ESOP Guy Posted January 12, 2023 Share Posted January 12, 2023 4 hours ago, Bird said: At this point, with my career in the rear-view mirror, I am of the opinion that the retirement plan rules are fundamentally broken and unfixable. We have widespread noncompliance, both due to complexity and willful neglect. This has been true for a while. I have been convinced any plan that wasn't designed to be simple is out of compliance if you look hard enough. Part of why I got into ESOPs was they were more interesting than small 401(k) plans which is how I got into this industry. They have gotten so complex the chances of making an error are huge. And I don't know how some of you folks do small 401(k) plans any more. All the silly notices and disclosures that if you miss a simple deadline can put things out of compliance. The volume of them is beyond sustainability. And they add no value as no one reads or understands them. I am becoming a cynic I think. austin3515, Lou S. and Anon401kTPA 3 Link to comment Share on other sites More sharing options...
imchipbrown Posted January 13, 2023 Share Posted January 13, 2023 More happily retired every day. Sorry, just woke up from my nap 😁 Bill Presson and Riley Britton 2 Link to comment Share on other sites More sharing options...
Anon401kTPA Posted January 13, 2023 Share Posted January 13, 2023 13 hours ago, imchipbrown said: More happily retired every day. Sorry, just woke up from my nap 😁 Brag 😅 Link to comment Share on other sites More sharing options...
Bird Posted January 13, 2023 Share Posted January 13, 2023 18 hours ago, Below Ground said: I would also note that I often find people who are primarily in the sale of assets love this law, while many of us on the operations side hate it. You nailed it. They have the ears of the staffers who input this stuff. Below Ground 1 Ed Snyder Link to comment Share on other sites More sharing options...
RatherBeGolfing Posted January 13, 2023 Share Posted January 13, 2023 22 hours ago, Bird said: At this point, with my career in the rear-view mirror, I am of the opinion that the retirement plan rules are fundamentally broken and unfixable. We have widespread noncompliance, both due to complexity and willful neglect. I can't say I've given it that much thought but maybe, just maybe, we need to move to some kind of mandatory employer contribution (SS after all is a mandatory employer contribution) that goes into some kind of DC plan...like a SH nonelective. Get rid of the auto-enrollment stuff, or at least make it optional. And increase the 401(k) max but decrease the overall DC 415 limits and get rid of cross-testing (if you want a DB plan then put in a DB plan!) and otherwise simplify. I am literally doing this on the fly so it's not like I gave it any previous thought, and my opinion is no doubt colored by working with small plans and largely taking TH contributions as a given. I mostly agree with you, other than fundamentally broken and unfixable. Call me an optimist, but it is entirely possible to provide fully compliant plans at a competitive cost, even if the industry as a whole has widespread noncompliance. I stress simple design for simple goals, do not overcomplicate things. As for mandatory contributions, I think that is where we are ultimately heading, but it will be both EE and ER. I think we will see mandatory plans with mandatory contributions in the next decade. Bill Presson 1 Link to comment Share on other sites More sharing options...
Roycal Posted January 13, 2023 Share Posted January 13, 2023 Ausrtin3515, you correct, but the entire US so-called "retirement system" is a complete mess, a s--- show, so this legislation fits right in. Below Ground 1 Link to comment Share on other sites More sharing options...
Nate S Posted January 13, 2023 Share Posted January 13, 2023 21 hours ago, jsample said: Now creating 1099R forms for employees who did not know that they were making catch-up contributions but had to have deferrals reclassified as catch-up due to a failed ADP test and somehow change sources from pre-tax to Roth... Wait, what???? When was it said that recharacterization was going to trigger the ROTH conversion aspect??? I get the conversion as a 402(g)/415 limit issue since that speaks directly to the amount an HCE benefits from, but for anything else, no. This is half the problem, all the hand wringing and jumping at shadows. Instead, focus on the upcoming regulatory comment period, and work to build a unified voice that will result in reasonable governance. You want ASPPA to advocate for the little guys, time to step up and say what the smaller providers need. Otherwise, we all better start figuring out who the 'big 5' will be. Link to comment Share on other sites More sharing options...
jsample Posted January 13, 2023 Share Posted January 13, 2023 1 hour ago, Nate S said: Wait, what???? When was it said that recharacterization was going to trigger the ROTH conversion aspect??? I get the conversion as a 402(g)/415 limit issue since that speaks directly to the amount an HCE benefits from, but for anything else, no. This is half the problem, all the hand wringing and jumping at shadows. Instead, focus on the upcoming regulatory comment period, and work to build a unified voice that will result in reasonable governance. You want ASPPA to advocate for the little guys, time to step up and say what the smaller providers need. Otherwise, we all better start figuring out who the 'big 5' will be. It was never said. I was ranting on potential consequences. I apologize for jumping the gun and stirring the pot. Link to comment Share on other sites More sharing options...
austin3515 Posted January 13, 2023 Author Share Posted January 13, 2023 That is the case as far as I know. If you contribute $15,000 and have $5,000 recharacterized as catch-up, you need to be taxed on the $5,000 AND have the money moved to the Roth source. It's on the list of bazaaro world requirements. Am I wrong about that? I hope so! Below Ground, Bill Presson and Zoey 3 Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Bri Posted January 13, 2023 Share Posted January 13, 2023 Can I presume that if your plan doesn't even allow Roth then those catchups aren't allowed at all, and instead of recharacterization any ADP excess would have to be refunded? Anon401kTPA 1 Link to comment Share on other sites More sharing options...
jsample Posted January 13, 2023 Share Posted January 13, 2023 16 minutes ago, Bri said: Can I presume that if your plan doesn't even allow Roth then those catchups aren't allowed at all, and instead of recharacterization any ADP excess would have to be refunded? Yes, that is how I understand it. If you plan does not allow Roth contributions, Catch-up contributions, that need to be Roth, would not be allowed. So would you eliminate catch-up contributions for those only earning over $145,000 (as indexed) or just eliminate them for everyone all together? We have a number of HCE spouses earning $30,000 and deferring $27,000, so eliminating catch-up for everyone would hurt them. Link to comment Share on other sites More sharing options...
C. B. Zeller Posted January 13, 2023 Share Posted January 13, 2023 18 minutes ago, jsample said: So would you eliminate catch-up contributions for those only earning over $145,000 (as indexed) or just eliminate them for everyone all together? I don't think this is an option. The way I read 414(v)(7)(B), it says that if you have anyone to whom subparagraph (A) applies (that is, anyone who is eligible for catch-up with prior year earnings over the limit), then paragraph (1) (which is the right to make catch-up contributions at all) does not apply to the plan unless anyone who is eligible to make catch-up contributions can make their catch-up as Roth. MoJo 1 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co Link to comment Share on other sites More sharing options...
C. B. Zeller Posted January 13, 2023 Share Posted January 13, 2023 Man, I'm seeing a lot of negativity in this thread. Yes, there is a new law, yes it was rushed through at the last minute, yes it's complicated and yes it's going to change the way we do a lot of things. I get it that there is a lot of anxiety and not a lot of guidance yet. We've all been through changes before and we will all be through them again. Retirement savings is still worth it and our clients need us to be on top of this for their sake, especially now. Bri and Anon401kTPA 2 Free advice is worth what you paid for it. Do not rely on the information provided in this post for any purpose, including (but not limited to): tax planning, compliance with ERISA or the IRC, investing or other forms of fortune-telling, bird identification, relationship advice, or spiritual guidance. Corey B. Zeller, MSEA, CPC, QPA, QKA Preferred Pension Planning Corp.corey@pppc.co Link to comment Share on other sites More sharing options...
Below Ground Posted January 13, 2023 Share Posted January 13, 2023 1 hour ago, austin3515 said: That is the case as far as I know. If you contribute $15,000 and have $5,000 recharacterized as catch-up, you need to be taxed on the $5,000 AND have the money moved to the Roth source. It's on the list of bazaaro world requirements. Am I wrong about that? I hope so! That's my read of it. Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing? QPA, QKA Link to comment Share on other sites More sharing options...
Popular Post austin3515 Posted January 13, 2023 Author Popular Post Share Posted January 13, 2023 13 minutes ago, C. B. Zeller said: We've all been through changes before and we will all be through them again. Retirement savings is still worth it and our clients need us to be on top of this for their sake, especially now. I never started a thread like this for any other legislation. This is different. It's insane. It's impractical. I promise you when I tell clients they have to auto enroll and auto increase participants they are not going to start a plan. Heck half of my new start-ups are SH Match based on the idea that participation will be lousy. That and the fact that automatic enrollment is completely beyond the <50 population. I have clients with 300 employees who could not handle auto enrollment (generally because they have enormous amounts of turnover). We are not overreacting. IT is every bit as bad as we say. Zoey, Lou S., Bill Presson and 2 others 5 Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted January 14, 2023 Share Posted January 14, 2023 I really like profit sharing only plans, even more now than ever. Nice to pair up with a cash balance plan. And why bother with participant-directed investments. Ah, life is easy. Riley Britton and Nate S 2 Link to comment Share on other sites More sharing options...
Nate S Posted January 14, 2023 Share Posted January 14, 2023 @austin3515 @Below Ground Nope, still calling the hypochondriac police on this line of thinking. Section 603(b)(1) only references an amendment to the 402(g) limit. 414(v)(2)(A) only addresses the 402(g) dollar limit and the 415 compensation limit. Recharachterization is not a 'contribution', it is phantom classification for excluding an amount for testing purposes only, neither the 402(g) limit nor 415 are impacted by a recharacterization. The only time I can see a retroactive conversion occurring is when an employer allocation pushes the total over the annual additions limit where the HCE did not first exceed 402(g). Link to comment Share on other sites More sharing options...
Popular Post austin3515 Posted January 14, 2023 Author Popular Post Share Posted January 14, 2023 If you call a lack of guidance hypochondria then sure I'm a hypochondriac. We've seen the IRS side in favor whatever their deepest convictions are of the meaning of something (whether we agree with them or not (best example was that QNECs couldn't be funded with forfeitures)) with zero regard for what is practical and/or. So I'll feel better when I hear it from them. Now if you'll excuse me I have a hang nail and I believe it requires some stitches so I've just called an ambulance 🤪. Below Ground, Anon401kTPA, Bill Presson and 4 others 1 6 Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
RatherBeGolfing Posted January 14, 2023 Share Posted January 14, 2023 19 hours ago, austin3515 said: I have clients with 300 employees who could not handle auto enrollment (generally because they have enormous amounts of turnover). There are clients with 30 employees who would screw up auto enrollment, I don't think its a size issue. I have had auto enroll clients with more than 1,000 employees and lots of turnover handle them just fine, with an issue here or there. And you know, if you need cash to pay for the ambulance for that hangnail, we have a provision for that in Secure 2.0 as well Below Ground, Zoey and DMcGovern 1 2 Link to comment Share on other sites More sharing options...
Below Ground Posted January 16, 2023 Share Posted January 16, 2023 On 1/14/2023 at 1:02 PM, RatherBeGolfing said: There are clients with 30 employees who would screw up auto enrollment, I don't think its a size issue. I have had auto enroll clients with more than 1,000 employees and lots of turnover handle them just fine, with an issue here or there. And you know, if you need cash to pay for the ambulance for that hangnail, we have a provision for that in Secure 2.0 as well I have a client that I have serviced for years who we have "trained" to always call us before letting a person make deferrals. During this call we review that person specifically and define that person's entry date. This is in addition to reports we issue that define when people's expected date of entry will be, which we send to all clients. Returning to the client I opened this comment with, she has 7 employees and usually has one termination and one new hire each year, so review of new entries is no big deal. Would you believe she hired a person and before she called us, told the person she could enter the Plan on a date that was prior to her actual entry date under plan terms. I suggest that this indicates that thinking universal auto enrollment is a good idea, is not in fact short sighted thinking. Some client just can't handle it, no matter what you do to help them. What you get is a frustrated client who dumps the plan leaving people with no plan at all. Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing? QPA, QKA Link to comment Share on other sites More sharing options...
Peter Gulia Posted January 16, 2023 Share Posted January 16, 2023 Below Ground describes having trained a retirement plan’s administrator to call the TPA before making a particular kind of plan-administration decision. Perhaps some processes would function more efficiently and effectively if an employer didn’t appoint itself as the plan’s administrator. Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Riley Britton Posted January 17, 2023 Share Posted January 17, 2023 On 1/13/2023 at 4:47 PM, C. B. Zeller said: Man, I'm seeing a lot of negativity in this thread. Yes, there is a new law, yes it was rushed through at the last minute, yes it's complicated and yes it's going to change the way we do a lot of things. I get it that there is a lot of anxiety and not a lot of guidance yet. We've all been through changes before and we will all be through them again. Retirement savings is still worth it and our clients need us to be on top of this for their sake, especially now. It's totally unnecessary and making things way.too.complicated. Retiring in 6 months and cannot wait to get out of this field. Thanks to our "president" we can only look forward to more of this mayhem. Below Ground 1 Link to comment Share on other sites More sharing options...
Below Ground Posted January 31, 2023 Share Posted January 31, 2023 Given that it appears that SECURE 2.0 now seems to have eliminated the ability to even do Catch-Up Contributions, perhaps the cheering sections will be subdued. I am referring to Bloomberg New below at: https://news.bloomberglaw.com/daily-labor-report/secure-2-0-error-would-prohibit-401k-catch-up-contributions. This, among many other sites, are exposing the truth of this law. Yeah, we have all been through changes and have all needed to see our clients through. That still doesn't eliminate the need for concern or the characterization of this "gem" as pure garbage. Part of the SECURE 2.0 Act (Pub.L. 117–328) legislation President Joe Biden signed into law in December was intended to require the contributions workers nearing retirement make to their accounts to be post-tax Roth deferrals. The elimination of a key paragraph in the bill during the drafting process inadvertently eliminated catch-up contributions entirely. Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing? QPA, QKA Link to comment Share on other sites More sharing options...
Below Ground Posted February 1, 2023 Share Posted February 1, 2023 Another link showing just how bad SECURE 2.0 really is... https://www.napa-net.org/news-info/daily-news/major-secure-20-error-puts-catch-ups-jeopardy-ara’s-graff?utm_source=MagnetMail&utm_medium=email&utm_term=dseals@ebspension.com&utm_content=COM_NAPA_eNews_1.27.2022_WIR&utm_campaign=Catch-Up ‘Muster%2C’ Markets Timing%2C %26 Grandfathered ‘Clock’ Having braved the blizzard, I take a moment to contemplate the meaning of life. Should I really be riding in such cold? Why are my goggles covered with a thin layer of ice? Will this effect coverage testing? QPA, QKA Link to comment Share on other sites More sharing options...
ESOP Guy Posted February 3, 2023 Share Posted February 3, 2023 On 2/1/2023 at 12:07 PM, Below Ground said: Another link showing just how bad SECURE 2.0 really is... https://www.napa-net.org/news-info/daily-news/major-secure-20-error-puts-catch-ups-jeopardy-ara’s-graff?utm_source=MagnetMail&utm_medium=email&utm_term=dseals@ebspension.com&utm_content=COM_NAPA_eNews_1.27.2022_WIR&utm_campaign=Catch-Up ‘Muster%2C’ Markets Timing%2C %26 Grandfathered ‘Clock’ As a tax person I can tell you now this will be fixed retroactively in a technical corrections law. After every major tax law there seems to be a technical corrections law that fixes this kind of silly stuff. The fact this kind of stuff happens so much is more proof of how rushed our laws are and how overly complex they are. But as long as this was a typo and not a decision agreed to this will be fixed without much to do. Bird 1 Link to comment Share on other sites More sharing options...
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