CuseFan

If 2022 reporting is still fully open (corp taxes, 5500/SB, etc.) and the haircut was agreed to by a generic "to the extent unfunded" then if economically advisable (Paul's questions) I think you're OK. The employer has the discretion to fund and make the "extent unfunded" less or zero. If there was a 2022 amendment and a hard-coded agreement for the haircut, then as previously noted, an HCE-only amendment could be problematic.

100% correct. If retired/separated they'd be eligible for distribution - which they are not. They simply wend from an eligible class of employee to an ineligible class of employee, but they are still employed by the employer (or any control group member) maintaining the plan.

Makes sense. The compensation was made available to the person on 9/29, a date before the effective date of participation which is the earliest date any salary deferral could be effective.

Great explanation Luke. I wasn't 100% sure about the spouse's survivor benefit amount being unaffected by when the retiree claimed, thanks for the clarification. As you both stated so well, then it's a matter of "doing the math" to see where the breakeven point is and then deciding what makes sense for the particular situation. Here, where the retiree may be terminal, it sounds like a no-brained to commence ASAP. I like it when I continue learn things from this forum or confirm things that I thought but wasn't sure. Thanks everyone!

Also note the maximum LS changes depending on when it is paid - and with CBPs that is usually the concern, the maximum lump sum as opposed to the maximum benefit. Effen gave the correct general stock answer and that is the starting point but unless you check all the boxes - 10+ YOP, FAE >= $265K, NRA 62 and distribution at age 62, then you're looking at something different. And if you're looking into the future, then IRS limit increases come into play, as could post-65 actuarial increases. Assemble all the facts and future expectations of the situation you're dealing with and then you can craft an answer/approximation/range that applies most appropriately to that situation.

It does not appear so to me, it looks like the cross-references are for deduction purposes only and nothing refers to minimum funding.

Looks like her benefit is a percentage of his basic amount (full benefit) based upon her commencement age, but like I said, delve into SS website as it has lots of great info. When a husband dies does his wife get his Social Security? These are examples of the benefits that survivors may receive: Surviving spouse, full retirement age or older — 100% of the deceased worker's benefit amount. Surviving spouse, age 60 — through full retirement age — 71½ to 99% of the deceased worker's basic amount.

You should go to SS website and research because it has lots of great information. In general, it looks like a surviving spouse can get survivor benefits no earlier than age 60 (50 if disabled) and there is a reduction based on the recipient's (spouse) age. If your client commences at 62, I don't know if his spouse's benefit calculation would be based on his age 62 reduced benefit further reduced based on her age (which I think is punitive) or his full benefit reduced based on her commencement age (which makes more sense). If/when the spouse claims her own benefit, she gets the larger of the two, not both - so either the survivor benefit continues for her life or it goes away and is replaced by her primary benefit.

As a control group all participating employers are deemed a single employer so I do not think a different formula for one or more employers works. Also, I think that any discretionary match must preclude the possibility that any HCE could get a higher rate of match compared to any like NHCE (i.e., one who defers the same percentage), which would prohibit participating employer(s) from having their separate discretionary matches unless such employer(s) have only NHCEs. If I'm wrong on any of this, I hope one of my esteemed and more knowledgeable colleagues with respect to this subject matter will set us straight.

The reason they ask for date of DL is that distributions are required to be completed by the later of 180 days after expiration of PBGC's 60 day review period or 120 days after date of IRS DL (if submitted to IRS before submitted to PBGC). The PBGC Form 500 shows the date of IRS submission, if I recall, so they already know if plan was or was not submitted to IRS before PBGC. They don't care one way or the other, just need to know for enforcing their requirements on timing - to which they are very stringent unless you ask in advance for and get extensions.

There was cutback relief from upping NRA to 62 for a couple of years after that was enacted, but that was quite a while ago now so I agree it would be a cutback and think a VCP would be needed in this situation. Accrued benefits and funding were never the issue for artificially low NRAs, it was a situation where NDT could be manipulated and/or participants could get in-service NRA distributions very early. A successful VCP application on this might be contingent upon neither of those IRS-perceived abuses occurring in that plan.

I just watched a recorded webcast where it was said the IRS could (would?) waive excise taxes if self corrected within 180 days. Given you're within that time period (and still the same tax year) I would do that. Worst case, I believe, is a 10% excise tax if corrected timely.

That responsibility is satisfied through these requirements being spelled out in the SPD, which we all know every participant thoroughly reads, understands and remembers - LOL! The legal responsibility is satisfied, but it would be a good employee relations practice to remind such participant of those provisions.

agree

Yes, it appears that PBGC is concerned with sufficiency, although they are concerned that benefits are calculated properly as well. If your offset was calculated properly but the DC not funded correctly (not sure how that goes) maybe this flies past PBGC and the client only needs to hold their breath on IRS audit for three years. If selected for PBGC audit, then they might scrutinize the situation more closely, but as it pertains to if the benefits were calculated in accordance with plan terms, not if those benefits were or were not discriminatory. BUT, that's not to say that the PBGC can't or won't contact IRS and tell them they should investigate. Maybe all those chances are slim, and if everyone can sleep at night for the next 3-5 years, go for it.

Sounds more like she decided to keep his balance in the plan and not even offer a distribution. If the employee terminated then that's the opposite of being nice. Also, with a balance >$5k, it was HIS choice to make to keep balance in or take it out. As ESOP Guy hit the nail on the head, the question is a facts and circumstances "was there a termination of employment?" How was it recorded in payroll, was the person offered COBRA, were any other termination of employment benefits offered? If the facts and circumstances and plan provisions steer to not fully vesting but the employer wants to do so, the plan can always be amended to provide such assuming this was not a highly compensated employer.

The plan's named Trustee has responsibility for delivering asset reporting to the Plan Administrator, the frequency can be monthly, quarterly or annually as needed by the PA (or its designated/contracted TPA) to properly administer the plan. The Trustee and Plan Administrator could, but need not, both be the Plan Sponsor. If the Plan Sponsor is neither, it still has the obligation to oversee each in fulfillment of their fiduciary duty. The consequences of lack of required financial reporting is a fiduciary lapse. Participants are not required to keep (or provide) copies of their own brokerage statements any more than they are required to keep their "regular" quarterly statements. It's a good idea but not a requirement.

I wasn't recommending just a prospective fix, merely stating it as an option. There are always a number of options, including those we do not recommend, we need to explain the ramifications of each.

Or to put it another way, play a game of audit roulette.

You don't say what the prior document had for that provision, so this might be a forever lack of compliance. However, why would a 403(b) plan have a 3% SHNEC (without a match) when there is no ADP testing? Assuming no matching contributions have been made, having that provision is not the problem. The issue is whether the document, in its current form, supports the 3% contribution. Maybe there is an discretionary QNEC provision that supports this, whether an adoption agreement selection or a plan default option. If not, I suspect the proper correction is a VCP to ask for retroactive amendment for compliant provisions, or the employer could decide to amend the plan prospectively and hope IRS doesn't look at the past as they struggle to manage their current (8955-SSA) and future (SECURE et al regulations) issues while dealing with a potential government shutdown later in the year.

Isn't it up to the Employee to catch and then request from which plan they want the refund? It's not up to the Employer to fix, it's only the Employer's responsibility to distribute the requested excess amount when requested by the Employee.

Agree and Yes, so it's always the important first step to RTFD because in 99.9% of routine administrative circumstances the document will tell you exactly what you need to do, and know that sometimes you need to check more than one section or definition.

How is that 80% paid to her, via a W2 with taxes withheld or a 1099 as a contractor? Since grant is paid directly to the administrator, it might be self-employment income to her in which case she may be able to do her own retirement plan on that income. Who "owns" the grant, the individual or the school? If she leaves does the grant go with her or does it pay her replacement? It seems like she owns the grant, otherwise why wouldn't it be paid to the school which then uses to fund that 80% portion of her salary? Need to know which rabbit hole we're going down first before we can get to a useful answer - and not just my questions or Peter's, all of them.

ESOP Guy is spot on - not unexpected for an ESOP related question. Nice to have knowledgeable specialized contributors on this forum!

My supposition is that this gets done during the compensation/total rewards package negotiation pre-employment when the contract is hammered out, an initial one-time event before employment actually begins, and not subject to change (i.e., can't get cash for what match would have been) if person decides not to defer. I don't disagree with CBZ (or Luke) as we're talking apples and oranges.