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Might as well.....and he can exclude HCEs from the SH if he doesn't want to feel it's even mandatory for himself.

Amend to a safe harbor non elective plan for 2023.

No, you are using prior year testing and the prior year NHCE percentage is 0%. Probably should have amended to current year testing before the end of 2022.

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.

I would step away from the table and let ERISA counsel step in.

I haven't seen any answers yet either. I don't really understand the need for this when plans can just allow for in-plan Roth conversions.

I agree with MWeddell. I tend to treat disability definition as protected if it impacts vesting, withdrawal rights, distribution rights, etc. If the "new" definition is clearly and unambiguously easier for a participant to meet then there's no issue.

Does the Custodian think it can process distributions as well? It sounds like the Custodian does not have good forms/processes for handling assets that are part of a qualified plan. We have enough issues with paper forms and web designations being coordinated without having an unauthorized third party try to collect designations.

How many people are in the plan? Most plans I worked on with individual broker accounts are pretty small. It shouldn't be too hard to get proper plan forms. My first question does the form by the broker make it clear this is a plan asset or is it just some standard broker form? Just talk to the client and broker and make it clear since this is a plan rules beyond normal securities law apply here. I am not trying to be mean but what I hear is someones wants to add complexity and ambiguity because they aren't willing to get on the phone and make sure everyone is on the same page. I will get off my soap box now.

Once the vested balance is subjected to FICA/Medicare, only subsequent vested contributions are further subject to such, but not future earnings.

Start with the terms of the plan, as written, and go from there. I'd have to see the written plan document, for starters, to go further.

Maybe someone should spend a buck for a copier/scanner.

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 the plan’s administrator might consider anything submitted to the broker-dealer, among many factors one might consider: What do the plan’s governing documents require? What do the plan’s governing documents permit? How much discretion do the plan’s governing documents grant the administrator? Is there a written agreement, one the administrator has rights to enforce, that makes the broker-dealer the administrator’s agent? What records-retention obligations does that agreement mandate? What controls does the broker-dealer impose on the beneficiary-designation form to lower the risk of fakes? Does the broker-dealer reliably date-and-time stamp the writings it receives? What reporting does the broker-dealer provide to the administrator? When the administrator instructs the broker-dealer to furnish the writing it received, will it be the original showing the participant’s ink-on-paper handwriting? Or is it merely a scan of the writing received? For a beneficiary designation that requires the spouse’s consent, will the administrator be able to examine the notary’s seal or stamp? If the plan’s administrator does not itself have enough expertise to evaluate the soundness, legal effect, and prudence of what would be its agreement with the broker-dealer, has the administrator used outside help to evaluate the agreement? Does the broker-dealer have enough financial capacity and casualty and other liability insurance to respond to the inevitable errors and lapses in its performance?

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 suppose there's "language" behind the scenes - Does the document say the BDF must be submitted to, or simply received by, the Plan Administrator? And is the contract with the Custodian spelling out that anything they get on behalf of the plan is deemed to be submitted to the PA, since the PA clearly would have access to Custodian's portal as to download their own local copy?

If it is a legit election. referencing the plan and otherwise ok, I see no reason not to use it.

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/

I actually really like more than a few of the provisions in S2.0. Implementation is going to be a nightmare for many of these provisions though. I started having the " whoa there cowboy, while the law allows for it, there are lots of moving parts and we need guidance before we can..." conversations on 12/29/2022...

Thanks for the clarification on account balance vs non-account balance. I have actually contacted several attorneys working in this space, however they are not the ones that would have to handle the actual payroll reporting, and I want to make sure we get it right. So hypothetically if the employer sets aside $10,000 per year and credits it at a 5% rate of earnings with a cliff edge vesting of 5 years, in 5 years the account plus credited earnings is worth $58,019. When the employee vests, I would add 58,019 to their Social Security and Medicare wages. Each year subsequently I would add the annual contribution plus any earnings credited for the year. When the employee retires in 10 years, I would send them a W2 showing Box 1 Wages, and reporting Box 11 Nonqualifed distributions, but nothing in Box 3 and Box 5.

I would strongly recommend getting in touch with a vendor, lawyer, CPA, or consultant with experience in setting up these types of plans. All of what you describe is more or less standard, but it will be challenging to coordinate, draft, and implement without professional advice. Broadly, "what you know so far" is right, except that I would label this an account balance plan (fixed amounts go in; there is investment gain or loss; the employee gets paid the amount in the account). For "what you're confused about," triggering, in my experience, can refer to either an event triggering vesting or an event triggering payment. There is not an independent concept of triggering. Vesting and payment do not have to occur at the same time. Generally, once money becomes vested, even if not yet paid out, FICA is due under the special timing rule. For an account balance plan, generally FICA is the amount of money in the plan that becomes vested on a given date. But, again, someone with experience in the process is your best bet.

Yes, you can amend the 401(k) to immediately cover whatever specified acquisition group you want, and then lose the 410(b) transition period. If you can satisfy coverage for the 401(k) on that basis with the SIMPLE people not excludable but not benefiting, no worries. How about testing by parsing out those otherwise excludable?

Then it would simply be a gain/loss item. The question then becomes whether or not it is subject to UBTI.

I'm confused. Does the Plan have an investment in a Real Estate LLC? And does the Real Estate LLC payout something like dividends that are deposited to one of the Plan's Trust accounts? If so wouldn't they be treated as earnings?

A plan's definition of disability may also affect vesting, forms of benefit payment, and whether there is a distributable event. I think you have to consider what is impacted in your client's plan and proceed carefully, considering both Treasury Regulation Sections 1.411(d)-3 and 1.411(d)-4.

It would be quite interesting to see a fact pattern where a Safe Harbor Match was actually applied to a catch up.