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I'm not sure this is accurate based on the articles I have read. This appears to be something the IRS informed document providers of during the review process. See here too: https://www.relius.net/news/Docs/Flexible Match Communication.docx

...right, the problem is compounded if an ADP refund turns non-catchups into catchups even though they're below 6% of salary. Now the previously matched amounts are ineligible to be matched as a result of the re-characterization.

All good ideas. I usually argue (persuasively) that it makes no sense to not match catch-up. The match cap should limit the plan sponsor's financial exposure, if that is their concern.

They made a deposit in error to the participant that wasn't withheld from his paycheck? Sounds like removing it from his account (along with earnings) and using it to offset future deferrals is probably the correct fix.

Yes, unless the plan also has a true-up provision or otherwise allows calculation on annual basis.

That depends on the plan document. If you have per payroll match you are violating the terms of the Plan document. If your plan matches on annual compensation or you have a true up you have no problem with what you are doing; I assume you are doing it for all similarly situated employees and not just a specific HCE who maxed out.

We've been doing it this way from the beginning. It gives clients max flexibility. We do* issue a notice that says "no we're not" if that is the case, but I agree that it is probably not necessary. *Did. Under the new law, we have all of our SHNE plans as NOT SH and simply amend them in November; no maybe notice needed.

I agree. I work for an employer that matches 100% of 6%, no match on catch-up, with an annual true-up. What does this mean? Really nothing. The employer thinks they are not matching on catch-ups, and therefore, saving them some money. This is true and misleading in concept. 20,500 divided by 305,000 is 6.72%. Adding catch-up in only increases the deferral %, still capping at 6%. Less compensation and more deferrals is only going to get you the cap of 6% match which Patricia alluded. Keep it Simple comes to mind. I've seen this confuse employees thinking they are getting the short end of the stick. While in reality, if they defer 6%, they will get 6%.

As of his rehire date, there is no loan. Let the guy do a QPLO makeup by his tax deadline, perhaps?

I have seen auto-enrollment default numbers from 4% (and lower) to as high as 10%. I do not believe there is a maximum prescribed by IRS or DOL at this time. The plan sponsor would have to weigh the benefit of assisting employees saving for retirement with the possibility of irritating employees by setting that number "too" high. I think The Principal's own plan (401(k)) uses 8 or 10%. Also important with a 403(b) is universal availability. Employees are usually eligible to defer their own money immediately with the first payroll after hire. Look at your plan document, but I have seen a 30 day wait before implementation of auto enrollment in 403(b)'s and have experienced a vendor's refusal to implement auto-enrollment (they were mailing packets and considering other tasks involved) for a 403(b) because the timing on initial entry after hire was too tight for them to feel comfortable. It is, as with many of these things, critical to read the plan document and make sure it is followed or written correctly and in a manner that can be administered. Good luck! Patricia

Correct me if I am wrong, but doesn't the FTW Document Maybe language from November 2021 say something like "We will tell you by November 2022 if we are going to make it for the 2022 year". I don't believe there is a notice that says "No, we are not going to make it". Just the notice that says "Based on what we wrote last year, we ARE going to make it for 2022". Again, I could be wrong.

Does your document have a question that looks something where option 3 is selected? Safe harbor nonelective contributions (select one) 1. [ ] 3% contribution. The Employer will make a nonelective "ADP test safe harbor contribution" for the Plan Year to the Account of each "eligible Participant" in an amount equal to 3% of each Participant's Compensation. 2. [ ] Stated contribution. The Employer will make a nonelective "ADP test safe harbor contribution" to the Account of each "eligible Participant" in an amount equal to ___% (may not be less than 3%) of each Participant's Compensation. 3. [ ] "Maybe" election. The Employer may elect to make a nonelective "ADP test safe harbor contribution" after a Plan Year has commenced in accordance with the provisions of Plan Section 12.8(h). If this option d.3. is selected, the nonelective "ADP test safe harbor contribution" will be required only for a Plan Year for which the Plan is amended to provide for such contribution and the appropriate supplemental notice is provided to Participants.

Yes, this is permitted. I don't know that there are any limitations on the initial defaulted employee deferrals. I suppose if your auto enrollment isn't uniform, then you would jeopardize your preemption of state wage withholding laws.

That fees vary by participating employer should not by itself mean a set of fees results in a nonexempt prohibited transaction if the transactions meet the conditions of the statutory and class exemptions the service provider relies on. For example, ERISA § 408(b)(2)’s exemption can apply only “if no more than reasonable compensation is paid [for the necessary services].” Also, each participating employer “retains fiduciary responsibility for” selecting and monitoring the pooled plan provider “and any other person who, in addition to the pooled plan provider, is designated as a named fiduciary of the plan[.]” ERISA § 3(43)(B)(iii). That could include duties for a participating employer, acting with no less loyalty and prudence than ERISA § 404(a)(1) requires, to find the fees charged to its portion of the plan’s assets are reasonable.

To be clear, I'm not saying "tell the employee to not have catch-ups". we are in agreement.

The only problem (of which I am aware) is when: - Plan document permits catch-up contributions to be made and defines "catch-up contributions" in accordance with the regulations. - Plan document specifies that catch-up contributions are not matched but allocates a matching contribution based on other elective deferrals. - Employee elects to contribute to a catch-up contribution source separate from his / her election to make other elective deferrals. - Matching contributions are based on what payroll initially thinks are and are not catch-up contributions, not based on what actually turn out to be catch-up contributions once the year ends and compliance testing & monitoring is performed. - There is no process to grant or remove matching contributions based on what turns out to officially be catch-up contributions. So just avoid any of those five conditions. I would counsel the client to calculate the match based on all elective deferrals including "catch-up contributions." I also like NOT having separate employee elections for catch-up contributions, although that change requires payroll programming, so it's less friction free. Others in this thread seem to be advising clients to not permit catch-up contributions to be made, which strikes me as a huge overreach. * * * * * It sounds like you are concerned about eligible employees electing to make "catch-up contributions" (as unofficially defined by payroll, not as officially defined in the regulations) before they have reached the 402(g) limit or any other legal or plan limit. This is a non-issue. If the eligible employee has not reached a limit, then the extra contributions that payroll thought were "catch-up contributions" are not actually catch-up contributions and your client has not violated the regulations.

That is an incorrect interpretation. As discussed, deferrals become catch-ups after a limit (402(g), plan imposed, or ADP test restricted) is reached, not simply by election. By "people" do you mean participants or service providers? The latter group should know better. The SPD wording means (if drafted by a knowledgeable person, or platform) that you are eligible for catch-up deferrals if you attain age 50 at any time during the year, not simply after reaching age 50. Whether I turn 50 on 1/1/2022 or 12/31/2022 I can defer $27,000 in total in 2022, and do so all in Q1 if able or spread throughout the year. The SPD could possibly be worded with more clarity, but the administrative system providers (payroll and RK) should know how to do this properly.

Yes.... but it won't work. Tell the Provider to stop offering Catch-Up selection. You said it's a large plan... can you get any traction if the auditor "found" (with your help) participants that are not getting the correct amount of match? They put a nice little finding on the 5500-audit package. If no fix is done, seems like you have a not operating according to the plan Ideally, the payroll provider should know that employee A is not into catch-up and should be getting match. Even if have Catch-Up "selected"....

TPAs recharacterize the catch up is commonly happens when the calendar year is complete and start the compliance testing. How should plan sponsor operates the plan or how should payroll set up to match it? Since the Catch up is not matched, participants didn't max out 401k but start catch up contribution will lose a portion of match. And the match made by payroll, it is not required to have a true up at year end to make up the match difference.

There is a large difference in how the regulations define "catch-up contributions" and how everyone else frequently uses that term when payroll has a separate contribution source for catch-up contributions. It creates confusion.

No. Attaining age 50 in the calendar year (or already age 50+) makes an individual catch up eligible. However, a contribution is not recharacterized as a catch up until a limit is exceeded (e.g., 402g, plan imposed limit). In this case it would appear the "catch up" election should be matched until it actually becomes a catch up.

Yes, the full carryover option from the CAA FSA relief has expired. Here's a quick overview: https://www.newfront.com/blog/2023-health-fsa-limit-increased-to-3050 What About the Carryover Limit into 2024? The indexed carryover limit for plan years starting in calendar year 2023 to a new plan year starting in calendar year 2024 will increase to $610. The $500 carryover limit is indexed at 20% of the maximum health FSA salary reduction contribution for the plan year. The indexed carryover limit increases in multiples of $10. The adjustment to $610 (20% of the $3,050 limit) for amounts carried into 2024 represents a $40 increase to the $570 carryover limit in effect for amounts carried into 2023. Note that the CAA FSA relief provisions permitted employers to offer carryovers of the full unused FSA balance from plan years ending in 2020 and 2021 into the subsequent plan years ending in 2021 and 2022, respectively. This relief has expired and is no longer available for carryovers into 2023 or carryovers into 2024. Carryover Limit from a Plan Year Starting in 2022 to a Plan Year Beginning in 2023: $570 Carryover Limit from a Plan Year Starting in 2023 to a Plan Year Beginning in 2024: $610 Here's a quick slide summary: Newfront Office Hours Webinar: 2021 Year in Review

If they are both calendar year plans and merging on 1/1/2023. Then for 2022 they are completely separate plans. The fact that the 2022 safe harbor contribution will be deposited to the post merger surviving plan in 2023 should have no impact on 2022.

Pooled non-calendar year profit sharing plans are often valued annually on the last day of the plan year. The 401(a)(9) regs address this. You take the balance on the valuation date, add in in contributions from the valuation date to 12/31, subtract distributions from the valuation date to 12/31 and that is your adjusted 12/31 balance for figuring out next year's RMD.

Google is a wonderful thing. https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-guidance-clarifies-relief-for-fsa-carry-overs.aspx https://www.flexiblebenefit.com/blog/carryover-grace-period-run-out-period-whats-difference Can an FSA have a carryover and a grace period? Health FSAs have an additional option of allowing participants to roll over up to $550 of unused funds at the end of the plan year and still contribute up to the maximum in the next plan year. Health FSA plans can elect either the carryover or grace period option but not both. There is also potentially a run-out period, different from the grace period, which can be paired with the carry-over if my understanding is correct.

Consistent administrative procedure should be set up. Any method seems like it would be acceptable as long as it is consistent. The pay roll probably has a hierarchy established. I had that happen to someone this year and their payroll which did ROTH first which capped him out and he had no traditional on his final deposit.

If the plan does not specify a hierarchy I would think prorated/weighted split is most reasonable. So $500 would be $333.33 pre-tax and $166.67 Roth, +/- a penny on either side depending on how you round.

https://www.irs.gov/forms-pubs/additional-guidance-for-substitute-and-telephonic-submissions-of-forms-w-4p-and-w-4r Whoever told you that "the IRS didn't rule on implementing" might have meant that the IRS hasn't provided any rules for implementing a simplified substitute form, like we were used to with the old W-4P. The rules for using a substitute form now are so onerous that it is basically impossible. The new forms W-4R and W-4P (or suitable substitutes) must be used starting in 2023, unless the IRS comes out with some guidance before then.