CuseFan

That was my thought - how was it reported to IRS and correcting it there. Will also require employee to file amended tax return, so employer should do the right thing and cover any associated costs including interest and penalties on additional taxes owed. Seems like it's OK at the plan level.

I agree with Luke and I think your summary document may not be correct. Say your original election was later of age 62 or separation. If you left at age 64, payments would begin at age 64, correct? But, a year before your turn 62, you elect to change the age to 67. You separate at 64. If payments begin at 67 they have only been deferred 3 years from the time they would have otherwise been payable (later of age 62 or separation, 64 in this example), not the required 5, and that would be a 409A violation. You should also note that 409A penalties (excise taxes, in addition to income taxes) are assessed to the employee, not the employer, so it is in your best interest that this is administered properly. It could be that the major firm taking over admin of your plan noticed this as a compliance mistake/issue and fixed it.

As I understand it, IRC Section 409A requires that any change to the time and form of distribution must defer the commencement of payment(s) at least five years beyond when it would otherwise be required to commence. If your payments were originally required to commence at the earlier (or later) of age X or separation then 5 years must be added to such timing. Adding 5 years to only the age component does not satisfy that requirement.

Correct, that is the usual application but it could also apply if a change in plan year created a short plan year

Fully agree with Effen - if 0% vested terminated employees are deemed cashed out then you have a legitimate forfeiture under the terms of the plan at the time specified in the plan (usually termination of employment). These people are no longer participants as of the plan termination date, same as if someone was say 20% vested and paid out while forfeiting the unvested 80%. If the plan later terminates you do not go back and fully vest. However, be mindful of partial termination issues that could come into play before the actual termination. If you have standard language that forfeiture occurs upon earlier of distribution of vested balance or 5 consecutive one-year breaks but without the deemed cash out provision, then I believe you would need to fully vest those non-vested terms w/o 5-year breaks. However, I would be shocked if that was the case, I can't recall the last time I saw a plan w/o the deemed cash out provision.

I struggle with the use of alternative investments as options in participant directed plans because usually such decisions are driven by one or more stakeholders at the owner or management level who fancy themselves knowledgeable and sophisticated investors, whether they are or not is irrelevant, for the purpose of catering to their preferences rather than as a fiduciary prudent decision for the benefit of all participants. Should such plans offer crypto, hedge funds, real property? Certainly they could be strategic components of a well diversified retirement portfolio, but what limiting parameters should be imposed, if any, and what sort of investment education is provided to protect Joe Lunchbox (and is there a sophistication level sign-off, like brokerages often require before you can trade options)? I can see a 55-year-old retail middle manager who got a very late start saving for retirement after putting kids through college, sees Bitcoin trading at $20k and knows it was at $60k not that long ago and should get there again, and even knowing the risks (it went from $60k to $20k after all) invests 50-100% of his account in crypto. You can say it's a personal choice but it is also a retirement security and social issue - if a future crypto crash wipes out a billion dollars of retirement savings (on top of other normal stock market declines) who is left holding the bag? Tax payers supporting the social programs that end up being the safety nets for those making poor, ill-informed decisions. If we were still in a pension-driven environment where SS and a DBP could deliver 50-60% or higher replacement ratios, then I'd be all for aggressive DC investing - and where this is actually the case, sure, take the gloves off. However, that is not the majority of our retirement plan participants. Sometimes we need to be protected from ourselves - we have met the enemy and it is us.

Agreed, and I thought I remember this coming up before in this forum and no one thought filing an extension for a non-existent return created an issue.

Yes, they are fairly basic for a plan freeze, but as Jakyasar noted you do need to describe the prior structure as well as the new structure which is the freeze (no future contribution credits). The prior structure description should include the contribution credit formula (either plan-wide or that applicable to the participant receiving the particular notice) and the interest crediting rate methodology.

So they could have not filed and been ok but because they did file but late there's a penalty? I can see the letter of the law and robo-IRS response but agree that it's crazy. I assume filings were made even though not required to start statute of limitations? I would write the letter to request abatement and pursue through further legal channels if not resolved favorably (i.e., no penalty or penalty less than legal fees). Then, to get my revenge, assuming assets continued to remain under $250,000, file an EZ every other year. There's no requirement that once you start filing you must continue, right? I saw that response recently on here where assets went from >$250k to <$250k.

10000000000%

As long as that is applied consistently without discrimination I don't see a problem and agree that 2 1/2 months can be vague and open to interpretation (which then should also be applied consistently without discrimination). It appears then this is what the TPA is essentially suggesting, that the Plan Administrator adopt an interpretation that 2 1/2 months for this purpose is 75 days. I think most view as half month as 15 days, one could argue 14 if February is involved or 16 days for 31 day month, not to mention the number of days in respective full months, so formalizing a plan policy at 75 days and coding the administrative system makes sense.

I don't think so, but I'm more on the CB side of the equation so I don't know that unequivocally. What possible advantage would they get to do this? Just retroactively adopt the PS-only 002 for 2021 with the desired allocation formula, merge it into the existing plan 001 at 12/31/2022 and prior to 12/31/2022 (or earlier if you still send notices) amend the existing plan 001 effective 1/1/2023 for the SHNE and PS allocation formula from 002. And of course, timely adopt your new CBP 003 effective for 2021. Isn't this standard operating procedure? If they're trying to get deferrals out of 001 and into 002 for 4Q2022 to save on the SHM and get cross-testing benefit of SHNE, I don't think that flies. It's a trap!

Maybe, but don't service providers who handle funds (RKs, corporate trustees, custodians) sometimes make mistakes and then directly correct them? Things like errant transfers, mistaken deposits, fee withdrawals from the wrong plan, etc.? Yes, the plan sponsor is ultimately responsible, but wouldn't direct RK corrective action provide a paper trail that mitigates that somewhat? As I said, personal preference and not so much a strong recommendation - the main thing is that the corrections get done timely, completely and accurately and there is sufficient documentation as to precisely how.

If the plan is less than 100 participants and not covered by PBGC, then yes, 15 days. If freezing benefits before the termination date, then 15 days before that amendment. If >100 participants, 45 days, and if PBGC covered then a Notice of Intent to Terminate is due 60-90 days in advance (and PBGC has a model). If you use a pre-approved document that provider should have 204(h) statements, I know FTW does.

Personally, I would want the forfeited accounts restored from the master forfeiture account to the extent sufficient, any additional forfeited accounts made whole by the plan sponsor (if necessary), and the lost earnings directly restored to such accounts by the entity responsible for the error and correction - in this case the RK. But I don't see a huge advantage/disadvantage of one method versus the other, unless someone else (TPA) then has to allocate lost earnings from forfeiture account to move them into accounts.

https://www.asppa.org/news/look-new-long-term-part-time-employees-rules https://www.napa-net.org/secure-act-long-term-part-time-employees-qas Here are a couple of articles that appear to opine, especially the NAPA piece (see Q&A#3), that the 3 years of 500-999 hours is only a 401(k) deferral eligibility service provision and does not change any reasonable eligibility class exclusion that may be in the plan. So a truck driver exclusion could continue to apply to all truck drivers whether full-time or part-time. This is obviously the interpretation that makes sense versus an interpretation that would require including PT truck drivers who would be excluded if working FT. The equally obvious disclaimer - do not assume subsequent regulations and/or guidance will clarify with the most logical interpretation, stranger things have come out of the IRS. But I cannot see this going the other way.

yes, good point

If we were talking recent PYEs then I might be more concerned, but seven years down the road it's a safe bet (but won't say guaranteed) that this issue is dead and buried. Yes, it probably would have been safest to vest that person and pay them out, but to do that now might raise the dead, especially if the plan had been filing as an owner-only arrangement since then.

Even if owners accrue, as 50/50 partners I believe they can elect (with spousal consent if married) to forego the portions of their benefits necessary to fully pay all other participants upon plan termination.

That is how I read it. If I'm allowed to make up missed prior deferrals, what good does that do me if they are subject to current year limits together with my current year deferrals? But if that forces a plan sponsor to go back and amend prior returns, I think that would be very draconian/punitive and not make sense.

just a bit outside...

Great points by all. I have not seem documents with that sort of specificity, do your (BL groupies) preapproved plans have that sort of language? Although document preparers have wised up over the years, I still see adoption agreements out there that list salary deferrals allowable up to 100% of pay even though we all know that is an impossibility. Absent specific document language or an employer's (or payroll company's) governing procedures, how about incorporating the withholding hierarchy or stating where 401(k) sits on the hierarchy (subject to applicable law first and employer desires second) within the friendly confines of the salary reduction agreement?

Also, is it essentially the same entity but with a new name and EIN, hence "meet the new boss, same as the old boss"? That is, the person signing for the new boss is/was also authorized to sign for the old boss? If so, then there are probably no issues following Bird's flight, but if this is a change in ownership, officers, those authorized to sign for employer and plan administrator, etc. then there may not be a choice but to have the new boss sign because he is not the same as the old boss. We run into similar issues - acquire an entity and assume sponsorship of their plan after the PYE but prior to the filing due date. So as of 12/31/YY the plan sponsor is Their Bank but when the filing gets made 7/31/YY+1 or 10/15/YY+1, the sponsor is Our Bank, Their Bank no longer exists and the person who signed for Their Bank is no longer around, or at least no longer authorized in that capacity.

I think you would account for any such contributions in the current year (year made).