"The court awarded my client a percentage share of her ex-husband's 401(k) account. It turns out that abut 90% of his 401(k) are in a Roth funds. I am working on the QDRO. She plans to take a taxable distribution since she needs the money now. If the distribution was coming from a traditional pre-tax 401(k) it would be income taxable to her and the Plan would withhold 20% for Federal taxes, and there would be no 10% premature withdrawal penalty under IRC 72(t)(2)(C). Since it's a Roth account, will she have to pay income taxes on a direct distribution, or will it be tax free? 72(t)(C) provides that an exception to the imposition of the 10% penalty under 72(t)(1) includes: '(C)Payments to alternate payees pursuant to qualified domestic relations orders: Any distribution to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)(1)).' So one would surmise that the 10% penalty will not apply to the Roth distribution. I guess she could take a loan or make a hardship withdrawals if she is disabled, or she can just wait until age 59-1/2. What do you think? Any creative ideas?"

"Company A with a 401(k) plan with a nondiscretionary SH is being acquired in a stock sale this coming week by company B which wants A to terminate their 401(k) plan B's lawyer insists that the plan can be terminated right away before the sale date but according to this IRS webpage ... 60 to 90 days notice of plan termination is required ... I have had another situation where an actuary for a DB plan not covered by the PBGC and where benefit accruals had already been frozen did a retroactive termination (ie. doing the termination paperwork in February, 2023 with a date of termination of June 30, 2022) believing that the 60-90 day notice rule only applied to PBGC-covered plans since that was in the PBGCs website instructions for terminating a DB plan. Their argument was that since the DB plan here was not subject to PBGC coverage it was not subject to the 60-90 notice requirement."

"Let's say a plan charges a distribution fee of $100. All terminee account balances under $100 are to be forfeited. I'm curious if there's a trend to actually use a higher forfeit de minimis amount, say for those balances that are just so minimal yet over $100. For instance, if the account balance is under $120, rather than create IRA's of $0-$20?"

"We have a Cash Balance Plan. Under 401(a)(26), we must have 50 participants. We have a cycle where annual contributions are set for 3 years. Assume we have 51 participants in year 1, all receiving meaningful accruals. If we have 3 participants retire in year 2, putting us at 48 participants, how do we correct since we have fallen below the minimum participation threshold? Added fact: all participants are HCEs."

"Under Code section 162 (incorporated by reference into 404), a corporation cannot deduct expenses of another corporation, even if the two are part of the same controlled group. So for example, a parent company cannot take deductions for contributions it makes to its 401(k) plan on behalf of employees of a subsidiary. There is an exception in 404(g)(2) in the case of termination liability that permits a corporation to deduct termination liability paid on behalf of another member of the controlled group. I have what I think is a simple question, but am going around and around on how it should be resolved. Assume in all cases the the party wanting to take a deduction actually will actually pay the expense.

"Corporation A wants to sell Corporation B to Corporation C, which is unrelated. Corporation B has both a 401(k) plan and a defined benefit plan. Corporation C does not want to take over either plan. So before the transaction, Corporation A takes over both plans, assuming all the liabilities. The 401(k) plan is terminated immediately before the transaction, but not all liabilities have been paid at the time of the transaction. Rather than holding up the transaction for the 60 days until the DB plan can be terminated, a resolution is adopted to terminate the DB plan before the transaction, but it is terminated shortly after the transaction.

"It takes a little while to work out all the liabilities under either plan. (E.g., there is a liability for employer matching contributions under the 401(k) plan.) So contributions must be made after the transaction to cover liabilities from before the transaction. In the case of the defined benefit plan, can Corporation A take a deduction if it pays the termination liability, because at the time the liability was incurred, Corporations A and B were part of the same controlled group? Or because at the time of the termination Corporation A was the sponsor of the plan and thus liable for the termination liability? Or is it barred from doing so because the employees covered by the plan were all Corporation B employees and the termination (and thus the liability) occurred only after Corporation B ceased to be part of the controlled group? Conversely, is Corporation B barred from taking a deduction if it pays the liability because it is no longer a sponsor of the plan at the time of the contribution?

"Who, if anyone, can take a tax deduction for the contribution to the 401(k)? Is Corporation A barred from taking a tax deduction if it makes the contribution because the liability for it relates to employees of a different corporation? Conversely, is Corporation B barred from taking a tax deduction if it makes the contribution because it is no longer a sponsor of the plan in question?

"And does the answer as to the 401(k) change if Corporation A terminates it only after the transaction?"

"This is certainly a very welcome change. I assume 'Beginning on Jan. 1, 2024' means ANY form for any plan year calendar 2023 or fiscal year ending in late 2023. Thank you"

"So just a little background:

1. There's a total of 37 eligible participants
2. 4 are owners (including owners through family attribution)
3. 19 HCE based on compensation

I know you can limit the HCE to the Top 20%, and all owners are considered HCE. So in this case, regardless of the compensation of the owners, would we use them and then the next 4 highest to create the 8? Or do you use the highest 8, and then add any owners who are not included (so you would be over 8)?"