Artie M

What they are saying is that the answer to your query depends on the specific drafting of the plan eligibility language. "Six months of service with 500 hours consecutive" can be interpreted in at least two ways.

Like @rocknrolls2 says get that SPD, and then review the SPD for what the contributions were but there will not be enough detail in there to get a precise calculation. I recommend the SPD so you can review the claims procedures. Make a formal written claim for benefits and follow the rules in those claims procedures. If there is no movement on the claim, contact the DOL EBSA by phone or I think you can file a complaint online at AskEBSA. Also contact the IRS. Maybe contact the taxpayer advocate service and they can direct you to the right office. You could contact an attorney, but this will cost you dollars, as most are not going look at this pro-bono... you are an HCE... or on contingency. Personally, I only point people to attorneys when the amount lost is substantial, the DOL or IRS don't move the needle, or employer is retaliating for making the claim, etc. Sometimes a delay is not bad. For example, under the missed deferral opportunity rules, where there is automatic enrollment, sometimes the required missed deferral contribution is lower if the error is corrected shortly after notice (whereas it goes up if they drag their feet).

Beware of AI is the first lesson here. I have found that AI will often use "intuitive" thought as opposed to actually looking at guidance or authority. Here, it likely responded simply with "taxable compensation ---> must be W-2 wages". First, any contribution under a qualified plan will be deductible by employer upon contribution. This is the whole concept behind qualified plans.... meet the rules and get the accelerated deduction. Moreso here because the Roth employer contribution (match and nonelective) is immediately taxable. Then, Notice 2024-2 says that it is other plan-based reporting under 1099-R. Needs to hit income this year and not W-2 because they are not wages for withholding or FICA. Folks who receive these Roth match/nonelectives should be told that they may wish to increase their withholding on their normal wages or make estimated tax payments.

you need to lay out the facts better. if there was a 401k plan termination, they did not have a unilateral right to move the distribution into a new plan. There would have had to have been a plan merger, not a plan termination. The only way we can assist is you have to have the facts. Also, you need to try to be precise in the terms you use of at least provide more information in the way you describe things... e.g., some will say rollover, when it is a transfer, etc. etc. etc.

Read up on "missed deferral opportunities"...there's lots of stuff on the internet concerning this. You indicate not only failure to enroll but also autoenrollment issues. This could affect correction methodology. You might need to know the ADP for HCEs under the Plan for the affected years. At a minimum, you should get a copy of the plan's summary plan description for the affected years.

On the way out the door but initially, have the executor/administrator of the estate provide you a copy of the trust instrument and perhaps a legal opinion indicating whether the trust was formed as a see-through or conduit trust or an accumulation trust. If it meets the rules as a conduit trust, you might be able to treat the underlying beneficiaries as the beneficiaries of the 401k. Usually, the key is ... are all the beneficiaries of the trust "individuals" without any "ghost" beneficiaries (e.g., no non-individuals, no remote beneficiaries, issues, heirs, charities, powers to appoint charities)? Of course, this assumes the plan's terms don't prohibit doing this. This is just general rules, I am sure there are folks on this board that know the details better than I.

I thought a terminating defined benefit plan could send actual dollars to the PBGC. I just looked at the website and the Overview page for the Missing Participants Program (https://www.pbgc.gov/employers-practitioners/help-finding-missing-participants) states: I have not had to look at this in a while so perhaps the website has not been updated.

Just in case, I agree with @David D's response as long as the "contributions" are solely after-tax contributions and does not include any earnings on those after-tax amounts. If the "contributions" include earnings, those earnings (and just the earnings) are taxable and reported in Box 2A. Also agree that Code G is used, but sometimes also Code 2 or 7 depending on plan/admin system (and age, of course).

I agree with the timing as relayed by @EBECatty. Though I have relayed my views of the required timing under the tax laws, I have a couple of clients who have been advised by their accountants that it is common practice to take the compensation into income not necessarily on the day that the option is exercised but in the same quarter it is exercised. Under the tax rules, the withholding, etc. should occur at or very near the exercise date (paid or constructively paid). The accountants noted that employers have some administration issues such as batching equity comp in payroll cycles, waiting for broker confirmations or fair market valuations, or their equity systems or stock agents' systems lag. It is kind of an "as soon as administratively practicable" attitude. To delay income inclusion, it seems there should be some impediment to immediate inclusion (e.g., 31.3121v2 allows some flexibility if the amounts are not reasonably ascertainable). Perhaps the more reasonable argument may be a stock agents' systems showing that the stock is not delivered to or made available to the participant until later so they actually don't have receipt of the optioned stock. I know that the IRS has informally stated (where I can't recall) that some minor timing differences may not be an issue if the income is included in the correct year and withholding deposits/payments are timely based on when the wages are treated as paid. Also, under 1.415c-2e, compensation is to be taken into account when it is actually paid or made available (i,.e., constructively received). As stated above, option income becomes taxable wages at exercise. Legal rule... include at exercise. Real world...maybe short delay Perhaps you can fall back on the Plan administrator has the power to interpret the terms of the plan provisions (assume your plan contains that) as long as it is applied consistently. I don't like taking that position because using this provision really means the Plan admin would be changing the definitions from W-2 wages paid or constructively received to W-2 wages as reported. Item 2 to me is answered by item 1 response. Seems like 50% QNEC + full match + earnings (unless Plan or IRS limits kick in).

I guess this is an operational failure because the distribution did involve a failure to follow the written terms of the plan document (i.e., distribution made when not eligible for the distribution). As you state, the corrective action is to return the amount of the distribution plus earnings to the plan. The employer is required to notify the participant that the distribution is not eligible for rollover reporting on a 1099R (so Code 1 or perhaps 7) and presumably requests the return of the amount to the plan. A late 1099R likely should be issued (there was a plan distribution) but there may be penalties for issuing it late. Note, the employee is not required to return the amount (at least under EPCRS). If they don't, the employer has to make a contribution to the plan in the amount of the distribution plus earnings. If this is an issue, the employer may wish to file under VCP to ensure the employee does not get a double dip (VCP would be used to put forth a proposal of what will be used with the employer contribution... for example, to be allocated to other participants or what). At least state that the unreimbursed distribution was an "advance payment" of their benefit. Based on your characterization of the facts, it appears that the participant accessed funds without Plan authorization so the transaction appears to involve a fiduciary breach and possible prohibited transaction. This person appears to be a fiduciary, even if not named one, because they have the functional ability to make discretionary distributions under the plan. As a fiduciary, the Plan may be able to sue them as fiduciaries are personally liable to make good to the plan any losses resulting from their breaches. If the DOL gets involved, there could even be criminal prosecution (or state law violations of embezzlement laws). If the participant improperly accessed funds there likely is a prohibited transaction under Section 4975, specifically an unauthorized transfer of plan assets for the participant’s benefit (i.e., self-dealing). This could be treated as a deemed distribution plus a prohibited transaction with an excise tax (15% initially and 100% if not corrected within each taxable period not corrected). Also, for the IRA, loss of IRA status. There is also possible plan asset control failure by the Plan fiduciaries. The Plan sponsor and the Plan administrator should review the distribution controls and determine how the participant could do this. Recordkeeper error? Admin approval failure? Participant circumvention? All of the above? Then, document the facts, corrections and methodology of correct and finally add some internal control improvements to ensure this cannot occur again. This violation does not appear to fall under VFCP. All of the above should be thoroughly documented in the event of an IRS and/or DOL audit(s). Just running through thoughts as they come to me....

1.401(a)(4)-1(c)(10) A plan does not satisfy the nondiscriminatory amount requirement of paragraph (b)(2) of this section unless it satisfies § 1.401(a)(4)-11(c) with respect to the manner in which employees vest in their accrued benefits. 1.401(4)-11(c), A plan satisfies this paragraph (c) if the manner in which employees vest in their accrued benefits under the plan does not discriminate in favor of HCEs. Whether the manner in which employees vest in their accrued benefits under a plan discriminates in favor of HCEs is determined under this paragraph (c) based on all of the relevant facts and circumstances, taking into account any relevant provisions of sections 401(a)(5)(E), 411(a)(10), 411(d)(1), 411(d)(2), 411(d)(3), 411(e), and 420(c)(2), and taking into account any plan provisions that affect the nonforfeitability of employees' accrued benefits (e.g., plan provisions regarding suspension of benefits permitted under section 411(a)(3)(B)), other than the method of crediting years of service for purposes of applying the vesting schedule provided in the plan. Seems like the client needs to show how having these two different vesting schedules doesn't favor their HCEs. Note that the IRS position is that "differences in vesting are not discriminatory per se" RR 74-166 (dealt with DB plans not DC plans).

I don't have time to look for authorities but I believe the person would be included for testing purposes as an NHCE that does not benefit. They receive no W-2 Plan comp and have no deferrals. All the nonresident aliens with no US source... the other employees of the EU entity... would be excluded for all purposes TR 1.410(b)-6(c).

New Jersey is very odd. Back in 2021 one of my clients asked us to assist one of its employees (someone pretty high up on the food chain) who had deferred over 90% of their income into the company's nonqualified deferred comp plans. This employee was a NJ resident. We are located in the South and normally do not provide any services with regard to NJ so I contacted a friend, tax partner in D.C who is barred in NJ, to assist. The client had treated the deferred comp as required under the IRC, which, we found did not align with the NJ rules (we didn't advise on the original set up). The employee had paid the increased NJ tax based on 2019 601B and was assessed a tax, penalties and interest of over $40K and asked the client if they could provide assistance with at least a possible waiver of the penalty and interest. Though we formulated arguments to assist the employee, we were not optimistic based on our reading of the NJ law. We in fact were researching the statute of limitations as to how far back could they go with this. After "chasing this rabbit" as the client phrased it, and working with the programmers to change the payroll set up, NJ ended up conceding that the deferrals weren't subject to NJ state tax and refunded the client all of the $40K plus interest. None of us understood the NJ reversal but of course did not argue.

A--Code 2 (Early distribution, exception applies), G (Direct Rollover) B--Code 2 (Early distribution, exception applies), G (Direct Rollover) C--Code 7 (Normal distribution), G (Direct Rollover) Box 1--$10,000 Box 2a--$10,000 Box 4--$0

We still give the notice even using the Brief Exclusion rule. I did not go back and look for authority...not time right now... perhaps it is just a best practice principle. I mean how does a plan sponsor provide an excluded participant an "opportunity" to make up the missed contributions without providing them notice that something happened.