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414(v)(4)(A) provides a special rule for a plan to satisfy the requirements of 401(a)(4) with respect to the availability of catch-up contributions. It states: This paragraph says "all eligible participants" - not just all eligible NHCEs - so I don't think you can eliminate the availability of catch-ups for just a portion of the employees, even just HCEs, without violating 401(a)(4).

Disagree - by that reasoning the person could be rehired a year but because they had a previous distributable event you would still pay them out? If the person is employed by the plan sponsor (or control group member) when the distribution is paid then you have an in-service distribution subject to those rules. And the timing described sounds like a "oh, I'm getting rehired so I better get my 401k money out while I can" but oops, acted too late. We see people try to play these games in DB world all the time.

Even if a participant, beneficiary, or alternate payee affirmatively or impliedly assented to electronic delivery of disclosures, furnishing a statement in the participant portal is not, by itself, enough. Rather, the plan’s administrator (or its service provider) sends to the individual’s email or smartphone address a notice of internet availability, which describes the document furnished and hyperlinks to or specifies the website address at which the individual retrieves the document. 29 C.F.R. § 2520.104b-31(d)(3) https://www.ecfr.gov/current/title-29/part-2520/section-2520.104b-31#p-2520.104b-31(d)(3). The idea is that the administrator must tell the participant that there is something to look for.

If by feasible you mean allowable then yes. You can eliminate catchup if you don't want to deal with ROTH. Depends on the client how the employees will receive that. As for seeking advice on establishing a ROTH-IRA, I'm guessing most of the folks who will have mandatory ROTH catchups will be over the income limits to directly do a ROTH IRA contribution. Though some folks who max out including CATCHUP, also max out their IRA contribution already, whether that is ROTH, nondeductitible, or backdoor ROTH via nondeductible.

To be very nitpicky, the 415 limit is based on the calendar year limit in which the limitation year ends, right?

The sections Peter refers to were added by SECURE 2.0 section 301, titled "Recovery of Retirement Plan Overpayments." The gist of this section is that plans do not generally have to seek recoupment of inadvertent overpayments. One of the exceptions however is that this does not entitle a plan to violate IRC 415. If the participant died in 2022, then presumably they had no compensation for 2023 and consequently their annual additions limit for 2023 would be zero. Thus any amounts allocated to their account for 2023 would violate 415 for 2023, and would not be eligible for the treatment afforded under 414(aa).

No. In order for spouse/dependents to get 36 months of COBRA from the date of Medicare entitlement, the employee must be entitled (enrolled) to Medicare before the qualifying event (termination). When the employee is entitled to Medicare prior to the qualifying event, the spouse and dependents are entitled to COBRA for the longer of: (a) 36 months from the date of entitlement to Medicare Part A; or (b) 18 months from the date of retirement. For example, if the employee turned 65 more than 18 months before termination, the spouse and dependents will be eligible for COBRA for up to 18 months from the date of termination, because that's longer than 36 months from the date of Medicare entitlement. Whereas if the employee is enrolled in Medicare on August 1 and then terminates employment on August 31, the spouse & dependents are eligible for 36 months of COBRA from the date of Medicare entitlement (i.e., 36 months from 8/1). The employee however is only eligible for 18 months of COBRA. See IRS Revenue Ruling 2004-22 (page 554)

For what purpose? For 1563 which is used in controlled groups no attribution in this case. Dad has more than 50% so he would be deemed to own Son's % if son had any. For 318 or 267(c) which are used for HCE, KEY, 401(a(9), prohibited transactions, ASG and few other items there is attribution.

If termination were the magic uncancellable ticket that allowed a distribution at any time thereafter, we wouldn’t have all the historical fuss about whether or not a termination is a valid termination because of the prospect of re-employment and whether the prospect of an expected rehire prevents the distribution. The point is that if the participant is employed at the time of distribution (or is expected to be re-employed within some “who knows what time” shortly after the distribution) a distribution can only be made under whatever in-service distribution rules apply. As I suggested in my earlier post, the burden should be on the participant in this situation, not the initial administrative functionary. If the participant is entitled to a distribution, the participant can make the case under the claims procedure with all of the reasoning and legal authority that the participant can muster, spelled out for consideration.

What does the plan document say?

Recordkeeper should be notified of the impermissable allocations and asked to revise 1099-R to not include basis allocated, and to reclassify any distribution of gains. Beneficiary should be issued 1099-MISC for each year from Sponsor for basis amount if they do not intend to request return of overpayment. If any forfeitures were used to make safe harbor allocation, those amounts should be deposited back to the forfeiture account by the Sponsor.

Makes sense to me! Naturally barring further guidance. With all the other garbage that we have to deal with before this issue, I thankfully can't get too concerned yet. With luck I'll be retired by then!

Lou, Op's situation is a little different from this. Your client is paying cash unless the participant chooses to defer. The OP's client is making a PS contribution unless the participant chooses cash. Still can be done and I've had a handful of plans that did the latter over the years, but it's not very common.

SECURE 2022’s § 338 amendment of ERISA § 105(a)(2) “shall apply with respect to plan years beginning after December 31, 2025.” That effective-date expression is somewhat awkward because ERISA § 105(a)(2)(E)’s command applies regarding calendar years. Some administrators are planning paper statements (to the extent required) in January 2027 for periods ended and as at December 31, 2026.

Lest there be doubt about what I posted, I think the distribution should be denied whether or not you are cautious, absent clear written administrative policies to the contrary.

Note SECURE 2.0 section 338 effective for plan years starting in 2016: Annual Paper Statement Requirement Requires the provision of a paper benefit statement at least once annually for a DC plan and at least once every three years for a DB plan, unless the participant is covered by the 2002 e-delivery safe harbor or otherwise affirmatively consents. The DOL is directed to amend the 2002 e-delivery rule to require a one-time paper notice before any disclosure may be sent electronically after the effective date. This gives the DOL almost 2-1/2 years to amend the rules. Maybe they will let generative AI take a turn at coming up with the new rules.

No need to speculate. The IRS says starting in 2024 you no longer have to take RMDs from designated Roth accounts. https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs "Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2022 and 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts. You must still take RMDs from designated Roth accounts for 2023, including those with a required beginning date of April 1, 2024."

Because a QNEC is typically a contribution made in response to a plan correction of one kind or another, do not park QNEC money in any source other than QNEC. Vesting is not the issue. You must have an audit trail. A QNEC is not a Salary Deferral. A Salary Deferral is not a QNEC. Regarding the missed Match, that is deposited into the Match source because it is treated as a Match and is subject to the Match vesting schedule.

Unless there is explicit language in the plan document, SPD or other formal plan communication saying the request is valid when put in the mail (which I highly doubt there is), then the Plan Administrator could reject the distribution based on the status of the participant when the paperwork arrived. I suggest you discuss the situation with the Plan Administrator (unless you are a 3(16) provider with authority to make this decision) and discuss options. This situation has occurred a handful of times among our clients and most of them decided to reject the distribution request. Very few have approved the payment. In all cases, it was not our decision.

jsample, that's the tip of the iceberg. No one reconciled W2s to deferrals. No one reconciled match to deposits. No one noticed current contribution amounts to a deceased participant. The tax return for the business likely is messed up with invalid deductions. Where was the recordkeeper? the bookkeeper? the tax preparer?

Catch-up contributions are not mandatory. Roth is not mandatory. So, yes, it could be done. The definition of feasible is "possible to do easily or conveniently". If removing these features has the participants showing up on your doorstep with pitchforks and torches, then it certainly is not feasible. A Roth feature within a 401(k) plan is a much better deal than a Roth IRA. The Roth IRA has much lower limits that, based on income, phase out to zero.

The provision in the act specifies that a High Paid person is an individual whose 3121(a) wages in the prior year were over $145,000. That specific reference does not describe compensation earned by self-employed individuals such as sole proprietors and partners. Since the statute specified 3121(a) wages, it is not clear if the IRS has a path to extend the definition of High Paid to self-employed individuals without literally without an act of Congress.

Probably no issue unless you run into a BRF issue with respect to timing if HCEs got their 3% earlier than NHCEs. As long as everyone gets what they are supposed to in the end, you should be fine.

Are you concerned that the plan did not file 5500's for the year's between 1988 and 1998? Was the plan in fact started in 1998 and this was a typo? Was there a change in service provider around 1/1/1998? (I have seen service providers complete a 5500 using the effective date the provider began working with the plan because they were too lazy to look up the correct date.) In any event, point out the discrepancy to the client and ask if they can provide any clues that my help solve the mystery. Note that the DOL edits check to see if this date is missing, not a valid date, a date before 1800/1/1, or is after the plan year end. If you can establish the correct date, then make the change prospectively.

And might a limitation year be specified differently than a plan year? Perhaps another RTFD moment?

Many pre-approved documents have language to support just this type of formula so it's allowable by the IRS from a document standpoint. I think in our document the question in the AA is written something like "the lessor of X% of pay or $Y".

Just kind of thinking out loud here - Ever have a client ask if they can add a DB plan when they already have a SEP, and then you have to tell them the 5305 Model SEP document precludes a second plan? A lot of times these sole proprietors have NO idea what sort of SEP documentation they set up years ago - so I was wondering it might be "obvious" that a custodian like Fidelity, Schwab, Merrill Lynch, etc. would or would not clearly be using a proprietary SEP document. So I wonder - is there a reasonably accurate list anyone maintains that would say "THESE guys definitely use their own SEP documents, but THIS custodian issues its customers the 5305, so be careful?" --bri

In my experience, those that have their own prototype SEP also offer the IRS Model Form 5305 SEPs. Employers can pull the IRS model from the IRS website. Schwab Pershing No- I don't have a list. But it does sounds like a good idea

It is defined in the plan language and not open to employer discretion, so it should be ok. Is it compensation or the 20% credit that is limited to $50,000? You might want to see if the document has other options that would accommodate the objective rather than using an "other" selection.

In order to treat the HCE's an amount as a cash bonus, it would have to be included in the plan's definition of compensation and already eligible for a deferral. The HCE would still get the 7% profit sharing on top of that unless the HCE was excluded from the allocation of that particular contribution source. It will be interesting to get a clearer picture of how this plan is set up.

I agree that this is the basic definition of a 401(k) arrangement, and that it is confusing - either the employer is trying to do something that doesn't make sense or it isn't being described properly. I disagree that it is discriminatory though. For the HCE(s?) it devolves to a 7% cash bonus that may be deferred if desired and if limits aren't exceeded.

This is literally the definition of a 401(k) arrangement. Can you elaborate on what you are concerned about? Maybe provide some specific examples with numbers? When you said "They also allocate the 3% to all participants" does this mean a safe harbor non-elective contribution? If so there is no ADP test, so there is nothing stopping HCEs from contributing up to the annual limit.

As long as the plan document allows it, why not?

The IRS issued opinion letters for protoype SEPs, but I have not been able to find a published list. FYI, the IRS has temporarily suspended is prototype IRA opinion letter program. https://www.irs.gov/pub/irs-drop/a-22-06.pdf If you do a search for the "name of a financial institution" + "SEP" + "5305" you will get a fair amount of information about their offerings. For example: "merrill" "sep" "5305" brings up a link to https://olui2.fs.ml.com/publish/content/application/pdf/GWMOL/SEPandSEPPlusAgreement.pdf

Is that a question or a statement? FWIW, I believe the participant can choose any combination of Traditional or ROTH to satisfy the RMD requirement inside a Plan prior to 2024 as the Plan has the RMD requirement and there is no mention of individual sources having to independently satisfy the RMD requirements in the regulations. Just that after 2023, ROTH is excluded from the calculation. I'm not sure if it is address if a participant can take from the ROTH source to satisfy RMD after 2023 but my guess is that distributions from ROTH will no longer satisfy RMD requirements after 2023.

Also see rev. Proc. 2005-25 which defines fair market value of the policy for this purpose. It may be more than the cash surrender value.