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It seems safe to omit, but they also can either: add Roth just "in case" / eliminate catch up contributions / eliminate catchcup contributions for anyone earning under $150,000.

At this point, going on nearly NO details - just a quick second-hand question based on a phone call from a plaintiff's attorney. We will of course be telling the client to talk with his legal counsel. But as much as I understand the situation so far: A participant terminated employment in 2023. He was an owner, and was bought out. Apparently, there is some sort of a lawsuit - the nature of which I have no idea, but the terminated participant is apparently getting some sort of settlement, and wants to know if he can contribute to the 401(k) for 2025 to save on taxes. The plaintiff's attorney wants to talk to us, apparently. This is way above my pay grade/knowledge, but I'd like to have some idea for my own background. I "think" I generally have an idea that a "restorative payment" which is determined under the facts and circumstances (Revenue Ruling 20something-25 - can't remember specific number) is not considered a contribution subject to 404, 415, etc., etc.) But this dealt with fiduciary breach-type situations as I recall. Assuming for the moment that this lawsuit is for other reasons, perhaps wage issues, unjust termination of employment, whatever, if the settlement is considered wages, then if he was still employed by the employer, he should be able to defer up to the normal limit. But, since he terminated in 2023 I don't believe he could defer into the plan. Could he? Please don't waste a lot of time on this, because as I said, it'll be handled by the client's ERISA attorney, and/or the plaintiff's attorney and/or tax counsel. But for my own edification, if you might have any quick general info based on your experience, I'd be grateful for anything you might care to share. We've been fortunate to never have run into this situation. Thanks!

BenefitsLink neighbors can tell us if I’m guessing wrong, but I guess the conventional approach is to treat the plan as having the provision needed to tax-qualify the § 401(k) arrangement, then recognizing a failure to administer that assumed-in provision as an operational failure.

Jakyasar seems to describe a situation in which, at least for 2026, no participant will be constrained to make age-based catch-up contributions as Roth contributions because no participant will have had 2025 Social Security wages more than $150,000. BenefitsLink mavens, if the plan sponsor is confident no participant will be § 414(v)(7)-constrained to make catch-up deferrals only as Roth contributions, do you think it’s safe for such a plan sponsor to omit a Roth-contribution provision?

If the plan says it is going to involuntarily roll over vested balances of < $7,000 following termination (as most pre-approved plan documents do), then you need to do as the plan directs. Otherwise, it is a failure to make a timely distribution under the plan terms (which is a question on the 5500). There should not be plan sponsor discretion regarding the timing of a distribution.

Then how/why were they reclassified as catch-up? My understanding is they would have to go over: Regular 402(g) limit. Nope. ADP limit. Nope. Plan imposed limit. Nope. Then why would they be 're-classified' as catch-up? These are my understanding of catch-up rules.

Hi As not being a DC person and dealing with very few DC plans, I have a really stupid question as I could not find anything on it. Owner only plan, owner (over 50 years old) makes 50k in w-2 and makes full deferral plus catch up. They are required to have Roth catch up, correct? The plan also needs to be amended to provide Roth deferrals/catch up as well by 1/1/2026, correct? Sorry if this was asked before.

I would tend to say that's not necessary. I've had IRS audits for clients where they checked the 'No' box and never got a bond, where the auditor simply says "...and tell them to get a bond". Your situation is even better because you can tell the agent that a bond was obtained and the year in question is retroactively covered. We can usually get the agent to tell us why a certain plan was selected for audit and my experience has been that it was never because of a lack of a bond.

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Yes - I wasn't thinking, both short periods can be combined for an annual census. Thank you.

I think the IRS got this one right. You might enjoy the whole thread...

I just want to make sure I am understanding the rule correctly. Facts: Plan doesn't currently allow Roth deferrals Owners have SE Income 2 owners are 50+ and will defer up to their catch-up limit Employees have W-2 wages No employees are 50+ No employees have FICA wages greater than $150,000 They are possibly moving from brokerage accounts to a Platform in 2026, and will likely add Roth deferrals at that time. They would prefer to no allow Roth until they are at a platform because they will have even more accounts to move. This Plan is not required to add Roth deferrals NOR remove Catch-up contributions right now because they don't have anyone that the Mandatory Roth Catch-up applies to, correct?

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Thanks, Brian

No. There no other contribution for key employees other than $7,500 of Deferral

so if I follow - the plan did not operate with an automatic enrollment provision - and because "the plan or contract is operated as if such plan or contract amendment were in effect" did not happen, it would not be a remedial amendment. The correction is still to amend retroactively - the various times I have submitted document issues to VCP that is always one of the requirements. Here, the plan would prefer SCP, so a corrective retroactive amendment still seems appropriate even if the plan decides not to utilize VCP. If that is the case - (and my apologies for citing the sunset provision and not the updated one) then I think it still follows that zero QNEC would be needed (assuming the plan satisfies the other requirements such as notice contents and timing). Where @Peter Gulia says "If that didn't happen, pursue corrections." corrections for which part? the document failure? the mandatory auto enrollment failure? the missed opportunity to defer/automatic enrollment? If the latter, the participants were given the opportunity to enroll, based on the plan's written provisions at the time. There was no operational failure, or failure to follow the plan document. So does a missed mandatory automatic enrollment provision in the document create an operational failure? I think I'm going a bit in circles. I do appreciate all the discussion and insight.

If they want us to do the final work, we will request the census for that short year, and then also the short year for the time they joined the PEP. We do not request an annual census.

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My observation was only about what tax law tolerates for when the § 414A-needed automatic-contribution provisions must be stated in what tax law imagines as “the” written plan. Among the conditions of the legal fiction of the remedial-amendment period is that “the plan or contract is operated as if such [delayed, but retroactive] plan or contract amendment were in effect[.]” SECURE 2022 § 501(b)(2)(A). So, a plan’s administrator must administer the plan according to the administrator’s prudent assumption about what the later-amended plan is deemed to have provided retroactively. If that didn’t happen, pursue corrections. For a convenient reference to C.B. Zeller’s pointer, my note above cites Notice 2024-2 and gives the particular hyperlink. (Because the IRS ended printing the weekly Internal Revenue Bulletins, https://www.irs.gov/irb is the official source.) This is not advice to anyone.

How did you do this? Was there some limit they exceeded?

This particular provision has actually expired: However, SECURE 2.0 sec. 350 codified essentially the same correction method into law at IRC sec. 414(cc). See also Notice 2024-02 section I, which gives further guidance, including how to apply 414(cc) to terminated participants.

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In the year the stand-alone plan joins the PEP, are you running two short plan year compliance tests, one for the final stand-alone plan and one for the period of time when they join the PEP through year end? In the year they join a PEP, are you collecting three census data from the employer - stand-alone period, PEP period, and annual data?

A client established a 401(k) plan as of January 1, 2020, for which it never obtained a fidelity bond. The plan administrator filed Forms 5500-SF 2020-2022 and 5500s for 2023 and 2024, and correctly check the "No" box for the question of whether during the plan year the plan was covered by a fidelity bond. The client recently obtained current and retroactive fidelity bonds for all years going back to 2020, and the question is, can, or should, the plan administrator file amended 5500s for plan years 2020-2024 to show that the plan was covered by a fidelity bond? Thanks for your time!