pensionam

The plan only permits in-service withdrawals at NRA. The owner has not reached NRA. The owner took the money for himself and transferred it to a personal investment, not an IRA. Direct transfer of $250k, no 1099-R, no withholding. Typical brokerage account situation where the advisor took the written direction of the owner to transfer the money out of the account. The plan does accept rollover contributions.

Owner was not eligible for an in-service withdrawal and we found out about the withdrawal when we began doing the 2025 annual administration work this month. No paperwork and money was transferred to a personal investment, not an IRA.

Hi! I have a PBGC covered plan where the owner took an impermissible withdrawal of $250k from the plan in June 2025. To correct, he returned the funds to the plan in February 2026 but with no earnings adjustment. Are earnings required? He wants to self correct and include a memo in the plan's files.

Right my issue is the plan terminated effective 12/31/2024 and wants to distribute the funds to the IRA. They're asking what happens to those nondeductible contributions and I'm at a loss. I've only experienced nondeductible contributions that are carried forward to future years but haven't run into a plan termination situation.

What happens to nondeductible contributions at plan termination? We have a plan sponsor that has negative K-1 income and 2024 is their final plan year (12/31/2024 plan termination date). They have a minimum required contribution and want to know what happens to this money at time of distribution. For what it's worth, it's an owner only plan and presumably, the owners (50/50) will be rolling over their funds into an IRA. I don't have any experience with nondeductible contributions at plan termination so am feeling a bit lost as the TPA.

That's a great idea. After much back & forth, he decided it was too administratively burdensome for him and told the participant she didn't have any options within the plan at this time.

The amount seems relatively small to me - about $5-$6k. I get the impression the plan sponsor doesn't want to help her himself.

Thanks all for your valuable feedback. From what I've gathered, the plan sponsor feels bad for the employee but just not bad enough to actually help her himself directly. He wants an option within the plan for her but doesn't want to make it permanent. His specific question was if he allows for loans, when can he terminate that option? It sounds like there really isn't a clear answer to this. It's a very small professional service organization with less than 10 participants.

Thanks, this is super helpful. It's when I brought up that he would need to notify all participants of the change that he asked how quickly he could remove the provision after allowing it. As a TPA, our default is to only allow safe harbor hardships and I admittedly have no experience with non-safe harbor hardships but it sounds like I should research further to explore that as an option.

I have a plan sponsor who would like to allow a loan for a NHCE participant who has fallen on hard times but is young and doesn't qualify for a "safe harbor" hardship. He would like to amend his plan to allow loans and then has asked how quickly he can amend to no longer allow it. Is there a general rule of thumb for this?

I know this is an old post but I was wondering if this is still how other TPA firms are preparing the 1099-R for an in-plan conversion of after-tax to Roth. Instructions remain the same and that was my understanding. However, I've had other colleagues believe that it should be code 2 or 7 depending on age.

Hello, We have a plan sponsor who will be hiring an intern for 90 days who will be paid by the military through a military internship program. After the 90 day period, the intern will be paid by the plan sponsor. The plan has no eligibility requirements and no excluded classes so the question came up as to when the employee would be eligible to defer and what compensation would be used. There was a debate among coworkers if the employee could use military pay to defer by personally writing a check to the plan sponsor or needed to wait until he was paid by the plan sponsor. Thanks.

Owner wanted to exclude employees terminated prior to 7/1/2018...

Thank you! I did see this before on a previous post but I always tend to second guess myself and our actuary thought this was the case but was not certain.

I have a DB plan that has an initial short plan year. The effective date of the plan is 7/1/2018 and the actuarial valuation date is 12/31/2018. Does the deduction for 2018 need to be prorated?

Thanks for your input everyone. I spoke further with the plan sponsor and they are going to work with their payroll provider to figure out what's wrong with the parameters that they have set up since it's not allowing participants to do both pre-tax and roth.

We're on an ASC doc so it is an other section where you can describe any "special rules". We'd have to write in under both the Deferral and Roth section that if they defer from one, they can't defer from the other at the same time. I was hoping for a clear answer on this but it sounds like it's kind of a grey area. I may just go the route of telling the client somehow nicely that they need to figure out their payroll system.

Unfortunately, our main contact, the HR person is also the payroll person. I really want to tell her that it isn't possible and she needs to figure it out or get a new payroll system but that's difficult to convey nicely.

They're telling me that they can't get their payroll system to allow for both but my feeling is that it's a user problem and not a payroll problem. They're going to offer both Pre-Tax and Roth but they want the participant to choose only 1 and not do both at the same time due to their payroll limitations.

Has anyone ever had a plan sponsor do this? Our standard document doesn't have this option but has a write in section where we could add language. I've never seen it before but I don't see it being an issue compliance wise. The plan sponsor can't figure out how to get their payroll system to do both so this was their solution.

Agreed, the goal was to delay the RMD.

Yes, the NRA is the later of age 65 and 5 years of participation. Vesting schedule is 6-year graded.

Thank you! It sounds like we should be using the 12/31/2017 accrued benefit but since the owner would be 20% vested in 2018, the RMD is due by 12/31/2018.

Thank you! We should definitely consider that moving forward.

New owner only plan effective 1/1/2017. Owner reaches age 70 1/2 in 2017. Vesting is 6-year graded and vesting prior to effective date of plan is excluded. As of 12/31/2018, the owner would be 20% vested. When would the first RMD need to be distributed? Since we deal with mostly small plans, our actuary uses the 12/31/2017 accrued benefit x 12 to get to what the RMD lump sum requirement is for 12/31/2018 rather than monthly installments. I'm getting hung up on the fact that although the owner is 0% vested as of 12/31/2017, he is 20% vested as of 12/31/2018. Would a distribution be required for 12/31/2018 or not until 12/31/2019? The argument from our actuary is that since the calculation is done based on the prior year accrued benefit, the first distribution wouldn't be required until 12/31/2019.