CuseFan

Correct - only works in HCE-only plans or very large plans that can also pass ACP testing because of generous match and excellent NHCE participation. Need to make sure that VAT contributions are tracked separately and get converted before any investment earnings accrue or pick up any such earnings as taxable upon conversion. This can be done via in-plan conversation or withdrawal of the VAT account, just make sure you have provider that can accommodate and all is properly tracked and reported.

The existing trust agreement should specifically state the procedures for replacing a trustee and appointing a new one. The new trustee could be seen as an additional trustee, not a replacement, so that distinction should be clear in some documentation, be it a resolution or amendment. There is usually a notice requirement for the exiting trustee, but since that is not possible given your circumstances then I think additional documentation is warranted. A clearly written resolution together with an amended trust agreement with the successor trustee should be sufficient documentation.

Agree, just be sure the basic document provides for eligibility failsafe at 1000 hours in 12-month computation period.

Interesting question. Similarly, what if one spouse worked elsewhere and there was a separate QDRO set up for the non-employee spouse within the plan, would you count that? I do not have a definitive answer but my inclination is that in either case you continue to count, and if distributed then count for 5 years. When a key or HC employee's account or benefit is partitioned or otherwise attributed to a spouse, beneficiary or ex-spouse, some restrictions/requirements remain attached. For example, in the DB world, if an HCE is restricted then his spouse/beneficiary/alternate payee is also restricted. In your case, I think it counts toward top-heavy determination, whether key or non-key, and the QDRO doesn't change that. IMHO.

Exactly, so w/o interest 1/7 of $105k is $15k in year one, 1/6 of $90k is again $15k in year two, so w/o any interest all years are $15k. With gain/loss, year two is 1/6 of whatever that balance is. If 10% gain, then 1/6 of $99k is $16,500 for year two. And so on.

Terminating the MP is probably the best option regardless, otherwise, a transfer of those accounts (versus an elected rollover) would require continued separate tracking and future annuity normal form requirement.

The SMM timing (legal requirement) severely lags the effective date of implementation, I suggest a best practice would be some sort of consolidated communication disclosing that and whatever else the employer is implementing/enhancing under SECURE 2.0. That is, take the current opportunity to "blow the trumpet" and get some positive PR - "as allowed by recent law changes we're making our plan better for you by ..."

HCE, you are correct. You may want to explore, with legal counsel and accounting input, the possibility of correcting now by applying FICA and Medicare taxes to the existing employer-attributed account (contributions and earnings) as if it just became vested, and then do properly going forward. Another potential fix is applying retroactively and paying the interest and late payment penalties, if these don't go back ages. Hope that is not your case as you don't mention related issues for any current or prior distributions. Again, consult legal and accounting counsel. The "penalty" for missing this, as you note, is that all payouts are then fully subject to FICA and Medicare, accumulated contributions and all investment earnings. Any investment earnings on contributions (and prior earnings, if applicable) already subjected to FICA and Medicare are not subjected thereto, which is why I would explore the prior years' fix and do properly going forward. At worst, you could probably split employer-based accounts into wrong portion (subject to F&M on payout) and right portion (apply F&M as contributed/credited). If your payroll is external, I'd review that contract/service agreement and look to seek some compensation or other recourse for the error. Good luck

Yes, if value of benefit exceeds $7,000 you cannot force out or force a lump sum. Some plans mandate commencement at normal retirement date, but most do not, so as stated above the person could defer benefits until RBD. Then, if still unresponsive, you can commence the benefit in the normal form - J&S if married, life annuity if not. You could try to purchase a deferred annuity that provides all the plan's options (including lump sum) but it would be very expensive if you could even find an insurer, as these are full of too many uncertainties that insurance companies dislike. It would be easier (but not necessarily easy and still expensive) to buy an immediate annuity for the specific option elected by the participant, but having an unresponsive participant does not facilitate that. Unless you're in the situation where this benefit must commence (upcoming RBD), I would just sit tight until you had to do something with this participant. You're not paying PBGC premiums, thankfully.

Return and re-issue proper checks is probably the best way to fix.

Peter, w/o knowing the exact facts, I do not see the time lag as problematic. My thought being, if done properly, the Plan Administrator (also likely Company X) instructs RK or TPA to initiate the involuntary cash out process which entails providing a 402(f) notice and at least 30 days in the election period. Adding administrative time on the front end and back end, a couple of months from start to finish is not unreasonable (if this is indeed how the situation unfolded). That begs the question and the initial ask from rocknroll2, if the cash out process begins when the account is under the threshold but exceeds such at the time of distribution, may it still be paid without consent?

Was it a default RO check? Otherwise, it would have to had been elected by A (so no problem), and if a direct payment be net of 20% tax w/h (again, no problem if taxes w/h).

Asset sale - practice B buys assets of practice A, owner A now becomes employee of practice B, plan A stays behind - no ownership overlap so no ASG. But on what basis/income does owner A make contribution to plan A?

Yes, after the sale I would say there is an ASG. I suggest unfreezing the DBP before the transaction (a MUST) and using the transition rule under 410(b)(6)(C), which applies to ASGs and also gives 401(a)(26) relief for the same period. 410(b)(6)(C) (C)Special rules for certain dispositions or acquisitions (i)In generalIf a person becomes, or ceases to be, a member of a group described in subsection (b), (c), (m), or (o) of section 414, then the requirements of this subsection shall be treated as having been met during the transition period with respect to any plan covering employees of such person or any other member of such group if— (I) such requirements were met immediately before each such change, and (II) the coverage under such plan is not significantly changed during the transition period (other than by reason of the change in members of a group) or such plan meets such other requirements as the Secretary may prescribe by regulation. 1.401(a)(26)-5 (5) Certain acquisitions or dispositions — (i) General rule. Rules similar to the rules prescribed under section 410(b)(6)(C) apply under section 401(a)(26). Pursuant to these rules, the requirements of section 401(a)(26) are treated as satisfied for certain plans of an employer involved in an acquisition or disposition (transaction) for the transition period. The transition period begins on the date of the transaction and ends on the last day of the first plan year beginning after the date of the transaction. (ii) Special rule for transactions that occur in the plan year prior to the first plan year to which section 401(a)(26) applies. Where there has been a transaction described in section 410(b)(6)(C) in the plan year prior to the first plan year in which section 401(a)(26) applies to a plan, the plan satisfies section 401(a)(26) for the transition period if the plan benefited 50 employees or 40 percent of the employees of the employer immediately prior to the transaction. (iii) Definition of “acquisition” and “disposition.” For purposes of this paragraph (b)(5), the terms “acquisition” and “disposition” refer to an asset or stock acquisition, merger, or other similar transaction involving a change in employer of the employees of a trade or business.

Also agree with all of the above if properly and sufficiently documented. As part of that - resolutions/amendments et al - I would also suggest that those should have been timely submitted to B's trustee/custodian and the titling on the account should have been changed on or about 12/1 as well.

Got it, thanks.

What is the reasoning for a separate plan?

You say overfunded DB plan and then this? I'm confused. If indeed an overfunded DBP, I don't see an issue with paying eligible expenses from the plan in the year incurred (current) regardless of the audited year and HCE/NHCE numbers for those years. If a DC plan where you were charging NHCE accounts currently to pay for an audit of a prior HCE-only plan year, that could be a concern, but not convinced that would be prohibited. With a DBP, employer funding is ultimately responsible for promised benefit either way.

Agree you cannot retroactively amend PS formula for 2024. Also, depending on the terms, it might be too late to amend 2025 as well, if anyone has already become entitled to a PS allocation. You could back into the total PS contribution that would get HCEs where you want them and which would provide a lower NHCE PS than is needed to pass testing. Then you can amend the PS under 11(g) to provide the added NHCE PS needed to pass, or under SECURE 2.0 any retroactive amendment to increase benefits is Ok now. Doing zero PS in existing plan and adopting new PSP retro with formula as you need/want is a good way to go if they don't mind the expense of the second extra plan for a couple of years. As John noted, if the CBP is PBGC-exempt be wary of the combined plan deduction limit and having to limit DC ER to 6% total, which will be very challenging with a SHM.

Agreed - PW compensation is compensation under any safe harbor definition, and although it could be excluded by specific provision I think it would be a rare instance that such would satisfy nondiscrimination testing. PW fringe benefit dollars may be "paid" in a variety of ways - as retirement, as a health and/or welfare benefit, or as direct compensation, in which case it is treated as such. As noted, if retirement contributions, they can be used to offset other required employer contributions but the plan document should specify. These are 401(a)contributions subject to all those rules for coverage and nondiscrimination and, as Lou noted, HCEs and NHCEs are determined by definition and lookback year gross compensation.

Correct - he only is required to get gateway if he benefits under 401(a) portion(s) of the plan(s) (non-elective - CB & PS). Since he gets no CB or PS under the terms of those plans then he does not benefit, so no gateway.

Yes, provided the discretionary matching contribution provisions in the plan document support doing that.

Ditto! Coincidently, 41 years ago today I started. DB pensions were prevalent, ERISA still fresh, TEFRA/DEFRA/REA started a new flurry of legislation, 401(k)'s were new, cash balance plans were on the verge of being invented (by Kwasha Lipton in 1985), participant investment direction and daily valuations were science fiction, no load/low fee investments were a wish, profit sharing allocations were done on "personal" computers with 8 or 9 inch floppy disks that took ages to boot up sounding louder than my car starting, and reports typed by a secretary on an IBM Selectric (oh, and the dirty looks you got if you found a mistake that had to be retyped/corrected). Like every other aspect of life, technology has transformed the retirement industry and it has been a wild ride. It will be interesting to see what the next 40+ years bring, watching most from the sidelines of course, for how many ever years I'm granted. And belated Happy Barry Bonilla Day and an early Happy Independence Day to everyone!

I don't know, I would expect not in any participant directed 401(k). Maybe still in the 403(b) insurance company and TIA-CREF world. I'm not involved enough in either to offer any hard evidence. I would think, if still prevalent to any significant degree, that the occurrence would be in DB plans, where assets can be placed in certain investments without the need or expectation that they will be liquidated for many years so that redemption fees/deferred sales charges et al either go away or are dwarfed by the extra return (I assume) that such long term investments generate. I remember seeing these investments in many a pension plan termination in the mid/late 80's when corporate raider plan terminations were the rage before excise taxes were implemented (yes, I'm old!).

Agree, but would hope in the modern world that those are non-existent or few and far between.