CuseFan

Yup - it was my mother who pushed Latin, saying it was the basis for all the other Romance languages - but after two years of Latin the last thing I wanted was to take another language. Should have taken Spanish or French, but I must admit Latin has helped on the vocabulary side, when I can remember that is! She also suggested I take typing (still called that back then) but I drew the line and refused. If I knew then what I know now I would have taken typing and not taken Latin, and maybe it wouldn't have taken 10 minutes to type this response LOL!

Yeah, I took two years of Latin in high school, and no, just no. Cogito ergo fuggetaboutit.

Certainly an operational defect (OD) and it has been corrected. Not all ODs give rise to a prohibited transaction (PT). To the extent you have deferrals deposited late you have a PT - but your correction was an ER contribution, there were no salary deferrals withheld for which the employer had prohibited use that would create a PT, in my opinion, so I think you are OK on that front.

Thanks Luke, I tend to get short and cryptic when doing seven things at once!

Also, if you allow new benefits to accrue based on COLA limit increases, does that create a 401(a)(26) issue in that you don't truly have a frozen plan?

Spun off as in a new employer with a new EIN and now that new company is responsible for those NQ benefits? I would say yes as it is a new plan established by a new employer.

3-year average compensation may be taken from any consecutive period, pre-plan, post-freeze. Likewise for Years of Service. Participation is credited service for which the person accrues (or would otherwise accrue) a benefit - so no for pre-plan and no for post-freeze. See the regulations.

I believe that as the earnings vest they are subject to FICA but then future earnings on vested amounts are not. So after year 1, 1/3 of $66,500 is subject to FICA. Year 2, $74,500 x 2/3 less the original vested total from year 1 AND the applicable portion of earnings attributable thereto. Similar for year 3 on remaining piece.

I know NYS taxes (or used to) NY-source NQDC if it is paid to a non-resident over a period less than 10 years, the threshold for qualifying as "retirement" income to which Peter alluded. I'm not sure if that is still the case, but knowing NYS would be surprised if it no longer applies. If so, I think the payer has a withholding requirement, which creates the compliance mechanism.

I don't think there has to be a minimum salary to be on the payroll and the one just needs to be an employee of the other, and really, I thought the criteria was either an employee or some involvement running the business - but being an employee and getting a W2 is likely an easier documentation.

Exactly, no reason NOT to do that, especially when you can fully vest on death or disability to protect against those contingencies. And I agree with Lou. They keep pushing out the age so why not just make it age based for everyone with a 12/31 due date, with a one-year delay for new plans like the above situation?

What is definition of plan compensation? I assume some standard definition and bonuses are not excluded, so then you need to look at whether post severance compensation is excluded or not and there's your answer. Or as Bill Engvall would say, "Here's your sign."

I wouldn't worry about a brief non-CG period. Also, Schedule SB is still used for multiple employer plans, you just need to do an SB for each employer. The MB is for multiemployer plans - a different animal. Very easy to force CG, put wife on husband's S-corp payroll, doesn't have to be material, she just needs to be an employee. I'm sure there are other easy ways as well, having husband somehow formally involved in wife's sole proprietorship. BUT - your administrative ease should not be the driving force (sorry) behind "to be (a CG) or not to be" question, it should be all the relevant issues/advantages/disadvantages with respect to their businesses and tax situations as discussed with their accountant (and attorney if necessary).

On what basis was vendor #2's deposit into the plan? They weren't reimbursing the plan for an expense it paid, partially or in total, because it was the employer that paid the expense. If the expense was paid by the plan and charged against accounts and then partially reimbursed, would that not have to be allocated back to participants? If the employer was reimbursing the plan for expenses the plan paid, and deducting as plan related administrative expenses then I think they would have to do that - they couldn't treat as contributions. Far be it from me to question a national vendor, but I didn't think that any plan-related party could just toss money into a plan and have it be used for whatever.

Agree with Lou. Definitely would have to take pro rata basis and earnings on any withdrawal. Any taxable portion would also be subject to 10% penalty, I think, if not a qualified distribution.

I'm not a practitioner in that area, but I would expect (hope) whatever service agreement the employer has with the FSA TPA delineates the TPA's responsibilities, if any, in adjudicating claims.

Two spot-on excellent answers. If the person wants ad hoc payments, take lump sum (if not restricted) and rollover to IRA and then withdraw at will.

Not relevant to the question, but I find this very interesting in that I always hear about posthumous QDROs being filed after the participant has died rather than the ex-spouse/potential alternate payee. Curious how often you all have seen this.

Or give the soon to be ex a partial legal settlement now from other assets in exchange for spousal consent and agreement to not include such in future property division? This is where the lawyers earn their money.

This is a discretionary amendment so as long as it is signed by 12/31/2023 it can be effective retroactively to any date in 2023 - even 1/1. Obviously that is not w/o risk if you administer based on a stated intent and then the amendment doesn't get executed. This is kind of like a CARES Act situation - yes we're doing/no we're not/memo accordingly/amend later. The only thing might be if you have a RK that won't execute w/o a signed amendment (but at this point the dates both in 2023 don't matter).

There are a lot of great thoughts coming out of Congress (did I really just type that? queue music for It's the End of the World As We Know It or Dazed and Confused) from retirement industry specialists (sorry, not saying experts, already gave too much credit) where some well-intentioned people say there oughta be a law and then they enact one. However, the bridge between concept (nice idea) and reality (administration) is often an architectural challenge/nightmare/near impossibility. I'm not saying that is the case here but it sure does sound like a case of no good deed goes unpunished - or 10% of the special cases that suck up 90% of your time - pick your cliche. Agree that being able to administer in a fashion that protects the victim's physical, emotional and financial well-being, as well as privacy, without undo burden on the Plan/PA is the need, how to accomplish that in different employment environments will be challenging for sure.

Unless you are talking in-plan Roth conversions you have two separate issues at play: 1. Under the terms of the plan, as limited statutorily, what contribution sources are available for distribution and under what conditions? 2. Is the distribution rollover eligible? Some types of contributions (401(k), safe harbor, QNEC, defined benefit/cash balance, etc.) have age restrictions on in-service distributions. Other types (profit sharing, match) might be available earlier but may have conditions (like full vesting or be in the plan x years). Then there are conditions that could apply to 401(k) and other sources, like hardships. Most but not all distributions are rollover eligible. Read the plan - it may be (and usually is) more restrictive than statute, but can NEVER be less restrictive, and ALWAYS governs.

No matter how many different matching formulas you have it's all a 401(m) plan subject to coverage under 410(b) and nondiscrimination with an ACP test. You do have a BRF for each separate match based on the timing of deposits and, even though your rates are the same, if A doesn't have 1000 hours/last day rule then the rates really aren't the same. A term EE in A gets match but similar term EE in B gets zero. But if you're passing BRF for A on one you should on the other as well.

In scenario 1 you did not change the event that triggered distribution (separation), you changed vesting. Yes, that indirectly accelerated potential payment timing. In scenario 2 you accelerated directly by design the timing of distribution which I think is impermissible.

Yeah, whether the client is dealing with the ghost of TPAs past, present or future, the plan document provides the story.