CuseFan

What happens when someone with an existing loan incurs a seasonal layoff? Like CBZ asked, are they considered on leave with repayments suspended? Or does the plan allow direct off-payroll repayments from the participant? Absent any specific plan/loan program documentation otherwise, I would likely treat similarly. But, ultimately, the Plan Administrator has the authority/obligation to reasonably interpret the plan.

So 2024 401(k) RMD done, then rest distributed via R/O check by 12/31/2024. Will this be the only IRA once established or are there others? If the IRA did not or could not include the in-transit R/O as part of 1/1 balance and there are no other IRAs, then would that not create a situation where no 2025 RMD was due? Is that something IRS would let fly? If that were the case, then everyone would say close my 401(k) account the last week of the year and then mail me a check, or someone could simply hold their R/O check for nearly 60 days to establish IRA in the next tax year. And maybe that's ok. In this case, the well-meaning philanthropist could possibly delay RMDs until 2026. If she has other IRA money then it doesn't matter. Anyway, interesting tax year anomaly and one I think should be posed to her accountant.

Does the plan document support in-kind distributions? I think that would be a requirement and then note it applies to everyone all the time. Otherwise, I don't think he can simply have his loan distributed/offset in total without also taking a total distribution. He could accomplish his objective doing that and directly rolling over his non-loan assets, having the loan offset taxable piece but no taxes withheld. If he really wanted to keep his other money in the plan then he could roll back. Even if plan had in-kind distributions are you all comfortable with someone just deciding they don't want to repay so they take as a distribution? Another option, but has a cash cost, would be a $50,000 taxable distribution, $10,000 withholding and $40,000 net cash used to pay off loan. This results in $10k more as a taxable event with all of such extra being withheld and then much being recovered later via assumed tax refund.

I don't have a ton of experience on these but I suspect not. If the filing has been made, can be proven/documented, and correction measures were of the pre-approved sort, then I see no issues if such a letter was delayed. If the desired correction was more aggressive or "outside the box" then if there was an examination before a closing letter was received, either the issue would be deferred to the EPCRS process and excluded or the EPCRS application maybe gets accelerated into the examination and resolved then. If you know the issue is resolved and just need the letter, even less an issue I would say. The potential downside for a client on delayed closing letter receipt is if they are waiting on letter before completing a relevant correction and the passage of time results in an increased cost of correction (e.g., attributable earnings).

What about review of VCP applications, and determination letter applications for terminated plans and the upcoming DB cycle 3 restatement deadline for modified language adopters? VCPs and plan termination d-letters already face a serious backlog and time delay and now add on the cycle 3 and who knows what that does to timing. Maybe those reviews continue as critical, I don't know but I'm guessing not.

I do not think you can split a QRP transfer across two years or a reversion. Also, as those transactions are linked, I question whether you could do one in 2024 and the other in 2025. Say you had $100,000 excess, so you need to transfer $25k to QRP and do so in 2024. Then you wait until 2025 to take reversion, to delay the taxes, but you now have $76,000 left in the trust - your QRP falls short of 25%. Maybe you can split and maybe it doesn't matter, but you're going to have a 2025 final 5500 in either case, so why not just do it all in 2025, unless they want to allocation dollars for 2024. I just think it's risky to do that. I view the entire transaction as one reversion with the direct transfer to the QRP and the other a taxable receipt (like a lump sum with direct rollover portion and a RMD portion). This is just opinion.

Yes, you're good either way. It's a 2024 allocation/annual addition based on 2024 compensation/census, and whether you allocate all or 1/7 or something in between because they want to exhaust in less than 7 years, your 2024 starting point is correct.

You cannot cross-test an ESOP. You likely need to satisfy NDT on the basis of contributions unless the initial allocation was safe harbor and the subsequent adjustments are deemed safe harbor or resulted only in reductions to HCEs/increases to NHCEs.

To avoid any potential limitations imposed by the plan she could take a distribution and rollover to an IRA where she then has complete control over where it goes upon her death.

Mandatory disaggregation, so having separate vesting schedules for union/non-union should not present any BRF issues.

Agree with Bill, not a CG. Also, unless you have a management company situation I do not see an ASG here either as there must be some ownership overlap, which there is none. Multiple employer plans do provide some cost savings in having one document for each plan, but you can't then operate as one employer so is it worth that savings for a situation that (in my opinion) makes the arrangement susceptible to administrative errors issues in making sure everything is run, calculated, contributed, reported and deducted as it should be?

Thank you everyone for your valuable input. Would be nice if everything was always black and white but having this forum to navigate the gray areas is invaluable. Have a great weekend!

Pension plan unmarried participant elects life annuity with 10 years certain and names three children as beneficiaries for one-third each. Participant dies before the 10-year guarantee period ends so remaining payments are due to the beneficiaries. However, one of the three beneficiaries also died, shortly after the participant but before receiving any benefits if that matters. Are remaining benefits now paid to the two surviving beneficiaries at 50% each, or does the deceased beneficiary's portion go to that person's estate? The plan is silent, as are the SPD and benefit election/beneficiary designation forms. Nothing specifically allows for beneficiaries to also elect their own beneficiaries so I'm inclined to say split remaining guaranteed payments between two remaining children. Thoughts? Do you think it different if beneficiary had started receiving payments and then died? Unless there is a specific legal avenue we must pursue (reason for my question) I think we ultimately need to have Plan Administrator interpret and decide upon how proceed. Thanks

If you bring in an NHCE to Plan A such that it passes the RPT of 410(b) on its own then there is no reason to test A & B together, A's PS is safe harbor so no further testing and no gateway. If the NHCE you bring into Plan A is also in Plan B, be mindful of the aggregation for 415 limits.

Do not understand your second bullet, on aggregated basis does not Plan AB satisfy coverage at 70%+ w/o further action? PS allocations happen in each plan per each document but then cross-tested as Plan AB together, which creates a gateway under A where there wasn't one before.

You can do an in-plan Roth conversion provided the plan document allows for it, which may mean an amendment from the sounds of it.

Agree - either get the distribution back, contribute enough to make the plan 110% funded, or satisfy one of the other exceptions (which I have actually rarely seen in practice).

Post-severance compensation has specific defined meaning(s) under the IRC and should be covered in the plan document as to what is and is not included. True severance pay - money paid upon/after termination of employment on account of such termination that would not have been earned/paid under continued employment is not plan compensation in the eyes of the IRS and cannot be considered for retirement benefits or contributions.

OMG - thank you SO much for creating and maintaining this forum which has proved invaluable for many practitioners, not to mention entertaining at times! Echoing Peter, you should be very proud and never hesitant to promote the impact you've had on our industry. Doing the math (it's much of what we do LOL), that makes you a young and not ready to retire age 66 so we can all rest assured BL will continue for years to come, right? Truly, thanks for all you and Lois have done and continue to do, it is greatly appreciated.

I think you can only change NRA for compensation deferred after the amendment.

Looks to me like Plan A does not pass ratio percentage (I get 55%). If the CG can satisfy average benefits then you could test A separately on ADP and the PS appears to be a safe harbor (depending on comp definition). If you do not pass average benefits then you MUST aggregate A with B to satisfy coverage and then must also aggregate to satisfy nondiscrimination (ADP, 401(a)(4)). Since B is cross-tested, you may very well have to run average benefits for the CG anyway, so you'll have your answer on the above. Note if you do not HAVE to aggregate, you may permissively aggregate and do so independently with regard to 401(k) and 401(a). If you want hasenpfeffer sometimes you have to go down that rabbit hole!

Whether the employment relationship has terminated or not is based on all the relevant facts and circumstances. You don't say what type of plan. If DC, is he working enough hours and considered employed 12/31 (if necessary) to get an allocation? Are there other benefits that he could get if retired or is precluded from unless retired and, if so, how are they treated?

I thought by rule that a safe harbor 401k is required/deemed to use current year testing. Or is it possible to be deemed current year for ADP under SH but elect prior year w/o SH for match? Do pre-approved documents even allow for that? Looking in our document, you can elect current or prior year testing independently for ADP and ACP but then each has their respective note below: NOTE: If the Plan is a 401(k) safe harbor plan, the current year must be used for those Plan Years during which the Plan is subject to the 401(k) safe harbor requirements. NOTE: If the Plan is a 401(k) safe harbor plan and it is intended to satisfy the ACP safe harbor, the current year must be used for those Plan Years during which the Plan is subject to the 401(k) safe harbor requirements.

You and 401(k) provider are correct that new hires with lookback year pay below the HCE threshold are NHCEs initially and, if other eligibility criteria are met, if any, they should be eligible to enter that plan and defer until the first plan year in which they become HCE. Unless eligibility for the NQDC plan specifically excludes any employee eligible for the 401(k) plan, it is determined independent of that plan. Also, the determination of "highly compensated" for the NQDC is different and independent (I'll use HC). HC for that purpose is someone considered highly paid in the context of the employer, and someone could be HCE for 401(k) but not HC for NQDC, or vice versa but that is less likely. There is the 20% top-paid group election that can be made for 401(k) HCE. For NQ, there is no formal 20% rule but there has been IRS opinion (I think) that to be predominantly for the benefit of HCs a NQDC cannot cover more than 20% of employees. Your NQDC provider is correct in saying the employer must determine who is or is not in the top-hat group (select management and HC). If you use generic definitions, be sure that any management or compensation thresholds are not too low/too broad. In summary, new executives could be eligible for both the 401(k) and NQDC for their first (partial) year or two of employment. I hope this was helpful.

Fully agree ESOP Guy, that's how I learned and now how I share that knowledge with others as well. You just tell someone an answer and they're asking the same question sometime later. You teach them how to arrive at the answer then chances are better they've learned and won't need to ask again.