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Doesn't really matter how it sounds. What matters is how it impacts the group. Are you generally restricting the compensation of HCEs, or NHCEs. You would need to annually demonstrate that the definition is non-discriminatory.

I am not an attorney, just a lowly TPA, but when I started reviewing the ACT, I thought I would create a spreadsheet that I could sort by the code section, effective date, etc. This was just my first run through and obviously needs to be updated, but please feel free to take it and make it your own. Secure 2.0 Provisions.xlsx

Solo 401(k), Uni-K, etc are all marketing terms. Not technical terms at all. It is one of my pet peeves that people think these kinds of plans are special or exempt from something because they are called 'solo' plans. Not trying to rail against you, I know you didn't invent the term. Just expressing my distaste at some of the marketing and sales things in general. Those plans are regular 401(k) plans subject to the same rules, reporting, discrimination testing etc. I agree with the others, if the plan allowed for deferrals immediately you likely have a missed opportunity to defer, but it is document specific.

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!

Ha, maybe hide behind the Plan Administrator's right to call for an interim valuation during 2022 anyway. With such a large asset drop it might have been prudent to re-value the account balances ahead of a large distribution, such that the guy was only going to end up with 80k anyway.

They already have a plan. And based on your post, the employees are likely already eligible.

It's based on the date on which the cash or deferred arrangement is established. A PS plan adding 401(k) is establishing a new CODA, so the auto enrollment requirement would apply.

If they executed the election then that means they cannot be in the plan, ever. If they signed it they can't say they should be covered so I think you are ok in that regard. Most of us in the biz don't like irrevocable elections for various reasons, but if it already exists, so be it.

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.

Has anyone read Atlas Shrugged? Or am I the only one thinking about the perils of over-regulation?

This discussion is not exactly the same, but may still be helpful. The payroll system should be adding both "regular" deferral and "catch up" deferral to calculate the match until the deferrals actually become catch up. D. Lewis provided the reasoning. This is exactly the reason I don't like separate elections for "regular" and "catch up". If you have one election then the payroll system just continues to withhold until deferrals reach 402(g) for non catch up eligible or 402(g) plus catch up for catch up eligible.

It is going to help you retire by aging you prematurely.

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.

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.

Absolutely there's a big issue, the successor plan rule. Some "solo" documents preclude other employees from participating at all. So a new document would be a definite. But for the same plan.

Ausrtin3515, you correct, but the entire US so-called "retirement system" is a complete mess, a s--- show, so this legislation fits right in.

(3)Definition of year of service (A)General rule For purposes of this subsection, the term “year of service” means a 12-month period during which the employee has not less than 1,000 hours of service. For purposes of this paragraph, computation of any 12-month period shall be made with reference to the date on which the employee’s employment commenced, except that, under regulations prescribed by the Secretary of Labor, such computation may be made by reference to the first day of a plan year in the case of an employee who does not complete 1,000 hours of service during the 12-month period beginning on the date his employment commenced.

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.

You nailed it. They have the ears of the staffers who input this stuff.

Yes I would issue 2 1099s and yes the participant should request a distribution from the IRA - but it is important to request it as a refund of an excess contribution, otherwise they will be taxed twice. No VCP. I doubt the check is uncashed and in any event wouldn't want to mess with blowing up an investment company's system with a bad check.

My gosh, thank you for sharing this! This list is amazing, and I'm sure took you lots of time. MUCH appreciated.

I realized my answer may not have been very helpful, so I will try to add more as I have seen this many times. I think you have a couple options: 1. If you keep the Fidelity system exactly as is, then Workday needs to be coded in such a way to add deferral and catch up to get your total deferral rate then the system calculates the match each pay period. Then once an employee reaches 402g, the system needs to know to only use regular deferral to calculate the match. This route may be the best as it is just an admin coding change. 2. Keep the elections and payroll as is and amend the document to add a true up. 3. implement one election at Fidelity that continues until you reach the limits. Workday then just calculates the match based on one total election. The problem with this is how you handle all the existing catch up elections. These are just ideas to further investigate as each has its own set of challenges.

Although my reply does not answer you directly, I would consider a smaller payroll company as well as an independent TPA firm. We have had many problems with the payroll companies "administration" that are more thoroughly handled with independent, whom smaller payroll companies have a much more beneficial relationship. Your issue might not rven be an "issue." Just my opinion.

The “reasonable period” does not refer to how long the failure remained undiscovered. Rather, it’s about how promptly the failure is self-corrected “after such failure is identified.” SECURE 2022 § 305 undoes the Internal Revenue Service’s time limit on which failures are eligible (if otherwise eligible) for self-correction. Congress’s statute provides no special definition for the word “inadvertent”. Merriam-Webster says inadvertent means unintentional or inattentive. https://www.merriam-webster.com/dictionary/inadvertent In VirtualTPA’s story, one might imagine the plan’s tax-qualification failure could have resulted from its administrator’s unintentional or inattentive lack of knowledge of the plan’s provisions. (Isn’t that a way many failures happen?) The administrator (the one responsible under ERISA and the tax Code, not the TPA) might not have known the plan compels an involuntary minimum distribution to a participant who was at a relevant time a more-than-5% owner. (I observe nothing about how responsibilities sort out between and among the participant, the administrator, and the third-person service provider.) If the Internal Revenue Service later pursues something under the IRS’s finding that a plan was tax-disqualified and not self-corrected, whoever asserts the failure was self-corrected must persuade a finder of law and fact that the failure was eligible for self-correction. One can imagine at least plausible, and perhaps persuasive, arguments that a failure of a kind VirtualTPA’s story describes was inadvertent. If it was, the passing of a few or many years does not by itself make a failure that otherwise was inadvertent necessarily less so. A plan’s administrator that errs by not knowing the plan’s provision that applies to a participant who was a more-than-5% owner might continue its ignorance for years or decades. Likewise, inattentiveness too sometimes persists over stretches of time. I concede there is a separate problem about whether the plan’s administrator had procedures reasonably designed to cause the administrator to administer the plan correctly. If an organization really wants rules obeyed, one must supplement written procedures with compensating controls designed under an assumption that some or many people won’t read the written procedures they are told to follow, especially if the rules are many or complex (or, worse, both). But I’ve never seen the IRS push such a point. Instead, the IRS treats the procedures condition as met, even if everyone strongly suspects no one read the procedures. We’re not getting the full facts of the story. If we had them, there could be a discussion about whether the failure was inadvertent, not egregious, and otherwise fits conditions for a failure that could be a subject of self-correction. But that a failure happened more than two or three years ago does not by itself make the failure ineligible for self-correction.

So you're saying the employer will reimburse a portion of the cost-sharing paid by the employee to ensure each visit does not exceed $75 OOP? That would be a GHP reimbursement of medical expenses in my opinion. I know it feels different because the provider is also the employer, but I don't see how that changes the basic concept that reimbursement of a medical expense creates an ERISA GHP. Here's an overview: https://www.newfront.com/blog/addressing-employee-health-plan-exception-requests-part-vi Specific Expense Payment Exceptions: Requests for Employer to Reimburse Outside the Plan Although many employers expend a great deal of time, effort, and money to maintain group health plan offerings for employees, there will always be at least perceived gaps in coverage where employees believe the plan does not provide sufficient benefits. This will often create situations where an employee requests that the employer pay for or reimburse a specific medical expense that was not covered by the group health plan. Common examples of situations where an employee will request reimbursement of a medical expense outside of the formal ERISA group health plan include: Services not sufficiently covered by the group health plan (e.g., infertility expenses, abortion travel expenses, gender dysphoria expenses, mental health expenses, autism-related expenses); Cost-sharing under the group health plan (i.e., deductibles, copays, coinsurance); Items and services not covered by the group health plan; Out-of-network provider costs under the group health plan; High-cost pharmaceuticals; Individual policy premium costs for part-time or out-of-state employees; Medical wellness expenses outside a wellness program integrated with the group health plan. Reimbursement of the Medical Expenses Creates a Group Health Plan Reimbursement of Internal Revenue Code §213(d) health expenses creates a group health plan, which would trigger the full array of group health plan laws (ERISA, COBRA, HIPAA, ACA, HSA eligibility, §105(h), etc.). Therefore, employers should avoid providing reimbursement for any §213(d) medical expenses outside of the group health plan unless it is part a HRA or wellness program that is integrated with the health plan. IRS Publication 502 provides a useful summary of expenses that qualify as §213(d) medical expenses.

Good call! The train has indeed left the station!

I still have some in-house recordkept, balance forward, plans and I still take the occasional individual account brokerage plan. I am no longer going to take any plans in-house. Trying to create distribution notices and forms. Having to track, create, and send annual notices for automatic enrollment participants who are not automatically enrolled. 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 - it is all too much to do without programmers to constantly evolve a recordkeeping system and a legal team to create notices and forms. I see some good things, but the devil is in the details as they say.

I'm a little nervous that so many people are factoring this in for retirement... Someone in my office is saying the same thing. There might be a mass exodus of talent as a result of this too. Quite frankly if I was 64 I'd probably retire too.

Austin, let me first say that I typically enjoy and agree with many of your comments. Quite frankly, I am thinking of retiring early given some of the garbage in this law. 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. Excluding states that are expected to mandate having a plan, I see many plan terminations will be the result. Do we exaggerate? Time will tell.

Thanks, agree, had a long talk with the client, who had no idea of any of this until I enlightened him.

Ill retire somewhere around Cycle 10 restatements...

6 months until retirement!! SO looking forward to it.

As a recordkeeper, we do the same thing - dual elections from the start. At the end of the year, if the participant hasn't met the criteria to be catch-up eligible (402(g), plan limit, etc.) we move the money to the regular deferral bucket until they do meet the limit. This will be a huge problem though, when catch-ups for those making too much (in Congress' eyes) are Roth.....

Ding, ding, ding!

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 don't have an answer for how to handle this in your payroll system, but from a plan perspective it's not a catch-up until a limit is exceeded. Electing it on a form doesn't make it a catch-up. It's a catch-up once the annual limit is exceeded (or another plan limit). We find many payroll systems and record keeper forms do not handle this well.

Here's a 20-page chart from Seyfarth Shaw that includes effective dates and whether a plan amendment is required. And a 10-page "Pocket Guide", organized by effective date, from Proskauer.

In 2019, I helped an administrator file twenty old years’ Form 5500 reports. EFAST worked. I found it useful to begin with the oldest year, and proceed in chronological order. Doing so set a preceding year’s ending balance as the next year’s presumed opening balance.

EFAST2 FAQ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf See also https://www.askebsa.dol.gov/FormSelector/

There is some good stuff, but also a lot of crapola. I agree that some of it is absurd from an administrative standpoint. What I hate about this type of thing is that there are always a few clients who insist on one of the useless options, and there are always "advisors" who try to puff up their importance by convincing a client that they simply must have one or more ridiculous provisions, and "Why didn't your TPA advise you to do this?" Etc., etc. - while recognizing that transition is always difficult (remember TRA 86, EGTRRA, et al) there is still an inordinate amount of garbage here. Why doesn't this legislation help ME retire?!!!

This list from NAPA https://www.napa-net.org/news-info/key-secure-20-act-provisions-and-effective-dates

I don't know about you all but I find these discussions much more interesting and enriching compared to the "what compensation do I use to calculate the safe harbor contribution?" questions that make me feel like we're doing someone else's job of basic training their staff.

Here are a couple of articles that might provide starting points: SECURE 2.0 in 2023 and beyond (Eversheds Sutherland) Secure 2.0 Highlights for Retirement Plan Sponsors (Ice Miller) (Caveat: I haven't done any research to determine whether those lists are exhaustive.)

Bill Presson, thanks, but may be too late, I received the form letter on my client's letterhead informing me that my services were no longer needed. Ascensus even screwed up that letter, the client apparently never read it, they are asking me to assist in the transition from Hancock, although the funds are with American Funds. Kinda sloppy. Since I am not a record keeper, I have no intention of aiding in the transition, unless absolutely necessary. Will let you know if it is too far in the game to do anything. Never great thing to lose a fantastic client; especially after 10 years. I could understand if I "messed up". I've been in business 35 years, am not a "newby" and see this all the time. Not bragging, but generally I lose only the clients I need to, generally by 3x my fee so they think it is their idea to leave me.

If the plan document, even after a careful reading, does not address this either way, then the plan administrator probably has a choice of interpretation to make, and many factors would be involved. Note that I would definitely review the language for the death benefit to see whether the "if" clause says something like, "If the participant dies before his or her annuity starting date,..." or something else. But even if (as is likely) the "if" clause does refer to the ASD, you need to check for whether the provision for payment of a lump sum indicates that it will be paid on the day that would have otherwise been the ASD if taken in the form of the default annuity, vs. saying it will be paid "on the date as soon as administratively feasible after the election," which would be ambiguous. I have not seen a DB plan that directly and consciously addresses the issue (e.g., "If the participant elected a lump sum, but dies before the ASD, then..."), although I hope they exist, but I have seen plans with a provision that if the participant elected a 100% J&S but died before the ASD the plan sticks with the 100% J&S. If your plan has such a provision it could also guide the analysis on the lump sum issue, since the administrative issue is similar.

See 1.430(d)-1(b)(1)(iii)(B) for a definition. (Just kidding! 🙃) I would say that plan-related expenses is anything that is paid by the trust that is not benefits (or the purchase of contracts to provide benefits). If it's an end of year valuation, you can use the actual amount of plan-related expenses paid during the year. For a beginning of year val, you would have to use the amount of plan-related expenses that are expected to be paid during the year. Just to be clear, plan-related expenses have always been part of the target normal cost that is reported on the schedule SB. This year is just the first time they are asking you to break out how much of the target normal cost is expenses vs expected increases in benefits. When there are plan-related expenses included in the target normal cost, we have always disclosed it in the actuarial assumptions attachment to the schedule SB.