C. B. Zeller

Yes. https://www.federalregister.gov/documents/2019/09/23/2019-20511/hardship-distributions-of-elective-contributions-qualified-matching-contributions-qualified

I can't offer any quantitative insights, and I'll refrain from anecdotal observations or conjecture. However, I'll note that there are at least 3 distinct definitions of "actuary" when it comes to retirement, and which of these you mean might affect your analysis: Enrolled actuaries Individuals with a credential from any of the five U.S.-based actuarial organizations Individuals working in an actuarial capacity, regardless of whether they have obtained any credentials For example, federal law only recognizes definition 1 with respect to ERISA and the tax code, and only those actuaries may certify a plan's actuarial report, its funded status, its PBGC variable-rate premium, or its sufficiency for a standard termination. However state law might expand that to include actuaries under definition 2 for some purposes. And some people under definition 3 might have a job title of Actuary.

Not all self employed, only sole proprietors. And it was not IRS, it was Congress, in SECURE 2.0.

Not really...just exclude them by name.

In general, I'm ok with this sort of exclusion, as long as it is carefully worded. Top heavy status is definitely determinable - it is based on the account values at the determination date. In theory one could know on January 1 whether the plan is top heavy for the year. In practice, it may take a little longer to run the test. If you have this language in the plan, and a Key employee contributes for the current year before it is known that the plan is top heavy, you have an operational failure, since the employee was not properly excluded. You could self-correct the failure by removing the contributions (with earnings) and refunding them to the employee. Or, instead of excluding Key employees entirely when the plan is top heavy, consider keeping them eligible, but imposing a contribution limit of $0. That would let Key employees who are over age 50 make a contribution which would be immediately reclassified as catch-up, due to exceeding a plan-imposed limit. Catch-up contributions for the current year are excluded from top heavy, so this would allow them to make a contribution without triggering the top heavy minimum. Paul's point about non-HCE Keys is a good one, and interesting. For a long time it would have been very unusual to see any non-HCE Keys, unless you had a top-paid group election and your officers and/or 1% owners were not among the highest paid employees. Now, however the HCE compensation threshold has risen higher than the compensation threshold for a 1% owner to be a Key employee* so I suspect we will start seeing this situation more and more in future years. If you had a non-HCE Key who was prevented from making deferrals due to this language, that's not necessarily a problem, but you would have to keep an eye on your coverage test and nondiscrimination tests for availability of BRFs. * The $150,000 dollar limit was in section 416 when it was added by TEFRA in 1982 and has not been adjusted ever. One inflation calculator I found online tells me that $150,000 in September 1982 is worth over $475,000 today.

No

After reading Calavera's comment, I realized I had earlier replied under the assumption that Joe and Mary were (or at some point had been) married. I re-read the original question and that was not part of the facts. So, my mistake. Anyhow, whether or not Mary's company has to be aggregated with the partnership for purposes of 415 depends on whether or not the partnership is a "predecessor employer" with respect to Mary's company under 1.415(f)-1(c). This is a facts-and-circumstances determination, but I would lean towards yes since she is continuing to do the same business with the same clients. Maybe she knows an ERISA lawyer who can give her an opinion.

There is no issue with using accrued to date testing, but in the first year with a typical cash balance/profit sharing combo, it's going to be equivalent to doing annual testing. You only count years in which the employee was eligible to accrue a benefit under the plan, so unless you have a DB plan that grants accruals for prior years of service, your years for accrued-to-date testing are just years of participation, which will be 1.

Clearly the contribution can't be allocated to Mary since she isn't an employee. It would need to be treated as an employer contribution and should be allocated to the participants in the plan according to the plan's allocation formula.

I agree. The good news is they also get credit for years of participation in the old plan for 415. They could also possibly spin off one of the plans to avoid the termination and offset.

The rule is that they may be excluded if: They terminated employment with less than 500 hours of service; They did not benefit in the plan; and The sole reason they did not benefit is because they terminated with less than 500 hours of service. In your case #2 is not satisfied, because they did benefit. Safe harbor non-elective is aggregated with profit sharing for 410(b) and 401(a)(4) purposes, so they are considered benefiting for PS because they received a safe harbor contribution. So they can not be excluded.

See Notice 2023-54, particularly the bit about guidance for plans that did not make a "specified" RMD.

What do you mean the sponsor has "opted" for a loan offset? The plan has a written loan policy, the sponsor needs to follow those procedures which will dictate when a default and offset will occur. A distribution upon plan termination would apply to a participant's entire account, including their outstanding loan. So the loan offset should just be a matter of reporting correctly. If the participant elected a cash distribution (not a rollover) don't forget to take the amount of the outstanding loan into account when calculating the amount of withholding.

Yes. From a reporting perspective it works just like a 60-day rollover.

You can't have a loan in an IRA, so they would not be allowed to roll over the loan itself to the IRA and continue paying it back in installments. However, a loan offset due to plan termination is a qualified plan loan offset (QPLO) so they could do a roll over by repaying the amount of the offset to the IRA before their tax filing deadline. Of course, this requires them to have enough cash on hand to contribute the amount of the offset. Which would be functionally the same as repaying the loan, just with an extended deadline. So if they don't want to/can't repay the loan in full, then the option to roll over the QPLO probably may not interest them either.

It is ultimately the Plan Administrator's responsibility to send a 1099-R to any participant who received a distribution during the year. If the Plan Administrator's agreements with their service providers don't cover providing a 1099-R under a specific set of circumstances, then they should make other arrangements to have the 1099-R sent to the participant. For example, maybe their TPA or tax preparer could prepare the form, given the necessary information.

Cuse, thank you for the support. Basically, if you're new to the world of ACP safe harbor matches, here is a great article that talks about how to use them. In your situation, you couldn't do the third "stack" described in the article, since that would had to have been in the document before the beginning of the year, but you might find it interesting nonetheless: https://ferenczylaw.com/the-triple-stack-match-its-not-just-for-pancakes-anymore-autumn-2015/

Technically, I don't think the rule is that you have to take an RMD before you can take any other distribution - I think it is that you have to take an RMD before you can do a rollover. So if the participant is just looking for a Roth distribution, I don't think there is a problem. Even if they wanted to do a rollover from their Roth 401(k) to a Roth IRA, I still think you are ok; the language in SECURE 2.0 says that 401(a)(9)(A) shall not apply to "any designated Roth account" which presumably includes rollovers from the account.

It does seem like capital is a material income-producing factor for a radio station. However "performing arts" is one of the specified fields that is automatically a service organization. I'm not sure if a radio station is in the field of performing arts. If it's primarily talk radio, as in it's broadcasting content created by its own employees, then maybe. If it's mostly playing music created by others, then probably not.

The 402(g) limit is always a calendar year limit. No need to prorate it. The 415(c) and 401(a)(17) limits may be prorated for a short plan year, although not necessarily for an initial short plan year. Check your plan document to see if it has special language about an initial short plan year.

A plan that has an ADP safe harbor match can also permit a discretionary ACP safe harbor match. You will need to read the document to see if yours does. Also see my edit to my earlier comment.

There are very limited circumstances under which a contribution may be returned to the company. Unless the $4,300 was the result of a minor typographical or arithmetic error, I wouldn't even consider it. As you suggested, the excess could (should) be allocated under the plan's allocation formula. Does the plan say that participants will have the right to direct the investment of 100% of their account? If yes, then I don't see how you could allocate amounts for those 5 participants to a pooled account. If no, then you could do it under the terms of the plan, but you still have to be aware of nondiscrimination testing. The right to direct investment is a benefit, right or feature that has to be available to a nondiscriminatory section of plan participants. If 100% of HCEs have the right to direct their investments but only 50% of NHCEs do (for example) then you might have a problem. Edit: Upon further consideration, I think there's a bigger problem, which is that only participants who have deferred in the past would have the right to direct their investments, which would be a violation of the contingent benefit rule. So I would not advise this approach. If you really want to use a pooled account, I would recommend putting everyone's profit sharing into it, not just the people who don't already have brokerage accounts set up. Does the plan allow a discretionary match in addition to the safe harbor match? If the plan was written well, it should allow a discretionary ACP safe harbor match in addition to the ADP safe harbor match. If you can allocate the excess as an ACP safe harbor match, that might be the easiest thing to do in this situation. Be aware that the plan probably has a notice requirement when a discretionary match is made.

You are correct. In order to satisfy the requirements of 1.401(a)(4)-11(g) (and 1.401(a)(26)-7(c), it's oft-ignored sibling), the amendment must pass coverage and nondiscrimination testing on its own. The way to bring in the HCE (presumably with a 0.5% accrual) under a retro amendment would be to also increase accruals for enough NHCEs to pass the ratio percentage test in the same amendment, also with 0.5% accruals for each (on top of whatever they earned in the plan under the base formula). This issue will largely go away next year when SECURE 2.0 retro amendments become available.

They can still be exempt from an audit if they increase the amount of the bond. How liquid is this investment? Will there be enough liquid assets in the plan after investing in this security to be able to pay cash distributions to terminating participants, and the owner's upcoming RMDs? The bigger issue though is fiduciary duty. Remember that the fiduciary must act solely in the interest of the participants and beneficiaries of the plan, and in the exclusive interest of providing benefits and defraying reasonable costs. And they must do so in the manner of a prudent person familiar with such matters. I would encourage this sponsor to review, with their lawyer's input, their duties under ERISA 404 and DOL reg. 2550.404a-1. If, after reviewing their duties, they still feel that it would be prudent for the plan to make this investment, then by all means proceed. Just be prepared to justify the decision to the participants (and their attorneys) if the investment goes poorly.

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.