Paul I

Look in DOL FAB 2014-01 in the section titled Individual Retirement Plan Rollovers – Preferred Distribution Option, third paragraph. The DOL says (and provides its supporting references) that if the plan is terminating and the participant is missing (read the plan cannot make the payment), then the plan should rollover the account balance to an IRA. You may wish to speak with some of the companies that specialize in setting up this type of account. On a separate note, it is possible to amend a plan after the termination amendment has been adopted. In this case, amending the plan should not be required unless the plan document, basic plan document, and termination amendment are silent on the issue and you want to rely on something more than the FAB.

@Tom here are some resources if you want to document that the you have the current opinion letter. You can learn about the 403(b) pre-approved plan document cycles here: https://www.irs.gov/retirement-plans/403b-pre-approved-plans You can find the current opinion letter numbers here (and the TIAA documents are on page 23, some with 8/7/2017 dates): https://www.irs.gov/pub/irs-tege/preapproved-403b-plans-list.pdf You can see that the next cylce's documents have not yet been issued here: https://www.irs.gov/pub/irs-tege/403b-preapproved-plans-list-2.pdf

@jsample technically you are correct that a fee can be charged to the employer. Practically, with our clients, if we told our clients we would charge our standard distribution fees for per payment because a participant took 4 very small payments for an undocumented "emergency", they would not agree to pay it and would think we were crazy for suggesting it.

Attached is an excellent discussion of the various IRS and DOL rules prepared by the law firm of Harter Secrest & Emery LLP last September. They do a great job presenting the alternatives available under each agency's rules. The DOL has multiple methods depending upon the employees' access to a computer at work that can be used - and employees are permitted to use - for interacting with the plan. In all instances, paper must be an available choice to any participant. In all instances, a participant can rescind their consent to receive electronic delivery. Within the DOL rules, there also disclosures about electronic deliver that must be presented to the participant before the participant can consent to electronic delivery. These requirements mean a plan must always be prepared to make paper copies available upon request, and to accommodate participants who do not have or have access to computers capable of accessing the plan information. Another DOL requirement is for the plan to have the ability to reasonably ensure actual receipt of the document. This is not a trivial requirement and does require the sender to be able to demonstrate that documents are being received by participants. The footnote at the bottom of page 2 addresses in part some of the questions. Also note the final paragraph on page 7 a new requirement that will be effective come January 1, 2026. HSE_ELECTRONIC_DELIVERY_RULES_FOR_BENEFIT_PLAN_COMMUNICATIONS.pdf

There is no reference to the date of the actual filing of the 5500 in the reg. The reg is clear that if there is a valid extension (i.e., the extension was requested before the original due date) then the SAR is due 2 months from the end of the extension period. For a calendar year plan, this is December 15th. ERISA § 2520.104b-10(c) reads: When to furnish. Except as otherwise provided in this paragraph (c), the summary annual report required by paragraph (a) of this section shall be furnished within nine months after the close of the plan year. (1) In the case of a welfare plan described in § 2520.104-43 of this part, such furnishing shall take place within 9 months after the close of the fiscal year of the trust or other entity which files the annual report under § 2520.104a-6 of this part. (2) When an extension of time in which to file an annual report has been granted by the Internal Revenue Service, such furnishing shall take place within 2 months after the close of the period for which the extension was granted.

Merge the plans, and transfer the assets from the B plan into the A plan (preserving all of the separate sources and protected benefits). There are a lot of potential land mines in this process. Before taking any action, be sure that the controlled group is passing coverage testing and nondiscrimination testing. If it isn't passing, fix it before proceeding. If the benefits or eligibility requirements available under each plan differ considerably, the fix could be expensive - but the deal is already done so A is committed to cleaning things up. Passing post-merger coverage testing also will help answer whether A wishes to continue provide benefits to B employees. If A is not so inclined, be sure the plan will continue to pass coverage with that classification exclusion. A merger very likely will end the transition period safe harbor, so again, anticipate the impact this may have on particularly on ADP/ACP testing. There are some quirks that often do not appear in discussions or commentary about mergers but they can have a significant impact. For example, determining the HCEs is after the merger is done on the basis of the controlled group which involves considering how B employees' compensation in the look-back year is determined. If one of the plans uses top-paid group rules, then neither plan can use the top-paid group rules. This is just a sample. Alternatively, A could freeze the B plan and have the B employees participate in the A plan. That leaves A with maintaining 2 plans. Or, A could terminate the B plan and allow B employees to participate in the A plan, and then deal with the successor plan rules applicable to B employees (which is what you wanted to avoid.) One last note, if neither plan is subject to an IQPA, then keeping the plans separate may be less costly administratively than having the A plan become subject to an IQPA.

@metsfan026 you (facetiously) must really be looking forward to dealing with PLESAs (Pension Linked Emergency Savings Accounts). Four features in particular will make administering PLESAs a lot of fun: They are Roth accounts. Participants can withdraw funds at their discretion. The first 4 withdrawals cannot be subject to fees or charges. Participants can replenish the account after taking the withdrawals. This almost makes the plan you are working with seem reasonable.

The predominant investment offering in plans is a menu of funds where each participant is choose the investments for their account. The fee disclosure rules are in the realm of the DOL in Labor Reg 2550.404a-5 and are applicable to plans that offer participant directed accounts. These rules do not apply to a pooled plan where the investment decisions are outside the control of the participant. One of the reasons allowing participants to choose their investments is the relief from some of the fiduciary responsibility for the choice of funds granted by the DOL regulations where plans make all of the disclosures about the various types of fees being paid from the plan. The most compelling reason to give to the plan sponsor of a plan that has a pooled plan account is the fiduciary responsibility associated with managing the trust fund, including the requirement of prudence. The plan fiduciary does not have the protections afforded by the DOL regs nor IRS 404(c). An extended period of poor investment performance relative to the markets could invite participants to challenge the handling of the investment of their accounts, including the expenses charged to the trust. Over the years, I have worked with several pooled plans where, frankly, the plans' investments demonstrably and significantly outperformed the markets. The plan fiduciaries were willing to accept their responsibilities, kept to a routine of due diligence and prudence, and some with the assistance of outside advisers, achieved excellent results for the participants. Your are correct - the decision is on them.

I am not familiar with Massachusetts taxes, but see if this site may be helpful https://www.mass.gov/info-details/wage-contributions-reporting-for-paid-family-and-medical-leave

The correction for a missed deferral opportunity in a plan with automatic enrollment is extremely liberal with plans having up to 9-1/2 months after plan year end to start deferrals before penalties kick in. Without the AE feature, the charity will at best have 3 months to offer enrollment to and start deferrals for eligible employees before some significant corrections are required. If they are not up to the task of managing eligibility and enrollment, the AE feature provides some time for their service providers to keep them out of serious trouble. Just a thought.

Let's not forget that if the employer is not a corporation, any person who owns more than five percent of the capital or profits interest in the employer is considered a more than 5% owner. Technically, for example, a 95%/5% capital interest split wouldn't make both partners key employees, but allocating more than 5% of the profits in a year to the 5% owner would make it work for that year. And while not on topic, let's add to the perks of an owners-only plan that the plan gets to file a Form 5500-EZ.

"Balance-forward" commonly is used to refer to a plan accounting method where historical transactions that occur in an account are summed up to a specific point time - typically up to the beginning of a plan year - or up to the date which provides the basis for an allocation. This technique was used to condense the data needed to be stored and processed which saved computer storage and decreased the amount of computer resources and time it took to perform an allocation. Almost all legacy recordkeeping systems used some form of balance-forward accounting, and several have an annual "roll forward" process for each new plan year. With the drop in the relative cost of storage and increase in computer power, recordkeeping can keep all transaction history available which allows them to easily compute a participant's balance at any point in time. The basis for an allocation is the amount that is used to pro-rate a participant's allocable share of an amount that is being spread across all participants included in the allocation. Employer contribution, interest, dividends, and expenses are typical examples of amounts that are allocated across all participants. The plan document may provide the formula for calculating the allocation basis for each type of transaction. If it does not, then the calculation should be well-documented in the plan accounting documentation. For example, an employer contribution may be allocated over plan compensation. Interest may be allocated over all participants who are in the fund in which the interest was paid. Expenses may be allocated over participants' total account balance. Some plans use only balance-forward method for allocating income. Typically, the investment is in a pooled fund that is valued periodically and the income earned over the period is allocated over the account's basis. Some plans use daily valuation for daily-valued investments, but may also have one or more pooled funds. There is a ton more detail to plan accounting. If your question is related to plans that use only balance-forward accounting, my experience is they are very rare and typically are used in small plans that only have a profit sharing contribution. If your question is related to any plans that use balance-forward accounting, my experience is every plan does at some level for some transactions in some accounts.

It sounds as if the plan fiduciaries no longer want to be bothered with fulfilling their responsibilities. The plan exists, needs to operate in full compliance with all operational, reporting and disclosure requirements until the plan distributes all assets to participants and is properly terminated. I suggest pointing this out to the former partners who as partners shared plan sponsor responsibilities and also pointing this out to any other party that acts or acted as the Plan Administrator. Also consider informing the company for which the investment brokers worked. If a participant has not yet filed a claim, having a participant file a claim will start the clock for requiring the plan to respond. If the plan fiduciaries don't get their act together, then consider getting the DOL involved by having a participant bring the issue to their attention. The DOL likely will follow up with each these individuals to explain what needs to be done and what happens if no one steps up. The DOL may deem this an abandoned plan and bring in an administrator to wrap things up. Some plan documents allow a trustee or a plan participant who is elected by the other plan participants to represent the plan through the close out. Don't make this your problem. If the DOL does not get actively involved, then the remaining participants should consider engaging legal counsel to lead them through the process of retrieving their benefits.

According to the ICI, there is $39,900,000,000,000 - yes, $39.9 trillion - in total retirement assets as of March 2024. This is up almost $28 trillion from $11.6 trillion since the year 2000 (remember Y2K and the prediction of the end of the world as we know it?) With all of that money and its impact on our economy, there is no way that Congress will stop meddling with retirement plans. Our biggest challenge is the rapid pace of new legislation. We have already reached a point where plans are being administered outside the terms of a formally adopted plan document and are relying on administrative intent to amend at a future date. Added to that, Congressional tinkering with funding of regulatory agencies has added to the challenge of implementing legislative changes. Further, with the passage of SECURE 2.0, several long-term practitioners decided that was the last straw and retired. In a way, we suffer from our success. While the challenges continue to mount for us as a profession and as an industry, our efforts are a significant factor to that success. Release Quarterly Retirement Market Data First Quarter 2024.pdf

Subparagraph (I) sets the RMD at age 73 for someone born in 1959, so regardless of what Subparagraph (II) says the person has an RMD due for the 2032 plan year. The conundrum is (II) says that same person turns age 74 in the 2033 plan year so the person has an RMD due for the 2034 plan year. Arguably as written, a person born in 1959 gets to skip an RMD for the 2033 plan year, or a person born in 1959 must have an RMD for the 2033 plan year because RMDs began under (I). Had (II) been written to say it supersedes (I), then there is a skip. If (II) does not supersede (I), then there is no skip. I don't think any of this has to do with Congressional intent other than Congress was looking at ways to balance out the revenue impact of the overall package. They look at a 10-year horizon for their impact analysis which would explain why the change to 75 was set for year 2033 - 10 years after the adoption of SECURE 2.0. Considering the potential impact of the recent decision on Chevron, the IRS should either hope for a clarifying amendment or go with the skip.

FYI, the IRS posted Public Inspection Documents from Internal Revenue Service for final regs and proposed regs. Final regs are effective 60 days after they are posted in the Federal Register, and there is a comment period for the proposed regs that is open for 60 days after posting. For your summer reading enjoyment, the final regs document has 260 pages, while the sequel in the proposed regs is a mere 36 pages. Enjoy!

I agree that would seem to make sense, but why bother risking some agent deciding otherwise? If you are preparing the filing using software that supports 8955-SSA filings, the software very likely imports the participant data from a spreadsheet. If should be very easy to copy data from one year to another, and report an employee as an 'A' in one year and a 'D' in a subsequent year.

The short answer is do not try to manually check the 5558 box on Form 5500-SF and expect it to be acknowledged and accepted. The Form has to be submitted electronically on EFAST2. Software vendors build their 5500 programs that create information files in a specific format that is input into the EFAST2 system. While an image copy of the filing may be attached and submitted concurrently with the electronic filing, EFAST2 will only look at the data in the information file it receives and that will show that no 5558 was filed. That likely will trigger a late filing notice and you will spend many, many more hours trying to convince the DOL and IRS that the extension was filed timely while also trying to calm down the client who sees the amount of potential penalties. There are 3 weeks left before the due date. Inform the client of the need to file timely and of the penalties for late filings. Also let them know that signing the form takes very little time on their part. Otherwise, after the you file for the extension and the deadline passes, you will need to send them a new form to sign which basically restarts the signing process. We all have stories about clients who procrastinate. We have a client that kept putting of signing the form so we put them on extension. At 6:30pm on October 15, we tracked them down having dinner at a resort in the Dominican Republic and had them sign the form electronically using their mobile phone. They never were late again. A little bit of education and some persistence pays off in terms of time spent by both you and your client. Hopefully, your client appreciates your work.

The instructions to the Form 5500 include this note: Note. An amended filing must be submitted as a complete replacement of the previously submitted filing. You will need to resubmit the entire form, with all required schedules and attachments, through EFAST2. You cannot submit just the parts of the filing that are being amended. The reason EFAST2 takes this approach is when a form is amended, the existing filing is removed from the system and the amended is added into the system. In the described situation, an amended filing will need to include the audit report for the year being amended. It seems that the auditors need to answer the question whether anything changes in the audit report, if any new audit steps need to be taken in this situation, and if nothing changes in the audit report, that the auditor stands by the original audit report as valid. My bet is the audit report will need to be reissued. Hopefully the audit firm will rely on its previous and only charge a fee for work impacted by the change to a MEP filing.

The triple-stacked match is approach is designed to maximize the match and also keep the SH for the ADP. The caps are designed to limit the amount of the match which is a method to controlling cost. The stated goal is to make some of the match subject to vesting while encouraging greater participation by lower earning employees. At a high level, it seems that the proposed match structure is using approaches that are not designed to achieve the stated goals. In the vernacular, it's like pounding a wooden square peg into a round hole. That being said, if the goal is to fill a round hole with wood, then go for it. You may want to consider other approaches to achieving the stated goals. For example, what is the impact of excluding HCEs from the SHM? What is the outcome of using average benefits testing and a new comparability formula? What is the impact of using or not using top-paid group rules? How many of the HCEs and NHCEs are or are not eligible to make catch-up contributions? Are catch-up contributions eligible for a match? Modeling alternatives using actual census data would provide a clearer picture of the effectiveness of each strategy to achieve the stated goals.

The IRS provided guidance in Notice 2014-35. This was when the Schedule SSA was replaced by Form 8955-SSA and the filing were made through EFAST2, and yes, that was 10 years ago. You will need to file a form for each year that needed to be filed. If the 8955-SSA is late for a year, there is relief from penalties if the 8955-SSA is filed within 30 days after the 5500 under the DFVCP for that year. The late 8955-SSA must be filed on paper and sent to the IRS. On the 8955-SSA, check the special extension box in Part I Box C and enter DFVC for the description. Send the forms, if using mail to: Department of the Treasury Internal Revenue Service Center Ogden, UT 84201-0024 If using a private delivery service, send to: Internal Revenue Submission Processing Center 1973 Rulon White Blvd Ogden, UT 84201

For starters, the vast majority of 401(k) plans are written so that once an employee is eligible to make salary deferrals, then the employee will continue to be able to make salary deferrals. At the end of the day, the plan document governs so you will need to read it carefully to confirm your conclusion. Now let's dive into the deep end of the pool. Plans have three sets of service rules: eligibility, vesting and benefit accrual. While the rules all may talk about hours, computation periods, time periods, breaks in service, rules of parity and such, each set of rules can be different. Further, the applicable rules may be different for each source of contributions (e.g. deferrals, match, profit sharing...) Your question is refers to deferrals and to two of the sets of rules: eligibility and benefit accrual. We assume the employee also has meet any entry date requirements. The employee's having satisfied the eligibility rules in the employee's initial eligibility computation period means the employee is eligible to make deferrals. That eligibility will continue year over year unless the plan has rules that would take away that eligibility. These are the rules of parity and they typically come into play when an employee has when an employee terminates employment and subsequently is rehired. That is not the case here, so the employee remains eligible to make deferrals. A rule that an employee must work 1000 hours to be eligible to receive a contribution is a benefit accrual rule. Typically, benefit accrual rules apply to the match or profit sharing contributions, and do not apply to deferrals. Note, that if the plan has a provision that excludes an employee from based on a classification, the an employee who met the eligibility requirements and was deferring would not be able to defer if the employee's classification changed to an excluded class of employees. An example of this would be a plan that excluded union employees from participation in the plan. If a non-union employee was eligible and deferring in the plan became a union, then that employee would no longer be able to participate. Again, read the plan document, and focus on the rules for eligibility to make deferrals.

@Benefits Plan you commented the employee was improperly excluded from participation. Some additional details would be helpful. When did the employee receive EACA Notice informing them of the terms of the EACA, and notifying them that they were eligible to make deferrals under the plan? What was communicated to the employee about the timing of notifying the plan of an election not to participate, and procedure to opt out? Are there other auto-enrollment features in the plan (e.g. QACA) and, if so, what are they? How much time has passed between the date the employee should have been included and the date it was discovered that the employee was improperly excluded? Is there a match under the plan, and if so what are the provisions related to the match? Plans with automatic enrollment features have some very liberal rules for correcting a missed deferral opportunity that could allow a plan to avoid a QNEC for an MDO up to 9-1/2 months after the close of the plan year in which the employee could have started deferrals. It is possible that there is a path forward that not only satisfies the participant's desire not to have any balance in the plan, and that also could save the employer some of all the cost of the QNEC. Consider the correction methods available under IRS Notice 2024-02 section I. The opening paragraph of this section reads: "Section 350(a) of the SECURE 2.0 Act adds new section 414(cc) to the Code. Section 414(cc) provides that, if certain conditions are satisfied, a plan or arrangement will not fail to be treated as described in section 401(a), 403(b), 408, or 457(b) solely by reason of a corrected reasonable administrative error made (1) in implementing an automatic enrollment or automatic escalation feature with respect to an eligible employee (or an affirmative election made by an eligible employee covered by such a feature), or (2) by failing to afford an eligible employee the opportunity to make an affirmative election because the employee was improperly excluded from the plan (implementation error). " The concept of an "implementation error" should now be considered when addressing MDOs in plans with automatic enrollment.

Personally, I think that any 5500 filing made by 10 1/2 months after plan year end should be exempt from penalties without anyone having to file for an extension. There are no taxes paid with the form and the filing for an extension has no filing actions other than its due date. If a 5500 filing is received after the 10 1/2 months date, then the penalties can be computed using the existing 7 month due date. (This could avoid needing an act of Congress to implement the change.) Bottom line... no extension to file, no form to maintain, eliminate a deadline, save time and cost.

@Mark G if you follow your proposed strategy, and the proceeds from the sale of the old car are less than the price pay for the new car, then the net result of the strategy is a taxable withdrawal from the IRA. For example, assume you have $500,000 in your IRA and take a distribution of $50,000 to buy the new car. You now have $450,000 left in the IRA. You sell the old car for $20,000 and deposit the $20,000 in cash into the IRA within 60 days as a rollover. You now have $470,000 in the IRA and a net taxable distribution of $30,000. Do you happen to be taking Social Security payments and not have other taxable income that triggers paying taxes on the Social Security payments? If so, then the taxable distribution could trigger needing to pay taxes on the Social Security payments. You do not mention what your rate of return is within the IRA. If your rate of return within the IRA (adjusted for your marginal tax rate you would pay on a withdrawal) is greater than the interest rate you will pay on a car loan, then you are better off taking out the car loan and making the payments over time from your IRA distributions. If you or your spouse are still working, you have the option to contribute funds received from the sale of the old car. If you do this, then consider making the contributions to a Roth IRA to keep the contribution and future income from being taxable later (after 5 years) and from being included in the calculation of your required minimum distributions when you reach age 73. There a lot of variables and assumptions that go into comparing the different strategies. There are no guarantees that all of your assumptions will accurate, and some strategies will carry a higher risk of unintentionally creating unwanted tax consequences. If you are adamant about taking the DIY approach, get the best information you can about the price you will pay for the new car, the proceeds you can reasonably expect from the sale of the old car, the likely terms of taking a car loan, any of your and your spouse's expected earnings from employment, a reasonable estimate of the investment performance of your IRA over the next 5 to 7 years, your marginal tax rates, start dates and amounts of any Social Security payments to you and your spouse, and any other factors. Write them all down, and do the math. If you think you are good to go, then ask someone you know and trust or ask a professional who is financially savvy to review your work and help you assess the risks. May you find a clear path forward.