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From Paul I: "A final note. A recordkeeper's system limitation does not take precedence over the plan document, nor does it take precedence over the IRC or agency regulations." I wonder how many recordkeepers vet the limitations of their "recordkeeping system" against all the plan documents that might be implicated? I would add: "and against all applicable law and regulations." This sounds like it would be a difficult, time consuming job, yet it is one that should not be avoided.

Absolutely. A lot of practitioners (not just TPAs) get stuck in mindset where they don't want to lose clients or do not want to replace clients with high annual invoices. I have seen people struggle to keep a client that represents 10% of revenue but 30%+ of work. Most TPAs don't track time or billable hours like CPAs and attorneys do, and it is no doubt a PITA! What diligent time tracking does do is show how valuable a client is, or if they are a vampire. For example, lets assume your hourly rate is $300. You don't bill your clients $300/hour, but $300 per hour is what you are worth to you firm. The $300 "rate" covers your salary and benefits, overhead, and estimated profit over the year. If you work 20 hours on a client and bill $3,000, you are only realizing 50% of your calculated rate. If this rate is calculated to allow you to continue your practice, this client is a vampire, especially if your combined realization rate is less than 100%. This is something I see TPAs struggle with all the time.

R. Scott, here are some things to consider when addressing this challenging topic: First there is a fundamental reality that you have a business to run and you need to align your revenue stream with your expenses no matter what anyone else is doing. To the extent that your fees are paid from a plan, you must disclose the fees to a Responsible Plan Fiduciary in accordance with DOL's 408(b)(2). It is a good time to review the rules to make sure you consider what must be disclosed, and here are some resources: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/fact-sheets/final-regulation-service-provider-disclosures-under-408b2.pdf https://www.davis-harman.com/pub.aspx?ID=VFdwak5BPT0= When you discuss fees with a client, you will raise their consciousness that you are a service provider and they pay you fees. Much like you have not addressed fees for almost 10 years, the client may not have evaluated the fees they are paying you over that same time period. Essentially, if a plan pays your fees and a client has not periodically re-evaluated your fees, they have not performed their fiduciary responsibility to monitor fees. You can expect varied reactions. A longstanding client that values their relationship with you as a trusted resource likely will not blink at the increase. A client that see you as a vendor providing perfunctory services will likely shop around. A client that has had a recent less than pleasant experience with you likely will use the fee as an excuse to terminate the relationship. A client may be experiencing its own need to reassess their revenue stream versus their expenses and you will be shining a light on the expense of your services. Hopefully, the client perceives that the value of your services match or exceed your fees. As part of this process, you also should address any clients that are vampires. They consume extraordinary amounts of your time and do not pay you for that time. You should be ready to have a frank discussion about services you have performed that were outside the scope of your existing agreement. Be prepared to walk away from any such bloodsuckers. A few others commenters have suggested what I consider best practices for keeping fee agreements up to date year over year. You should adopt a best practice and include it in your discussions and updated fee agreements. Good luck!

We send an annual engagement letter with a fee schedule attached. Used to send an updated fee schedule with the census request with stipulation that their providing the census was their consent to the new fee schedule. Most times, if there is a response, they ask what the old schedule was. Majority of the clients .... crickets.

In a very general sense, I think this is a common issue for small to mid size TPAs. Fees stay the same for long periods of time, and then comes the dreaded increase. This is why I do not like evergreen service agreements. When I was attached to a decent size CPA firm, pricing and service agreements were reviewed, revised, and sent for signature before work started every year.

Green, you need to provide some additional information that is fundamental to making a decision about what to do with this plan. You mention pension plan, but do not say if the plan is a pension plan in the ERISA sense (defined benefit, cash balance, money purchase plan) or you are using pension plan in the generic sense which would include 401(k) and profit sharing plans among others. You only mention an owner but do not indicate if there are other participants in the plan. The plan very likely uses a pre-approved plan document, and the authors of pre-approved plan document are fastidious about provisions regarding who is the Plan Sponsor, what are constraints on the employers who adopt the pre-approved plan, and sometimes what happens when a Plan Sponsor is not available (e.g., an abandoned plan, or a sole proprietor dies and there are employees remaining in the plan). Repeating mantra along with everyone else - read the plan document, and most importantly, this includes the basic plan document that accompanies an adoption agreement. Assuming the owner finds a viable path forward to keeping the plan, the owner needs to consider if the cost of maintaining a plan is worth it to preserve the opportunity to take a loan in the future. Minimally, there is a cost to keeping a plan document current with regulatory and legislative changes. There is a cost to filing 5500s. There is a cost to deliver various recurring notifications. There are administrative fees. Is the opportunity to take a loan in future really worth the time, cost and effort? All of this being said, a potentially simple answer may be to merge the plan into a Pooled Employer Plan. The Pooled Plan Provider is the Plan Sponsor of the PEP, the PEP files the 5500 and sends out required notifications, and if the employer ceases to exist, the participants remain participants in the PEP. To meet the objective of the owner, the PEP would have to allow loans to terminated participants, the account balances would have to be large enough to not be subject to cash-out rules, and the cost of administration must be tolerable. These comments leave out important details about specific steps to take and potential compliance issues that cannot be known until the additional information is known, so please take these comments as food for thought.

The IRS website says "Some RMD failures may be eligible for self correction" it further goes on the say the participant excess tax can't be automatically waives, that is you need to pay it and request a refund. It goes on to say that under VCP you can ask for a waiver of the penalty. I'm not sure which RMD failures are eligible for self correction and which are not. Given this is 1 participant who is being corrected in the same calendar year, my guess is the Plan would be eligible fore self correction, but I can't guarantee that. You should check the current EPCRS Rev Proc. https://www.irs.gov/retirement-plans/correcting-required-minimum-distribution-failures

While your Q/topic is not addressed specifically in the Guidelines, it is possible your query could be interpreted in a way that looks like "price-fixing". Generally frowned upon here. Tread carefully.

OH MY GOSH, it's like you know "me"! I save any hand-written 'love letter' I get from clients, including but not limited to Christmas cards This post made me laugh; glad it's not just I who am like this.

FYI, ASPPA has Benefits Councils around the country and accessible in most metropolitan areas. Some are active and others not so much. If you are near an active ABC, it likely offers local programming and educational opportunities that are in-person (=interactive, better learning experience) and that are less expensive. ASPPA membership is not required to participate in an ABC. It is worth checkout. You can learn more here: https://www.asppa.org/about/abcs

Here is a link to an outstanding article by McDermott, Will & Emery based on a webinar they presented in September. https://www.mwe.com/insights/employer-student-loan-debt-benefits-following-secure-2-0/ It gets into the details about the requirements of QSLPs and identifies several outstanding questions for which we do not yet have answers. The article reinforces my belief that payroll's role is minimal, and that much of the administration should be done by the plan's recordkeeper or a specialty service provider that is contracted to administer QSLPs either by the company or the recordkeeper. It is interesting that there are firms that already are offering full QSLP administration services to companies and recordkeepers. Here are two examples: https://www.meetsummer.com/recordkeepers https://getcandidly.com/student-loan-retirement-match/?gad_source=1 Anyone who does ADP/ACP compliance testing for a plan that allows QSLPs needs to explore the impact the QSLPs will have on their testing procedures and software. One major potential problem is an employee has up until 3 months after the end of the plan year (think by April 1) to send in their student loan information and receive the associated match, but the ADP/ACP testing must be fully completed by March 15 (for calendar year plans) to avoid excise taxes.

The rule is that it is based on the year in which the employee retires. The IRS has never given a concrete definition of "retires" for this purpose. If you asked the employee when they retired, would they say they retired in 2022 or in 2023? I have a feeling they would say they retired in 2022. Not that this is necessarily determinative, but it is probably indicative of the common understanding of what it means to retire in a given year. If I can hazard a guess, it sounds like RMDs should have started on 4/1/2023 but weren't, and you're trying to find a way to avoid the failure and associated penalties. I'm certainly sympathetic, but I would caution you (and your client) against taking a position that stretches reasonable interpretation. I'd also remind you (and your client) that the penalty for missed RMDs was reduced significantly by SECURE 2.0 and it may help everyone rest easier at night to simply admit to the failure and pay the penalty. Or better yet, file a Form 5329 and request a waiver of the penalty entirely.

For Cycle 3, the IRS required that the plan document explicitly specify the determination period for calculating matching contributions, including safe harbor match. Take a look at item C.18 in the adoption agreement. If the adoption agreement says the determination period is annual, and the employer calculates and deposits the match each pay period, then a true-up will be required. If the adoption agreement says the determination period is per pay period, then a true up would not be allowed unless the plan were amended, and then the rules for mid-year changes to safe harbor plans would come into play. If memory serves me right, FT had a FAQ sheet about this back when Cycle 3 came out. It is probably still on their website somewhere. Or I'm sure they would be happy to send it to you if you contact them, as Bill suggested.

What I see as the payroll issue is not related to administration of loan payments, but rather administration of the match, wherein the match is calculated along with payroll, for periodic deposit along with the 401(k). My initial thought was that a participant can present the terms of their loan up front, say with a statement showing that loan payments are being currently made, including the loan payment amount and amortization period. I think what I'm getting is that the participant really has to present after the fact, ie after eoy, what the loan payments made were so that the appropriate match can be made at that time. It does lead me to another question - does it matter if a participant pays more principal than just what is amortized during the year?

Part of the challenge is getting the loan provider to amortize the loan using repayments based on the payroll period. This could be further complicated if there are more than one loan provider that require different loan repayment frequencies.

The correction process in EPCRS 6.02(4)(b) would have the missed amounts deposited as contributions into the plan as Safe Harbor contributions along with missed earnings on those contributions. The contributions would be considered an annual addition for 2022 purposes of applying the 415 limitations for that year. The contributions will be deductible on the employer's 2023 tax return.

The situation seems to have some blanks that need to be filled in. Is this the scenario? A company had a standalone 401(k) plan and decided to move the plan to a PEP. The 401(k) merges into the PEP, assets were transferred out of the 401(k) plan and transferred into the PEP. Contribution sources continue to be accounted for separately in the PEP (pretax to pretax, Roth to Roth, NEC to NEC, match to match, rollover to rollover,...) All protected benefits in the 401(k) plan continue to be available in the PEP. The 401(k) plan filed final 5500 showing assets going to zero as a result of the transfer. The auditor discovered that additional Safe Harbor contributions were due to some employees. If this is pretty much the complete picture, then the company should fund the amounts due to the PEP and have them deposited into the Safe Harbor source. If the scenario differs, there could be some major compliance issues. Some examples: If the 401(k) was terminated, and the PEP was set up within 12 months, then there is a violation of the successor plan rule. If active employees were allowed to take distributions (not otherwise available as in-service withdrawals), then there were distributions made without a distributable event. If the PEP treats all of the assets transferred as rollovers, there is a problem that the character of and provisions related to the different contribution sources were removed (e.g., restrictions on the availability of elective deferrals for in-service withdrawals before age 59 1/2). If the PEP did not preserve protected benefits, then there is a violation of anti-cutback rules. Ask questions, get the complete picture, confirm that the transition from the 401(k) to the PEP was a merger, confirm that the final reporting and compliance for the 401(k) was completed timely, and if everything checks out, then addressing where to fund the missed Safe Harbor contributions is a trivial task.

Thanks Effen. I suppose if the plan were more than 100% funded then you're right, the MRC and PBGC VRP would both likely be $0 regardless of the methodology used. If the plan were less than 100% funded, however, we'd have to think more about the 'correct' liability to use. Though in either case I like your argument that a PBGC premium should not apply for a plan that is fully guaranteed under a GAC.

Ask him to show you the regs that says it is optional. Anything other than $7000 in your example is a random number chosen by someone; the excess over $7000 is not an RMD and subject to all normal distribution rules (e.g. 20% WH).

I don't think there is a "right" answer to this as the law never contemplated buy-ins. We have continued to use the segment rates, but it has always generated a $0 MRC so haven't really had to think too hard. We would probably think harder if the plan had a VRP premium. Since the PBGC has no risk if a plan is 100% in a buy-in doesn't seem right that the sponsor would be required to pay a VRP. I guess if that ever happened, we would probably have a conversation with the PBGC.

Read the document carefully. For example, some pre-approved plan documents use the term Statutory Compensation to define 415 compensation with choices for permissible adjustments. Plan Compensation has its own definition elsewhere in the plan document, and it is Plan Compensation that is used for calculating contributions to the plan.

Joe can go to work for an unrelated company and roll his balance into their plan before 2025. If Joe and Joe's wife's combined ownership drops below 5% and Joe's son is married, Joe's son could transfer his shares to his spouses name. Then Joe would no longer be a 5% owner since you don't double attribute. Or Joe, Joe's wife, and Joe's son can sell off such that Joe no longer owns directly or indirectly more than 5% of the business but continues to work there. So yes there are ways, just probably not the most practical.

Ahh... so my reference actually has nothing to do with the employee terminating and recieving a severance package. Got it!

Correct. True severance pay is not wages for plan purposes since it is not being paid for your services provided to the employer. Severance pay is an amount being paid to stop working, to be no longer employed, usually in exchange for your signature to agree to something regarding your termination. This is something that is paid after termination and would not have been paid to you if you were still working. Post-severance pay is wages for work that are finally paid after leaving employment. Such as unpaid PTO or your last paycheck or an earned bonus or maybe a commission, etc. Items that would be payable if you kept working.

This topic was discussed at the ASPPA National conference earlier this week. The bullet points for the discussion were: For this purpose, a terminally ill individual means an individual who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death in 84 months or less after the date of the certification. The employee must furnish sufficient proof to the plan administrator that the employee qualifies under this standard. Not subject to the 10% early withdrawal penalty tax Can be repaid within three years Note: This provision does not create a new distribution right under retirement plans, so a participant would need to be eligible for a distribution under an existing rule. It was taken as a given that the employee needs a physician to certify the individual is terminally ill and is expected to die within 84 months. There was a lot of discussion around the employee furnishing proof to the plan administrator. Some comments addressed HIPAA and privacy concerns. Other comments were concerned that an employee would be hesitant to disclose to their HR department that the employee was likely to die within 84 months. The concern primarily focused on the information leaking out and on the impact the information could have on career advancement and salary increases. These would be a significant burden on an employee where the only additional benefit derived from this disclosure is avoidance of the 10% penalty. Note that the text of S2.0 326 says "an employee shall not be considered to be a terminally ill individual unless such employee furnishes sufficient evidence to the plan administrator in such form and manner as the Secretary may require". No one yet knows what the Secretary may require, and there are efforts to have any such requirements acknowledge the privacy concerns. The rules for repayment within 3 years for the terminally ill provision points to the QBAD rules in 72(t)(2)(H)(v). The repayments are at the discretion of the participant and the repayments could be made to an eligible retirement plan or an IRA as a rollover contribution. The provision does not say the repayments have to be made to the retirement plan from which they are taken. The question was asked why would a participant want to repay the distribution? The response was the repayment would be part of a death benefit distributed to the plan's beneficiaries (as opposed to being part of the participant's estate). The treatment of the terminally ill distribution is different from virtually every other one of the newly or recently added forms of distribution that allow for self-certification. Expect more clarification to come from the agencies.

Gadgetfreak, a path to finding out what works best for your company is to discuss what you want your business to be known for in the market place. Classically, the characteristics of the business involve assessing some of the E's such as expertise, experience, effectiveness and efficiency. Here is how this may apply to a TPA. Expertise is characterized by in depth knowledge of benefits and tax laws, regulations, plan design, and specialty knowledge such as a focus topics such as M&A, related employers, for profit companies, not for profits, governmental plans... Experience is characterized by how long you having been operating in your market segment, how many clients you have with similar plan provisions or plan size, and the accumulated knowledge of topics and issues at the boundaries of your market segment. Effectiveness is characterized by doing the right things. Do you consider how a service you provide adds value to your client base, or do you find you add services just because a competitor is doing it? Efficiency is characterized by delivering your services optimizing your utilization of staff and technology to be fully engaged and providing responsive, accurate and timely services. You will find within most TPAs work is performed or assigned based what is needed to deliver the service to the firm's client base. If you want to be efficient where you have a large volume of routine transactions, then you will want to have specialty groups that focus on transaction processing. If there is enough volume of a particular transaction type such as distributions or contributions to keep staff fully employed, then organize them around those transaction types. If there is not enough volume, then the staff will need to be able to handle two or more different transaction types. A lot of firms will start a new employee in one area, say processing payrolls, and then put the employee on a rotation every 6 months or so to a team processing a different type of transaction type. The end result is a well-rounded, experienced staff member. The experienced staff member can act as a mentor to the new staff, but also is in a position to help respond to the unusual transactions that arise. This is the level where a transaction is not business as usual and requires the benefit of an experienced staff to address or fix it. If something is truly messed up, it is time to involve those who have the expertise to understand the issues and implications to the plan, and to guide both the business and the client in solving the problem. Scale is an important factor in this assessment. How many staff do you have or can afford to have? Fewer staff means you need more experienced staff. Your desired reputation in the market place also will contribute to your assessment. If you want to be the lowest-cost provider, then make sure your client base knows that you are a no-frills provider to manage their expectations. If you want to be the innovating or problem-solving go to company, you will need to have staff with the expertise and experience to meet the demands of your clients. I realize that this all sounds a bit too much like Harvard Business School, pie-in-the-sky comments, but if you give it an honest chance to guide your internal conversations you will find that your own organization will help define your business structure. Good luck!

Depends on whether you were right the first time...