Here is my issue.  I cannot find anywhere that, with respect to the "uniform percentage of Matched Employee Contributions", I am able to cap the Matched Employee Contributions at X%.  So everyone has a match expressed as X% of the first Y% contributed (e.g., 50% of the first 6%).  I cannot find anywhere in this document that I can include the Y% / 6% cap in my examples.  Has anyone noticed this? People always say, "you can get to the same outcome if you use the maximum match section and cap the match at 3%" - that only works if you never change the match so it's not a great solution.

To be honest, this was a real issue for me in the FT 401k plan as well, Cycle 3.  I am very curious to know if they finaly figured this out for Cycle 4.

As a sanity check I am just really hopeful other people have seen this too?  Or maybe I'm missing something?

In the beginning, the only vendor was TIAA-CREF. Later, the plan allowed Fidelity and Vanguard. More recently, the employer discontinued contributions to anything beyond TIAA-CREF. But participants with a Fidelity or Vanguard contract may keep it.

The plan administrator’s Form 5500 report and audited financial statements for every year have consistently included the Fidelity and Vanguard amounts in reported-on plan assets.

For a plan restatement this year, someone instructed a plan-documents technician, who is not associated with me, to add a mainstream small-balance cash-out provision.

The employer/administrator has only a fraction of one employee looking in on all employee benefits, with little attention on the retirement plan. Unless they can rely on TIAA, they’ll be unable to administer the cash-out provision.

Whatever service TIAA might offer to help implement a cash-out provision, I worry that TIAA would apply it looking only to TIAA-CREF’s records, without records of account balances at Fidelity or Vanguard. If it matters, the plan now is on TIAA’s RetirePlus Pro service. Am I right to worry?

If my hunch is right, following TIAA’s cues on who gets a cash-out would result in some involuntary distributions contrary to the documents governing the plan and contrary to ERISA.

Although my scope excludes plan design, I feel I should warn my client that it’s unwise to adopt an optional plan provision if the employer/administrator is not confident about its ability to administer the provision.

Am I on the right track? Or is there some bit of legal or practical knowledge I’m missing?

Internal Revenue Code § 414(v)(7)’s constraint that a higher-wage participant’s “additional elective deferrals” must be non-Roth contributions applies only regarding elective deferrals.

If an employer’s information feed to a recordkeeper carefully shows distinct amounts for each of Mandatory Contributions and elective deferrals, does a recordkeeper record these in distinct subaccounts?

Or, should an employer worry that a recordkeeper might flag as § 414(v)(7)-burdened many participants whose elective deferrals did not exceed the without-catch-up limit?

About this, are some recordkeepers better than others? For example, does TIAA—because of its wide experience with higher-education employers, many of which provide these condition-of-employment contributions—handle this more capably than other big recordkeepers?

The issue arose because the school wants to adopt a 457 plan. They are considering whether to "reclassify" itself as a non-QCCO.

ERISA and tax-qualification issues for their existing plan aside, have you seen a religious school undertake this process? Any thoughts?

PS: We realize that it can still adopt a 409A plan instead, but they would prefer that distributions be eligible for rollover treatment. 

https://www.nj.gov/treasury/taxation/njit5.shtml

I came to learn of this through work on 457b plans.  I had no idea how extensive their bizzarness was, including employer contributions to SIMPLE IRA's and SEPs.  I am posting here because they do not even allow deductions for 403(b) Plans.  This is really insane.  Are people aware of this??

The plan is getting hung up on "conversion" vs "rollover" when there is no distributable event. I only seem to see the term "in-plan Roth rollover (IRR)" these days, and information I see about "Roth conversions" is generally associated with an IRA to Roth IRA. The 1099R instructions state: An IRR is a rollover within a retirement plan to a designated Roth account in the same plan. Yet, there is no plan consensus. 😕

Three scenarios:

A - Participant is under age 59.5, still employed and contributing.

B - Participant is under age 59.5 and severed from employment.

C - Participant is over age 59.5.

It is agreed that box 2a would be 10K, but there is disagreement as to how this transaction is to be reported in box 7 on 1099R and I am hoping someone could offer clarity (TIA). 

What is the appropriate code(s) for box 7 and is it the same in all three "in-plan" scenarios? 

This idea makes me uncomfortable. Seems more like a violation of "once-in always-in."

And, I also understand the related issue of the 20 hour per week rule being impacted by the LTPT rule.

Thanks!

Are there any special considerations when doing this? 

Now that it is more restrictive, for a governmental plan, is there anything wrong with using the nonelective contribution, with everyone in their own group, and "coincidentally" the only people who get a nonelective are those who deferred? Smells funny, but would be easy to do...

We have an individual taking a distribution of his after-tax (non-Roth) money. There are questions as to how reporting this transaction is different than reporting a Roth distribution. The main question comes down to which distribution code(s) the payer is to use in box 7.

For a [qualified] Roth distribution, the payer indicates:

• the full distribution amount in box 1;
• $0.00 in box 2a;
• the Roth contribution (basis) amount in box 5, and
• code "7B" for box 7
• year of first Roth contribution in box 11

This is what has been proposed for the After-tax (non-Roth) 1099-R:

• the full distribution amount in box 1;
• taxable earnings portion in box 2a;
• the after-tax (non-Roth) contribution (basis) amount in box 5, and
• code "7" in box 7

Anyone know if this is correct?

Any reason why the new rules would not apply to the special 15 year catch-up? 

edit: confirmed Section 603 only applies to age based catch-up.

Thanks

We are trying to firm up our restatement timeline for our clients, but we have no idea when our doc provider might have their system ready. The restatement 'window' supposedly opened 1/1, but with no document in sight, we're stuck.

Thanks!

Sue

I work in an industry that employs highly-compensated people who are often highly-compensated by two employers and are eligible to contribute to two 403(b) plans.   We inform people in a number of ways that the 402(g) limit is a "person" limit as opposed to a separate limit for each plan to which they contribute.  Usually our 402(g) refunds are due to new employees who contributed to both their old and new employers' plans, but I have a case now which I have never seen before.

We received an email from a participant who has two current employers and contributed the max to both plans for the years 2018-2024.   (2018 was the first year she contributed to ours.)  Our advice was "get thee to a tax advisor ASAP" but her response was interesting.  We had previously had our plan recordkept at Fidelity but changed recordkeepers in 2019.  Her other employer's plan is still recordkept at Fidelity and she says that in the past Fidelity had enforced the 402(g) limit because they had access to the salary deferral data for both plans.  She blames her overcontribution on our recordkeeping switch--although that does not explain how she was allowed to defer twice the annual limit in 2018.  

In all my many years in this position I have never seen Fidelity limit any of our participant's salary deferrals based on their deferrals to another plan.  They would give us regular monitoring reports and stop our participants' deferrals when they reached the max in our plan, but never, as far as I can tell, based on activity in another employer's plan.   Fidelity clients, does this make sense to you or is this participant just trying to deflect the blame from her own lack of attention?  I don't imagine this population prepares their own tax returns but I guess it is possible, but it surprises me that a tax preparer or the IRS themselves has not picked up on this before now.

Let's assume they qualify. Mandatory auto-enrollment in 2025 shouldn't apply, correct? 

Under SECURE 2.0, new 403(b) Plans (established after 12/29/2022) are required to include auto-enrollment/auto-escalation.  Would this apply to new employers who join the MEP?  The MEP itself is not a new plan, but would a new employer who joins the MEP be considered to have started a new plan by joining the MEP?  Are there any exceptions or ways out of this new requirement? 

While different employers in the MEP do have some flexibility regarding the MEP, its much easier if the MEP is mostly uniform across all participating employers (so having auto-enrollment/escalation for some and not others makes it more complex to administer).

While we're at it, is there any way around the Long-Term Part-Term rules?  I don't think so, but figured I'd ask while I'm here.

EDIT:  According to Notice 2024-02 (https://www.irs.gov/pub/irs-drop/n-24-02.pdf), it looks like an employer joining a MEP after 12/29/2022 is treated as starting a new plan.  There is a possible exemption if the employer joining the MEP already had a pre-12/29/2022 plan and is treated as merging into the MEP, the employer can treat the MEP as a continuation of the older plan, rather than a new plan.  I think this answers my question -- whether you agree or disagree I appreciate your comments!

We're launching a new attempt to reason with RKA, but we are expecting it to fail.  One of the directors asked if they could incentivize the participants to either take a distribution or authorize the transfer to RKB.  $100 cash, say.  Since the financial advisor didn't immediately shoot it down, I said that I'd look into it.

How insane and/or illegal is this idea?  More importantly, are there any other good ideas?

Thanks.

Client is a 501c3 and Im looking at what I was told was a pretty simple 403b (plan 001).  Nothing exceptional stands out in the plan document, participants get a 3% non-elective on top of a 50% match up to 4% of comp.  The plan files a Form 5500 every year.

After speaking to the accountant, what happens in practice is throwing me off a bit.  

• Elective deferrals in excess of 4% of comp are actually deposited to a second 403b plan (lets call it plan 002).  I havent seen a plan document for this plan, and no 5500s have been filed.  It sounds like its a deferral only non-ERISA 403b.
• Both plans are with the same provider
• Plan 001 does not mention anything about deferrals in excess of 4% of comp being funded to a different plan

This doesn't seem right to me, I would expect that plan 001 would have to spell out that it will only accept elective deferrals up to 4%.  Am I missing something?

What is the point of splitting elective deferrals into two plans?

any insight would be greatly appreciated.

By way of background, we have a client that is a school (the “School”) that sponsors a 403(b) plan (the “Plan”). To comply with the universal availability and LTPT rules, the Plan provides that all employees are eligible to participate in the Plan for purposes of elective deferrals upon hire.

The Plan also provides for (1) mandatory employee contributions and (2) nonelective employer contributions to all participants who make mandatory employee contributions. From a cultural and employee relations standpoint, it is important for the School to continue to offer mandatory employee contributions and to provide nonelective contributions to all participants who make mandatory employee contributions. However, the School would like to impose an annual service requirement on mandatory employee contributions and associated nonelective contributions so that only participants who work 1,000+ hours in a year receive such contributions for that year.

This annual service requirement on employer contributions is important for the School because the School employs many individuals on a temporary/seasonal basis (coaches, summer camp counselors, substitute teachers, tutors, etc.), has many former full-time employees return to work with the School in temporary/seasonal positions, and has high rates of employee turnover. It would be extremely administratively burdensome for the School to make employer contributions every year to all employees who once worked 1,000+ hours in a plan year and who now work less than 1,000 hours/year.

Because we cannot use an allocation condition to impose an annual service requirement on mandatory employee contributions, we’re trying to find a way to impose an annual service requirement on these employer contributions through eligibility. However, we’ve received pushback from the School’s consultant and recordkeeper that the “once in, always in” concept applicable to elective deferrals also applies to employer contributions. While it’s clear that the “once in, always in” requirement of the universal availability and LTPT rules do not apply to employer contributions, we cannot find conclusive guidance as to whether or not Code section 410(a) imposes a “once in, always in” requirement on employer contributions.

One is that for purposes of DEFERRALS ONLY, (not employer contributions) the "less than 20 hour exclusion" is no longer valid at all, and therefore all employees must be allowed to defer under the universal availability rule, absent another valid exclusion category.

Another is that the "less than 20 hour" exclusion is still valid for deferrals, EXCEPT for LTPT employees. In other words, someone who works only, say,  6 hours per week could still be excluded for deferral purposes.

I'm not 100% sure which is correct. From a practical standpoint, since most plans (of ours, anyway) don't use the 20 hour exclusion anyway, it isn't a giant problem for most small plans regardless.

Thoughts?

The account is held on a platform at a large national insurance company.  Their instructions were for the non-profit to send a letter of instruction saying the plan is being terminated.  The account would stay at the insurance company as a 403b account but would no longer require an employer signature.  

But if it is still considered a 403b account....can we really say that the plan is terminated?  Could we file a final 5500 with $0 assets at EOY if the account is still a 403b account?

Thanks for any thoughts on this.

Are non-erisa church plans allowed to have adopting employers?  If so, are there any rules around why they may or may not be able to?  

I have a client who is a non-erisa church plan who acquired a new entity.  They have 100% ownership of said entity, however, the new entity will be maintaining its own EIN.  Can those employees participate in my clients existing non-erisa church 403b?

Thanks, 

Not sure if this is a thing, but my first google search found no results... 

Thanks in advance!

I think it doesn't strictly need to be 403(b) related, if there's a good resource for 401(k) that would probably help. 

Thanks!

Thanks.

Thank you,

Tom

Agree/disagree?

I have some vague memory that these provisions were instituted due to Microsoft or similar situations, where employees who were treated as independent contractors subsequently were determined to be common law employees.

Thanks