Paul I

Here is a fact sheet that will give you details about how abandoned plans are handled. It includes information on how to contact the Abandoned Plan Program at the DOL. https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/abandoned-individual-account-plan They determine if the plan is abandoned. If it is abandoned, they arrange for a QTA to wind down the plan.

Generally, there is nothing wrong with your memory! There some nuances, though, that are worth checking. For example, if there is a key employee in the union, then the union employees are included in the required aggregation group for determining if the plan is top heavy. Otherwise, the union employees may be permissively aggregated with the nonunion employees when determining if the plan is top heavy. (The permissively aggregated group would need to pass coverage and nondiscrimination tests.) If the union employees are included in the determination of whether the plan is top heavy and the plan is top heavy, the union employees do not have to receive a top heavy contribution. There are some other fun things to consider such as the union employees are not subject to the LTPT rules, or whether the plan as actually has been subject to good faith bargaining.

You may want to point them to this law suit where the Department of Labor stepped in to recover the Davis-Bacon contributions: https://www.planadviser.com/government-contractor-accused-of-missing-401k-payments/ If anyone were to bring your client's situation to the attention of the DOL, the DOL very likely would intervene. (Note that the suit later was dropped by the DOL after the past due contributions plus earnings were paid.)

Generally, I would say an electronic-only requirement would not be onerous for the vast majority of practitioners. Most already use EFTPS for transmitting taxes and Pay.Gov for other types of payments.

A very large portion of business-to-business transactions are electronic payments. This differs from plan participants we serve. The FDIC provides a survey of unbanked or underbanked households https://www.fdic.gov/household-survey which has some surprising numbers. For example, in Mississippi 9.4% of households are unbanked. It can be challenging to make payments to this segment of the population. Many within this segment use non-bank money orders, check cashing services or non-bank money transfer services. As an industry, we need to be mindful of the needs of the populations we serve.

I, too, am very conservative when it comes to using mistake-of-fact. This situation technically could be seen as not being an operational error since payroll ran on schedule, and the 360 file arrived on the usual day. Is there precedent where where a 360 file containing deferral elections was processed after payroll ran? If yes, were any adjustments made to payroll to recognize the order of processing was not post the 360 file elections before running payroll? The answers could color whether there was an operational error. If there is no precedent, is there documentation that payroll was instructed not to run until after the 360 file was posted? If yes, this would reinforce the point of view that an operational error occurred. Certainly, any communications to participants that explained the change/change back procedure for excluding the bonus would support the notion that an operational error occurred. This argument would be strengthened if the communication specified the dates by which the elections would need to be made in order for the elections to be in effect when the bonuses were payable. Notably, this is not a situation where there was a violation of a plan limit. A violation of a plan limit would allow the amounts to be considered excess allocations. Excess allocations are refundable (with earnings) and are not considered in compliance testing. If these are not excess allocations, then there is not a prescribed EPCRS list of steps to correct the problem other than to file a VCP with a proposed cure (old school). If there is no operational error, then the participants should live with the consequences. If there is an operational error and there is ambiguity about how to correct, then given the number of people involved it may make sense to file a VCP. But that takes time and payroll is going to run again and again before there is any response to the VCP. I agree that if payroll runs without adjusting the employees' YTD amounts, there will be additional layers of errors upon errors. Almost every payroll has a correction process to rerun payrolls to correct prior payrolls. The questions and concerns should be presented to the payroll company on how they would go about fixing the issue. So what would I consider doing in this situation? I would confirm there is an operational error (i.e., there is not a good argument it was not an operational error). I would calculate amounts that should not have been funded the plan, remove the amounts from the affected participants' accounts and hold the amounts in a separate account inside the trust to be used against the next deferral deposit(s) and forfeit any positive earnings or fund negative earnings , have payroll adjust their records to reflect what should have happened, have all related payroll taxes paid asap, monitor the next few payrolls especially for the affected participants' paychecks, and review the year-end payroll reports to confirm they report the corrected amounts, and file a VCP asking for a blessing after the fact. Hopefully this helps breakdown the many issues involved. There are a lot of moving parts, likely there are some weak points in this process, and this is not advice to anyone on how to proceed. Obviously, payroll has to cooperate or this will fail. If payroll refuses to be part of the solution, then they are part of the problem and that needs to be fixed, too.

Are you asking if the Employer chooses to have a discretionary match, then is the Employer able to specify the definition of Plan Compensation each year when instructing the discretionary match? If this is your question, and the plan is using a pre-approved plan document, the very likely the answer is no. Most pre-approved plans have a set of provisions applicable to the definition of Plan Compensation depending upon the type of contribution (elective deferrals, match, nonelective employer...). These provisions will control what compensation is considered in the calculation of the match, the time period for determining the compensation, if pre-participation compensation is included, and any other provisions related compensation.

From the standpoint of what a recordkeeper needs to know about a participant's gender for the recordkeeper to provide plan accounting services, they do not need to know. From the standpoint of interacting with the participant in delivering notices, sending out plan-related correspondence, emailing or having conversations with a participant, acknowledging the participant's gender identity helps build a rapport with the participant. Gender identity goes beyond the use of pronouns and includes things like Mr., Mrs., Miss, Ms. or Mx. as titles or honorifics typically intended to show respect for the individual.

It is likely @Bri 's boss was making the comment long before the EBSA started to be used. The name of the group at the time ERISA was enacted was the "Pension and Welfare Benefits Program". In January 1986, the group became the Pension and Welfare Benefits Administration and used the acronym PWBA. It was February 2003 when the group became the Employee Benefits Security Administration (EBSA). Did someone just whisper "OK Boomer"?

Short answer... Yes. Also note deferrals that exceed 6% of comp can be matched. There is a lot of flexibility in how to structure a match. The more creative the formula, the greater need to test for compliance. If you would like to see what could be called the ultimate match formula, type "triple stack match" in the search box at the top this BL page.

For sole proprietorships and partnerships, the owners are allowed to make deferrals against any draw they take from the business. All of the income from self-employment and deferrals are considered to be determined as of year. S-corp shareholders typically get W-2 income and S-corp dividends. The S-corp dividends are not considered compensation for purposes of the plan. Conceivably, the IRS could say that if payments made during the year that were not from amounts subject to taxation when paid, then salary deferrals cannot be taken from those payments. I haven't seen this situation, so this is just my thoughts.

For clarity, the formula says 133 1/3% of the first 3% of contributed eligible compensation. I does not say 133 1/3% of 100% of compensation It is permissible to have a match rate on elective deferrals where the match rate exceeds 100%. There are plans that go up to a 200% match on deferrals up to 6% of compensation. If this match formula is intended to be a Safe Harbor Match, then the match must be applied to deferrals that do not exceed 6% of compensation. The plan sponsor even may think it is too good to be true.

There are some instances in the instructions for the 5500 and the 5500-EZ that caution the filer not to reveal a Social Security Number. For example, this comes up in the instructions for the Schedule DCG where it says: "Do not use an SSN in lieu of an EIN. Because of privacy concerns, the inclusion of an SSN or any portion thereof on this line may result in the rejection of the filing." On the Schedule H, there is an instruction that says "Schedule H and its contents are open to public inspection and may be published on the Internet. The inclusion of a Social Security number, or any portion thereof, at line 3c may result in the rejection of the filing. For privacy reasons, a Social Security number should never be shown on line 3c." On the Schedule MEP, an instruction says "Enter the EIN of each participating employer. Do not enter an SSN in lieu of an EIN. The Schedule MEP is open to public inspection, and the contents are public information and are subject to publication on the Internet. Because of privacy concerns, the inclusion of an SSN or any portion thereof on a Schedule MEP may result in the rejection of the filing." You haven't missed the boat.

Most systems allow you to create multiple employer accounts and assign a different vesting to each account. This also is not uncommon where a match has a different vesting schedule than a profit sharing contribution, or a participating employer has a different vesting schedule from the plan sponsor, or union members have a different vesting schedule from non-union participants, or the plan changed vesting schedules and had to grandfather existing participants who were already partially vested.... I think you get the picture. This should not be difficult to accommodate.

Note that Q3 in the DOL FAQs, the process is first file the form and second pay the penalty. Completing the filing is no guarantee that the IRS will give a complete pass on an examination, but they do take into consideration that the form was filed and the plan is acting in good faith.

For clarity, can we assume that this is for a 5500 or 5500-SF? (Form 5500-EZs have to use the IRS late filer program.) The DFVCP Q&As https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/dfvcp.pdf say: Q2. Who is eligible to participate in the DFVCP? Plan administrators are eligible to pay reduced civil penalties under the program if the required filings under the DFVCP are made prior to the date on which the administrator is notified in writing by the Department of Labor (Department) of a failure to file a timely annual report under Title I of the Employee Retirement Security Act of 1974 (ERISA) Note that the DFVCP is available unless the DOL has sent the plan a notice of a failure to file. If the information is available to make a complete filing, then it is worth filing under the DFVCP asap to get ahead of getting an official notice from the IRS. However this develops, one thing is that is certain is the plan ultimately will have to file the 5500 for the that is late.

Consider whether any of the following comments and observations are applicable to this situation: There are regulations addressing what is or is not a "mistake of fact", and this term very likely is not applicable here. Contributions are explicitly defined in plan documents and they are are funded or accrued, and there is no such thing as a "pre-funded contribution" unless it has been defined in the plan document. If there are allocation conditions that are not determinable at the time the deposits are made, then the plan would also need to address how amounts that do meet the allocation conditions could be removed from an account. If the amounts are not uniform (e.g., @AlbanyConsultant 's plan that puts in 2% of pay each pay period) then there should be evidence that the disparity in amounts is nondiscriminatory. If the profit sharing account is subject to vesting, then the plan should address if and when the pre-funded amounts could be included in the calculation of the participant's vested benefit (keeping in mind that vesting has its own set of rules for counting service). If the pre-funded amounts are as @0AMatt comments "in excess of a minimum benefit that we calculate", this does not necessarily make part of the pre-funded amounts excess allocations if more or all of the pre-funded amounts do not violate any regulatory limits or nondiscrimination tests. If the plan does not set a non-discretionary limit on the allocations and there are no violations, then the removal of the amounts from a participant's would be discretionary and likely prohibited. The should specify how to determine the amounts to be removed. There are many aspects of this that can result in operational errors, which leads to the question of why does the client wish to do this? A common motivation is the participant wants to capture the investment income on the contribution (optimistically expecting a positive return every year). The participant likely is a fan of the Fear and Green Index: https://www.cnn.com/markets/fear-and-greed

For the record, there are babies born in the US who are named: Erisa https://www.momjunction.com/baby-names/erisa/#origin-meaning-and-history-of-erisa About 6 or 7 babies per million babies born each year in the US are named Erisa! Apparently none of them were named in honor of the Employee Retirement Income Security Act of 1974

The plan most likely was a pre-approved plan and should have been restated by now for Cycle 3. (It is possible, but very unlikely, that the plan was an individually designed plan that was structured with an Adoption Agreement and a Basic Plan Document.) The instructions for a Form 5500-EZ say to answer the compliance questions "enter the date of the most recent favorable Opinion Letter issued by the IRS and the Opinion Letter serial number listed on the letter". Hopefully the plan was restated and all is good. If the plan was not restated, then inform the client of the issue (they need an updated document). If the client asks you to provide the document, be sure to charge the client for all of your services.

A plan provision like @EBP notes a provision would work if the true-up is run for everyone at the same time. If the current plan provision specifies that the true up is done at or after year end, then it would require an amendment to permit it to be calculated earlier. The problem comes in with calculating the true up early only when a participant reaches the comp limit. Here are some issues: As @BTG and @Artie M note is the early true up likely it will be discriminatory. The true up would need to be calculated after each payroll in which a participant reached the limit. A procedure would have to be in place to address the situation where a participant reaches the limit in a pay period, but a subsequent payroll adjustment would drop the participant's year-to-date comp below the limit. The plan should not have any allocation conditions that would have precluded a participant from getting a true up come plan year end (such as a last-day rule or an minimum hours requirement.) This is the type of plan "enhancement" that leads to operational errors, and at some point in time in the future, successor people in HR, payroll and at the TPA are asking who decided that this was a good idea?

See if this meets your need: https://www.govinfo.gov/content/pkg/COMPS-896/pdf/COMPS-896.pdf

These are all excellent questions that every plan should think about when adopting self-certification because the plan documents, plan administrative procedures and service provider agreements all may have conflicting legacy language. Under self-certification, the participant gets in trouble for lying or for not following the rules - unless for plan administrator happens to have knowledge that the hardship is not valid. The plan administrator is not expected to monitor each hardship. Self-certification is not limited to the SH reasons, but best practice would be for all hardship reasons and parameters applicable to a facts & circumstances conditions to be in writing and readily available to a participant. It also seems that best practice would be to limit the number of hardships that can be taken within a fixed time period, and any request exceeding limit would a review by a plan representative or service provider includes the review in the service agreement.

If you look at I.R.C. § 416(c)(2)(B) Special Rule Where Maximum Contribution Less Than 3 Percent, it says: "(i) In general The percentage referred to in subparagraph (A) for any year shall not exceed the percentage at which contributions are made (or required to be made) under the plan for the year for the key employee for whom such percentage is the highest for the year." There is no mention anywhere of recalculating the top heavy percentage to take into account the top heavy contribution.

The SHM is based on deferrals up to 6%. The Basic SHM is 100% match on the first 3% deferred plus 50% match on the next 2%. The match rate is not limited to 100%. The formula of 100% match on the first 3% deferred plus 50% match on the next 3% works. The client may want to consider alternatives like: 200% match on the first 6% deferred. 200% match on the first 2% deferred plus 150% on the 2% deferred plus 100% on the next 2% deferred. While these may not be practical or affordable for many clients, discussing these possibilities can lead a client to have a better understanding of their demographics and matching obligations.

The participant turned age 73 in 2024. The amount of the RMD for 2024 is based on the 12/31/2023 account balance using the RMD factor for age 73. The Required Beginning Date RBD for this RMD is 4/1/2025. The participant turns age 74 in 2025. The amount of the RMD for 2025 is based on the 12/31/2024 account balance using the RMD factor for age 74. The RBD for this RMD is 12/31/2025.