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My new client received a certified letter from a former employee requesting a copy of the SPD from the years in which she was employed (not necessarily a participant), 1997-2003. Since I was not the TPA I don't have the SPD and my client doesn't think he has it either. She was paid a benefit of about $50K in 2005 and apparently is not disputing that. Is my client obligated to provide the old SPD from 23 years ago to the former participant?

Client is doing a discretionary match of : Since it relates back to service it can not be used as a safe harbor match 100% of deferrals up to 6% of comp up to 5 years of service - then 150% of deferrals up to 6% of comp if over 5 years of service How the Formula Works (Example: $50,000 Salary) Years 1-5: You contribute 6% of $50,000 = $3,000. Employer matches 100% of your contribution up to 6% = $3,000 match. Total contribution: $6,000 ($3,000 your money + $3,000 employer). After Year 5: You contribute 6% of $50,000 = $3,000. Employer matches 150% of your contribution up to 6% = $4,500 match. Total contribution: $7,500 ($3,000 your money + $4,500 employer). Can they do a Enhanced SH match of 100% of deferrals up to 6% of comp and then a discretionary match of 100% of deferrals up to 3% of comp if you have been then at least 5 years In other words - 1-5 years 0% match ; 5 years or more 3% match Would that need to be tested alone (ACP) without the safe harbor match? Would ADP test pass automatically since there is a safe harbor match?

A participant is over age 73 and has an RMD for 2025. He terminated before NRA and because of that, he is not 100% vested. Is the RMD amount calculated based on full account balance or vested account balance? Thanks.

A new development in all this... The plan's definition for calculating contributions (both employer and deferrals) includes housing allowance. The plan has received challenge that including housing allowance in the deferral contribution calculation is not allowed. I have found mixed information on this topic, but nothing clear. Does anyone have a related citation specific to church retirement plans and limitations on how they define compensation for this purpose? (On a side note, the plan does not include housing allowance when considering available comp for the 415(c) limits)

I have a Township who currently offers a 401a plan to it's full time employees. They want to create a plan that offers match, but only for the part time employees - excluding the individuals who are eligible for the 401a plan. I apologize for my ignorance, but we don't do a ton of these. I think they can do this...but I would love some confirmation. Any guidance or alternative thoughts on this would be very much appreciated. Thanks!

The few situations I’ve heard about use a service provider to confirm to an employer its employee’s student-loan repayments. I have not seen a form, whether website app or paper, for a participant’s self-certification.

Does the plan provide a § 72(t)(2)(I) emergency personal expense distribution? If not, might the plan sponsor consider an in-operation amendment (to be included in a SECURE 2019 & 2022 restatement)? The standard for an “emergency personal expense” is wider than for a hardship. A participant may certify that the claimed distribution is “for purposes of meeting unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses.” I.R.C. (26 U.S.C.) § 72(t)(2)(I)(iv). Although the $1,000 an emergency personal expense distribution might provide might meet only a portion of a tree-removal expense, $1,000 might be more useful than $0.

Chaz, might an element be missing from your simplified example? What is the fair-market value of the health coverage? Using your example, let’s put an illustrative amount on the value of the health coverage: Imagine $30,000. An employee who’s not offered an extra opt-out payment chooses health coverage, has $10,000 taken from her pay, and gets another $20,000 in value provided by the employer. (Assume this layer of choice is a proper § 125 plan, and does not discriminate.) Her Federal income tax wages is $90,000. (Her total compensation is $120,000.) The employee who is offered an extra opt-out chooses against health coverage, has $0 taken from her pay, and gets the $15,000 opt-out payment. If what I’ll describe as the “second” § 125 plan (the choice offered only to the one specified individual) discriminates, the offeree, if highly-compensated, is not relieved of constructive receipt of whatever she could have chosen. Looking to the greater-of, the $20,000 value of employer-provided health coverage counts in her gross income; it is $120,000, not $115,000. Might an employer’s or employee’s tax practitioner analyze it this way? If § 125 does not apply to the extra opt-out choice, must an employer recognize constructive receipt in its Form W-2 wage reporting?

I agree - I believe it's not a preventive hardship w/d option, but only for actual damage. Your last sentence, though, was the key.

Thank you, ESOP guy!

And the plan must have the safe harbor provisions. It is not considered safe harbor if the plan does not say it is safe harbor.

I'm hearing different things from TPA's regarding whether or not they are making a Student Loan Matching Certification Form available to participants. Has anyone seen TPA's putting anything together? I'm also surprised I haven't seen anything from document providers?

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No. A match of 100% on the first 6% satisfies the ADP and ACP safe harbor (assuming no allocation conditions, vesting rules, notice requirements, etc. are satisfied). The 4% rule you reference comes into play when a discretionary match is funded in addition to a safe harbor formula. If there is a discretionary match in addition to a safe harbor match, then to satisfy ACP safe harbor, the match cannot take into account more than 6% of pay and the match contribution cannot exceed 4% of pay.

You also need to check how the plan document defines After Tax Contributions. Many I have seen say that After Tax Contributions are made from Gross Wages paid to the employee during that tax year and withheld from pay, not submitted from other funds the participant may have access to.

Can it be created on 12/31 such that no accrual occurs until the next year?

I have found it most practical to create the document closer to the time the client is ready to fund. I can't tell you how many plans were created in December when the client had tons of money, only to find out later when it was time to fund in September that circumstances had changed, and they did not have the needed funds.

Isn't one advantage signing after 12/31 not filing 5500 form? Actuarial certifications still need to be done For example (extreme one): S-corp (with employees) decides to start one on 9/14, signs and funds on 9/15. If wanted to file 5500 form, has to file on 9/15 (special extension) as no 5558 to extend to 10/15. Of course, it is assumed that s-corp tax filing is on extension. Full disclosure, not a fan of above but happened once or twice😁 CuseFan has made good points. But more and more I think and encourage, the clients should start the plans after year end as the census data would be final and available and also allow a better design than making one up during the year as census changes all the time. Just saying it.

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A plan has a 100% match on the first 6% of comp. If I recall correctly, a formula can be considered safe harbor if you contribute a match only based on the first 6% of comp, but only if that amount is less than 100% of the first 4% of comp. That would make this match on the first 4% of comp safe harbor, and the match on the next 2% a fixed non-SH match. Since there's a portion that's non-SH, the plan would be subject to ADP and ACP testing - do I have all of this correct? Would the ACP testing be done using the entire match or only the non-SH portion, i.e., the amount based on the 4% - 6% of comp? Thanks in advance for any assistance.

IMO it would not qualify as a casualty loss.

Yeah if there's only one HCP involved I think you're right. Still wouldn't want that structure in place in case another HCP comes along who wants to enroll in the plan someday, but until then I think there's no practical consequence of the discriminatory arrangement. As you noted, that HCP is already being taxed on the full amount anyway via the cash opt-out credit.

Depends on the circumstances. I don't think you want someone signing a plan on 4/14 expecting to fund a trust (that can't be set up earlier) on 4/15 so they can file on time. The advantage is for clients who don't want to extend their returns (and for those doing the work, fitting these new plans into their busy Q1 schedules). Also, some clients may want to begin funding sooner rather than later given market conditions at the time. And what's your guard against doing all the work up front so can accommodate, including the valuation, only to get hit with a late change of mind/chickening out and stiffing you on payment for work done? Personally, the earlier a plan gets implemented the more time we provide our actuarial teams to do their work and I do not like to commit staff to aggressive unrealistic timing - been on the other side of that, it's unfair and bad for morale, IMHO.

You can parse otherwise excludable employees but must test that group separately and you don't get a free pass because that group has HCEs. You may want to try restructuring and parse the young HCEs with older NHCEs and test that group on contributions. The question then is whether your restructured plans can pass using ratio percentage or if you can pass average benefits with those young HCEs (might need to calculate AB% on contributions as well).

Just as many BenefitsLink neighbors remind us to Read The Fabulous Document, if a question involves an annuity contract one might read Read The F*** Contract. Even if a contract is a group annuity contract, a contract might provide fewer or narrower rights than one imagines.