All Activity

Doesn't the discretionary match formula, to be covered under ACP safe harbor, have to preclude any HCE from getting a higher rate of match than any NHCE contributing the same rate? If any HCE has >5 YOS and any NHCE <5 YOS that won't hold. Or am I confusing this with something else?

Is the § 129(d)(8) condition measured on the whole of employees of all business organizations that together are one § 414(b)-(c)-(m)-(n)-(o) employer. In counting who is a highly-compensated employee (for § 129 or § 128), does one count a worker who is not an employee (because she is a partner or other self-employed individual)? In counting “employees who are not highly compensated”, does one count a worker who is not an employee (because she is a partner or other self-employed individual)?

Well the issue here is that my clients are too small to pay the exorbitant fees for that kind of a service. I think those services (which are awesome and well worth the fees charged) are really only available to the larger plans (say $50MM or more). As an example I have a plan with 15 people who wanted to add it!

Regardless of the status of the proposed cafeteria plan nondiscrimination regulations, the §125 nondiscrim rules are easy to pass. That's not a concern. The hard part will be that the new §128 for tax-free Trump Account contributions through and employer includes a requirement to apply rules "similar to" the §129 dependent care FSA nondiscrimination rules. That means the dreaded 55% average benefits test will likely apply. That wasn't so much of a concern when it initially looked like Trump Accounts were only going to permit employer tax-free contributions, but now that employees may be able to contribute pre-tax it is very likely that HCEs will contribute disproportionately. That will presumably cause routine failures of that 55% average benefits test in the same vein as with dependent care FSAs. https://www.congress.gov/119/plaws/publ21/PLAW-119publ21.pdf ‘‘(c) TRUMP ACCOUNT CONTRIBUTION PROGRAM.—For purposes of this section, a Trump account contribution program is a separate written plan of an employer for the exclusive benefit of his employees to provide contributions to the Trump accounts of such employees or dependents of such employees which meets requirements similar to the requirements of paragraphs (2), (3), (6), (7), and (8) of section 129(d).’’.

Apart from differences in how highly-compensated and other employees use one’s wages, an employee population might have a skew about which employees have a dependent who is an eligible individual.

About § 125’s nondiscrimination condition, the Treasury department has done no more than propose an interpretation. More than 18 years later, that interpretation remains merely proposed.

The DOL's missed filing rules are here: https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/dfvcp

Sounds like you should do the AE adjustment from March to December on the benefit, and then calculate the lump sum as of December based on the adjusted benefit.

According to the ERISA Outline Book, the IRS took the position at a conference that you count ADP/ACP, but had no opinion on 402g excess. (The book's discussion also suggested you wouldn't count 415 excess distributions, since those were never proper annual additions to begin with.)

That was my thought, too - you can do it but you have lots of other things to pass, the ADP not one of them.

Totally agree that this will be a meaningful benefit. Do we think nondiscrimination rules will apply? I imagine that highly compensated would be much more likely to take advantage of this.

Thanks again to responders! We decided to provide the former participant with a letter stating that as a former participant with no benefits in the plan now, she is not entitled to receive an SPD at this time. We provided a copy of the last statement she received which reflected the amount she was paid along with the check number and date of her benefit check which was rolled over to an IRA. We stated that we do not maintain historical copies of SPDs. We think she met with SSA in-person as she was never reported on Form SSA which would explain why her request was stated the way it was. We do have copies of historical plan documents but did not provide that to her.

Thank you, that was what I was wondering about...but couldn't exactly work out how to do. Have a nice Holiday Season!

The issue of former cashed-out participants thinking they have money in a plan is almost always prompted by the DOL trying to be a hero. We haven't yet had money laying around for one of these former employees. Even so, it's a good reminder to keep a distribution paper trail. In the above case, I suspect the former employee will go away she's reminded of her past distribution + I'd send the SPD if available.

If you're going to offer a match to 457(b) contributions, you want the match to go into a 401(a) plan. That could be the existing one, but with a separate benefit structure for the part-time employees, or a new one. The problem here is that the 402(g) limit ($23,500 in 2025, disregarding catch-ups) for 401(k) and 403(b) plans applies only to the employee's own contributions. However, the comparable limit for 457(b) plans applies to the aggregate of employee and employer contributions. So for example, if the employer is doing a 100% match and putting it all into the 457(b) plan, the employee could contribute a maximum of $11,750. That would give rise to an employer match of $11,750, and the employer and employee contributions together would equal the $23,500 limit. However, if the employer match goes to a 401(a) plan, the employee could contribute up to $23,500 to the 457(b) plan, because the contributions to the 401(a) plan would not count against the limit.

I’ve encountered a similar situation. A Form 5500-EZ was filed for one participant plan. However, we discovered months later that they hired an employee who is paid via W-2 wages and became immediately eligible on their hire date. Consequently, a Form 5500-SF should have been filed. Could you please explain the correction method and any applicable fines or penalties for correcting this error for a PYE on December 31, 2024? The 5500-EZ that was filed should have been a 5500-SF.

What if the client has a 360 or 180 payroll integration between their payroll company and the recordkeeper? I would think that the indicator could be placed in the file layout so when it goes to the record keeper it is updated. They could also include prior year FICA wages in the file layout if the recordkeeper has the capability to track that somewhere. also, how are fiscal year end plans being handled (for instance a 9/30/2025 PYE)??

vested account balance.

Hi All, Happy Holidays to All. A DB plan ret age is 62. Employee retirement date was march 2025 but did not receive his lump sum until Dec 2025. He was entitled to his lump sum since March 2025. What rate would you use to give interest on the lump sum from march 25 to Dec 25? Plan equivalence? Thank you

Not entirely. I have seen that ... see below from DOL website... this is just part of the notice. Based on her response, she could simply be looking for "lost" retirement benefits.

Thanks for the comments. It appears that the letter may have been prompted by her application for SS benefits as she states "as recommended by the SSA" in her letter. I am unaware of any such comment in the SSA letters I've seen. She further states that the US DOL EBSA has requested that she obtain the SPD. This is ridiculous.

The concept of a recordkeeper requesting an indicator is separate from administering Roth catch-ups. As the honorable WCC notes the recordkeepers want the indicator for targeted communications and also for monitoring after end of the year. But I am not aware of any recordkeepers doing more than that- so in reality regardless of whether an indicator is shared with the recordkeeper payroll providers are effectively responsible for the administration.

Yeah, I don't know of any plan sponsors that do this on their own. I know Fidelity does it and I know some other recordkeepers that use third-party vendors such as BenefitEd, Highway Benefits, SoFi at Work, and Candidly to verify student loan payments, etc. for qualified plans.

ERISA §101 Duty of disclosure and reporting states: (a) Summary plan description and information to be furnished to participants and beneficiaries. The administrator of each employee benefit plan shall cause to be furnished in accordance with section 104(b) [29 USC §1024(b) ] to each participant covered under the plan and to each beneficiary who is receiving benefits under the plan Section 3(7) of ERISA, "participant" means “any employee or former employee of an employer, …., who is or may become eligible to receive a benefit … or whose beneficiaries may be eligible to receive any such benefit” ERISA Reg. 2510.3-3(d) provides: (1)(ii) An individual becomes a participant covered under an employee pension plan-- (A) In the case of a plan which provides for employee contributions or defines participation to include employees who have not yet retired, on the earlier of-- (1) The date on which the individual makes a contribution, whether voluntary or mandatory, or (2) The date designated by the plan as the date on which the individual has satisfied the plan's age and service requirements for participation. My understanding of these rules are that once an employee contributes money to the plan they are a participant. Once their funds are distributed from the plan, then they are no longer participants (assuming they are not still eligible to contribute to the plan) and they would not have any beneficiaries eligible for a benefit under the plan. Here, you state they are a “former” employee who has taken a full distribution. Presumably that means they are no longer eligible to contribute to the plan. At the point they take the distribution (and are not eligible) they are no longer required to receive an SPD. However, to the extent they can still make a viable claim for benefits under the plan, it seems an SPD should be provided to a former participant as an SPD almost by definition is a document that would be relevant to their claim. Assuming the applicable plan does not have a statute of limitations provision, I have no knowledge of a state that would provide a statute of limitations that would permit a claim for benefits 20 years after the benefit distribution has been made… but I guess there could be one.... That said, like @Peter Gulia states… you should likely lawyer up

Question: For the purpose of calculating the top heavy balances, are adp/acp corrective distributions added back in? Plan failed 2024 ADP/ACP testing: HCE/Key employees adp/acp corrective distributions of $5,000. These were corrected on 3/1/2025. When looking to add back in "In-Service" distributions, would these be considered that for top heavy balance for the 2025 determination? Or excluded from the Top Heavy balance. My argument is that these distributions were forced distributions because of the failing ADP/ACP test. The participant did not have the option not to take it, so why should it be added back in? Thoughts?