C. B. Zeller

Yes. See the IRS rollover chart for reference: https://www.irs.gov/pub/irs-tege/rollover_chart.pdf They could also potentially do an in-plan Roth conversion instead, which would avoid the need to actually distribute any money from the plan.

For the first plan year only, the audit requirement is based on the number of participants with a balance at the end of the year.

Strictly speaking, you only get a free pass on general testing if the plan is a design-based safe harbor, meaning that the safe harbor allocation formula is required in the plan document. If the plan document says each participant is in their own group, then you do not have a safe harbor allocation formula and you need to run the general test. However, if every participant who benefits is getting the same allocation rate, then the test should pass easily on allocation rates, no cross-testing required.

There is not enough common ownership to create a controlled group. So, the question is, does there exist an affiliated service group? A, B, and C are all automatically service organizations because they are in the field of health. There is common ownership between A and C and between B and C. The questions you need to ask are: Does A regularly perform services for C (or does C regularly perform services for A)? Are A and C regularly associated in providing services to third parties? If the answer to either question is yes, then you have an affiliated service group. There are no quantitative tests to answer these, they are facts-and-circumstances determinations. If your client is unsure, they should hire a qualified ERISA attorney to provide an opinion. Even if an affiliated service group does exist, that does not necessarily mean that A's plan needs to cover the employees of C (or B), it just means that those employees need to be included in testing. If A's plan could pass testing without benefiting those employees then they do not need to be covered.

Schedule SB is used to designate a contribution for a particular year for 430 (minimum funding) purposes. There is no indication on the SB for which year a contribution is designated for 404 (deduction) purposes. There is no requirement that the 430 and 404 years be the same for any given contribution; if the timing permits, you could count a contribution towards 2023 for minimum funding but 2024 for the deduction. If the timing of the contributions was such that they couldn't be counted as a 2024 deduction (for example, if they were made before the end of the 2023 tax year), and the amount of the contributions exceeds the 404(o) deductible limit, the sponsor may want to consider making a IRC 4972(c)(7) election to avoid the excise tax. The non-deductible amount would have to be carried forward and deducted in the next tax year.

It's unlikely that any portion of the contribution could be returned to the sponsor. If the plan document says that employer contributions will be allocated pro rata, then that's what should happen. If the contribution couldn't be allocated (maybe everyone was already at their 415 limit, for example) then EPCRS says to keep the contribution in an unallocated account and use it for future employer contributions before any additional employer money may be actually paid into the plan.

Yes, it is too late to make a deferral election (including a Roth deferral election) for 2023. A deferral election has to be in place before the compensation is paid to the participant. The contribution that was made to the plan needs to be allocated according to the plan's allocation formula for employer contributions.

I agree that a plan could restrict the availability of distributions beyond the termination of employment to the later of either normal retirement age (or age 65, if earlier), or the 10th anniversary of participation. I find it unlikely that a plan restricting distributions in such a manner would allow former employees to take a hardship distribution. But I suppose it could happen.

If the employee is terminated, then they would have a currently available distribution from the plan by reason of termination of employment. Thus the hardship request would fail to satisfy the requirements of this section.

Union employees* are a mandatory disaggregation population. They must be treated as a separate plan for coverage and nondiscrimination testing, and may not be aggregated with the portion of the plan covering non-union employees. Of course, I am using the term "union employee" as shorthand for "an employee who is included in a unit of employees covered by an agreement that the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, provided that there is evidence that retirement benefits were the subject of good faith bargaining between employee representatives and the employer or employers" (from 1.410(b)-6(d)(2)). If this definition applies in your friend's case, then there would be no aggregation for testing, and no gateway needed for these people.

The 404(a)(3) limit is 25% of compensation. The top heavy minimum contribution in a DC plan is 3% of compensation. Since 3 is less than 25, I am not sure why the deduction limit would be an issue here. Can you be more clear about your question?

In general, no notice is required for a 401(k) plan termination. The notice you are asking about only applies because you are seeking a determination on the termination. The instructions for Form 5310, line 19 states Following the reference to 1.7476-1(a)(i) And on to 1.7476-2(b) 601.201(o)(3) is a very long section, but the timing rule you are looking for is in subsection (xv) Presumably, the notice has to be given to interested parties before the application is filed, so that an interested party has the opportunity to raise a complaint with IRS during the determination process if they feel that IRS ought to find against the plan.

What I am wondering is, if you look at the K-1 for "Other, LLC," who does it list as the member? Is it Joe, or is it XXXX? It's certainly possible for one LLC to be a member in another LLC. That would also explain why the income from one would affect the other. Ultimately it's all going to flow through to Joe's 1040.

This sounds like it would fall under the definition of an "overpayment" under both EPCRS and SECURE 2.0 sec. 301, so you do have some correction options. I think the easiest thing to do might be to reduce the future payments. You could also amend the plan to increase the benefit so that the actual payment becomes the correct payment. The plan could ask the participant to repay the excess. What I would probably not do, is decide not to seek recoupment of the overpayment and just let the participant keep it. While this could be an acceptable option under SECURE 2.0 sec. 301 in certain cases, there is an exception for when the participant is culpable. In your case since the participant is also the sponsor, I think there is too much risk that they could be considered culpable, even if it was just an honest mistake. There is also an exception that this is not allowed if it would cause the plan to violate 415 or 401(a)(17) - I don't know if that applies in this case. Regarding spousal consent, is the benefit being paid in a form that requires spousal consent? If it's a QJSA or QOSA then the spousal consent wouldn't be needed. If it's some other form of annuity benefit, then the correction under EPCRS is to get the spousal consent now. Withholding isn't mandatory on periodic distributions. Ideally the participant would have completed a W-4P for 0% and given it to himself (as the plan administrator). If that wasn't done before, do it now.

Is XXXX the member of Other LLC - as opposed to the individual himself? If so then it might make sense as the income from Other LLC would flow through to XXXX (and affect the K-1) but would not be earned income with regard to XXXX.

What? Are you saying that the pay credit for any given year only gets 11/12ths of the following year's interest credit, while the rest of the hypothetical account balance gets the full interest credit? I have never heard of something like this. Is this a preapproved document? If I'm understanding this correctly, I don't see any problem with your proposed amendment, just be aware since the amendment will increase the funding target, it would be restricted if the AFTAP is less than 80% or if it would cause the AFTAP to fall below 80%. I can't imagine the AFTAP would be impacted much by adding 1 month of interest credit to the funding target, but just in case.

I hesitate to disagree with Paul since you're usually right, but in this case I think I do. The instructions for the 5500 say this: The 5500 due date (and corresponding last date to file a request for extension on Form 5558) is always the last day of the month.

It is actually 4/1/2026. 2025 is the first distribution calendar year, but the required beginning date is April 1 of the following calendar year. The definition of "required beginning date" is found in 1.401(a)(9)-2 Q&A-2 (which has not yet been updated for SECURE, let alone SECURE 2, so mentally substitute age 73 below)

I'm going to have to disagree. 1.414(v)-1(e)(1)(i) says (emphasis added): This doesn't require that everyone be allowed make the maximum amount of catch-up permitted under the law, it only requires that the same limit be available to everyone. So, I think you could ignore the 60-63 catch-ups and limit everyone to the regular catch-up limit.

I think the counter-argument would be Notice 2016-16, which prohibits a mid-year change to reduce the number or otherwise narrow the group of employees eligible to receive safe harbor contributions. Does revoking the participation of a participating employer violate that prohibition?

A plan can allow distributions of deferrals and safe harbor match upon reaching age 59-1/2 without violating any IRS rules. As to whether this particular participant can withdraw her account... ☝️

Mods, can you move this post into the 401(k) forum? This is not a multiemployer plan question. To the actual question, in a controlled group situation the employers are considered a single employer for most purposes. You would have to read your document to see what it says, but if the contribution is discretionary then there shouldn't be an issue with differing amounts coming from different companies.

To be a safe harbor 401(k) plan, you only have to make safe harbor contributions to NHCEs. However you have to follow the document. If the document says that HCEs will get the safe harbor contribution, then they have to get it. They can't retroactively eliminate it even for HCEs since that would be a prohibited cutback.

The defaults from your preapproved document provide might only increase the limit to $7,000 if the limit was previously $5,000. You could still go straight from $1,000 to $7,000 but the amendment might need the sponsor's signature. Distributions less than the force out limit are not 411(d)(6)-protected, so there is no anti-cutback issue. It does to me too - but it is actually straight out of the preamble to the proposed LTPT regulations. Here is what the IRS said: https://www.federalregister.gov/d/2023-25987/p-37

It's the same as any other employee who is eligible and elects not to defer. They still have to receive all of the various notices going forward, and have the right to change their deferral election according to plan procedures. They still count as an active participant on the 5500. They don't have to receive any safe harbor contributions (if the plan is safe harbor) or a top heavy minimum (if the plan is top heavy). To JRN's point, SECURE 2 changed the top heavy rules such that otherwise excludable employees no longer have to receive the DC top heavy minimum at all, regardless if they are eligible solely because of the LTPT rules or because the plan has more lenient age/service criteria than the maximum. And you can always disaggregate the otherwise excludable employees for coverage and nondiscrimination testing purposes; typically that group would contain no HCEs (since anyone with less than a year of service is unlikely to have prior year compensation above the limit) so it would satisfy testing automatically.