casey72

But generally, yes, you will be able to cash out your account. Your current balance will be used to offset your loan amount, and that outstanding loan amount will be reported as a taxable distribution to you. (If you take cash, the whole thing will be taxable; if you roll it over, the remaining amount would not be taxable.) It is *possible* that the plan might make you wait longer to take a distribution, but very unlikely.

I agree with traveler. That EOB excerpt above is not relevant to the service crediting issue. (1) Service with the foreign parent must be counted. As has been stated on other posts, service with all controlled group members, regardless of whether they are participating in the plan and regardless of whether they are foreign entities, must be counted for qualified plan purposes. See 1.414(b)-1(a) (which ties in 1563(a) rules for qualified plan purposes, but disregards 1563(b) rules). (2) Unlikely an amendment is required since this rule comes from the Code - the rule is probably already in the plan, but this point should be confirmed (particularly if it's not a pre-approved document)

I agree with Paul. 50% would be the safe option here. I don't believe SECURE 2.0 changes this since it expands the types of errors that can be corrected but doesn't reduce the size of corrective contributions.

executive exceeded 415(c) and company refunded the $10,000 of excess after-tax contributions through payroll rather than through the plan. months later, company convinced plan recordkeeper to remove $10,000 from participant's account and send it to the company. issues abound! there's still a 415(c) issue because the earnings were never distributed from teh participant's account. A 1099-R was never issued (since the amount distributed out of participant's account went to company). Moreover, there's a prohibited transaction here given the transfer of assets from the plan to the company. Welcome other thoughts, but I think the company should unwind as best as possible by returning funds to the plan (with earnings/interest), moving it to the participant's account, distributing it to the participant as a 415(c) excess, reporting it on 1099-R for current year, and then recouping that amount from the participant outside of the plan (since participant would otherwise have a windfall). My main concern is with the fiduciary violation. Would this qualify as a below-market interest loan from the plan to the company, such that it could be corrected via VFCP?

I am not sure it's that simple. Although that may work under 411(d)(6), the IRS interpretation of 411(a)(10)(A) is that you can't decrease a participant's nonforfeitable percentage in future accruals either. This would mean that anyone who has already hit the current (lower) NRA would need to remain fully vested, even in future accruals.

Agree with Brian. And such a good point about FICA savings!

I imagine the conflict between the ERISA SPD and the 125 SPD arose because the ERISA SPD is addressing when benefits are effective whereas the 125 SPD is addressing when elected benefits can be paid on a pre-tax basis. I think many employers go back to the date of the event when choosing an effective date of coverage, but technically any retroactive coverage should be paid on an after-tax basis (other than in the cases Brian described; birth/adoption). It sounds like this person would have a claim to coverage as of the date of the event, just not a claim that such benefits could be paid on a pre-tax basis. Agree with Jack that it should be confirmed with insurer/stop loss insurer!

I agree with MWeddell. I tend to treat disability definition as protected if it impacts vesting, withdrawal rights, distribution rights, etc. If the "new" definition is clearly and unambiguously easier for a participant to meet then there's no issue.

The proper citation is 1.413-2(d), which says that all employers are viewed as a single employer for purposes of 411. That means you have to look at the plan as a whole in determining whether there has been a partial termination of MEP. It's not done on an employer-by-employer basis. ERISA Outline Book confirms.

i would not withhold from a future check for 401k. Have the company/administrator adopt a written policy that states the payroll hierarchy (e.g., does medical come before 401k?), and address whether a partial deduction will be taken if that's all that is available in the paycheck. Agree that it also should be communicated to participants in SPD/SMM.

Assuming there was a distributable event for the participant, wouldn't they want a QDRO to avoid double taxation? Otherwise, distribution comes to participant and they are taxed; then when they transfer/pay funds to former spouse, the former spouse would also be taxed (unless under gift limit). The QDRO avoids that by letting the amount be paid directly to the former spouse.

ASPPA apparently takes the view that 2021-30 does not clearly permit a retroactive amendment to add a related participating employer to the plan. See this October 2021 comment letter, which requested that EPCRS be revised to explicitly permit such retroactive amendments to be adopted: https://www.asppa-net.org/sites/asppa.org/files/COR ARA Comment Letter to IRS EPCRS 2021-30.pdf From the letter: "Failure of a related participating employer to adopt the plan Section 4.05(a)(i) of Rev. Proc. 2021-30 permits a plan to correct an operational failure by plan amendment in order to conform the terms of the plan to the plan’s prior operations if the plan amendment would result in an increase of a benefit, right, or feature. A frequent error that our members see is participation by employees of a company related to a plan sponsor (i.e., a member of a controlled group or an affiliated service group) but the failure of the related business to sign a participating employer agreement. This error commonly occurs when a business reorganizes its structure, transfers employees among related companies, or acquires another entity. In this instance, the related entity's employees are permitted to participate in the plan despite the fact the entity is not a participating employer under the terms of the plan. It is not clear whether the addition of a participating employer’s employees is a "benefit, right, or feature" that may be corrected under SCP by retroactive amendment. ARA recommends that the Service revise Section 4.05 to specifically permit plan sponsors to adopt a retroactive amendment to correct an error involving the participation of a related employer's employees (who otherwise meet the plan’s eligibility conditions) when that employer did not take the necessary steps to adopt the plan."

Is there a specific deadline for requesting a determination letter for the initial qualification of a new individually designed plan? The instructions to Form 5300 do not appear to contain a deadline, nor does Rev. Proc. 2022-4. By contrast, there are specific deadlines for determination applications for merged plans.

Thank you!

Individually designed plan failed to adopt the required hardship withdrawal amendment by 12/31/21. Assuming it has a favorable letter, this error seems to be available for self-correction under EPCRS. Anything I am missing? It seems too easy.

Company A acquired Company B in stock acquisition in 2021. Each entity sponsors its own 401(k) plan with calendar year plan year. Company A's plan is a QACA safe harbor with a 3% non-elective contribution. Company B is not safe harbor. Company A wants to freeze Company B's plan as of 12/31/22 (end of 410(b)(6)(C) transition period), add Company B as participating employer under Company A plan as of 1/1/23, and merge Company B's plan into Company A's plan sometime in 2023. (No bandwidth to do a year-end plan merger.) Company A wishes to carryover the deferral elections under Company B's plan to Company A plan as of 1/1/2023. I am concerned that this doesn't satisfy the uniformity requirement under QACAs/EACAs (that eligible employees be automatically enrolled at a uniform percentage of compensation). 1. Am I being too conservative? Would such carryover be okay for a QACA? 2. Would your opinion differ if the plans were merging as of 1/1/2023, given that the merged plan would be a continuation of both Company A and Company B plans?

If there are two plans with the same safe harbor match formula in a controlled group, would they satisfy nondiscrimination testing (regardless of whether they have to be aggregated for 410b testing)?

I agree that this is an issue without guidance. I also agree that if you're making the correction within the same plan year, consistency would seem to require you to limit the participant to the 402(g) limit reduced by $8,000. In some ways, then, it seems better to wait until the plan year ends to correct these errors. IRS guidance on this point is needed.

I am very new to VEBAs. VEBA holds surplus assets, and accountant determined that it owes a large UBIT. Can this be paid out of VEBA assets (as opposed to being paid by the company)? VEBA trust document is silent.

Thanks, but Heimeshoff was about bringing suit in court, not filing an initial claim with the plan fiduciary. I'm asking about limiting the timeframe in which the participant can even bring a claim.

Thanks, jpod and JamesK. The bonus would have been calculated based on how much $ was returned to the HCE. I think it technically fits into the scope of the contingent benefit rule and in the end why risk it. And if you're going to do it anyway, don't document it!

Company sponsors an unfunded severance plan subject to ERISA. They impose a 120-day limit on filing claims. (120 days is calculated from date employee receives notice that he/she won't receive benefit or notice of the amt of his/her benefits.) DOL regulations don't specifically address this, but they do say that the claims procedures can't inhibit or hamper the filing of claims. (The example they give for this is that you can't charge a fee for processing claims.) Has anyone thought about whether imposing a time limit on filing claims is reasonable? Thanks!

Thanks, jpod, that's what I was thinking too -- this might be an issue under the contingent benefit rule. (1.401(k)-1(e)(6).) Agree that it's a conservative answer.

I think anytime the plan administrator is making a determination as to disability, and that determination impacts the rights or benefits the person will receive under the plan, it should be subject to the special rules governing disability claims. So, yes, I think even if it's just about cancelling a deferral election the enhanced disability rules will apply if and when they are adopted (and the special timing rules for disability claims already apply).

Plan fails ADP testing for 2016 plan year. Company distributes HCEs' excess contributions in February 2017. Excess contributions are subject to tax in year of distribution (2017). Company provides a make whole payment to HCEs to account for the tax owed on the distributed excess contribution. (Idea being that if the plan had passed ADP testing, the excess contributions would have stayed in the plan and would not have been subject to tax.) Payment to the HCEs is made outside of the plan -- structured as a bonus essentially. Anyone see a problem with this? I tend to think this is okay...