CuseFan

A 457(f) plan can be structured many ways, it could be in the form of DB SERP that takes into account average compensation and all years of employment, and may be offset by other employer-provided benefits. It could be an account balance plan where the employer books an annual contribution of whatever for the executive, there is no limit (other than overall reasonable comp & benefits for tax-exempts), so why would it matter what criteria the employer used to determine? 457(f) applies to any tax-exempt organization's NQ plan that provides benefits in excess of the eligible 457(b) limits. Whether exempt form 409A as a short-term deferral depends on the design. As a NQP it is also unfunded by definition, so if/when/how the employer wants to set aside any assets to cover this benefit doesn't matter, except when the time comes to pay the obligation. This would be a book expense until such time. If the employer was also wanting to allow the executive to elect to defer compensation into the arrangement then you have those timing issues, otherwise, no.

If this person is re-employed then you need to follow the distribution rules as they apply to employed participants. If these are being reported with code 1 for premature that tells me the person is not over age 59 1/2 and these are now impermissible in-service distributions. If for some reason they are permissible then they are subject to the additional 10%.

Totally agree. Just didn't want to go down that rabbit hole again ranting about employee accountability and how (not just here, but many other cases discussed here) it is mind boggling that someone doesn't notice or doesn't say something when something that is supposed to affect their pay and doesn't. But if double health plan premiums were withheld by mistake you can bet they'd be in HR the next day!

BUT, the notice would only go to those experiencing the reduction, i.e., the owners, and not any other participant whose benefit is unaffected.

It depends on the terms of that pension plan. Some allow QDROs to paid out in a lump sums to the alternate payee at any time after the DRO is qualified by the Plan Administrator and becomes a QDRO. Other plans restrict the timing to when the employee reaches the plan's earliest retirement age and may not have a lump sum payment option, requiring the alternate payee to receive an annuity.

That is the best solution, and you got great advice above - fixing a plan error that didn't exist in the first place by doing something not otherwise supported by the plan document creates a plan error. We've had other discussions in this forum over the years about employee accountability, so I'll reserve opinion on that.

Depends. You can freeze a DBP, including a CBP, before accruals/credits are earned. If the plan has a 1000-hour requirement then you need to freeze before anyone is credited with 1000 hours. If there is no hours requirement, accruals are earned from day 1 of the plan year but you could freeze further accruals and limit to the portion of the year earned (for example, freeze effective 2/1 after a month's worth of credits have been earned). Unless it's an owner-only plan, you need to provide an advance 204(h) notice at least 45 days (large plans >100) or 15 days (small plans <100) prior to the effective date of the amendment. Such amendment needs to be adopted on or before the stated effective date or the adoption date becomes the effective date (i.e., cannot be adopted retroactively). Those are the relevant timing issues for executing the plan freeze, the employer's decision deadline is a function of these timing concerns and it's actuary's/TPA's lead time requirements for providing the necessary items (resolution, amendment, 204(h) notices).

That is correct, very odd, but correct. So if someone entered a calendar year plan on 12/1/2020 they would become fully vested under this rule on 1/1/2025 regardless of years of vesting service.

I agree with Corey. You lose SH and do ADP/ACP testing using gross comp (or some 414(s) compliant definition) as your testing comp. If this was a DB or PS that otherwise had a safe harbor formula but failed nondiscriminatory compensation you would need to general test using a 414(s) comp, and ADP/ACP are the "general test" versions for 401(k) and 401(m).

Paul, those are the latest statutory distribution dates not normal retirement, which is defined in the plan but can be no later than age 65 or 5 years of participation.

There is no prohibition on doing another DBP like the 401(k) successor plan restrictions, but make sure all the relevant circumstances concerning the termination of the first plan are legitimate and well documented, especially if the owners were under age 59 1/2 and the plan was in existence less than 10 years. Otherwise, IRS could possibly challenge the permanency of the first plan and view the termination and subsequent re-establishment as a circumvention of the in-service distribution rules.

Is this for a DB plan termination? If so, and these are (more) excess assets, they should only be allocated to those who got plan termination distributions. If a DC pooled plan termination, then they got 12/31/2022 balance early 2023 and agree they are not part of the plan termination, but (as always) check your document to make sure it doesn't require anything different.

Thanks for these points, gentlemen, I did overlook the fact that there may no longer be an "employer" in existence to sponsor an ongoing plan. If there is a corporation of some sort maybe it could be left open even if dormant. I don't know how long an unincorporated sole proprietor could go without income and/or expenses to still be considered as having a business. I do know that these questions/issues are best referred to a knowledgeable accountant or tax attorney as ErnieG mentioned.

I thought that IRA protection has come a lot closer to QP protection in most or all states but think maybe an estate planning or bankruptcy specialist from the respective state would be a good source to refer. I do recall seeing past court cases where rollover IRAs were afforded more protection. Retiring with a plan doesn't require the plan be terminated and distributed. Why can't the plan continue until exhausted as long as it pays at least the RMDs, keeps document updated and files 5500s? Not saying that is preferable but do think it's possible.

Great question and I agree with your opinion, unless IRS tells us otherwise. Thankfully the form has those counts in addition to the account balance counts.

I think under the SECURE 2.0 benefit increase amendment, if that even applies in this instance, that you'd have to amend by tax return due date, including extensions - or, if you need to take that out to be able to allocate gateway and pass testing then you could do an 11(g) amendment by 10/15. Either way, I don't think you can go out to 12/31/2024. If the plan was properly designed and drafted, you should have overriding gateway allocation requirements (if that's your issue, and I think most pre-approved documents now have that) or those allocation conditions should have been removed as incompatible.

Agreed - unresponsive participants under the plan's cash out threshold must be paid out through the PBGC's missing participant program.

Not necessarily. Did plan have provision to allow in-service at 59.5? Even so, the plan still was terminated and that is the event triggering the successor plan rules. Starting a new plan would not be w/o risk, so I would proceed forewarned.

Spouse must be beneficiary of the pre-retirement death benefit unless the participant names another beneficiary and the spouse consents in writing to such and such consent must be notarized or witnessed by a Plan Representative. Spouse, if participant has died, can and should make a claim to the Plan Administrator and go through that formal process which may or may not lead to discovery of fraud, and then proceed from there including any claims appeal. If that fails then the spouse can bring suit. If participant has not died and spouse has discovered fraud through some other avenue, maybe contacting the Plan Administrator can address the situation. We have some good legal minds on this forum who have better or more comprehensive advice.

If those 401(k) successor plan rules did not apply to owner-only plans then they could circumvent the pre-59.5 in-service distribution prohibition rules at will. Unless there was some specific investment he could in IRA rather than 401(k), what was purpose for terminating in the first place? If no other distributable event per RBG, I think he must wait 12 months from the distribution.

I knew Brian would come to the rescue!

If you've contributed $X YTD then I think the cash refund you'll get is $X less whatever claims have been paid to you. If your paid claims were more than $X, I don't think the excess can be clawed back (like if you terminated and your YTD claims exceeded your YTD contributions). But that is just the cash flow issue. Whatever you had contributed YTD will all be taxable to you regardless of cash refund amount and also subject to FICA and Medicare taxes. There is a very smart health and welfare plan practitioner in this forum who hopefully will see this and either confirm my understanding or set me straight and give you the correct answers.

Control group issue is simple - the stock ownership attribution rules consider both you and your wife to each own 100% of the laundry, and 100% of your original S-corp, so yes, these businesses are a control group. I'm not an expert on the PEO situation, but here is my understanding: those leased employees are considered your laundry business employees unless they have a 10% money purchase pension from the PEO (I have never seen one). However, any employer contributions they receive from the PEO in a PEO-sponsored plan can be considered provided by you because you ultimately pay for those indirectly. I thought this model changed over the years, though, and PEO's could only sponsor a multiple employer plan and the individual employers had their own participating employer "plan" that covered their leased employees. I'm sure there are more knowledgeable practitioners on this forum who deal with these arrangements and can confirm or correct my understanding or lack thereof. Finally, provided some conditions are met, there are transition rules that allow you to treat each entity as before, not in a control group, for the remainder of the transaction year (2023) and the entire following year (2024) - so you have time to sort this out and hopefully have a competent TPA to assist you.

So sad - and a huge loss to the profession. Rest in peace brother.

Funny. I'll worry about that when the sales people start designing and modeling plans!