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In 1974 when ERISA was enacted, there were very few provisions (any, as a practical matter?) that regulated the administration or mandatory benefits under health plans. The first big health plan provision didn't happen until the addition of COBRA rights for employees and their dependents, in 1985. Later amendments to ERISA added additional mandatory health benefits, especially the Affordable Care Act, enacted in 2010. Both 'pension' and 'welfare' plans are employer-provided benefits, so they're under the same tent as a federal government regulatory matter.

If the amount of the deferral was less than 3% of the key employee's compensation, then the top heavy minimum would be less than 3%. If the only contribution were a catch-up contribution (because it was reclassified due to a plan-imposed limit, or a failure of the ADP test, for example), that would not trigger the top heavy minimum. If any key employee received a contribution of at least 3% of compensation, including elective deferrals, then all non-key employees who are actively employed on the last day of the plan year must receive a top-heavy minimum contribution of 3% of compensation. This ignores the case of a safe harbor plan, for example a plan with a safe harbor match that excludes HCEs from the match. If no non-HCEs deferred and the only contributions to the plan for the year were deferrals made by a key employee (who is also HCE), then in that case there would be no employer contributions and also no top heavy minimum would apply.

For now. And don't forget discrimination issues. If the reason distributions are not required is because older hces want to leave the money in the plan you can't force out rank and file but fail to force out the owners.

Title has now been changed. Thanks to you and @Tom Poje for all your work on this!

https://www.irs.gov/retirement-plans/self-correction-program-scp-faqs Two-year SCP window. IRS website actually gives an example of 415 failure for 2016 that would eligible for self correction by 2018.

ESOP Guy, I greatly appreciate your viewpoint as an accountant. I am by no means an accountant, but your point of "chump change" is well taken, and that had crossed my mind. I appreciate someone with the accounting expertise chiming in on that. Luke Bailey, as Professor Gulia alluded to, I am not aware of the distinction between "settlor" and fiduciary decisions. Professor Gulia, I will be in touch. All, thank you so much for your thoughtful comments and contributions to this post. You all are incredibly smart, and I'm incredibly grateful.

Question for Peter and Brian. Would it not be better to change the plan document wording to something along the lines of "A discretionary amount to be announced by the Employer at the beginning of each Coverage Period" and eliminate the specific number?

I wouldn't consider that approach to need an amendment for each increase.

Also remember that the plan has to have more than 120 participants on the first day of the plan year to require an audit. That's anyone eligible (whether or not they have a balance) and anyone terminated with a balance of any size.

The plan can require mandatory distributions for terminated participants who have reached the later of age 62 or normal retirement age, regardless of account balance. Assuming some or all of the participants have reached such an age, this should help.

Pique?

12/31/2021. See Notice 2020-51 Q&A-5

Yes. Depends how you write the amendment. At this point you could still do a 3% SHNEC for 2021.

An important part of the lobbying and legislative “deal” that moved the legislation that became ERISA was big businesses’ desire to get national preemption of State laws. See, for example, State v. Monsanto Co., 517 S.W.2d 129 (Mo. Sup. Ct. Dec. 16, 1974) (Before ERISA, Monsanto’s provision of health and welfare benefits was insurance subject to State regulation.) Also, a preceding Federal law, the Welfare and Pension Plans Disclosure Act of 1958, had already treated those different kinds of plans together. For more information, see James A. Wooten, The Employee Retirement Income Security Act of 1974: A Political History (2004).

Not surprising when one recalls the true name of the enabling legislation: Every Rotten Idea Since Adam.

There are two ways a plan can allow in-plan Roth conversions: 1. Allow conversions only of amounts that are otherwise distributable to the employee. Once converted, the Roth conversion source may be distributed at any time, if allowed by the plan. 2. Allow conversions of vested amounts at any time, but retain the distribution restrictions associated with that money after the conversion. In this method, the plan would usually have to separately recordkeep each different Roth conversion source. For example, a plan that has deferrals, safe harbor match, and profit sharing, would also have to recordkeep deferral conversion, safe harbor match conversion, and profit sharing conversion sources. The option to allow Roth conversions to be distributed at any time is only applicable when the plan uses the first method for Roth conversions. Edit: Lou beat me to it by a minute. As he points out, some plans may use different terminology for the two methods, so read your document carefully. I do not think the methods have different names in the code or regs.

I don't believe that it is. As I understand it from our document provider there are 2 types of In-Plan conversions of Pre-Tax money to Roth money. The first is an In-Plan Rollover. This is available when the participant is eligible for a distribution under the Plan but choses to do an In-Plan rollover converting pre-tax to Roth. In this case the new funds are treated like a Related Rollover account in the Plan with Roth tax characteristics attached. The second is an In-Plan Transfer to Roth. This is done when the Participant is not eligible for a distribution from the plan (unusally pre-59.5). In this case the the funds are converted to Roth, but the source retains all the other charateristics of the source from which it was converted. So if it is 401(k) money subject to the pre-59.5 restriction on in-service distributions, that remains. If I'm wrong I'd love to see a citation because otherwise it seems like a loophole to avoid some restrictions.

Professor Gulia, I will be in touch very soon. Thank you!

For top heavy purposes, the plan effectively has a short plan year and a TH minimum would be required (assuming it would otherwise be required!) Prior discussion that may be helpful:

For Temple University’s law school, I teach (now going on 11 years) a specialized course on ERISA Fiduciary Responsibility. I teach it, and my summer-semester course on Professional Conduct in Tax Practice, as writing courses. Beyond my courses, I’ve served as consulting or reviewing faculty on papers for others’ courses or for independent-writing projects. I have experience with help a student choose and refine a topic, and plan how to research it. If doing so doesn’t interfere with anyone in your school’s faculty, I’d be glad to converse with you to help you discern whether your idea would research and write effectively to fulfill your course’s or project’s purpose. Also, I can tell you about (at least) two big cases you likely would want to consider in your research.

There is a phone number to get it if you don't know it. https://www.irs.gov/businesses/small-businesses-self-employed/lost-or-misplaced-your-ein

He owns all 3 100% correct? Controlled Group.

Ralph W. Shaw in Denver. rshaw@shawlawdenver.com Let him know Guy Hocker sent you!!