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I would consider it a mistake (which violates exclusive benefit rule) and have the plan return the rollover to it's source. It shouldn't count for any purposes under the plan and should be corrected as soon as possible, in my opinion.

IMHO, you should never combine union and nonunion plans. There are a number of reasons for this position, but I focus on one. Union plans are frequently subject to review and adjustment to reflect the collective bargaining. You would be putting a program, the plan as applied to nonunion employees, within the negotiations with the union. This can cause several problems, not just related to levels of benefits which of course would be subject to scrutiny. I suggest the better question is why would you want to combine these plans, putting your nonunion benefits in the middle of what might be adversarial negotiations. You have different populations, with different agendas. Combining plans seems to just be asking for trouble.

Are these just plans merging and spinning off, rather than terminating?

Listening to a presentation today on SECURE 2.0 and I left with the impression that this is literally impossible to implement. Anyone else? Between Roth as catch-ups, match as Roth, mandatory auto enrollment (with Auto Increase to boot), 37 new distribution options that you can only take once every 3 years. Sure I'm exaggerating but only a little. I just can't see implementing this stuff with a small service business that has 25 employees.

Agree with Bri, but also want to say there was likely an issue with the successor plan timing unless the original single ER plan was merged into the PEO. Where did that money go?

HSA eligibility is purely an individual issue. So the fact that the spouse is enrolled in Medicare doesn't affect the employee's HSA eligibility. That's simply disqualifying coverage for the spouse that blocks the spouse from contributing to an HSA in the spouse's name. The employee can contribute up to the family limit if at least one other person is covered by the HDHP--regardless of whether that other person has disqualifying coverage. So an employee covering a Medicare-enrolled spouse in the HDHP can contribute to the family limit even though the spouse is not HSA-eligible. The spouse enrolled in Medicare is not HSA-eligible and therefore cannot make the catch-up contribution. Only the HSA-eligible employee could make the catch-up contribution in that situation. Here's an overview: https://www.newfront.com/blog/hsas-and-family-members The Family HSA Contribution Limit: Family Members’ Other Non-HDHP Coverage Irrelevant HSA-eligible employees can contribute to the family limit if they enroll in any HDHP tier other than employee-only coverage. The HSA rules define family HDHP coverage as any coverage other than self-only coverage. This means that employees who are HSA-eligible and cover at least one other individual under the HDHP can contribute up to the family HSA limit. The family HSA contribution limit is available regardless of: Whether the other covered family members are HSA-eligible (e.g., the family members may also be enrolled in non-HDHP coverage or Medicare); or Whether the other covered family members are eligible for tax-free coverage under the plan (e.g., non-tax dependent domestic partners). Example: Ben enrolls in HDHP coverage for himself and his domestic partner Julianna for all of 2021 (and has no disqualifying coverage). Ben’s (non-tax dependent) domestic partner Julianna also has employee-only coverage under a non-HDHP HMO plan with her employer. Result: Ben is eligible to make the full $7,200 family HSA contribution limit for 2021. The fact that Julianna is a non-tax dependent domestic partner and has other disqualifying coverage is irrelevant for purposes of Ben’s ability to contribute to the family HSA limit. Note that Julianna cannot make or receive HSA contributions to an HSA in her name because she is not HSA-eligible. https://www.newfront.com/blog/hsa-catch-up-contributions Catch-Up Contributions: Married Individuals Both spouses may make the additional $1,000 catch-up contribution if they are both HSA-eligible and are both age 55+ by the end of the calendar year. Although the special HSA contribution rules for married individuals permit one spouse to contribute up the standard statutory family contribution limit in his or her HSA, the catch-up contribution rules are designed differently. The catch-up contribution rules require each spouse to make the catch-up contribution to his or her own HSA to take advantage of the double catch-up contribution. In other words, each spouse would have to contribute $1,000 to their own HSA to take advantage of the catch-up contribution for both HSA-eligible and catch-up-eligible spouses. One spouse cannot contribute a $2,000 catch-up amount (or any more than $1,000) to his or her own HSA for this purpose. Therefore, in a married relationship where only one spouse has established an HSA—which is common due to the special HSA contribution rules for married individuals—the other spouse would need to establish an HSA just to fund the $1,000 catch-up contribution. That is the only way to take advantage of the catch-up contribution available to both spouses. Example 2: Anthony and his spouse Chelsea are both age 55+. Both Anthony and Chelsea are covered by a family HDHP through Anthony’s employer, and both are HSA-eligible for all of 2020. The couple wants to take advantage of the maximum standard statutory and catch-up HSA contribution amounts available for 2020. Result 2: Anthony may contribute up to $8,100 to his HSA ($7,100 family contribution limit + $1,000 catch-up contribution). To take advantage of her catch-up contribution, Chelsea must establish her own HSA and contribute the $1,000 catch-up contribution to her HSA. The catch-up contribution available to Chelsea cannot be made to Anthony’s HSA (i.e., Anthony cannot make a $2,000 catch-up contribution to his HSA). Slide summary: 2023 Newfront Go All the Way with HSA Guide

Employee benefits for unions are collectively bargained and timing of the effective dates of changes to the union plan are tied to effective date of the bargaining agreement. That often differs from the effective dates of changes in the nonunion plan.

If the employer is relying on an IRS-preapproved plan document, it might be difficult, if not impossible, to accommodate different benefit structures for the union and non-union employees on a single document. Not just the safe harbor contributions (or lack thereof), but if there are any different eligibility or distribution options for the two groups. If there are different pay schedules (e.g. weekly for the union employees and semi-monthly for the office employees), the plan's recordkeeper or other service provider may struggle to correctly account for that difference within a single plan.

Plans still define, or need to define, IRS required beginning date per statute (in my opinion) regardless of whether the plan by its provisions (and administration) maintains an earlier required commencement date. For example, there are defined benefit plans that require commencement at normal retirement age (65) regardless of employment status but those documents are still required to have RMD provisions. And we had clients that desired to maintain 70 1/2 after SECURE, so we amended the statutory RMD requirements but maintained the earlier required commencement. The practical difference being if someone has available and elects a lump sum at a required commencement date before their statutory RBD age they can roll it all over rather than splitting into RMD and non-RMD pieces. And a plan sponsor might want to keep 70 1/2 to avoid actuarial increases between 70 1/2 and later commencement. For purposes of simplifying this discussion I left out the later retirement consideration. I also think the option available to the plan sponsor is retaining the prior commencement structure and foregoing the updated statutory structure (1.0 or 2.0), and an amendment would be required in either instance.

You don't have to stop HSA contributions upon reaching age 65. You won't lose HSA eligibility until you enroll in Medicare. Just keep in mind that Medicare Part A enrollment will be six months retroactive, so you'll have to account for that issue. Here's an overview https://www.newfront.com/blog/how-medicare-affects-hsa-eligibility General Rule: HSA Eligibility The general rule is that an individual must meet two requirements to be HSA-eligible (i.e., to be eligible to make or receive HSA contributions): Be covered by an HDHP; and Have no disqualifying coverage (generally any medical coverage that pays pre-deductible, including Medicare). HSA eligibility also requires that the individual cannot be claimed as a tax dependent by someone else. Medicare is Disqualifying Coverage Enrollment in any part of Medicare is disqualifying coverage that causes an individual to lose HSA eligibility. This means that an individual who is enrolled in Medicare Part A, Part B, Part C, Part D, or any combination thereof is not eligible to make or receive HSA contributions. Even enrollment in only the (generally premium-free) Medicare Part A hospital coverage blocks HSA eligibility. Individuals Who Are Age 65+ May Still Be HSA Eligible Medicare enrollment causes an individual to lose HSA eligibility. However, many employees age 65 and older delay enrollment in Medicare, and therefore may continue to be HSA-eligible. In other words, mere eligibility to enroll in Medicare has no effect on the individual’s HSA eligibility if the individual chooses not to enroll in any part of Medicare. The Medicare Part A Automatic Enrollment Trap: Individuals Receiving Social Security Retirement Benefits Individuals who are receiving Social Security retirement benefits are automatically enrolled in (premium-free) Medicare Part A hospital coverage with no opt-out permitted. Accordingly, any individual receiving Social Security retirement benefits is not HSA eligible by virtue of the automatic Medicare Part A enrollment. The Medicare Part A Retroactive Enrollment Trap: Six Months of Retroactive Coverage For individuals who delay enrolling in Medicare until after age 65, the Medicare Part A enrollment will be effective retroactively up to six months. This six-month retroactive enrollment in Medicare Part A will also block HSA eligibility retroactively for six months. Individuals have two options to address the retroactive Medicare Part A enrollment causing the retroactive loss of HSA eligibility: Plan Ahead: Stop making HSA contributions at least six months before applying for Medicare, and limit HSA contributions during that period to the prorated amount; or Correct Mistake: Work with the HSA custodian to take a corrective distribution of the excess contributions by the due date (including extensions) for filing the individual tax return (generally April 15, without extension). Example: Jose reaches age 65 in August 2018 but does not enroll in Medicare. Jose signs up for Social Security benefits on October 1, 2019, which automatically enrolls him in Medicare Part A retroactive to April 1, 2019. Result: Jose retroactively loses HSA eligibility as of April 2019—and therefore he can contribute only 3/12 of the HSA statutory limit for 2019 (plus 3/12 of the catch-up contribution). If he already contributed in excess of that limit, Jose will need to make a corrective distribution of the excess contributions by April 15, 2020 (assuming no extensions) to avoid a 6% excise tax. Slide summary: 2023 Newfront Medicare for Employers Guide

Absolutely. It's still an employer contribution. A really interesting question I never thought of is, will the Employer have to pay the employer FICA portion, and Employer unemployment taxes. Has that come up yet?

There are clients with 30 employees who would screw up auto enrollment, I don't think its a size issue. I have had auto enroll clients with more than 1,000 employees and lots of turnover handle them just fine, with an issue here or there. And you know, if you need cash to pay for the ambulance for that hangnail, we have a provision for that in Secure 2.0 as well

If you call a lack of guidance hypochondria then sure I'm a hypochondriac. We've seen the IRS side in favor whatever their deepest convictions are of the meaning of something (whether we agree with them or not (best example was that QNECs couldn't be funded with forfeitures)) with zero regard for what is practical and/or. So I'll feel better when I hear it from them. Now if you'll excuse me I have a hang nail and I believe it requires some stitches so I've just called an ambulance 🤪.

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.

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!