Leaderboard

416(i)(1)(B)(iii)(I) says that sec. 318(a)(2)(C) is applied by substituting "5%" for "50%." In other words, take anywhere that "50%" appears in 318(a)(2)(C) and mentally replace it with "5%" when you're thinking about who is a 5% owner for sec. 416 purposes. What 318(a)(2)(C) says, is that if you own at least 50% (but we're treating it as if it says 5%) of a corporation, then you are deemed to own a proportional share of any stock owned by that corporation. Based on the facts presented, I don't think this section applies to your situation. Ordinary spousal attribution under sec. 318 applies, and so each spouse would be considered to own 10% for 416, and consequently for 401(a)(9), purposes.

There isn't a controlled group, since that requires 80% common control and you only have 51% common control, even assuming that that the spousal non-involvement exception doesn't apply. This is assuming that the other 49% of A is owned by an unrelated person. ASG status is more fact-specific. Both corporations are in the field of consulting, which is one of the specified fields and automatically makes them service organizations. If we are considering an A-org group, then a corporation can only be the FSO if it is a professional service corporation. Are either of the corporations professional service corporations? Consultants are not on the list of professional services in the proposed regs, so they are probably not a professional service corporation. If not, then there can't be an A-org group since neither of them could be the FSO. In order to be a B-org group, a significant portion of one of the corporations' business must be in providing services to the other corporation. If neither of them provide services to the other then there isn't a B-org group either. It seems unlikely that there is an ASG, but as my signature line below says, this free advice is worth what you paid for it. If you want some advice you (or your client) can rely upon, get a lawyer.

...and it's probably, as CBZ indicated, *immediate* upon rehire. (As opposed to waiting for the plan's next normal entry date for newly eligible folks.)

I think we're going to see a few owners paying themselves $144,999.99 in salary this year.

IRC 414(v)(7)(A) (as added by SECURE 2.0) says that if a participant exceeds the comp limit, paragraph 414(v)(1) (which covers all types of catch-up contributions, including ADP catch-up) does not apply unless the contributions are designated Roth contributions "made pursuant to an employee election." The election to treat a deferral as a Roth contribution must be made at the time of the contribution, 1.401(k)-1(f)(1)(i). It's not unreasonable to read these together to say that if the deferrals were not contributed as Roth at the time they were made, then they could not be used for catch-up, including for ADP catch-up. If IRS wants to allow pre-tax deferrals to be retroactively recharacterized as Roth catch-up to avoid their having to be distributed from the plan on a failed ADP test, they will need to provide some guidance.

Well the VCP fix might be just to merge the plans back together (hopefully they weren't simply avoiding an audit requirement this way, too). Sounds like they only really meant to change the investments available for participants.

Or as Danny Glover lamented in Lethal Weapon, "I'm getting too old for this s _ _ _ !"

It ain't going to be fun. The solution? Buy lottery tickets!! Odds of winning are about 1 in 320 million or so, and the jackpot is 600 million or so. So if you buy 320 million tickets, you are guaranteed of winning and making a huge profit so you can retire!! (I'm using government accounting mathematics.)

The offset balance includes interest through the date of the offset. If the loan was suspended under the CARES Act, then repayments were probably supposed to have started in January 2021, which means it probably defaulted on the last day of the calendar quarter following January 2021, which would be June 30, 2021. You could issue a 2021 1099-R, which would include interest through June 30, 2021, but that would mean they would have to amend their 2021 tax return. Or, you could self-correct the loan under EPCRS, which allows you to report it in the year that it was corrected. If you're correcting it by defaulting the loan and reporting it in 2023, then it will include interest through 2023.

It sounds as if there will no longer the ability to recharacterize deferrals under a failed ADP Test unless they were originally contributed as Roth Deferrals. For many plans this will basically mean the plan has no value and should be terminated since it is only by recharacterizing deferrals that the HCE can make a reasonable deferral.

I predict that this will be addressed when the IRS finalizes the RMD regulations that were proposed last year.

Belgarath, thank you for contributing your thoughts. I consider these questions from the perspective of a retirement plan’s administrator (the named fiduciary, not a third-party administrator). If 2033 arrives with no correction from Congress (and no Treasury department rule that binds a plan’s administrator), I’m not sure it’s cautious to compel an involuntary distribution, which might be contrary to a participant’s or beneficiary’s right to preserve her retirement savings. About a summary plan description (a task I’m working on now), I’ll explain the provision for those born in 1958 and earlier, explain it for those born in 1960 and later; state that there is an ambiguity for those born in 1959, and inform that the plan’s administrator intends not to decide an interpretation until it becomes necessary. BenefitsLink neighbors, other thoughts? A Treasury department interpretation or tolerance seems somewhat likely. SECURE 2.0 includes not only the change from age 72 to age 73 or 75 but also other nuances about minimum-distribution provisions. Treasury could include these points in a revision of its pending proposed rulemaking. BenefitsLink neighbors, any predictions?

The rule of parity allows you to disregard eligibility service before 5 consecutive 1-year breaks in service for an unvested participant. If this person has a vested balance in the plan then they probably entered the plan immediately upon re-hire, regardless of how many 1-year breaks in service occurred.

It seems to me that would be a violation of the exclusive benefit rule. Any use other than providing benefits to participants and their beneficiaries, or defraying reasonable costs of plan administration, is not allowed.

Never look for trouble. The simplest answer is often the best: if you can provide the page(s) from the audit report, do so. That is exactly what the SAR reference means. Peter is (as usual) correct: confirm that a PDF transmittal will be acceptable.

I agree - all those provisions that sound great for enhancing overall retirement plan coverage just make things more complicated and error-prone for the small and unsophisticated (from an HR perspective) employer that they serve as a detriment. Fewer employers will want to adopt these plans, fewer providers will want or be able to serve these plans, and administrative costs will increase, wiping out the short term tax credit savings. I've been in this business for nearly 40 years, have done both DC and DB in terms of administration, plan documents and compliance, and remember when DBPs were the complex animals no one wanted any more. Now, DBPs and CBPs look pretty simple compared to the modern and continually evolving 401(k) plan environment. Maybe all the heads of the states' with those new mandatory retirement plans met in a NYC pizza parlor and conspired with the Federal government to make 401(k) plans so damn complicated that no small employer would dare set one up and thereby drive all their employees into the mandatory state plans, just saying.