CuseFan

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.

As with many answers in this forum, even if you CAN do something doesn't mean you SHOULD do it. Can they do this? Yes. Whether or not they should is an overall HR/employee relations issue that should be considered.

If you are passing ADP & ACP with a 415 comp (a safe harbor) as your denominator then I don't think you need to do the 414(s) test or take any remedial action. Same is you were general testing a profit sharing and used a safe harbor comp as your denominator instead of plan comp. I assume comp less bonuses was the plan definition. Passing using that as your denominator only works if you satisfy 414(s), which you don't.

Agreed - discretionary doesn't mean do as they want carte blanche, must follow the plan document.

You are correct.

Can be paid out concurrently but in two portions - RMD not RO-eligible and not subject to 20% w/h, and then a RO-eligible LS which is subject to 20% w/h to the extent not rolled over, either to another plan (401k as you mention) or IRA.

I don't know all the particulars but do know that participation of Canadian resident citizens in US retirement plans have a lot of complexities that can create both tax issues and Canadian retirement plan issues, including their version of social security, for those individuals. We had to grapple with that on pension plans. It is much easier not to include them.

Agree with Effen and truphao. I think says more that participants don't have to get excess unless plan says so, or its reversion provision wasn't old enough. 7.12.1.17.1(2)c says: "Establish a qualified replacement plan per IRC 4980(d). Follow the processing procedures in IRM 7.12.1.17.1.2 (5), Reversion of Excess Assets." I think that also seems to indicate that IRS views transfer to a QRP like a reversion from the perspective of plan provisions. If you look at pre-approved plan language, the options are allocate to participants or revert to employer, so transfer to a QRP needs to fit under one or the other, and it has to be reversion.

A Qualified Replacement Plan (QRP) need not be a new plan, it can be an existing plan.

I agree. If you Google "is a person on leave considered employed" you'll get their AI Overview and a lot of snippets, all of the opinion that such a person is still considered employed. If the only choices are employed or terminated, then clearly the answer is employed. However, be sure that the plan document does not otherwise address this in some other fashion.