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The spouse and adult children if they have 500+ hours in 2024 and 2025 (but <1,000) and are age 21, they are LTPT for 2026. The doctor owner wants them to be able to fund maximum elective deferrals as LTPT employees. He knows they will not receive any employer contribution. I just want to make sure these LTPT family members do not come into play for testing whatsoever with this cross-tested plan which only has to provide the minimum gateway for eligible NHCEs at 3.4% to max the doctor. Thank you

I think amendment after year-end to increase the match only for HCEs is problematic, even if it is to simply bring their percentage up to NHCE rate. I think forfeiting amounts allocated in error along with attributable earnings is the proper correction. The design/practice is burdensome, but at the end of the year the payroll provider has sufficient information to identify the following year's HCEs and should be able to implement. Maybe if payroll is weekly the timing is tight, so why not have the employer make deposits monthly? In addition to solving a current problem, put on your consulting hat and help them avoid its recurrence.

I have a new Solo plan client that needs help cleaning up the plan. They had been flipping real estate and we are current investigating the possible errors that are in addition to not filing the 5500-EZ for a few years. My question is does VCP make sense for them and should this be done by an ERISA attorney instead of a TPA firm. I don't have experience with VCP. Thank you!

for EPIC RPS (Remote / Norwich NY)View the full text of this job opportunity

I would instruct the payer to make the check payable to Corp IRA FBO Participant, not over think and be done with it. Joe Participant is not going to be cognizant of all those nuances.

Another unfortunate case that we see all too often, the questions that should have all been asked, answered and documented before the transaction are surfacing afterwards when it it likely too late to do what the parties had hoped to do. As the consultant to at least one of the parties (which I assume you are) the best you can do is assemble all the relevant facts and communicate what you believe (in your professional opinion) the parties (or at least your client) can and cannot do in accordance with your understanding of applicable law and regulation.

What do you mean "wants to cover"? Make them employees? If they are already employees he either has to cover them under the LTPT rules if they qualify or he can provide coverage for them on a different basis in which case they are otherwise excludable employees. Either way, I believe they are excluded from average benefits test. However, I think you need to careful how they get added because as otherwise excludable they are HCEs and you would have separate coverage and nondiscrimination testing. From a prior ASPPA presentation, link to which is provided below: An LTPTE is an employee who: completes two consecutive years with 500 hours of service (HOS), and for plan years beginning before 2025, three consecutive years of 500 HOS; attains age 21 by the second (or third, if applicable) year of 500 HOS; is not a union employee/nonresident alien (union HOS count); and does not otherwise satisfy normal requirements. An employee who satisfies normal requirements before (or at same time) as LTPT conditions is never an LTPTE. An employee who satisfies normal requirements after becoming LTPTE ceases to be LTPTE and becomes a former LTPTE (FLTPTE). If the employee becomes eligible for any other reason, he or she is not an LTPTE. If the plan has eligibility requirements that are more lenient than those of the LTPT rules (e.g., in which HOS are not an issue or where the otherwise LTPT will enter faster than required under the law), the employees are never LTPTs. The effect of not being an LTPTE is that the LTPT vesting rules will not apply. https://www.asppa-net.org/news/2024/5/close-look-ltpt-rules-asppa-spring-national/

Personal opinion is you use only the non-union prior year ADP and ACP. Those are numbers for the disaggregated component plans and you still have that for non-union, just a larger population for 2025. Look at it this way, what if union covered employees were excluded from the plan before, now enter 1/1/2025 when union is dissolved. Is there any question you'd use the 2024 ADP and ACP from those (non-union only) participants? You look at that union disaggregation as if it was a separate plan.

Hello -- what is your take on an employer offering two-employee, married, family plans? In general, these could be cheaper than asking each employee to fund a plan. Does this violate ERISA if all employees of these "similarly situated individuals" are offered this discounted plan?

I don't know why but it seems for one plan they don't know how to obtain the Section 125 pay to provide with the annual census. Shouldn't that be an easy request from Payroll?

Had a similar shock entering into my firm, which uses FIS Relius for recordkeeping + compliance. As someone on the younger side (especially for this industry) and with a lot of exposure to modern tech, this industry is decades behind. That said, there are some pretty good options emerging. Congruent's CORE recordkeeping platform has blown us away with actually looking & feeling like a modern cloud-based system that is still highly functional. Definitely worth getting a demo & looking into. At RANDUG this year, along with Core, there's a platform called Penelope that seemed fairly intriguing. There's also SS&C, Schwab's RK tech, and I feel like ASC has a RK platform as well, but don't quote me on that. On the documents side of things, ASC's documents are far superior to FTW in my experience. The user interface & process of designing plans is so much smoother, and they have an API system for integration with any proprietary firm software you may use. These are the only two vendors I'm aware of in the Doc space, but frankly ASC is so easy to use I don't have much of a drive to look at alternatives. For compliance, it's once again really just ASC and FTW I'm aware of. I'm not thrilled with either compliance module, and this is the area the industry needs work. Because of this, I'm actually in the process of designing & developing a modernized compliance testing software with a friend of mine. It'll be a good year or two at least before it's ready but it's coming along well.

401(k) plan with a 1/1 to 12/31 plan year, union and non-union employees, and they utilize the prior year testing method. In 2024, an ADP test is completed separately for union and non-union employees, due to the mandatory disaggregation rules. An ACP test is completed for the non-union employees (union group deemed to pass ACP). On 1/1/2025, the union is dissolved/decertified. All union employees are now considered non-union effective 1/1/2025. So for 2025, there is just one ADP/ACP test (given that all employees were non-union in 2025). When determining the prior year percent for the ADP test - is there any guidance on what to use? Do you just use the 2024 non-union NHCE average and disregard the 2024 union NHCE average? Calculate a weighted average? If a weighted average should be used, then how would you go about determining the NHCE average for the ACP test? (given that there was no ACP test in 2024 for the union group)

I realize this response is late coming to OP, but have a question for all the experts out there. The sample unenrolled participant notices I've seen look like a condensed "mini SPD." I understand that participants must receive an SPD at the point of eligibility regardless of the unenrolled participant "easing." The plan document system I subscribe to for my 401(k) clients does not yet offer an unenrolled participant notice in the system (many notice such as safe harbor, are available, and I'm hoping the system's authors will eventually add an unenrolled participant notice). Until then, we are left to draft our own based on the guidelines set forth by the government and "best practices." To me, rather than trying to write a notice from scratch, which contains information that is also wholly included in the SPD, seems like not a good use of the client's time nor funds expended on TPA consulting services. Does anyone have an opinion of providing the SPD annually to unenrolled participants, in lieu of an annual unenrolled participant notice, to unenrolled participants? Would doing so not be in the spirit of the unenrolled participant notice rules / guidelines? I realize that in lieu, we could simply continue providing all of the usual notices, but I do have some clients that for some reason (despite much explaining) wish to follow the new unenrolled participant notice guidelines instead of simply providing all of the usual notices to the entire eligible population. Appreciate any feedback on my SPD thought.

Anyone here have any experience with determining COBRA coverage where inpatient hospital stay billed to self-insured plan under diagnosis-related group pricing (DRG)? Participant's COBRA coverage ended 7/31 and was admitted to the hospital on the same day. She remained in the hospital until 8/29. Because charges were billed under DRG (as one claim dated 7/31), former employer's plan being told it is on the hook for the entire bill, even though her COBRA coverage ended 7/31 and 99% of the charges were incurred after COBRA coverage ended. Thoughts?

Thank you. That is what they will do.

for ASIFlex (Remote / Columbia MO)View the full text of this job opportunity

If you have a straight 6% profit sharing plan with 5.7% on wages above social security wage base what is the formula. I do not know if my formula is wrong or my procedure for checking after calculation is wrong. Anyone run into this scenario.

Kay

Lay: The client would need to obtain the Fair Market Value (FMV) of the life insurance policy to determine the value, which may or may not be the Cash Value. It may be the $620,000 or some other value based on the year-end FMV combined with the other assets.

RMD's are on the total account balance of the pre-tax assets, so $620,000

A plan sponsor wants to cover his LTPT spouse and children so they can make deferrals. I realize they will not receive any employer contribution. This plan is cross-tested and provides the minimum gateway for other NHCEs (3% SH and 1.4% PS) The family members' deferral rates will be a very high % of pay. I want to make sure their deferrals don't get included in the big average benefits test EBARs Otherwise they will cause that part of the test to fail and then cross-testing will become very challenging. Thank you, Tom

Santo Gold might also ask: What is my Company’s responsibility with regard to determining the answers to the relevant questions or simply following instructions (other than determining whether or not there is a service agreement with anyone with respect to which the Company is obligated)? Are the questions in the post a matter of curiosity or are they a matter of gaining some advice for making some judgments. decisions, or recommendations that will be passed on to a client?

To David Rigby’s questions about what might lurk in the deal documents, someone might consider adding, for each might-be provision: Is the supposed provision merely a wishful statement? If a provision is somebody’s obligation, exactly which person, whether artificial or human, is obligated? Is the obligation consistent with, or contrary to, applicable law? Or relevant law? Even if not contrary to law, is the obligation legally enforceable? By which person? A? B? Some other person, whether artificial or human? This is not advice to anyone. And Santo Gold might wonder: Does my company have a current service agreement with A? Does my company have a current service agreement with B? Does my company desire to revise either service agreement, or both?

Peter's info (as he is clear to remind us, not advice) is thorough and excellent as always. It sounds like the client is happy with the current tax situation, and ejohnke is just looking to correct the potential disqualifying defect of allowing a distribution that shouldn't have happened. Is that accurate? If the individual could have had a distributable event, but the plan didn't allow the distribution, could the plan be retroactively amended to permit it? For example, the participant is 60 years old, so amend the plan retroactively to 2025 to permit in-service distributions at age 59-1/2. Problem solved. If there really is no possible distributable event (don't forget that employer money sources can have much more liberal distribution restrictions than 401(k) deferrals), then you might still be able to get relief for the distribution (and leave the money in the Roth IRA) through VCP.

If making a payment payable to a payee other than the retirement plan’s participant, beneficiary, or alternate payee (presumably because the distributee requested a direct rollover), the plan’s administrator, trustee, custodian, and payer (among them) have some responsibility to check that the payee not only is the one the distributee instructed but also is a banking, insurance, or securities institution Internal Revenue Code § 408 recognizes as an IRA custodian. Else, the plan might not get a satisfaction or discharge of the plan’s obligation to pay the plan’s benefit. This is not advice to anyone.