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Peter, as one who does not get involved in that level of administration, I'll give you my opinion from a top-level viewpoint FWIW. "Must" the payroll function cut off deferrals when limits are reached? No. "Should" the payroll function have the ability to recognize the highest applicable limit available to a participant and only stop deferrals once that limit is reached? Yes, in a perfect world, and certainly yes for any payroll service company that claims to be full service. For those companies that use third party software to run their own payroll in-house, such software may lack the ability or the users lack the programming skills to properly account for all the new complexities associated with recent legislation. In those instances I think they should make every effort to properly administer limits and try to at least account for most situations. Yes, it is easy enough to identify and correct excess deferrals after year-end through corrective distributions (I am not a proponent of playing with W2s after the fact). Besides the added administrative work, the other ramification could be under withholding on income taxes for an affected individual who gets a material taxable refund. The employer would need to make sure recipients were able to make timely tax withholding elections on their refunds to avoid be under withheld. If I'm the employee, I might consider this a big hassle and ask why should I have this inconvenience because my employer or its payroll provider can't properly administer legal limits? Furthermore, if I'm expecting my deferrals to be stopped at a certain point and they aren't, I'm not getting a part of my pay that I was expecting. Yes, I could then elect to cease deferrals, but then I have to elect to restart come 1/1, putting the administrative burden on me the employee. Anyway, that is my humble opinion.

As far as amendments go, I think most of the providers have been clear, absent guidance that would allow us to treat them as separate catch-ups, they are treated the same. I would not expect a provider to draft the S2.0 amendment any other way. Restatements are a different animal. You can draft the C4 document aggressively even without guidance and let the IRS tell you Yay/Nay.

There are defined contribution plan that can generate a statement on a daily basis. Most send a statement monthly, some quarterly and I have seen a few that only value Participant's account only on December 31st each year. The citation from Gina seems to confirm that 12 months is the mandatory time for benefits statements.

My response to the question How important is it to apply a cutoff during a year? is it is very important, but not mandatory. Anytime excess deferrals are taken by payroll, it is a violation of 401(a)(30) and an operational failure. If the excess deferrals are not removed by April 15th of the following year, the plan could be subject to disqualification (unlikely to happen) but the correction must go through EPCRS (which is not cheap). Note that a 401(a)(30) failure is a payroll failure that differs from a 402(g) violation which is a participant failure (e.g., where the participant had deferrals made while working for unrelated companies). From what I have seen, 401(a)(30) failures are more likely to occur when there was a change in payroll systems/providers. Another relatively common 401(a)(30) failure occurs when there are other related companies such as within a controlled group where payroll was not run on a common payroll system/provider and a participant had deferrals taken from multiple payrolls that did not share YTD information. Technically, all excess deferrals should be corrected through refunds which would address the distribution of earnings on the excess deferrals. If the refunds are not made by April 15th, the excess deferrals are corrected through EPCRS (SCP, VCP or Audit Cap) and are taxable in the year of deferral (except for Roth deferrals) and in the year of distribution (including the amount of any Roth deferrals). According to the IRS web site (https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-elective-deferrals-werent-limited-to-the-amounts-under-irc-section-402g-for-the-calendar-year-and-excesses-werent-distributed) the refund could be subject to the 10% early distribution penalty, 20% withholding and spousal consent rules.

First of all, I'm assuming the employee is paying the employee-share of the premium pre-tax through the Section 125 cafeteria plan. That's just about always the case, but making that assuming clear up front. This is an interesting question because the -4 regs that apply here only specifically address mid-year enrollment of a child to accommodate a newly imposed QMCSO/NMSN. They don't say anything about the employee's ability to drop the election for the employee upon the QMCSO/NMSN terminating (or in this case being rescinded) and the employee no longer being required to cover the child (and by necessity, the employee). The only opportunity to drop they recognize is when a QMCSO/NMSN is requiring coverage for the child under the other parent's plan, and even then it only recognizes the ability to drop the child's coverage. So I'd say that unfortunately there doesn't appear to be any permitted election change event here that would allow the employee to revoke the election mid-year on account of a QMCSO/NMSN terminating. In other words, the irrevocable Section 125 cafeteria plan pre-tax payment must remain in effect through the rest of the plan year, or until an earlier permitted election change event. It doesn't feel fair to the employee, but I can't see a way to accommodate the election change in the rules. Would love for someone to point out one that I'm missing, though. Treas. Reg. §1.125-4(d): (d) Judgment, decree, or order. (1) Conforming election change. This paragraph (d) applies to a judgment, decree, or order order) resulting from a divorce, legal separation, annulment, or change in legal custody (including a qualified medical child support order as defined in section 609 of the Employee Retirement Income Security Act of 1974 (Public Law 93-406 (88 Stat. 829))) that requires accident or health coverage for an employee's child or for a foster child who is a dependent of the employee. A cafeteria plan will not fail to satisfy section 125 if it— (i) Changes the employee's election to provide coverage for the child if the order requires coverage for the child under the employee's plan; or (ii) Permits the employee to make an election change to cancel coverage for the child if: (A) The order requires the spouse, former spouse, or other individual to provide coverage for the child; and (B) That coverage is, in fact, provided.

As far as ADP "the recordkeeper", their website has the following: Catch-up Contribution increase, aged 60 - 63: ADP is currently evaluating this provision and will release more comprehensive information as we approach the effective date. For those using the ADP prototype Plan Document, ADP will include this provision in an interim amendment. I agree that the payroll providers more than likely are scrambling right now. We have a local payroll company that services most of the local businesses in the area. They currently have no idea how to accomidate this by 1/1/2025.

I've given many presentations on S2.0 and this is something I bring up a lot. A lot of payroll is done only as a means to an end with respect to a larger operational system. I have a trucking company as a client, and they use software that does payroll, sure, but also tracks everything about miles driven, trucking routes, assigning jobs to truckers, tracking the trucks (maintenance, miles,, etc.) Are they really going to spend a bazillion dollars on this? I hope the answer is yes but really who knows.

On a seperate note, curious to know if others agree or perhaps have heard that payroll companies are implementing this as a modification of existing catch-up rules, and not an optional provision to "opt into." I just think their payroll systems are going to calculate the limit differently as a result of this change. They have already made decisions on how to proceed here since it is effective in just 4 months. Has anyone heard from the likes of ADP/PayChex/Paylocity, etc?

Well I'm still waiting on their response so perhaps they will surprise me. But if I were drafting amendments and giving counsel about brand new legislation, and knowing that advice will affect thousands (nay, tens of thousands of plans), and I knew there was this much ambiguity in the law, I think I would try and delay until the IRS at least told us what they thought. Wouldn't it be a shame to have to come back to all their clients with their tail between their legs and say "Well I think I was right but the IRS disagreed so everything I told you shouldn't be relied upon." That's not a position I would like to be in. And not for nothing, but this decision for sure is not in a vacuum. I would be shocked if every payroll company out there is trying to accomodate this new catch-up limit, and I'll bet a million dollars they're not asking their clients if they want to take advantage of that new feature. They are just turning it on when it's ready for all of their clients. I have no proof of this of course, but I'm pretty sure I'm right!

I am just going to put out there that this is one of the silliest parts of secure 2.0. That and making the mandatory Roth catch-up highly paid individuals not the same as the HCE number. It makes so little sense, and creates needless complication.