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The Labor department’s rule states: “A loan will be considered to bear a reasonable rate of interest if [the] loan provides the plan with a return commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances.” 29 C.F.R. § 2550.408b-1(e) https://www.ecfr.gov/current/title-29/part-2550/section-2550.408b-1#p-2550.408b-1(e). And that might be a nonexclusive way to meet the statutory prohibited-transaction exemption’s condition that a participant loan “[b]ear a reasonable rate of interest[.]” 29 C.F.R. § 2550.408b-1(a)(1)(iv) https://www.ecfr.gov/current/title-29/part-2550/section-2550.408b-1#p-2550.408b-1(a)(1)(iv). But even if ERISA § 408(b)(1) tolerates an adjustable-rate participant loan, is the administrator’s service provider capable of accounting for it?

There is a rapid expansion of providers focusing on small businesses. Some are specialty groups within major providers, offerings from providers of payroll and HR services for small businesses, and fintech start-ups are fully automated and that bundle plans in with investment, banking or other financial services. Here is a small sample: Guideline 401Go Human Interest Fidelity Advantage Schwab Small Business Betterment for Business ADP Paychex Paycom Paycor Ubiquity Simply Retirement Sharebuilder 401k Ascensus Vestwell ForUsAll Gusto Rippling With trillions of dollars at stake, we can expect continued expansion of high tech integration of plans with other financial services. We also already are seeing AI being applied to investment advice, financial planning, plan design and tax advice. From the perspective of having and maintaining a plan, we all know that company demographics, human errors, ignorance, and expanding regulatory complexity can easily derail plan accounting and cause operational failures. We can expect to see attempts to apply AI to these concerns. To borrow a conclusion from the British Journal of Clinical Pharmacology: "Like the iconic scene from Malcolm in the Middle, we must avoid finding ourselves unprepared for the unforeseen consequences of these powerful tools. As Dewey's famous line from the show reminds us, ‘The future is now, old man’, indicating that we already live in a time that was once considered the distant future."

VATs may but need not be reported on W2. Just answered this for a client this morning. Google is a wonderful thing. Generally, according to the instructions to IRS Form W-2, Wage and Tax Statement, an employer may, but is not required to, report non-Roth, after-tax contributions on Form W-2 in Box 14.

Aside from showing enough in wages to justify the 415(c) level, the amount contributed as after-tax prior to Rothification wouldn't typically also be listed.

@MoJo I think you have the right of it, why anyone wouldn't adopt now to save the trouble later I have no idea.

I suspect that this would have to be manual adjustments which makes a hard no for me

Oh, you sweet, summer child. 😇

Gina, Cuse, and Lou, I figured this would be the case, just as it is in a DC plan. Appreciate your time and input!!

Simplified Employee Pension, funded with IRAs

I agree with everything everyone has said thus far, but I think a few practical points need to be put forth. First, if a plan is a start-up post Secure 2.0 signing, then whoever is the recordkeeper should "strongly encourage" the employer to implement the ACA provisions from day 1. In our case, virtually all did. Second, it is actually highly unlikely that a post effective date start-up has actually decided to move recordkeepers. In most case (not all, but most), there aren't sufficient assets to entice a successor recordkeeper to seek out that business, nor are salespeople interested because the payout is low. If a salesperson is going after start-ups or newer plans, it's because of a relationship with the advisor (and of course, they are the most important advisor on the planet gobs of new business if we do this one favor for them....) Indeed, many recordkeepers loathe startups to begin with (the payback is lengthy) end have back end "term fees" that discourage moving the plan early. There are some that move, and it is incumbent on our transition services team to verify status, and our document consulting team to engage the client to implement ACA at transition time, rather than 1/1/25. Our approach, is to accept startups, or many newer plans ONLY IF they implement ACA provisions to kick start asset growth (oh, and it's good for the client too.)

The business can fund the plan from whatever revenue they have. The Minimum Required Contribution to the Plan must be made in cash. The benefits that accrue to participants in the Plan have to be based on W-2 wages or Self Employment earned income. If the business's only income is on Schedule E it's likely there are no benefits to accrue to employees.

You have different issues at play here. You need to be considered an employee or self-employed and have "compensation" or net earned income upon which to base a contribution. Assuming you have that, the source from which the business funds the contribution does not matter although should consult with accountant regarding deductibility from certain sources.

Yup.