Good Afternoon,

Has anyone found a way to extract hours of service from date of hire to first anniversary date for newly hired employees?  We haven't had any luck pulling hours reported per payroll across plan years at a participant level. 

Thank you.

We are currently using DATAIR for the documents and their pension system for testing. What software systems do you all have personal experience with and recommend? 

Any thoughts on this one is appreciated.

We have a large 403(b) Plan, over 100 lives.  They have filed as a large plan previously, along with the required audit.

A new ownership group took over; 2023 plan year is their first one involving the plan.  After much foot dragging, I finally received their 2023 employee data, 6 weeks before 10/15.  After stressing that they need to take action since the audit is needed and those take time (and money), I finally heard back today:  "They do not believe the audit is needed".  They want us to finish the 2023 form 5500 and they will file but without the audit.

Reasoning and pointing out that an audit is needed whether they want to engage that or not has gone nowhere.

I can document how they are wrong on this, but otherwise, would everyone just prepare the 5500, indicate the audit is not attached, and let them get 
"caught" by the IRS/DOL a few weeks from now?  Should we as the TPA file the 5500 for them knowing it is not complete?

Thanks for any comments.

I am having a hard time finding how Secure 2.0 will actually impact Top Heavy.  I know Top Heavy Rules were changed so now non-excludable and excludable can be tested separately and the Top Heavy minimum can also be allocated to just the non-excludable.   I know the provision applies to plans starting after 12/31/2023, but we have differing thoughts on when these options will actually start affecting plans.  The prevailing thought is that in order to allocate the Top Heavy minimum to just the non-excludable, the actual Top Heavy must be disagg as well.  Since the determination date is the last day of the prior plan year, the consensus is we cannot use the non-excludable option for the minimum allocation until 2025.  Another thought is that they are independent of each other, that you can run test with all employees but then allocate the Top Heavy minimum to just the non-excludable employees.  I am of the former opinion as I do not see the benefit of using disagg for Top Heavy Test since the more Non-Key balances the better for the percentage.  My thoughts are the only way it makes sense to split the test is so you can get the benefit of allocating the top heavy minimum to the non-excludable, since more likely than not there are no excludable key employees which makes the test 0%.  Basically I think you have to allocate the Top Heavy Minimum in the same manner as you ran the test.  Thoughts?

Another thought that is confusing the issue, is what if there is a Key employee who is in the excludable test, so that test is actually top heavy?  With ADP/ACP and Coverage, we know there is the option to disregard the excludable employees from the test.  I haven't see that spelled out for Top Heavy as yet, and if my previous observation is accurate and there is a Key employee who is excludable and that test is technically "top heavy" does that mean that those excludable employees now need a top heavy minimum?

There seems to be pushback by a recently retired sponsor of their own DC plan who has an unusually large account balance and does not want to terminate as recommended.

They believe the funds and investments are safer under a retirement plan than an IRA.

Plan 001 effective date was 01/01/2017, and the Plan merged into a MEP on 02/12/2021.  This Plan spun-off from the MEP on 11/06/2023 into a newly established standalone plan.

We have some conflicting views on the effective date of the newly established standalone Plan.  I believe the original effective date should be 11/06/2023, but others believe it should be 02/12/2021.

• Plan 001 Original Effective Date was 01/01/2017.  This Plan did not file 2017, 2020 or the final 2021 5500 prior to joining the MEP.  The 2021 5500 for Plan 001 should have shown the assets as a “transfer out”; listed the receiving Plan Name; marked as a short plan year, and final 5500. 
  • Even though the assets were not distributed, this would have essentially terminated the Plan, because 001 no longer ceases to exist, and the remaining assets were absorbed into another Plan.  The only difference is that when filing the 5500, the plan merging into a MEP would answer “No” to whether there has been a resolution to terminate the Plan; whereas, a Plan Termination would have answered “Yes” and shown the assets as distributed instead of a rollover.
• The Plan joined the MEP (Plan 333) effective 02/12/2021.
• The Plan spun out of the MEP into a “newly established” standalone plan on 11/06/2023, but we are using the MEP joinder effective date of 02/12/2021 as the effective date of the newly established Plan and under Plan 001.

When preparing the 5500, it will show that the Plan has a 01/01/2023 beginning balance of zero, which is true because the assets were under a MEP (Plan 333), and then a transfer/rollover was processed during the year from the MEP.  It is being suggested that we file the 5500 using Plan Year 11/06/2023 through 12/31/2023 under Plan 001 as a short plan year, but I am arguing that we can't do that if the original effective date on the 5500 is 02/12/2021.

If we file the Plan like this, I feel as though it will trigger the IRS, and they will want to know what happened to all the other 5500 filings. 

Regardless of missed filings, I believe this Plan should be 002 with an effective date of 11/06/2023.  Filing under 001 is going to trigger a bunch of activity from the DOL and IRS that we don’t want, and potentially the correction of 2023’s 5500 (along with all other missed filings) if filed as-is under 001 with effective date 02/12/2021.

Thoughts?

Business A and business B are related, but their plans are not part of a controlled group.  Business B is purchased by business A in November and the TPA included all income/contributions from both entities in the testing for business A's plan (SHNE was paid to plan A after the merge).  However, each business was operating separate plans before that.  I don't believe this is an issue because the plan's benefits are identical.

Would testing need to be completed separately for plan B?  Would both 5500s be marked as yes for permissive aggregation?

Hi

Joe owns 100% of corporation and 100% sole-prop - separate lines of bizs with separate income sources. Corporation has employees and sole-prop does not. Both entities adopted the plan

Joe's 2023 DB contribution is 200k split 50/50 between the 2 entities (his w2 from corporation was 165k and had 500k net c from sole-prop so 50/50 of the 401a17 limit).

Joe asked if he could pay the full 200k from the corporation which was not the original agreement.

Joe also asked if he could transfer 100k from sole-prop to the corporation and have the corporation put in the 200k but still deduct separately from each entity.

Any thoughts/comments?

Owner of 3 companies (only one with employees) starts up a solo 401k in 2023 and doesn't make any funding until 2024.  the funding isn't permitted because the employer has 40 staff in another company he owns.  What is the correction method for this?  Can this be withdrawan as a mistake of face? This owner is not taking a deduction for the solo funding for his 2023 taxes.

We have a client with an existing 401(k) plan with an EACA. The plan currently states that all eligible employees will be subject to the 3% automatic deferral each year so an employee will need to make an affirmative election to opt out or defer a different percentage. The Plan Sponsor wants to have the recordkeeper handle the automatic enrollment going forward. The recordkeeper cannot provide notices and automatically enroll all eligible employees each year, their system is only setup to automatically enroll newly eligible employees or employees with no deferral election. Can we amend the plan as of 10/1 to change the automatic enrollment under the EACA to newly eligible employees or employees with no election or do we have to wait until 1/1/2025?

A university is adding a new employee-paid vision plan to its benefits package. Currently, the university allows employees to enroll in a health care flexible spending account if they enroll in health, dental, or both to help pay for qualified medical expenses. If an employee chooses to enroll in the new employee-paid vision plan only (not enroll in health, dental, or both), are they eligible to enroll in the health care flexible spending account? The health care flexible spending account that is currently offered by the university is not the HCFSA limited purpose. Furthermore, is the university required to link the new employee-paid vision plan with the HCFSA, or is this optional?

Reviewing the current fee setup during our audit and see there are fees being paid for out of the Plan for investment advisory (participants). The issue is this is our own internal wealth management group. They are under a LLC while the company is an LLP.

Another challenge is the wealth management team was very outspoken to not use specific record keeper services (managed accounts) as it could conflict/overlap with our internal wealth company. Those that would use our internal advisors are mostly HCE where I do believe the managed services by the recordkeeper benefits all. The NHCE employees do have the option to use our internal advisors. 

This seems to be walking a very gray line and wanted outside thoughts. 

I don’t understand how the internal wealth management group is helping making fiduciary decisions, specific around investments but then can get paid for advisor fees from the Plan for those clients of their. 
 

If a school district sets up a foundation and funds the foundation (and perhaps has the ability to hire and fire board members), is it possible that the foundation and school could be in a controlled group?

Not sure if this is a thing, but my first google search found no results... 

Has anyone done a projection or estimate for 2025’s inflation-adjusted elective-deferral limit?

And for the two (50-, 60-63) age-based catch-up limits?

Assume a non-SH 401K plan where the employer is making discretionary contributions. A non-owner HCE becomes eligible for deferral but was not given the opportunity to defer thus creating a MDO. The corrective QNEC is 10%.

Question 1: In general, can a corrective QNEC be used for the 3% TH and for the 5% gateway allocations?

Question 2: The non-owner HCE become eligible for deferrals (triggering the MDO), but does not satisfy eligibility for the discretionary contributions. Am I correct that because of the corrective QNEC they must receive TH 3%?

Thank you for any help!

I believe you can't fund a defined benefit and a sEP in the same year.

I set up a DB for a client, in December 2023, have been following up for the date of the contribution, client finally returns my call only yesterday to find out he contributed $66,000 to a SEP in 2023.

I'm looking for a cite that addresses a DB and a SEP in the same year.  If need be, I'm going to have him transfer the $66,000 from the SEP.

Hi All,

We recently came across a situation at work regarding HCEs. Since I started working at this company last year, New Hire executives and above that are “considered” a highly compensated employee is excluded from participating in the plan, meaning those we hire with a salary over $155K for 2024. Per the IRS definition, determination depends on if the employee was a 5% owner in the current testing period or the 12 months preferring the testing period OR if they earned greater than $155K in 2024. Im our plan documents state that HCEs are excluded from the plan. My question is, should they be eligible to participate in the 401k plan as a new hire (assuming they meet the eligibility requirements for the plan)? And then in the following year for 2025, determine their eligibility based on their actual gross compensation for 2024? Just confused if we should be allowing them to enter the plan at all in their first year.

Is there any remedy if an employee states that they made a Roth election in 2024  by mistake and it should have been pre-tax? The enrollment system is online, so it is possible they mis-read the entry. I am aware of this regulation below that states Roth is irrevocable. But what if it was a matter of an online error? Can the plan sponsor direct the recordkeeper to move it to the pre tax source and then record the  2024 W2 correctly?

The rules of IRS Reg. section 1.401(k)-1(f)(1) and (2) for designated Roth contributions under a 401(a) plan apply to designated Roth contributions under a section 403(b) plan. Thus, a designated Roth contribution under a section 403(b) plan is a section 403(b) elective deferral that is [IRS Reg. 1.403(b)-3(c)]:

Designated irrevocably by the employee at the time of the cash or deferred election as a designated Roth contribution that is being made in lieu of all or a portion of the section 403(b) elective deferrals;

In 2025, a particular participant’s limit on elective deferrals might involve four (or more) variations, turning with the participant’s age (0-49, 50-59, 60-63, 64-).

Some employers might try, in payroll, to impose a during-the-year cutoff on § 401(k), § 403(b), or § 457(b) elective deferrals. But some employers might lack software or other ways to impose such a cutoff reliably. For some, imposing an unnuanced cutoff could deprive a 60-63 participant or even participants older than 49 of what might be a legitimate elective deferral.

How important is it to apply a cutoff during a year?

Or is it good enough that each January an employer checks the recently closed year’s sum of amounts paid over for elective deferrals to find each individual with an excess and instruct a corrective distribution?

In which situations would an excess deferral not be corrected by a corrective distribution or by W-2 reporting?

Is it permissible for an employee to cancel his coverage when he enrolled solely because a court issued a QMCSO requiring him to cover his dependent and such order was subsequently rescinded?  Employee was not previously enrolled and had to enroll for coverage to comply with the original order to cover the child.