CuseFan

Yes, that is likely the best path forward, and many payroll providers and recordkeepers have 360 degree integration, although I think some payroll providers stay 180 so their bundled product can maintain an administrative edge. Still, keeping all relevant information current and accurate in payroll records is a challenge for both larger employers with HR departments because of sheer volume and smaller employers without the dedicated resources to handle in real time. Thankfully (hopefully?) we now have a technological savvy generation that can tackle this, but it doesn't matter how great the technology is if the system inputs are incomplete or inaccurate - or as our generation says, garbage in garbage out. Another thought - will these changes accelerate consolidation of the provider market, driving out smaller recordkeepers and TPAs, while the 500 gorillas Fidelity and Vanguard et al get even fatter?

That is important as you don't want plan and IRA issuing 1099R for same taxable distribution. The Plan Administrator should write letter to IRA custodian explaining the error. The IRA custodian may not be able to distribute out to the individual w/o tax reporting, in which case the request should be to return to the plan which can then make the proper RMD distribution. Agree with bito too that this was indeed a plan/administrator/trustee/custodian mistake/problem/issue because the plan is required to split the distribution and properly satisfy its RMD requirements under the terms of the plan. Therefore, whichever entities/functions made this ill-advised lateral should fix it before the IRS recovers and runs back for a game winning TD against the Patriots, I mean the participant.

I agree - all those provisions that sound great for enhancing overall retirement plan coverage just make things more complicated and error-prone for the small and unsophisticated (from an HR perspective) employer that they serve as a detriment. Fewer employers will want to adopt these plans, fewer providers will want or be able to serve these plans, and administrative costs will increase, wiping out the short term tax credit savings. I've been in this business for nearly 40 years, have done both DC and DB in terms of administration, plan documents and compliance, and remember when DBPs were the complex animals no one wanted any more. Now, DBPs and CBPs look pretty simple compared to the modern and continually evolving 401(k) plan environment. Maybe all the heads of the states' with those new mandatory retirement plans met in a NYC pizza parlor and conspired with the Federal government to make 401(k) plans so damn complicated that no small employer would dare set one up and thereby drive all their employees into the mandatory state plans, just saying.

As the Patriots found out on Sunday!

For the DB R/O - absolutely if current plan allows distribution of rollover balances at any time. This amount had already experienced a distributable event and all the conditions to distribute were satisfied. However, since the participant is not 59 1/2 this would be subject to 10% premature distribution tax if not rolled over to an IRA. Rollover to a Roth IRA would be taxable, obviously, but not subject to the penalty tax. I think the SEP rollover is treated similarly.

I don't think rolling after-tax withdrawals directly to a Roth IRA is a conversion any more than rolling Roth 401(k) out to a Roth IRA.

Yes, absolutely do this if you want to be in the headlines for the next big cybersecurity breach lawsuit.

Agree with the above, but sometimes there are situations when you have to aggregate plans to satisfy coverage and nondiscrimination. For example, an anesthesiology practice with primarily owners, maybe some other HCEs and a few administrative NHCEs. The CBP may cover just the owners because they make up more than 40% of the headcount and exclude everyone else. Thus the CBP would fail coverage and have to be aggregated with PS and likely SH portion of the 401(k) plan to satisfy coverage.

So, unless it was a partner whose earned income was zero/negative, how can you say such a person was an employee and performed services for the employer during the year? You can't. That the employer may not have "terminated" the person the person in their payroll system is not consistent with the facts and circumstances of the situation. I would say they are terminated as of their last day worked or for which hours were credited. Also, for reasons noted above, like 415, you can't cover/benefit them so why should you need to include them in your testing denominator? Finally, on what basis could you include for coverage but exclude for ADP?

Distribution of VAT at any time is not the same as a Roth distribution, check your plan provisions carefully. We typically have person make the VAT, keep it temporarily invested in non-interest bearing cash, then take a withdrawal of their after-tax account and roll to a Roth IRA. If there is some income on the VAT then it must also be distributed and can be rolled to regular IRA, taken in taxable cash, or rolled to Roth IRA (and taxable).

Peter, those whose benefits are collectively bargained are mandatorily disaggregated, statutorily excluded from sections of the plan for non-bargaining employees and tested separately, so does it matter?

What may happen is that IRS and/or DOL, based the 5500, sends a letter to plan sponsor asking for information to justify a partial termination did not occur. Also, if these termed NHCEs were fully vested then no issue. On your other question, agree you need to test your SH+PS.

Not a bad idea, but haven't seen it in practice. Could make your baseline benefit equal to a 0.5% accrual and then layer on a cash balance credit as a percentage of compensation in excess of some strategic threshold. But can this fit into a pre-approved document without modification necessitating submission? I'd be interested to hear if anyone sees compliance issues or other drawbacks to this approach.

If they have already forfeited under the terms of the plan, whether by distribution of the vested balance or incurring five consecutive one-year breaks, then you do not restore/fully vest. If they have not yet forfeited under the terms of the plan, then they must be fully vested. The key here is "the terms of the plan" as that governs what needs to be done. If people have been gone for longer than five-years breaks but have not yet been forfeited, then you have an operational compliance issue to fix that is different/independent from your question, such as allocating amounts retroactively to applicable years based on entitlement in those years.

Not an option - more than 6% ER was contributed to DC so there is a 31% combined plan deduction limit for 2022, end of story. Can still do CB for 2022 and deduct up to that 31% total for 2022 and deduct the rest for 2023. Maybe the 2023 total max CB deduction is high enough to cover that residual 2022 plus the 2023 minimum, maybe not - it could be 2024 before deductions catch up. They can try to remove the 2022 PS in excess of 6% and maybe it never gets caught, but if it does, you've got some 'splaining to do Lucy and I don't think IRS will buy the excuse.

Post-severance compensation is different from severance pay. The employee would be entitled to the former if employment continued and its treatment for retirement contributions must be specified in the plan document. However, the employee is only entitled to the latter as a result of discontinued employment and such severance is NEVER considered plan compensation.

No for DBPs and only cash is cash.

Agree with Lou - your 415 clock and comp reset.

There was also environmental Armageddon going on all over the country, so if you were in an area that had a Federal weather disaster you may have an extension for that as well. Good luck.

good catch, thanks

ONLY IF separation occurred after age 55 does the code 2 exception apply, one cannot age into the age 55 exception. This was the old early retirement provision exception in the code that then got modified to treat people the same whether or not their plans had early retirement provisions.

not words I expected to see in the same post Luke! I'd say leave such humor attempts to the actuaries, but ...

I do not deal with these directly but have consulted with advisors and their clients, communicating their need to restate their SEP onto a prototype and get off the 5305 platform so they could adopt a defined benefit plan, and no one had come back to me saying they couldn't do that so I'm assuming this can be done.

You do not say what type of pension plan this is - there are a few possibilities and the answers vary depending on plan type. If it is a defined benefit plan, including a cash balance plan, it is subject to ERISA minimum annual funding requirements. If the plan is frozen (no current benefits are being earned) then if the plan is well funded the employer may not need to physically contribute. My guess, by your comment that you have $250k, is that this is a cash balance pension plan. Your employer, saying they will stop contributing, was stating very generically (I assume) that they are freezing the plan and will stop adding contribution credits to your account. Your account will still be required to get credited with interest according to plan terms until it is distributed, whether after your termination of employment or the plan's termination. Regardless, the employer will need to fund the plan each year in accordance with ERISA requirements or be subject to excise taxes. Also note as a large plan (assuming over 100 employees) it is required to have an annual audit by qualified CPA. Finally, each year you are required to get an Annual Funding Notice that describes the relative health (funded status) of the plan. If this is a money purchase pension plan, then it is like a profit sharing 401(k) except with required annual contribution obligations. Employers may amend these plans to cease future contributions but your account continues to be invested as before but w/o those future contributions. I encourage you to review your Summary Plan Description(s), or request them if you can't locate. The industry trend for larger companies has certainly been away from pension plans and emphasizing 401(k) plans. Regarding your individual retirement outlook, I suggest consulting a qualified and trusted advisor. Maybe your employer has resources (financial wellness plan?), the advisor to the 401(k) plan, your accountant? Good luck.

Agree with Luke, whatever assumptions are used should be fair and reasonable. Getting signed releases on agreement of benefits might be worthwhile. The NQDC plan is ultimately a contract between the employer and employee, and litigation from a disgruntled employee thinking they might have been shorted is obviously something you want to avoid. As for assumptions, without any plan defined parameters maybe apply the ASC assumptions, assuming they had to report this liability on their financial statements.