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The LTPT rules are designed to create an opportunity for them to defer, and a selling point for this is the LTPTs can be excluded from all of the other requirements to provide benefits and for compliance testing. My understanding is for LTPT employees, once you move beyond providing the opportunity to defer, they will be treated as any other employees eligible for those other benefits.

Below is an excerpt from some form QDRO Procedures (Relius), which is part of a Retirement Plan. I am trying to understand how this provision is compliant with ERISA: Below are the some of the problems that I see with this provision. Am I missing something? 1. Freezing a Participant’s Account Based on Mere Knowledge of a Divorce (Without a DRO) • ERISA’s QDRO Rules (ERISA § 206(d)(3)): ERISA’s anti-alienation provisions generally prohibit plans from restricting a participant’s rights to their benefits unless a valid DRO is received and under review for qualification as a QDRO. • DOL Advisory Opinion 2002-03A: The Department of Labor (DOL) has stated that a plan administrator may suspend distributions only when there is a pending domestic relations order that is being reviewed to determine whether it qualifies as a QDRO. • ERISA and DOL Guidance: Under ERISA § 206(d)(3) and Internal Revenue Code § 414(p), a plan administrator may place a temporary hold on distributions IF there is notice of a pending domestic relations order (DRO) that could become a qualified domestic relations order (QDRO). • The phrase "on notice (verbal or written)" is problematic. While a plan administrator may place a hold upon receipt of a DRO, simply having a "reasonable belief" that an account may be subject to a QDRO (without an actual DRO) could be seen as an impermissible restriction on a participant’s rights. • DOL guidance (Advisory Opinion 2002-03A) suggests that a temporary hold is allowed only if there is an actual pending domestic relations order and it is being reviewed for qualification as a QDRO. 2. Placing a Hold Based on "Reasonable Belief" That the Account "May Be" Subject to a DRO • Allows a hold solely because the plan hears of a pending divorce, even if no DRO exists. This creates an impermissible restriction on the participant’s rights because ERISA does not authorize a plan to preemptively place a hold based on speculation that a QDRO may be issued. • Problems with "Reasonable Belief" Standard: o The language allows the Plan Administrator to act based on a subjective belief that the account "may become" subject to a DRO. o This exceeds the authority provided under ERISA, as there is no legal basis to restrict a participant’s account based on speculation or indirect information. o It also creates potential fiduciary risks, as the administrator might inconsistently apply this standard or unfairly restrict a participant’s access to their benefits. 3. Problems With the Release of the Hold • Requiring a participant to provide written confirmation that a court will not issue a QDRO may go beyond ERISA’s requirements. • The burden is on the Plan Administrator to determine whether a QDRO exists, not on the participant to prove that a QDRO will not be issued. • A participant may not be able to obtain such confirmation, as courts do not typically issue "non-QDRO" determinations. • Instead of requiring a participant to provide a property settlement agreement or written confirmation, the Plan Administrator should instead remove the hold after a reasonable time period (e.g., 18 months per ERISA § 206(d)(3)(H)) unless an actual DRO is received. • The Plan Administrator could also release the hold if there is written confirmation from both parties that no DRO will be submitted.

Sorry it took me so long to respond. There is no guidance as to your question. But it appears to me from the language of the law that a rollover of the SIMPLE money to the 401(k) means that the rollover account is subject to 401(k) distribution limits forever. The actual statutory language of 72(t)(6)(B) says: B) Waiver in case of plan conversion to 401(k) or 403(b) In the case of an employee of an employer which terminates the qualified salary reduction arrangement of the employer under section 408(p) and establishes a qualified cash or deferred arrangement described in section 401(k) or purchases annuity contracts described in section 403(b), subparagraph (A) shall not apply to any amount which is paid in a rollover contribution described in section 408(d)(3) into a qualified trust under section 401(k) (but only if such contribution is subsequently subject to the rules of section 401(k)(2)(B)) or an annuity contract described in section 403(b) (but only if such contribution is subsequently subject to the rules of section 403(b)(12)) for the benefit of the employee. Section 401(k)(2)(B) is, of course, where the 401(k) distribution limits live. This language is also repeated in Notice 2024-02. So, the statute says that the contribution must be subjec tto 401(k)(2)(B) - it doesn't say just for the 2-year period. If the participant wants to retain the right to take distribution, he/she should keep the money in an IRA.

Thanks Bill. That was my stance as well. I'll pass this along.

"Likewise, if considering the retroactive amendment, keep in mind that you would need to make sure that the plan was operated that way with respect to all participants (immediate entry rather than first of January/July)." KEC79, I don't believe this is true. Others can correct me if I'm wrong, but it's my understanding that you can do a retroactive amendment to allow early entry for a specific person (assuming the participant isn't an HCE, which again, is unlikely as C.B. Zeller points out).

Welcome to the twilight zone! If you are working with a preapproved plan document (Cycle 3), your plan provide may provide an amendment that includes this so you should pose the question to the preapproved plan document provider. Note that the Cycle 4 restatement cycle that should open 10/1/2026 (yes, folks, that is 19 months away) and this particular feature is not on the list of provisions that are required in the Cycle 4 documents. Here is where the fun really begins! amendment for SECURE 2.0 have to be amended by December 31, 2026, which is 4 months after opening of Cycle 4. The proposed regulations say the mandatory Roth catch-up rules will be effective for the first day of the plan year starting 6 months after the rules are published in the Federal Register. Given the timing of the comment, review and approval process (and several thousand IRS employees laid off), the earliest effective date will be January 1, 2027. BUT, in the meantime, the plan must operate in accordance with a good-faith interpretation of the proposed rues. The least complicated action to take right now is to adopt an administrative policy about how the mandatory Roth catch-ups will be administered, communicate this policy to the plan participants, and share it across all service providers working with the plan.

I am assuming that you use FIS/Relius. We had to go in and fix the rates in our system after we ran the global updates. Someone in Jacksonville is not doing a good job of checking their work.

Here is a little bit of background to start: I assume you are referring to filing the Form 5500-EZ and that you (and maybe your spouse) are the only individuals to participate in the plan. The rule is you must file for a plan year when the total assets (adding in the assets you may have in other qualified plans like this one) reaches the $250K threshold. Note that each plan needs to file even if a plan by itself is below threshold. You look at the total assets that will be reported on the Form 5500-EZ on line 6a(2) of the form which is total assets of the plan for the plan year. Note that this line does not take into consideration any outstanding liabilities that the plan may have as of the end of the plan year. To answer your question, you do not have to file for a year if your total assets go below the $250,000. That being said, going forward you may want to file anyway if your asset dip below the threshold since the IRS may send you a letter noting you filed in the previous year but not for this year. Worse, they may send you a penalty letter for a delinquent filing. The effort to complete a Form 5500-EZ can be much less than the effort to respond to the IRS letters. Since you appear already to have delinquent filings, you should file under the Form 5500-EZ Delinquent Filer Penalty Relief Program using Form 14704 to transmit all of the filings. One quirk with this process is you have to file on paper Form 5500-EZ for each year using the Form 5500-EZ for that year. You can download previous year forms and instructions going back to 1990 here: Prior year forms and instructions | Internal Revenue Service Good luck!

Paging @QDROphile... Care to share your thoughts?

Response to Susan L. The folks at OPM are not the brightest bulbs on the marquee in good times. I have no idea what they will be doing now. I am concerned with delays. See my attached Memo. . CONSEQUENCES OF DELAY 02-14-2025.pdf

My understanding - and I thought this came up not that long ago and I opined similarly - is that you can only do that if the CG files a consolidated return, which is clearly not the case here. So for CG AB, A cannot make contributions and take deduction for B's employees on A's tax return, or vice versa, but either can contribute whatever toward A's and B's employees if AB deducts on a consolidated tax return.

Boy sure would be nice if the IRS had clear guidance on M&A and how it affects plans and testing wouldn't it? I think the approach taken is reasonable and would not be challenged by the IRS assuming A now owns all of B or at least enough for a CG to exist in the testing year. I also think testing them separately would be acceptable as well.

First thought is, why ask the actuary's office rather than the accountant's?