Leaderboard

Sorry for the delay - so many meetings! The CPI-U for July, August, September of 2025 are all published with values of 323.048, 323.976, and 324.800 respectively. Based on Tom Poje's spreadsheet, the dollar limits for 2026 will be: NOT Official via any IRS pronouncement yet, of course: Deferral limit: $24,500 (up from $23,500) Catchup: $8,000 (up from $7,500) (Super-Catchup, age 60-63 = $11,250, (unchanged) Compensation Limit: $360,000 (up from $350,000) Annual Addition Limit: $72,000 (up from $70,000) DB Limit: $290,000 (up from $280,000) HCE: $160,000 (unchanged) Key Employee: $235,000 (up from $230,000)

I rarely seen it longer than 20 years and often its 10 years - which has always been my recommendation if they really want to go longer than 5 years. In these times, the probability of simply being employed for 10 years at the same employer has dropped considerably and odds are the employee will will have an outstanding balance when they leave. And I find it rare that a participant can pay off a loan in full when it comes due before maturity. So that just goes to Paul I's last point. Most participants don't think thru all the financial consequences if they should suddenly incur a taxable distribution down the road. Also, some payroll providers may charge their own processing fees in additional to the financial / TPA recordkeeper's loan fees. I do remember once that an owner had a desire to assist a particular employee (or family member) which resulted in 30 year term for home loans being added. I think, maybe moreso in the past, that the adoption agreement would get filled out with a 20 or 30 year term automatically entered at time the plan is set up without anyone really having put a lot of thought into that decision (until an EE puts in a request).

The CPI-U for July, August, September of 2025 are all published with values of 323.048, 323.976, and 324.800 respectively. Based on Tom Poje's spreadsheet, the dollar limits for 2026 will be: NOT Official via any IRS pronouncement yet, of course: Deferral limit: $24,500 (up from $23,500) Catchup: $8,000 (up from $7,500) (Super-Catchup, age 60-63 = $11,250, (unchanged) Compensation Limit: $360,000 (up from $350,000) Annual Addition Limit: $72,000 (up from $70,000) DB Limit: $290,000 (up from $280,000) HCE: $160,000 (unchanged) Key Employee: $235,000 (up from $230,000) the 2026 HPI comp number should be $150,000 (up from $145,000) It's unclear but my guess is that means in 2027 we look at comp over $150,000 paid in 2026 for determining HPI's in 2027. The official taxable wage base for 2026, announced by SSA, is $184,500 (up from $176,100).

Maybe I missed it above, but I always point to the uncomfortable scenario where even a 50 year old taking out a 30 year loan might be a tad unrealistic since they will be an octogenarian by the time they are done. I don't know about y'all but I'll be living near the beach sipping Pina Coladas at noon long before then if everything goes according to plan 😂

In terms of a protected benefit, consider that such cannot be cut back or eliminated with respect to benefits already accrued. That context really does not translate to automatic enrollment (which is a statutory design requirement) except that someone who is automatically enrolled must remain so unless they make an election. If the small plan of the buyer was merged into the larger plan of the acquired with that plan being the survivor, then that plan goes away for prospective benefits. I do not see anything as needing to be protected except possibly one's default enrollment. I would also consider a campaign to get affirmative elections (including zeros) from all employees previously in the buyer's plan so there are no residual default enrollments to worry about protecting if required. Another consideration, institute auto enrollment for the merged plan as an enhancement.

The taxable wage base for 2026, announced by SSA, is $184,500 (it's $176,100 in 2025). https://www.ssa.gov/oact/cola/cbb.html

I am going to guess regarding the $145,000 HPI limit. This was stated to be adjusted the same way as the others, but using 7/1/2023 - 9/30/2023 as the base period for years beginning after 12/31/2024 with increases occurring in $5,000 increments. Thus, $145,000 was the limit for 2024 when the law required mandatory Roth Catchups to begin (and in an unusual move by the IRS, we were allowed to ignore the law in 2024 and 2025), and the COLA for the 2025 HPI limit would have been increased this as follows: $145,000 x (314.540 + 314.796 + 315.301) / (305.691 + 307.026 + 307.789) = $148,799, which is not $5,000 more, so no increase for 2025, stayed at $145,000 But, for 2026: $145,000 x (323.048 + 323.976+ 324.800) / (305.691 + 307.026 + 307.789) = $153,077, which is at least $5,000, so the 2026 HPI comp number should be $150,000 It's unclear to me based on the law/regs, but my guess is that means in 2027 we look at comp over $150,000 paid in 2026 for determining HPI's in 2027.

Number nerds hanging around here? I doubt that.

Thank you, @John Feldt ERPA CPC QPA!

If you are numbers nerd, the unrounded values are: Deferrals: $24,683 Catchup: $8,227.50 Compensation Limit: $364,460 Annual Addition Limit: $72,892 DB Limit: $291,568 HCE: $164,680 Key Employee: $236,899

I agree with @Peter Gulia. In addition, the PA should consider whether ANY communication from the ex-wife might be considered a claim. If so, that would enable the PA / Administrative Committee to determine NOW whether a benefit is payable to the ex-wife. In the alternative, the plan might tell the ex-wife to get a QDRO, only to later conclude there is no benefit payable; this alternative means the ex-wife bears the legal cost for no ultimate value. The PA will have to make the determination either way, so I suggest it's better to do it now.

When in doubt, have PBGC make the determination (you can check on their website). I have had multiple applications for determination and got different determinations. Depends on the kind of the business as well as professional licenses held by the business owner.

I think you need to hold the benefit until a valid SSN or TIN is provided. This also needs to be reported to the correct authorities- SSA's Office of the Inspector General. This is from a previous post asking the same question:

If asked, we recommend 15 years with 20 years being okay but not preferred. We point out that: The maximum plan loan is $50,000 and the mortgage amount typically is considerably higher. The plan loan often helps spread paying off realtor fees, closing costs and moving expenses. A $50,000 loan will have monthly repayment of about $400 for 15 years or $330 for 20 years. Most loans for purchase of a primary residence are considerably lower since the individuals taking the loan commonly do not have a vested balance that exceeds $100,000. For a $10,000 loan, the monthly repayments are about $80 for 15 years or $66 for 20 years. These are small amounts (and even smaller when the payroll period is semimonthly or biweekly). Processing loan repayments for small amounts can become an annoyance for payroll. The longer the loan amortization, the more the participant and/or employer likely will pay in loan administration fees. The longer the loan is outstanding, the more likely the participant will terminate with an outstanding loan balance which always seems to add time to process the distribution.

To adjust the § 414(v)(7)(A) amount, its base period is “the calendar quarter beginning July 1, 2023[.]” https://benefitslink.com/boards/topic/80061-is-150000-the-limit-on-2025-fica-wages-before-a-participant-must-make-2026-age-based-catch-up-elective-deferrals-as-roth-contributions/ In July, I estimated that, for 2025 FICA wages to drive how § 414(v)(7) applies for 2026, the $145,000 will become $150,000. John Feldt, how’s my logic and my math?

Attached is a very well written explanation of the start-up plan tax credits. It does not answer 100% of all questions, but does provide a good summary of points to consider in deciding in the credits are available. In Zoey's initial case, it is not likely that a credit can be claimed because the plan is not a new plan. There are two plausible scenarios about how the plan of the acquired company was handled and neither leads to the plan being a new plan. This was a stock transaction so the seller's plan survived and became an existing plan sponsored by the buyer (or a member of a controlled group of the buyer). If the EIN change was made to reflect the EIN of the buyer as the plan sponsor, that change would be reported on the 5500 or 5500SF on line 4 as a change in EIN. If the buyer set up a new plan and merged the seller's plan into the new plan, then the merger would be reported when the assets were transferred from the buyer's plan to the seller's new plan. This latter scenario is a more plausible argument for trying to take the credit, but given the facts is not likely to succeed. If the buyer's plan was kept separate and apart from the seller's plan, the buyer's plan could have a plausible argument to taking a credit for the buyer's plan. The strategy of creating new plans for each seller's plans going forward likely will become unavailable fairly quickly as the buyer's employee count grows. The tax credit is available to small businesses, not small plans. The tax credit starts phasing out between 50 and 100 employees. I suggest paying careful attention to the rules where the seller has made contributions to a SIMPLE or SEP IRA. It is easy to overlook these arrangements in planning for an acquisition. Changing topics from tax credits to auto enrollment/escalation, if the acquiring company established (or added) a new 401(k) feature on or after December 29, 2022, the plan needs to implement auto enrollment/escalation starting in 2025. There are rules in Notice 2024-02 about grandfathering plans of acquired companies that did not have a 401(k) feature prior to SECURE 2.0 enactment. This is an equally vexing topic to consider in doing mergers. tax_credits_under_secure-2.0-easy_reading_version_from_gps-2023-02.pdf