Leaderboard

This was just released thru BL today. Issue Snapshot — Deductibility of employer contributions to a 401(k) plan made after the end of the tax year | Internal Revenue Service (irs.gov) Not a 401k expert. Example 5 is an interesting one, is it correct though? SECURE 2.0 section 317 states for plan years after 2022. What am I missing here? Thanks

From your post I'm assuming plan counts vesting years of service as (calendar years / plan years) with 1000+ hours. Looks like he has 1000+ in: 2014, 2017, 2020, 2021, 2022 & 2023 from the wording in your post so 6 years. Doesn't look like he has any 5 year Break in Service so even if you are using the BIS rules there doesn't look like any service to toss.

Keep in mind that Starter 401(k) primarily are designed primarily for small companies that do not have plans. They will not start out with a pot of accumulated assets and likely will not grow quickly. There are a lot of financial advisers that will shun the plans until the AUM grows. On the other hand, there is a fair amount of interest among some financial advisers that would like to team up with a fintech company or PEP with view that a lot of plans with small AUM collectively add up, and the FA would have an inside track for spinning off a plan that does outgrow the Starter 401(k) into full fledged 401(k). Time will tell if this is visionary.

The HSA annual limit is pro-rated monthly - each month you are enrolled in an HDHP (single or family) determines your maximum contribution for the CY. Employees who were enrolled in an HDHP for all 12 months in the calendar year (CY) can contribute the CY maximum. If they first enroll on 9/1, they can contribute 4/12ths of the CY maximum. There is one exception -- if you enroll mid-year and are enrolled on 12/1, you can contribute the CY maximum for that calendar year but you must stay enrolled through the next CY (called the testing period) or you owe taxes/penalties on the excess contributions.

See Section 2A in Notice 2020-50 Guidance for Coronavirus-Related Distributions and Loans from Retirement Plans Under the CARES Act. The gist is the plan could expand the amounts that could be distributed if the plan permitted the distributions, but you cannot pay out amounts that are not permitted to be paid (which I read is like non-vested amounts). The vendor may have gotten creative and allowed payments of a vested portion of an account that was only partially vested (e.g. a partially vested NEC account). That would then require them to use the funky formula to add into the current calculation of a vested amount an add-back of the previously distributed amount. The auditors should look to the vendor to 'splain what they did.

Reasonable assumptions about things like salary increases are fine, but I don't think you can make assumptions about plan provisions that will be adopted or amended in the future. 1.430(d)-1(d) lays out rules for what plan provisions may be taken into account when determining the funding target and target normal cost. With limited exceptions, only plan provisions actually adopted by the valuation date may be taken into account, unless the sponsor makes a 412(d)(2) election.

1.416-1, M-7.