY choose to set up a successor /spin off plan. But nothing in the document says they have to. I think the old rule was, the discontinuance of an ER doesn't necessarily create a partial plan termination or distributeable event because the employee's haven't terminated employment. But I thought there was a narrow circumstance where it could be considered a partial plan term and distributable? Am I imagining this possibility? Anyone know the rules? Point me in the right direction?

I don't think so. This is an outdated example, but the best I can think of off the top of my head. If a sponsor has more than one plan (such as a money purchase plan) and a profit sharing plan, the participant's vested balance in both is used in determining the maximum loan amount available. But only one plan might actually allow for loans. If only the profit sharing plan allows for loans, then obviously the participant can't take a loan from Money Purchase dollars. I don't see how this is different from restricting sources within a single plan.

I'm not aware of a regulation. I think that comes down to a contractual issue. Can a custodian hold the plan assets hostage when there are unpaid invoices and trustee direction to move the assets? Probably No. Can a custodian / recordkeeper say in their contract that if there are unpaid invoices, and a liquidation / asset transfer request is received, they will first pull the fee amounts before completing the asset transfer? Yes. I have see recordkeepers do this, and it is so specified in their contracts and fee disclosures ahead of time.

Thank you Doghouse and Lou S. Especially the EOB cite. I knew there was something out there on point, but just couldn't put my finger on it.

A sponsor wants to amend their plan to require employees who defer to defer at least 4%. Employees cannot elect a lower percentage unless it is zero. Other than needing to be tested under 401(a)(4) - how would we even do this? Is this permissible? It seems like it would flagrantly disfavor NHCE. Complicating matters is the plan presently has a Safe Harbor match, and plans to keep it for the foreseeable future. Thoughts?

They could consult with an attorney who might be willing to help them disqualify / unwind the plan. Also, were the participants offerred the ability to make deferrals in 2018? If no, EPCRS says the ADP test is run without those participants in the test. In which case the HCE would be the only ones in the ADP test and it would pass. Still doesn't solve the TH issue, and then you would have the Missed Opportunity to Defer correction to deal with, but just something to consider.

I would just clarify - that "QRP" might stand for Qualified Retirement Plan, instead of Qualified Replacement Plan. So not necessarily anything to do with a DB plan that is closing. The promoter might be using QRP as a more general term to distinguish a more comprehensive plan from it's "solo 401(k)" product. I, like a number of folks on these boards dislike the terms "solo 401(k)" "uni-k" etc They are marketing terms that often confuse at best, or mis-lead at worst, and routinely create compliance issues.

I'm not sure I understand. The auto defer / auto escalate almost always go hand in hand. If a participant is subject to one, they are subject to both. When plans implement these provisions for the first time they have to decide who it applies to. 1. New hires only 2. Current eligible employees who have never made a deferral election (this might be zero based on your description, but I find most larger companies there are at least a FEW who didn't opt out or in) 3. Current eligible employees who have never made a deferral election, or ones whose current deferral election is 0% 4. Current eligible employees who have never made a deferral election, or ones whose current deferral election is less than the starting auto enroll - in this case 1% Which of the above will apply to your plan? Only scenario 4 would require any sort of analysis. 1% is pretty low, is there a baseline paycheck you can examine to calculate the % for those that are deferring flat amounts? Moving forward - the auto escalation applies to folks who you auto-enrolled. If you never autoenrolled them, then their election stays as whatever they elected. Even if it would end up being less than what they would be at under the escalation. Very rarely (but it does happen) do I see the auto escalation bifurcated from the auto enrollment, and each provision is applied separately. You'll have to read your plan document to see if that is the case.

Eh, I would say §411 is pretty clear everyone's rights are non-forfeitable upon plan termination, regardless of what the plan document says ( but the document should agree with the regs) https://www.law.cornell.edu/uscode/text/26/411# https://www.irs.gov/retirement-plans/terminating-a-retirement-plan https://www.irs.gov/retirement-plans/retirement-plan-faqs-regarding-partial-plan-termination

I do think you are correct about the forfeitures. A QACA SH subject to vesting will allow some forfeitures to occur, and those can be used in future years towards new safe harbor contributions. I don't see how having fewer participants deferring or not will impact that. If the QACA was structured as a match, yes, it might be more expensive due to increase participant from automatic enrollment (but also create more forfeitures), But CPS mentions a QACA 3% nonelective. So the traditional 3% SH nec will be the same as a QACA 3% nec (absent forfeiture available to reduce). It isn't impacted by how many defer.

It may be helpful to know that MT's uncashed check literature only mentions account balances under $5,000 unless the plan is terminating. And it makes zero mention of Roth. I suppose I don't actually know what MT does with Roth account balances when part of a force out distribution. I too am concerned about Voya setting policy for the plans.

After receiving the TPA notification I had asked some follow-up questions, and it was in response to those questions that the rest was explained in an email. I don't know that they will provide that additional information unless asked. So I encourage all of you to ask. I have not seen any issues with MT or Penchecks when used by other sponsors, so I don't think the issue is them. There was zero mention of a taxable savings account in the clarification I received (whereas Penchecks is usually happy to explain that option when asked about uncashed check services). Unless the sponsor opts out, the communication from Voya made it clear uncashed checks would be going to an IRA. The e-mail response I received even mentions that if the money is an excess contribution to the IRA, the customer is subject to a 6% penalty each year it remains in the IRA. So they clearly know this will create issues for the participants. I imagine this particular possibility is the reason Penchecks has their taxable savings account option. My concerns are two fold - 1. Will this create issues for the plans / sponsors, particularly in that the terms of the document are not followed (such as an affirmative election for a cash out that instead ends up in an IRA), and 2. What issues this may create for the participant. I just get the impression that this wasn't well thought out. For example - I asked about Roth IRAs (because some portion of the uncashed checks are Roth money), and the answer to that was the IRAs may record the money as pre tax or post tax, but that the IRAs themselves aren't recorded as pre tax or post tax. So it sounds like the Roth uncashed check money will go to a traditional IRA, but be recorded as post-tax money. Which for the record is not the same as going to a Roth IRA. Not to mention Roth 401(k) can't be rolled over to a traditional IRA, so it would count as an after-tax contribution to the IRA (and I presume lose it's status as Roth money).

Here is the initial communication, which doesn't say much. I suppose to be fair they are allowing sponsors to opt out of this approach. The additional clarification from XYZ went into more detail on the 1099-Rs, rollover treatment and IRA contribution treatment etc, which I outlined in my original post. "Dear TPA , We are writing to let you know that one or more of your Plan Sponsors will be receiving a letter from XYZ the week of November 11th regarding uncashed checks. This letter is to inform Plan Sponsors of action we will be taking on checks that have been outstanding for 365 days or more. Our plan is to transfer those funds to an outside company, to establish an IRA for the benefit of each respective individual. If a Plan Sponsor is in agreement with this process, no action is necessary. Alternatively, if they wish to provide more current participant addresses, they may complete the Notice of Direction (included with their letter) and return it to us no later than 60 days from the date of the notice. If the check remains uncashed after mailing to the updated address provided by the Plan Sponsor, XYZ will need direction from the Plan Sponsor how to process the check. If a Plan Sponsor’s plan document allows for disposition of such assets to the plan’s existing Forfeiture or Trustee-level Account, the Sponsor may use the Form provided with this email to direct XYZ accordingly. As a reminder, you may access our Uncashed Checks Report for your plans on XYZ Website within the “Reports” section. For a list of your impacted plans, please contact the XYZ Team. Please let us know if you have any questions. "