C. B. Zeller

Is this a DB plan, or other plan subject to QJSA? If so, does the plan exempt distributions between $1,000-$7,000 from the QJSA requirements? If it does, then I agree with the other commenters that you can go ahead and distribute the single sum upon plan termination. If it does not, then you have to make the distribution in a form that preserves the QJSA rights. This probably means buying an annuity contract, or transferring the benefits to the PBGC's missing participants program. Optional forms of benefit with respect to distributions less than $7,000 are not a protected benefit under 411(d)(6), so the annuity options could be eliminated without disqualifying the plan. Once the annuity option is eliminated, you could distribute the single sum. However, if the plan is covered by the PBGC, you may not amend the plan to eliminate a form of benefit after termination, regardless of whether it would be ok under 411(d)(6).

This might be back pay within the meaning of 1.415(c)-2(g)(8). If so, it's considered compensation for the year to which the back pay relates, so 2022 or 2023 in your case. Does the document address back pay at all?

The applicable interest rate for 417(e)(3) is tied to the stability period containing the annuity starting date - not the termination date. So if the stability period is the calendar month, then the interest rate would change if the distribution is paid in July versus, say, August. However if the stability period is the calendar year, then the interest rate would not change until January. It's possible, although it seems unlikely to me, that the actual accrued benefit (not just the lump sum equivalent) could be affected by one day of re-employment. You'd have to look at the plan's benefit formula to see.

In general, the required contribution in a defined benefit plan is based on the difference between the market value of assets and the actuarial present value of accrued benefits, measured on the plan's valuation date. A significant decline in the market value of assets could result in an increase in the plan's required contribution (conversely, a sudden rise in the value of plan assets could result in a reduction in the maximum contribution, possibly to the dismay of an employer who was looking forward to a large tax deduction). The increase in the required contribution due to a drop in plan assets may not be dollar-for-dollar however, as the "funding shortfall" amount is amortized over a period of 15 years. This only speaks to the minimum required contribution under ERISA 303 / IRC 430. Plans may have a funding policy that directs the employer to contribute an amount larger than the required minimum. Cash balance plans may use an interest crediting rate based upon the actual rate of return of plan assets, which may even be negative (although the "preservation of capital" rule of 26 CFR 1.411(b)(5)-1(d)(2) prevents the interest credit rate from being negative on a cumulative basis). Proponents of these formulas claim that it ensures that plan liabilities will always be in line with assets; in other words, if the sponsor contributes the amount of the pay credits each year, then the assets will always equal the hypothetical account balances. This may be true, however it can be problematic for smaller plans, especially those that are tested together with a DC plan.

From the instructions for this line: The highlighted portion seems to describe your plan, so it might make sense to check "N/A" as described.

In addition to Peter's helpful sources and reasoning, I'll point you to IRC 413(c), which lists several purposes for which the employers sponsoring a multiple-employer plan are considered to be a single employer, including: 410(a), regarding service required to participate in the plan 411, regarding service required to become vested in the plan 401(a), but only as it regards whether the plan is for the exclusive benefit of the employees of the employer and their beneficiaries Congress could have added section 401(a)(9) to this list, but they did not. Which implies that the employers maintaining a multiple-employer plan are treated as separate employers for purposes of 401(a)(9).

I don't see a BRF issue unless there is some benefit, right or feature that is available to HCEs but not to NHCEs. Getting rid of the ERA for everyone shouldn't be a problem. There might be a 411(d)(6) issue but again, what is actually being removed if you eliminate the ERA in the DC plan? Not the availability of distributions, since you can still have that at age 59½. Not full vesting, since the definition of ERA already requires 6 years of vesting service. Is there something else that is granted by the attainment of ERA in the DC plan that could be a cutback if eliminated? Read the document to see, but I can't think of what that might be.

I would just eliminate the ERA in the DC plan. What is it even doing there? Since you can already have distributions at age 59½ without needing an early retirement feature, you should be able to remove it without it actually being a cutback. No need to add an ERA in the DB plan. Your testing age will still be NRA. I don't think I've ever seen a DB plan with an ERA that is combo-tested with a DC plan. I believe that in that case, you would need to test the MVAR at every early retirement age to see if it is more valuable. So my recommendation is, don't do it.

I agree that it could be done, but I would recommend against it. A better approach is to exclude all HCEs from the safe harbor, and rely on the plan's individual-groups allocation formula for nonelective employer contributions to make an allocation to some or all HCEs, if desired. This is a little bit more complicated (but only a little bit) and it gives the employer much greater flexibility.

If the document says that HCEs get the safe harbor then HCEs have to get the safe harbor. If they want to change that, it will need a plan amendment. Whether you can do that mid-year for the current year or whether it will have to wait to take effect until the next plan year is circumstance-specific. Did the safe harbor notice say that the employer may reduce or eliminate the contribution mid-year? Is the employer operating at an economic loss? Regardless, you can't eliminate benefits that have already been accrued. The anti-cutback rules protect both HCEs and non-HCEs alike.

What you are talking about is called a Qualified Charitable Distribution (QCD). The IRS has a webpage about QCDs (https://www.irs.gov/newsroom/qualified-charitable-distributions-allow-eligible-ira-owners-up-to-100000-in-tax-free-gifts-to-charity) and you'll be able to find more information by googling that term. Both IRAs and qualified plans are subject to the RMD rules. All IRAs owned by the same individual are lumped together for purposes of RMDs, however qualified plans must each separately satisfy the RMD rules. In other words, if you have 2 IRAs and 2 qualified plans, you can take one distribution from either IRA to satisfy the RMD for both IRAs, but you must take a separate distribution from each qualified plan. Only a distribution from an IRA can be a QCD. Maybe. Clearly your client is over age 73 if they are looking at their RMDs. Are they retired from the employer who sponsors the qualified plan? Or are they a 5% owner of the employer? If either of those are yes, then they are required to take an RMD from the qualified plan this year, and that would have to be taken before they could roll over any additional amount to the IRA. You would also need to check that particular plan's rules to see if the distribution would be allowed; there could be restrictions on what they can do if they are still working or if they want to take less than the entire account. The QCD can be any amount up to $100,000 per year. Correct.

I think manually checking the box on the hand-signed copy of the form that gets attached to the e-filing is fine. What I think is a problem is you modifying a document after it has been signed by the plan administrator. Either have the plan administrator check it themselves before they sign it, or send them a new copy with the box already checked. No problem. I probably wouldn't but ultimately I don't think it will make a difference.

A hardship is not an eligible rollover distribution, so there is no mandatory withholding. There is 10% automatic withholding but that can be waived. I don't see a problem here.

If I'm understanding the original question correctly, I believe CDA TPA intends to file a 5558 and mark the 5558 box in the software, but the client has already been provided with a copy of the 5500-SF for manual signature without that box checked. CDA TPA is asking if they can check the 5558 box on the paper copy of the 5500-SF after they receive it back, signed by the plan administrator, before scanning it and attaching the scanned copy to the electronic filing. I would not advise you to modify a document after it has been signed by the plan administrator in any way. However I would have no problem if the plan administrator manually checked the 5558 box before signing the 5500-SF. As long as all of the data elements on the manually-signed 5500-SF match the electronically-filed 5500-SF then, in my opinion, it is a valid and complete filing. I don't see how it matters whether the "X" in the box on the paper copy was placed there by your 5500 software, or a PDF editor, or a pen in the plan administrator's hand. It might be easier to send them an updated copy with the box checked, and say "If you don't get form back to us by X date, we will put you on extension and you must sign this attached form instead of the earlier one."

IRC 402(e)(1)(A)

I agree, no controlled group. No attribution because neither the parent nor the child owns more than 50%. IRC 1563(e)(6)(B) Jak, the issue you're thinking of has to do with controlled groups that are formed between spouses (or unmarried parents, for that matter) who are both owners of their own businesses when they have a young child together. The 1563(e) rules automatically attribute ownership from a parent to a minor child, so a controlled group would always exist because the child would be attributed all of the parents' ownership and therefore the child would be deemed to own 100% of both companies. SECURE 2 didn't change 1563, but it changed 414(b), (c), and (m) to say that a controlled group or affiliated service group will not be considered to exist merely because of the existence of a minor child, or because the spouses live in a community property state.

EACAs have a required notice and QACAs have a required notice but I don't believe there is a required participant notice for ACAs which are neither EACA nor QACA.

If a federal district court rendered such a decision, would that be binding precedent that other plan administrators could reply upon? Would it be applicable nationwide, or only within the same federal circuit? Could we end up with different precedents, and therefore different standards for the same issues, in different parts of the country?

Verily, and with great haste, thou shalt consulteth thy plan's governing documents and discover therein the answers thou seekest. Should fortune smile upon thee, thou may findest that thy plan be graced with a determination letter, be it sealed by the hand of the wise ones who dwell within the halls of the Internal Revenue Service, granting reliance upon the terms found therein. In that happy moment, thou shalt knowest that thy plan's allowances of in-service distribution of rollover accounts shall never be said to fail to satisfy the requirements of section 401.

Assuming no credit balances and no annuities purchased for NHCEs, the AFTAP with a BOY valuation date is (assets) / (funding target). For a EOY valuation, the AFTAP is based on the prior year's funding values, and the formula is (assets + contributions adjusted to valuation date) / (funding target + target normal cost). In both places, "assets" means plan assets as used for sec. 430 (minimum funding) purposes. For a plan with an EOY valuation date, the 430 assets do not include any contributions made for the current year prior to the valuation date. You increase those contributions at the effective interest rate to the valuation date, and subtract them from the value of the trust to get the value of assets. This rule is found in 1.430(g)-1(d)(2) So the numerator for an AFTAP measured at EOY is (assets + adjusted contributions) = ((trust account value - adjusted contributions) + adjusted contributions) = (trust account value) Which means it ends up being the same thing, but not maybe not for the reason you were thinking. I would recommend discussing this with the actuary who will be signing the AFTAP.

Assuming that the plan year is the calendar year, then I agree.

For distributions, the stability period can be the plan year, calendar year, plan quarter, calendar quarter, or calendar month containing the distribution date. The applicable interest rate can be determined as of the 1st, 2nd, 3rd, 4th or 5th month preceding the stability period, or may be an average of interest rates during those months. See 1.417(e)-1(d)(4). For funding, the segment rates are the ones published for the applicable month, which is the month containing the valuation date. However the plan sponsor may elect an alternative applicable month of one of the 4 months preceding the month containing the valuation date. The plan sponsor may also elect to use the corporate bond yield curve instead of the segment rates. Once an election is made, it may only be changed or revoked with IRS approval. See 1.430(h)(2)-1(e).

WDIK has the correct code cite. In addition, the instructions to Form W-4R state (emphasis added): Of course, this assumes that the distribution in question is an eligible rollover distribution. Is it? If this is a 401(k) hardship distribution, for example, that would not be an eligible rollover distribution and the 10% (not 20%) automatic withholding could be waived.

The outcome of a VCP submission can sometimes depend on what evidence the employer can provide that they intended to do the right thing. Cuse's observation about 204(h) notices is a great example. You could request an anonymous pre-submission conference to get an idea of how open they would be to this correction. My guess is that they would be ok with it, since it is in the participant's favor and there is some evidence to back up the employer's position.

Both IRC 412(d)(2) and temp reg 11.412(c)-7 refer to an amendment which is adopted no later than 2-1/2 months after the close of the plan year. To me, that means adopted, not resolved to be adopted. That said, what is an amendment really? In our world of administrators and actuaries we tend to think of the amendment as being something very formal that is spit out of our document system when we click the amendment button and that says "Amendment" in bold letters at the top. However I have been told by more than one lawyer that there may be other things that could be considered to be an amendment. A board resolution that clearly specified the changes to be made might be enough.