CuseFan

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.

Note the IRS presumption is that a plan in existence at least 10 years will not be questioned concerning its permanency. I think 3-5 years is a good interval for design changes, like reducing or freezing benefits, but there is no guarantee IRS won't come looking for justification if you terminate after 5 years. An owner starting a plan at 57 who retires at 62 and winds down the business, sure, no concerns for me, but a 45-year-old who decides 5 years later (s)he doesn't want the plan anymore where nothing materially changed with the business is a riskier proposition. I would recommend freezing and running it out to 10 years if possible unless some significant business event happens in the interim such as a transaction, material ongoing decline in revenue, significant increase in workforce/payroll, etc.

Exactly, if document requires then you have operational defect to correct.

Confirming - SB gets prepared/signed and provided to plan sponsor but is not filed, and a first and final EZ filing would be required. On the form there are check boxes for first and final as well as a line to disclose the effective date of the plan, so it could very easily be flagged for IRS scrutiny. And if the situation is as described, plan sponsor changed their mind after an initial tax deferral, that is precisely what IRS does not like, as we all know.

OK, so then if the 4/1/2023 consolidated installment was for calendar 2023 RMD then yes, a lump sum of remaining benefit paid by 12/31 would all be rollover eligible.

There are some very limited circumstances when putting life insurance into a pension plan makes sense, but I would say unless such suggestion came from an independent certified financial planner or similar advisor who does not also happen to sell life insurance, I would avoid insurance and the person selling it. Unless you know (and the insurance company doesn't) that you're going to die in the next few years, in which case I say load up!

I think it's the partnership return due date (3/15, which changed from 4/15 a few years back) which can be extended to 9/15.

My understanding is that the loan still exists, it was just taxable as a deemed distribution, which is different than a distribution/offset where the loan is actually "distributed" and no longer in the plan - but I defer to others who deal with this more regularly, as I do not. This all ignores the prudency and possible other concerns lending to someone who recently defaulted. Again, not my area so I'll others argue any issues there.

First distribution calendar year was 2022? If so, then don't you also have a distribution calendar year for 2023? If you continued (consolidated) annuity and paid 12x again next 4/1 then you're OK, but I think a lump sum changes everything. Maybe I'm wrong but I would dig further.

Interesting question, because being in the plan at zero means they are not benefiting for purposes of 410(b) or 401(a)(26), so are they really "covered"? This is different than someone not accruing because they hit some limit. Also, being in a plan with a defined accrual of zero doesn't get you 415 years of participation either, in my opinion. I do sometimes have individuals in at zero, but that's because a classification exclusion doesn't work and I'd rather specify individuals in a benefit formula than an eligible employee/excluded employee definition.

From TH regs, M12 - you just need to provide 3% DC. M–12 Q. What minimum contribution or benefit must be received by a non-key employee who participates in a top-heavy plan? A. In the case of an employer maintaining only one plan, if such plan is a defined benefit plan, each non-key employee covered by that plan must receive the defined benefit minimum. If such plan is a defined contribution plan (including a target benefit plan), each non-key employee covered by the plan must receive the defined contribution minimum. In the case of an employer who maintains more than one plan, employees covered under only the defined benefit plan must receive the defined benefit minimum. Employees covered under only the defined contribution plan must receive the defined contribution minimum. In the case of employees covered under both defined benefit and defined contribution plans, the rules are more complicated. Section 416(f) precludes, in the case of employees covered under both defined benefit and defined contribution plans, either required duplication or inappropriate omission. Therefore, such employees need not receive both the defined benefit and the defined contribution minimums. There are four safe harbor rules a plan may use in determining which minimum must be provided to a non-key employee who is covered by both defined benefit and defined contribution plans. Since the defined benefit minimums are generally more valuable, if each employee covered under both a top-heavy defined benefit plan and a top-heavy defined contribution plan receives the defined benefit minimum, the defined benefit and defined contribution minimums will be satisfied. Another approach that may be used is a floor offset approach (see Rev. Rul. 76–259, 1976–2 C.B. 111) under which the defined benefit minimum is provided in the defined benefit plan and is offset by the benefits provided under the defined contribution plan. Another approach that may be used in the case of employees covered under both defined benefit and defined contribution plans is to prove, using a comparability analysis (see Rev. Rul. 81–202, 1981–2 C.B. 93) that the plans are providing benefits at least equal to the defined benefit minimum. Finally, in order to preclude the cost of providing the defined benefit minimum alone, the complexity of a floor offset plan and the annual fluctuation of a comparability analysis, a safe haven minimum defined contribution is being provided. If the contributions and forfeitures under the defined contribution plan equal 5% of compensation for each plan year the plan is top-heavy, such minimum will be presumed to satisfy the section 416 minimums.

Yes, these situations can be as murky as any, all the facts and circumstances need to be examined and qualified counsel consulted if the situation warrants. Like I said before, if only a small/immaterial population in question, then maybe just take the easy conservative interpretation.

Depends on what the plan says for allocation conditions - it could also include people that terminated during the year. Also, pay attention to timing, when the forfeitures occur and when plan says they are to be allocated. If you're holding forfeitures that should have been allocated at 12/31/2022 and want to allocate them at a plan termination date of 11/30/2023 only those active on such date, that is an issue. Read the plan, follow its terms, and just treat your plan termination date as your latest plan year end and you should find out exactly what you should do or should have done.

If you can somehow get those excess PS reclassified, maybe you're OK, but I would not tell anyone that I think such strategy would hold up under audit. I'd say we can try but you're playing audit roulette for three years on this, at least that's my opinion. In these cases, I'll usually present limiting total deduction to the 31% and then carry forward remaining CB deduction to the next year properly limiting the PS to 6%. Depending on CB contribution and deduction funding cushion, sometimes it even takes a second year to catch up. This just follows the fact pattern, I don't see a legitimate basis for being able to reclassify a contribution that was made as a deductible profit sharing contribution as something different - and certainly not as VAT contribution when no such designation was made when contributed.