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Am I the only one?


austin3515

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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.  

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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. 

 

 

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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. 

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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.

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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.

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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.

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

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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.

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

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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

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@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).

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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 

 

 

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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

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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

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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. 

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  • 2 weeks later...

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

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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

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On 2/1/2023 at 12:07 PM, Below Ground said:

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. 

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