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What seems incongruous? The notice Internal Revenue Code § 414(w)(4) calls for is about how someone makes or is deemed to have made one’s cash-or-deferred election. What you describe goes like this: A worker, from one’s employment commencement date, is eligible to elect. A worker always may elect between cash and a deferral. During the notice period, a worker may elect, impliedly, cash or may elect, affirmatively, a deferral. After the notice period, a worker may elect, impliedly, a deferral, or may elect, affirmatively, cash. A worker’s right to elect between cash and a deferral is constant during and after the notice period. To the extent of differences in whether and when an automatic-contribution arrangement applies, an employer can’t avoid at least some incongruity about which choice results from a worker’s communication or an absence of the worker’s communication. But Congress set that course.

I agree with @Bri that the individual trustee(s) of most small plans are associated with or part of the management of the employer. For many of these companies, all of the decision-making for the companies is concentrated within a group of 5 or fewer individuals, and the duties of the plan administrator are performed by individuals within that group, and the trustee is also within that group. When the company is named in the plan document as the Plan Administrator, often no one in the management of the company is specifically designated to have that responsibility, but the trustees often are clearly identified in the plan document. Often, the trustees are one or more of the owners, the individual named as the president/general partner, or the treasurer, and the focus of the trustees is on the investment menu. They leave (and don't ask, don't tell) plan operational considerations to others such as human resources or payroll. It is fairly common that only or two individuals have hand-on knowledge of the operations of the plan, and these individuals most often have some responsibility for the company's payroll. As a result, they should know about any missed/late payroll deposits, but often they do not know the timing requirements for the making deposits to raise the issue with others. Note that, in an effort not to be considered a plan fiduciary, outside payroll providers generally do not alert the company about late deposits. Investment advisers go out of their way to disavow any responsibility for fiduciary responsibility, and to limit their services to at most the oversight of the investment fund menu. Some advisers may comment to the company about a late payroll, but this comment primarily is in response to their keeping tabs on asset growth and associated adviser fees tied to deposits or asset balances. Most recordkeepers will alert a client if a routine payroll is not timely deposited. The alert occurs after the fact and at best is accompanied by a message that a correction may be needed. The service agreement does not include any accountability resulting from missed or late deposits. All of the above being said, the decision on whether to have an independent trustee often comes down to the company not wanting to pay a fee no matter how small that fee may be.

guestdelta, along with others’ pointers, consider these to ask your lawyer about: Read the IRA agreement. Many of these include provisions about beneficiary designations, primary and contingent beneficiaries, and default beneficiaries. Don’t assume Florida law governs. Many IRA agreements include a choice-of-law provision. That choice often is the State a bank, trust company, insurance company, or broker-dealer prefers, or the State some investment funds’ manager or adviser prefers. Some frequent choices are California, Delaware, Massachusetts, and New York. JPMorgan Chase might prefer New York law. Don’t assume, without reading, that any State’s simultaneous-death statute for decedents’ estates applies. Consider that a State’s statute might not apply to determine the beneficiary under an IRA agreement, a contract right. Consider that an IRA agreement might state its provision about simultaneous deaths and the orders of deaths. Consider that a simultaneous-death provision might apply only between or among beneficiaries, and might not apply an order of deaths regarding the originating IRA holder’s death. As MoJo notes, a simultaneous-death time need not be limited to minutes, hours, or days. It might be months. Up to six months is not unusual. See, for example, I.R.C. (26 U.S.C.) § 2056(b)(3). Consider that a simultaneous-death provision might be irrelevant because the IRA agreement might provide who is a contingent beneficiary and who is a default beneficiary without using any such concept about the order of deaths. For these and other points, remember a beneficial interest in an IRA is about contract rights. If the default beneficiary is the personal representative of a decedent’s estate, ask your lawyer about whether one might persuade JPMorgan Chase to pay the applicable decedent’s estate’s takers instead of the personal representative, on satisfactions, releases, and indemnities all around. Yes, there are some IRS rulings and other nonprecedential guidance your lawyer could read to suggest potential courses of action for a situation in which there is only a default beneficiary. This is not advice to anyone.

I would respectfully disagree. A "simultaneous death" doesn't mean at the same time or even for the same reason. In some cases, a "simultaneous death" occurs even if there is a gap of up to 30 days, if the deaths were the result of a common cause (i.e. a car accident that kills one instantly, and the other lingers for weeks before dying of injuries received). In other cases, the cause of the second death is irrelevant, if the deaths occur in close proximity (sometime days separated). The bottom line is, each state has it's own simultaneous death statutes that will define whether or no a simultaneous death exists give the facts - and each determination is very fact specific.

I am actually not sure. I was never involved at the signing stage. I think a couple of the larger document providers put it in their mass submitter documents. I want to say ASC and Relius (or whatever name you know them by) both have it. It was because of the change in the law none of the Custodian's wanted that duty at all.

Interestingly some of the custodians require you to name a special trustee for this purpose. Small market it's almost 100% just the employer.

A person starts a new job, usually gets various employment forms to review and complete so just add this to the list. Basically, you can make an affirmative election now to enroll or not enroll (defer 0%), and pursuant to this notice, if you fail to make an election you'll be automatically enrolled on X date. This is always the concern for any administrative task foisted upon a small business.

Bruce1: I appreciate the cautionary notes. The two-year holding period is not an issue. We are responsible for the 401(k) plan and have no connection with the SIMPLE. That said, in telling the spouse she cannot roll the inherited SIMPLE into the 401(k), we will strongly recommend that she confirm with her financial advisor what the best move would be with respect to the SIMPLE. Thanks.

Hi Peter - hard to say - I never see the plans where everything goes well - questions only come to me when there's a problem, so sometimes my perceptions are a bit skewed. If I had to guess, I'd agree with Bri most of the time - maybe 80% we find it, 20% they find it internally. And the ones who discover it internally are usually the ones who have been through it and received our assistance with appropriate correction before!

Peter - I'd say that the "owner/trustee" only realizes there might have been a missed/late payroll deposit when the TPA notices it as part of the year-end reconciliation.

Leaving aside the investment advisor, most of our small plans have either one or two Trustees. Just at a ballpark estimate, I'd say about 20% have only one Trustee, the other 80% have two or more. And no, for the 1-Trustee plans, I'd say there is no other fiduciary who would call attention to a breach.

Employer has history of reimbursing some COBRA for terminated employees being provided severance. Company is concerned about number of individuals on COBRA for general health insurance renewal purposes as well as with possible switch to a PEO with benefits. Former employees generally have no contractual right to COBRA reimbursement and there is no severance plan or program--the Company has just offered to reimburse some limited COBRA on a discretionary basis with past terminations. Company would prefer to avoid more COBRA beneficiaries if possible. Any concern in stopping the old COBRA reimbursement practice (maybe forever, maybe just temporarily) and implementing a new severance arrangement where the amounts provided for COBRA reimbursement are instead provided as special "transition health insurance benefits" (or whatever you want to call them) for use in covering the cost of transition health coverage either through an exchange or COBRA and requiring proof of coverage? If that is a problem, any issue in simply providing that amount generally earmarked for transition health coverage but paid no matter what--i.e., they get the cash and can spend however they want without being limited to reimbursement. Employer would not limit ability to elect COBRA and would provide all required COBRA election packages but may highlight the potential benefits of exchange coverage as part of the exit process. Thanks.

I don't see any issue with them stopping the COBRA subsidy practice going forward to new terms. Those who have been promised a subsidy should receive the promised amount to avoid issues. As for how to handle COBRA subsidies, lots of employers simply provide a taxable cash payment regardless of the employee's COBRA election. Aside from the downside of being taxable, this has multiple advantages including avoiding the Section 105(h) nondiscrimination limitations that apply to self-insured plans. That's basically a standard payment in the amount of the intended COBRA subsidy, which a gross-up if they want to offer it. Here's some more discussion of that issue: https://www.newfront.com/blog/cobra-subsidies-reimbursement-2 Here's a quick slide summary: 2024 Newfront COBRA for Employers Guide

I share Gina's concern on this situation for the same reasons. You can correct the situation for the amounts that were not contributed in the past by filing under the Voluntary Fiduciary Correction Program and contributing the amount owed plus interest using the DOL's calculator. As far as the IRS is concerned, I am not aware that they have any program in place to address voluntary correction of tax exemption issues. Because of this, you should retain highly competent ERISA counsel to assist you in rectifying this problem. The DOL program would likely resolve any prohibited transactions and other fiduciary issues. The danger is, that you do not want the IRS to know about this and hit your client with a 100% excise tax on a reversion. Perhaps there is a closing agreement you could pursue to address any IRS issues. Regarding the overfunded status of the VEBA, you could, prospectively, collect lower premium amounts from employees or amend the VEBA going forward to add additional benefits to help soak up some of that excess amount. I hope these suggestions prove helpful to you.

A safe harbor match can not require hours in order to receive it on a year-by-year basis, but it can have a service requirement for initial eligibility. No, you can have different eligibility for deferrals and safe harbor match. The major consequence of this design is the loss of the top heavy exemption, as Bri noted earlier. Under this design you are technically doing an ADP test for the disaggregated portion of the plan covering otherwise excludable employees, since that group is not covered by the safe harbor match. It is unlikely that there would be any otherwise excludable HCEs, so that group should always pass the test automatically. But it's something to be aware of. No, you can have a service (hours or elapsed time) for initial eligibility for matching contributions, including safe harbor matching contributions. If your document uses a checkbox-style adoption agreement, there are probably options for this. A plan that consists solely of deferrals and matching contributions which satisfy the ADP and ACP safe harbors is exempt from top heavy. This is determined based on the contributions that are actually made to the plan on a year-by-year basis. A plan can permit non-elective contributions but will not lose its top heavy exemption unless non-elective contributions are actually made (or forfeitures allocated) in a given year. Likewise, making non-safe harbor matching contributions will also cause the plan to lose its top heavy exemption.