"If there was an ADP failure and the TPA refunded the refund amount prior to 2½ months after year end but didn't refund the earnings until 3 months after year end, do you have to pay excise tax on the earning portion that was not distributed prior to 2½ months or is excise tax only due on the refund amount?"

"Is it possible for a plan to provide for both the 30 day retro initial election window and for those who do not make a time election also offer an extended enrollment period for up to, say, an additional 30 days to initially enroll on a prospective basis? Put another way, the plan would provide a 60 day initial enrolment window with those diligent EEs electing to enroll within 30 days of DOH retro coverage to DOH. The rules do not say if this is allowed or if use of the retro option excludes the prospective option. Of course, any such provision would be applicable to all new hires so there should be no discrimination issues involved."

"We've been asked to provide testing services for a payroll company bundled plan. The payroll company did not perform the ADP/ACP tests for 2022. I don't recall why it was not done or why they would not agree to do it now. So we agree do it for a healthy fee (they are a client for other purposes, just not TPA.) Testing fails and refunds are due for ADP and ACP, not 401(a) on the match.) Now that is April 2024 and this is a 2022 plan year. I believe the last I read was this can be corrected without risk of disqualification by end of second year. I will tell the payroll company to do the earnings calculation and hopefully their tax advisors will do the 5330. Am I missing anything?"

"If a pre-enactment (grandfathered) plan without automatic enrollment now chooses to add automatic enrollment, does it have to be an EACA and comply with the SECURE 2.0 rules? Or can the plan add a plain vanilla ACA without any problem?"

"Quote below is from the 401k plan fix it guide. Plan failed ADP test 2 years ago. Seems to still be in a self correction program window of 3 years after the first year of correction. Under SCP below, 1st option is to bring up the NHCE ADP. The 2nd method would be far cheaper to just determine the correction amount (w/earnings) and then contribute that equivalent amt to NHCE's. However....all HCE's that are due a return of contributions have already terminated and taken full distributions. I'm thinking they will need to be sent letters detailing the amount of their distributions/rollovers that were not considered eligible rollovers. Preference would be to find an allowable correction that does not require a qnec to NHCE's.

Self-Correction Program: The EPCRS revenue procedure defines this as an operational error. Employer G determined the plan had established practices and procedures designed to keep it compliant and that the mistake wasn't significant. Correction could involve one of two methods:

• G could make QNECs to the NHCEs to raise the ADP to a percentage that would enable the plan to pass the test.
  • In this example, each NHCE would receive a QNEC equal to 1% of the employee’s compensation.
  • G must make these contributions for each eligible NHCE (if the contribution doesn't cause the 415 limit to be exceeded).
• Under the second method, the plan could use the one-to-one correction method.
  • Excess contribution amounts are determined.
  • The amount is assigned to HCEs and adjusted for earnings and this total amount is distributed to the HCEs
  • An amount equal to the distributed amount is contributed to the plan and allocated based on compensation among the eligible NHCEs."

"Spouse owned a Sole Proprietor' business with her name as the business name and created a Solo401k through Vanguard in 2019.

1. In CY2021, her Solo401k balance exceeded the $250k threshold (due to rolling funds into the plan), so we filed (CY2021) 5500-ez with the IRS using her 'Sole Proprietor' name and EIN in ~July 2022.
2. On 1/1/2022, spouse changed the business structure from 'Sole Proprietor' to an LLC (filing as an S-Corp) with a different name (call it XYZ LLC) and a new EIN where she has several (1099) independent contractors who she pays (not employees).
3. In ~July 2023 (we were late), we reached out to Vanguard to discuss what we needed to do related to this change in business structure and completed forms for 'restating the plan' with the new 'XYZ LLC' name and EIN number (filed with Vanguard in July 2023).
   • With restating the plan, would Vanguard have notified the IRS that our business structure (name and EIN) have changed?
4. We filed (CY2022) 5500-ez with the IRS using her 'XYZ LLC' name and EIN in ~July 2023.

QUESTIONS

1. Were/are we allowed to continue using the same 'Solo 401k' when she changed her business structure (and name) and we restated the plan? Or should we have closed out the previous (Sole Prop) Solo401k through Vanguard, filed a 5500-ez closing it out and then opened up a new (XYZ LLC) Solo401k under the new business name?
2. I am now wondering how the IRS would know that we changed the business name and EIN? Will/would they consider the Sole Prop. to not have filed a 5500-ez for CY2022 and we'd be subject to the severe penalties that go with not filing a 5500-ez form?
3. If there is a problem here, given our situation, what do you recommend as next steps?"

"I read a post (can't find it again') where someone said that a client received a letter from the IRS with a large penalty and their solution was:

• file an amended return
• check the 'DFVC Program' box
• do the DFVC filing
• and then write the IRS and request an abatement because you fully complied with DFVC.

Is that what people are doing ... successfully?"

"If a participant has a OFAC restriction can they continue contribution? how is the contribution affected?"

"There was a message in my email inbox this morning (sent after hours on Friday) from an institutional recordkeeper notifying TPAs that the recordkeeper will apply the $7000 increased cash-out limit starting July 2024. The message in the email to TPAs essentially was the recordkeeper was going to apply this to all cash outs, but no rush, you have until 2026 to amend the plans. The message in the communication to the TPA's clients was the recordkeeper was going to apply this to all cash outs, and you (the client) will need to update any participant communications and amend your plan document. If you use the recordkeeper's pre-approved document, no worries, an amendment will be provided asap. If you do not use the recordkeeper's pre-approved document, then you should notify your document provider so the change can be made and appropriate notice is provided to your plan participants. It seems this recordkeeper is trying to put TPAs and document providers between a rock and a hard place.

• There is no discussion of amending now versus amending later.
• There is no suggestion of plan sponsor discretion.
• There is no opt-out offered.
• There is a sense of urgency communicated to plan sponsors that is not communicated to TPAs.

What is your opinion of a recordkeeper making a unilateral decision applicable to all of the plans they service?"

"A defined benefit plan is being terminated. The only participant, I will call Mr. Bill, received the maximum payout allowable and there are excess assets. There is no possibility of a qualified replacement plan so our only option is to revert the excess back to the Corporation. Now we find out that the Corporation no longer exists. My understanding is that there was a divorce and the ex was awarded ownership of the Corporation. The only employee of the corporation and the sole Participant in the Plan was Mr. Bill. He terminated employment with the corporation that the ex took over and started a new company. Now we found out that the ex closed out the corporation. Any suggestions on what to do with the excess assets."

"Company X sells health coverage to employer consumers and would like to partner with company Y, which is not engaged in the sale of health plan or other benefits/insurance products, to incentivize employer consumers to purchase a group health policy from Company X. Essentially, if employers purchase a group health policy, they would receive a nominal discount on services from Company Y. I am familiar with incentives in other contexts, but this is new. Curious about limitations regarding this kind of promotion and incentive program."