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BenefitLink is a great forum for venting some frustrations. And while I wouldn’t describe Bill Presson’s smart observation as a rant, reading and learning from neighbors’ intelligent observations and criticisms is among the reasons I use BenefitsLink. But we can learn by thoughtfully considering the observations. (My note above is an observation about an observation.) For a field that involves many professions and special-focus workers—third-party administrators, recordkeepers, lawyers, public accountants, actuaries, consultants, investment advisers, and many others, we can do better by being mindful of other perspectives. For example, there are many things recordkeepers do that are profoundly frustrating to me and my clients. Yet, by understanding why recordkeepers do it the way they do, I can provide better advice and help my clients manage problems that result from recordkeepers’ business methods.

Beyond whatever Federal income tax law might call for as a plan’s tax-qualification conditions, for a plan governed by ERISA’s part 4 (fiduciary responsibility) of subtitle B of title I or with transactions that can result in an excise tax or other consequences under Internal Revenue Code § 4975, consider that the rule implementing the statutory prohibited-transaction exemptions requires that participant loans “[a]re available to all such participants and beneficiaries [those who are a party-in-interest or disqualified person regarding a plan] on a reasonably equivalent basis[.]” 29 C.F.R. § 2550.408b-1(a)(1)(i) (emphasis added), https://www.ecfr.gov/current/title-29/part-2550/section-2550.408b-1#p-2550.408b-1(a)(1)(i).

There was a bill proposed last year that would have required automatic re-enrollment of participants who opted out or who enrolled at a lower percentage than the auto-enrollment default. If a new law would be needed to require auto re-enrollment, then it stands to reason that auto re-enrollment is not required under current law.

And let’s consider: Many plans’ sponsors and administrators will interpret what the tax-law condition requires or permits and how to administer a set of partially or ambiguously written plan provisions about two or more years before those provisions might be stated by what tax law calls “the” plan document.

My understanding is the plan is not required to get an new election each year from each participant. The plan is required to give each participant a notice each year before the start of the next plan year which explains the EACA including default elections, auto-increases, and opt-out elections among other things. The timing of the annual notice is the 30 - 90 day window before the start of the new plan year. That being said, the plan document can have provisions that require the plan administrator to solicit new elections for each participant every year. The plan may also provide that a participant that is not deferring anything will have default elections made unless the participant again opts out. The plan may extend this default to a participant that is deferring, but is deferring below the minimum default deferral percentage. Then there is administration of refunding deferrals if the participant requests to opt out and the plan permits it. These are yet more decision points for the plan sponsor, and hopefully the decisions be made with due consideration of the company's payroll being able to adhere to the requirements of the plan.

Not quite, if the first day of the next plan year comes up sooner, that takes precedence over the 6 months. See 410(a)(4).

The policy should be okay if it passes BRF testing. The policy likely will not solve the problem of per diem employees being unable to pay via payroll deductions. Consider that a regular employee takes a loan and begins repayments through payroll deductions. The employee subsequently becomes a per diem employee. The loan is outstanding and remains subject to required repayments to avoid default. If, in the opinion of the plan sponsor, there is a significant number per diem employees that need access to plan loans, then the plan's loan policy could be adjusted to allow for periodic, non-payroll-based repayments. In practice, the an employee not repaying through payroll deductions should be educated on the conditions and consequences associated with a loan default. One thing to consider is whether the availability of the non-payroll-based repayments should or could be restricted to per diem employees, and regular employees would remain subject to repayments through payroll deductions.

Technically, this #2 guy is a statutory exclusion, like let's say the guy termed on 9-15-2024. But the IRS allows for multiple interpretations for plan sponsors to take on how they sort out these people. They'd be okay if you didn't consider them excludable, since the plan's entry date for the person would have passed on 7/1. They also permit the interpretation to say the employee stops being excludable right at the 1-year anniversary date in March. (I've used software that lets you choose the interpretation your sponsor wants.)

Ambiguously written? Nah, couldn't be... Thanks all for the opinions. It's very reassuring to be able to see the informed discussion on such issues.

I think we all like your rants, @Bill Presson, but I believe Peter is concerned about the attitude of - to paraphrase Shakespeare - the first thing we do, let's blame all the lawyers. (Sadly, that is an improvement on the original version). 😉

Even when that alternative-plan rule applies, it might not preclude a new organization from creating a retirement plan, even one that includes a § 401(k) arrangement. Rather, the consequences fall on the “old” plan. That plan might have paid a too-soon distribution—absent some circumstance (perhaps including age 59½) that under the “old” plan’s provisions allows a distribution from the participant’s elective-deferrals subaccount. That plan’s supposed cash-or-deferred arrangement might be treated as not a § 401(k) arrangement. And that plan might be tax-disqualified if, in approving a too-soon distribution, the plan’s administrator acted contrary to the plan’s written provisions. Further, a too-soon distribution from a tax-disqualified plan might not be an eligible rollover distribution. But none of those consequences by itself precludes a new organization from creating a retirement plan, even one that includes a § 401(k) arrangement. The challenges are about administering the “old” plan. And the new organization’s plan might refuse an attempted rollover contribution if the would-be-receiving plan’s administrator knows the distribution from the “old” plan was not an eligible rollover distribution. 26 C.F.R. § 1.401(k)-1(d)(4)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.401(k)-1#p-1.401(k)-1(d)(4)(i). This is not advice to anyone.

Because advice about what to do with retirement plans, and even health and other employee-benefit plans, was not in the scope one’s client allowed. Or, even was contrary to one’s client’s instructions. Or, a lawyer advised about what to do with employee-benefit plans, yet the client didn’t follow the lawyer’s advice. Or, tolerating a retirement-plans exposure was the client’s choice, after considering its lawyers’ advice. Or, the retirement-plans exposure would no longer belong to one’s client. Or, one’s client had no choice to make. There are many ways a retirement-plans exposure can be left behind despite a client’s lawyers having done good or even perfect work.

I'll never understand why M&A attorneys aren't sued for ignoring retirement plan issues prior to the transaction date.

We've seen it. The PBGC does not do "matured" or "expired" plan. They insist on the forms 500 and 501 being filed, even if everything is zero. I think the PBGC is wrong, but it's not worth fighting.

If the error had not occurred, would she have received match? If so, then she should receive 100% of the match that she would have received had the error not occurred. (Rev Proc 2021-30 Appendix A Section .05)