Tom

Perfect - that confirms what I was expecting. Thank you

Thank you - makes sense!

This will be a very easy question for this group. Dentist along with 2 eligible employees will receive 3% non-elective safe harbor for 2024. Dentist will also fund 10% PS. One employee terminated in 2024 with <501 hours. Coverage test rules seem to say if term <501 hours they are excluded from the coverage testing. Ok, but I'd bet our admin soft ware will say discrim testing fails since Dentist and 1 employee are getting 13% total and terminated employee with <501 hours is only getting 3%. I'm just doing a fast calculation to advise the client. I'm thinking this would fail 401(a)(4) perhaps? BTW the PS is provided on allocation basis not accrual cross-tested basis so no gateway minimum. Thank you, Tom

Right or wrong in a couple small cases I excluded Sat/Sun in coming up with the 3-day large plan or 7-day small plan deadlines. Right or wrong 🤔?

This is a very rare occurrence for us but I need clarification. Participant terminates employment after attainment of the later of age 62/NRA and has balance say of $3,000. Participant does not respond to distribution communication provided to them. The plan provides for the standard provisions of mandatory IRA rollover <$7,000 but cash-out if <$1,000. The plan also appears to say that a terminated participant who has attained 62/NRA is not to be rolled to an IRA but instead provided a lump sum distribution. That doesn't seem helpful to a person of retirement age. Is my understanding correct. Thank you!

Thank you for your comments. I did a little more research on this since this was new to us - all our plans use plan year 1000 hour for Year of service for vesting. My reading confirmed when using elapsed time, a participant gets a year of vesting service at each anniversary date regardless of hours. This is what the record keeper was doing. Thanks all

The plan requires the following Vesting Years of Service 1-yr 0%; 1 yr - 50% and 2 yrs 100% on PS and Match. Years are based on Anniversary Year and there is no hour requirement for vesting. Plan as immediate eligibility as background. Example: DOH 3/1/2023; DOT 9/30/2024. The plan record keeper has their distribution set at 50% vesting because according to them the participant did not complete the second full 12-month anniversary year. The participant did complete 1000+ hours in the first anniversary year and in the second short year. I realize a Year of Service for vesting cannot require more than 1000 hours but can it require a full 12-month Year of Service? As I write this I'm thinking this person perhaps should have been 100% vested. The record keeper directly mentioned they did not make it to their second anniversary date for full vesting. I realize this plan is much more liberal over vesting than allowable. One alarm in the plan document system (FIS) I cannot get rid of the mention of 1000 hour for a Year of Vesting Service even though that is not checked. As a side note FIS users when I choose elapsed time for vesting, I cannot select Anniversary Year instead of Plan Year for vesting service determination. Comments are greatly appreciated. Tom

We have a client that gives about 100 employees varying gift cards throughout the year. They do not want the gift card included in compensation for employer contribution purposes. Total gift cards provided might be $10,000 on NHCE wages of $15,000,000. This will certainly pass the generally accepted 3% spread for compensation testing. But I see one IRS requirement that says the definition "does not by design favor highly compensated employees." This clearly does because the HCEs do not get gift cards so they have no comp reduction (but which is irrelevant since they earn well over $345,000.) It would probably be ok to exclude but then we'd have to get reduced compensation from the client. My question is- we can reduce plan comp by the gift cards for contribution allocation purposes but can we use the same reduced compensation definition for testing purposes (this is K/DB combination.) I wouldn't want a small inadvertent error to cause a testing problem, minimum gateway or top-heavy minimum violation. Comments? Thank you, Tom

A client provided a census file and we ran the ADP test and processed 3 corrective distributions By March 15. The plan auditor discovered in August, there was incorrect compensation on the census file. The 3 with the refunds ended up with higher wages. Of course then it meant the the issued refunds were too high. Approximate example: correct refund should have been $5500 but $7500issued. Two of the 3 are over 59 1/2 and so their excess can be considered in-service under the terms of the plan. But then there is the younger HCE. Do you believe this must be corrected? We could have the participant return funds and have the record keeper change the 1099-R that will come out in January if that's even possible. I'd rather avoid that. Thoughts - thank you. Tom

I realize record keeping platforms generally indicate 10% will be withheld unless the participant elects something different (implied higher.) But can a participant elect zero withholding on an RMD? Example below. Thank you.

We have 2 clients in this situation both changed payroll companies in 2024. With the small client 10 participants, I can probably get actual earnings for the multi-month period and reduce by 50% (since funds would have been deposited evenly pro-rata over the period. Then there is the large client 150 to 200. Getting actual earnings for the late period is not possible. I know some will say you cannot use the DOL calculator unless you file with the IRS. I see no other practical option. I don't why this has to fall on the TPA to fix when it is the payroll company responsibility and plan sponsor to monitor. I told the small plan sponsor - what do your corporate accounting records who - there should be a 401(k) liability - withholding less payments to the plan. Accounting probably not kept current. (I know whining doesn't help.) Thank you, Tom

We have a client ABC with a SH 401(k) plan. I just received word they are acquiring company XYZ that sponsors a SIMPLE IRA. It's an assets purchase which will take place 9/30/2024. I don't know if ABC wants to recognize service worked with XYZ in meeting eligibility. I think that is likely. So, the 402(g) deferral limit would apply as combined for any SIMPLE deferrals and deferrals under the 401(k) plan for 2024. ABC only funds a 3% non-elective SH. I'm guessing XYZ funds the SIMPLE match. If we sweep into the ABC plan XYZ employees who meet ABC eligibility, would the 401(k) funding be as simple as providing the 3% SH for ABC 12-months and former XYZ employees for 3-months? I believe there is some flexibility in testing in the case of acquisitions. Thank you!!

A plan was required to be audited in the past but no audit required now since the # of account holders dropped just below 100 as of 1/1/2023 and 1/1/2024. Looking ahead to 2025 - what if the account holders go to 105 as of 1/1/2025? I'm reading that the plan can file as per the prior year if between 80 and 120 account holders. So in this case the plan could file 5500-SF for and no audit for the 2025 plan year? Filing the 5500 wrong certainly has bad consequence which is why I'm asking. Thank you.

Participant has passed and spouse passed some years ago. We believe 3 adult children are beneficiaries. Question - I imagine the beneficiaries will need to waive the annuity as the default distribution option just as the participant would if he had lived and elected to roll to an IRA? Thank you

We file one 5500 for a 403(b) plan. It is long frozen. I asked for their IRS Opinion letter. They provided me one with an approval date of 8/7/2017. This does not seem current. Does anyone know? I requested this from the plan sponsor. But I believe I need to tell them to contact TIAA to make sure this is the most recent. Thank you, Tom

We file one 403(b) 5500. It is a TIAA 403(b) plan document. I assume the plan sponsor should have a copy of the Opinion Letter for 5500 purposes? Thanks

We have a situation whereby the client is attempting to get information to us about a potential first time 5500 filing. We could file an extension to be on the safe side. Is there a problem with then not filing the 5500 if it ends up there is no filing requirement? I know we could file one anyway but this could go on for years when it wouldn't have to. Thanks

Great question ESOP guy! When you get close to retirement (a year or two) I don't want anything to blow up.

In the past we mailed our forms in several batches of say 50 each, with "return receipt requested" whereby the IRS signs a card and returns. We've never had a problem but I'm rethinking this for the 2023 forms. Do you recommend sending them overnight delivery for example? I'm tempted to send the forms in twice - the old way and also overnight delivery to make sure they are received. Getting them twice should not be an issue I wouldn't think. We have fewer this year - maybe 75 total but I want zero risk that 75 plans would be considered filed late because of no Form 5558. Would be a nightmare! Thank you for any ideas. Heck I'd hand delivery them to the IRS at the federal building if I thought I could. Tom

We unfortunately file 2 WB 5500s for large clients - out of necessity from years ago. They have pretax cafeteria insurances covered under the 5500. We file the 5500 as one filing covering all the benefits. We provided a cafeteria plan document listing the insurance benefits. Their new benefits broker is taking this over (thankfully) and are asking for a wrap document. One does not exist that we can see. There is an Summary that looks like a SPD that someone produced some years ago but they tell me that is not an SPD. It has a summary of each benefit structure, eligibility, benefits, etc. That led us to believe they had a wrap document. The issue now is for them to draft the wrap document now and move on, or amend past 5500s and file for each benefit structure since there was no wrap document. Problem there of course is - filing 5500s as "new" for 3 years ago will be late and DFVC will apply. Going forward without amendment/filing separate they say carries risk of not being in compliance by not having a wrap document. Comments? Thank you.

Sometimes we don't know if there is anyone to report on Form 8955 by July 31 and so we file for extension of 5500 and 8955. Is there a problem if we file for extension and then the IRS does not receive an 8955 filing? I'm wondering if we can file 8955 with no participants listed, but I'm guessing the software might block the filing. Thank you.

Correction to my math. LLC(3) has 6 eligible so 22/28 78%+ coverage assuming LLC(3) does not participate in the plan. Fairly safe coverage ratio.

Dentist Sue owns 100% of LLC(1) and dentist Bill works PT for this LLC. 14 eligible covered employees in Sue's LLC(1) plan. Dentist Sue and Bill purchase a practice about 10 miles away, they form LLC(2) with Sue owning 80% and Bill 19%. I assume they will both see patients at both locations. LLC(2) will co-sponsor Sue's LLC(1) existing 401(k) plan. This will add 8 covered employees for then a total of 22. Dentist Bill also owns 100% of dental practice LLC(3) 15-20 miles away. Sue has no ownership, nor does she work there. LLC(3) has no 401(k) plan. They are asking if they must cover these employees in the plan shared by LLC(1) and (2). The easy answer is 22/30 covered = 73%. Assuming my estimated coverage is correct, LLC(3) need not be covered. I realiz this will have to be carefully reviewed every year. But, does anyone see an ASG here? I don't believe there will be any association of patients between LLC(2) and (3) for dentist Bill. The practices are distant enough, patients won't associate one with the other. Does that seem reasonable? Thank you!

I had actually l read that article the other day which prompted my question. The last sentence of the paragraph below applies to the type of plans in the bolded paragraph heading, not to all plans. That's always been my understanding. But when I read this, I misunderstood the contest of that sentence and made it too broad. Thanks for the clarification. It just seems counterintuitive that a spouse must be the beneficiary (if not waived) but the participant can take distributions without spousal consent for plans without the QJSA/QPSA requirement.

Assume there is a 401(k) that does not provide for QJSA/QPSA as the plan contains no contribution sources requiring such nor does the plan include the annuity options electively. A 401(k) plan primary beneficiary must be the spouse unless the spouse consents to an alternative. Assume the participant wishes to take in in-service distribution. Do TPAs typically look up the beneficiary before approving a distribution to confirm the spouse is the primary beneficiary or that the spouse consented to an alternative? If a non-spouse was named without spousal consent, then that would be in invalid designation and the spouse would remain primary beneficiary. So it would seem distributions can be approved without reviewing beneficiary designations?