C. B. Zeller

You mentioned the employee is only a participant due to a special eligibility window. If they never worked 1000 hours in any plan year, are they otherwise excludable for testing purposes? If the group of otherwise excludable employees passes without needing to cross-test (perhaps, because there are no HCEs) then the gateway does not apply to that group.

That thread cites the EOB as authority for allowing an EACA to be effective mid-year. If you have access to the current edition of the EOB, try looking up that section and see if it's been updated to address this question.

Do you have a source on this? EACA requires a notice to participants before the beginning of the year, therefore it can't be adopted mid-year. The earliest you could make it effective at this point would be 1/1/2022 (assuming calendar year). Not eligible for the tax credit in that case. The EACA has to apply uniformly to all employees unless they have an affirmative election.

Nope. A one-time irrevocable election is NOT treated as a 401(k) election. 1.401(k)-1(a)(3)(v)

If Company A and Company B are not part of a controlled group or affiliated service group, then an individual who is a participant in both company's plans has a separate 415 limit in each plan and can receive his full annual additions limit in each plan. As you pointed out, he still has only a single 402(g) limit.

I almost mentioned this in my earlier reply. I'm going on the assumption that the doctor asked ratherbereading to run a projected ADP test in late 2020 to see what was the maximum he could defer without failing the ADP test. Because we all know that an owner with earned income has to make their deferral election before the end of the year, even though they have until their taxes are finalized to make the deposit, right?

Short answer, yes, it almost certainly would affect it. Longer answer: As a participant in a defined benefit plan, your father would have earned something called an "accrued benefit." This is usually based on his salary and the number of years he worked for the company, and it is usually expressed as a number of dollars payable monthly starting at his normal retirement age and ending at death. Let's say that his accrued benefit was $2,000 per month. You said he started receiving benefits 30 years ago, so 1991, and his date of birth was 1933 so he was 58. If the plan's normal retirement age was 62, there would have been an adjustment for early retirement; so instead of $2,000 per month starting at age 62, his benefit would be maybe $1,800 per month starting at age 58, depending on the plan's early retirement factors. If the plan says that the $1,800 per month was payable starting at age 58 and ending at his death, then there would need to be another adjustment due to the fact that the payment ends at the later of his death or his spouse's death. The plan's actuary will calculate the amount of the adjustment, but the younger the individuals involved are, the larger the adjustment (and the smaller the payment) will be, since it would be expected to be paid out over a longer period of time. So, if they have been paying out all these years based on an adjustment for a 58-year-old and a 43-year-old, it would be potentially very different than the adjustment for a 58-year-old and a 53-year-old. In order to determine if they did it correctly, you would need to know, at a minimum: Your father's accrued benefit at the time he retired The plan's early retirement adjustment from normal retirement age to your father's actual retirement age The plan's adjustment factors for the form of benefit elected by your father at at your father's actual retirement age using your parents' actual ages Using those, you should be able to calculate the amount of the monthly benefit that was actually payable. If the plan provided cost of living increases or other adjustments for retirees, then there may be additional factors that need to be taken into account. Good luck!

Yes, it makes sense. When you reclassify deferrals as catch-up due to the ADP test, the only amount that gets reclassified is the amount that would otherwise be refunded. So it makes sense that the amount reclassified for the one HCE is equal to the amount of the refund for the other HCE, earnings aside.

More than that - it's a fiduciary failure, as Peter alluded to. If the contributions are not in the participants' accounts then they cannot exercise control over them and you have a 404(c) issue. If the TPA or other intermediary can't get the money into the plan for a couple of weeks, let's say, and the market blows up in those couple of weeks, participants could sue.

I believe you would just need to file an amended 5330. There is a section in the instructions for "Claim for Refund or Credit/Amended Return."

The 6% limit only applies if the DB plan is exempt from PBGC coverage. If your business is a sole proprietorship (not a corporation) and you are not in the business of professional services, then you might not be exempt. If you are not exempt then you are probably past due on a 2020 PBGC premium, but you would be able to get the full 25% deduction on the profit sharing plan.

https://apps.irs.gov/app/picklist/list/priorFormPublication.html?value=1099-R&criteria=formNumber&submitSearch=Find You can also get to this link from the IRS's "About Form 1099-R" page by clicking the link for "All revisions for Form 1099-R and instructions"

Since you took the distribution in 2020, if you meet the definition of a qualified individual (impacted in certain ways by COVID), then you should be able to treat the distribution as a coronovirus-related distribution, which a) lets you spread the income tax out over 3 years, and b) lets you recontribute it back to an IRA or qualified plan within 3 years, without regard to any rollover or contribution limits. More info on coronavirus-related distributions here: https://www.irs.gov/newsroom/coronavirus-relief-for-retirement-plans-and-iras

I am not aware of any "reasonableness" requirement on the definition of compensation for deferral election (not testing) purposes. The plan can generally place a maximum limit on the amount of compensation that can be deferred so I don't see any issue with carving out certain pieces of compensation for deferral election purposes. However, see 1.401(k)-1(a)(4)(iv)(B) for rules regarding nondiscriminatory availability of benefits, rights and features that can be an issue when using an alternative definition of compensation.

I think the fact that Example 1 talks about a defined benefit plan makes it irrelevant in this situation. As you pointed out @shERPA the 415(c) limit means any former employees would not be eligible to receive an allocation under a new DC plan. In profit sharing plans (including 401(k) plans) benefits are always determined on a year-to-year basis. I can't see any rationale for taking former employees into account. If we were talking about a defined benefit plan, then maybe there is an argument to be made but I think it's still a stretch. Especially if it's a cash balance plan where benefits are not typically based on past service. All in all, I think this reg exists to give the IRS a way to go after people who engage in abusive transactions; as long as there is a legitimate business reason for the changes in employee population and plan benefits, I doubt you would have much to worry about.

I have always interpreted this reg as meaning that the plan must satisfy 401(a)(4) and 410(b) both with and without the QNEC. In your situation, the QNEC is at least equal to the gateway minimum and all rate group pass, so the plan passes with the QNEC. You didn't mention if coverage is an issue treating the participants who only receive a QNEC as not benefiting, so I will assume coverage passes, and all rate groups still pass, so the plan passes without the QNEC. Therefore I think the test passes overall and you are good.

I assume we're talking about COVID distributions under the CARES Act? Notice 2020-50 addresses both the reporting on the 1099-R and how the participant treats it on their 2020 tax return.

This is still running it through payroll. The owner in this case is just giving themselves an extra paycheck that is large enough to cover the entire year's deferral in one shot. As you mentioned it still gets included on the W-2. It is also subject to withholding for FICA and other taxes. And it's still a prohibited transaction if it's deposited late. A one-participant plan is not exempt from IRC 4975. Can you share any of the materials you feel are ambiguous?

I assume the PA is being sold in an asset sale? I don't think it would be a problem for the person who served as Plan Administrator to continue signing off on distributions and the final 5500 even after the business is no longer technically running. If they are really worried about it though, keep $1 in the company's bank account until everything is wrapped up. Why is there a star next to this thread's title?

Well, I don't think Vanguard has branches, but I'm sure the participant could call Vanguard's customer service line and get someone to help them with the paperwork.

Plenty of banks would be falling over themselves to get more of their clients' money. If the participant brings the rollover request form into the local branch of their regular retail bank I'm sure they could find someone to help them fill out the paperwork.

In order for a mapping to preserve protections under 404(c), the new investments must have reasonably similar characteristics, including risk and rate of return, to the old investments. If you think your target date fund will meet that standard, then go for it, but I think that's unlikely in most cases. If you can't map them to like funds then you will have to get a new investment election from the affected participants.

Here is a followup question: given that the change in the law that precipitated the update to the instructions was actually effective 1/1/2007, could it have applied to to any 5500s filed between 2007 and 2019? More concretely, if you were now (in 2021) preparing a delinquent filing for, let's say 2016, for a plan that covered only the 100% owner of an S-corp, the owner's spouse and their child, would you submit under DFVCP with a 5500-SF, or under Rev Proc 2015-32 with a 5500-EZ?

How are you planning on reversing the transaction if the amounts were already distributed? Also who is "we" in this question - are you the plan sponsor, the TPA, or someone else? If the recordkeeper decided on their own to allocate the forfeitures then they may have become a fiduciary, and therefore could have legal liability for their actions. However fiduciaries don't have a duty to reduce costs to the plan sponsor. The only way I can think that they could get in trouble for this would be if the plan sponsor decided to charge the plan-related expenses against the participants' accounts, and a participant sued over those fees. The plan sponsor might want to have their lawyer send the recordkeeper a little love letter - hopefully dropping the "f word" on them might get them to take it seriously. However, the plan sponsor should also carefully review their service agreement with the recordkeeper, and their plan document, especially if the plan document was prepared by the recordkeeper, before doing anything else. There could be a provision that says that any forfeitures remaining in the plan after X period of time will be allocated to participant accounts. If that is the case then the recordkeeper would have been performing a purely ministerial function by allocating forfeitures in accordance with the plan document, or the written agreement of the plan sponsor.

@Jakyasar remember that while partners and sole proprietors can deposit their deferrals after the end of the year, they still have to make a deferral election in writing before the end of the year. If the plan did not exist in 2020 then I don't see how they could have made a deferral election in 2020.