Our company is being acquired and the acquiring company has informed us that they wish to terminate our existing 401k plan.  Our plan is a Safe Harbor plan (100% match on first 3%. 50% on the next 2%) that incorporates a year end true-up.  The acquiring company wants to move fast and wishes to terminate the plan ASAP.

I have limited experience with 401k plan closures, so I have a few questions:

-  If for instance, the plan was set to terminate on March 15th and we have a pay date on March 15th, the regular 401k deferrals and matching contributions would not be deposited into the 401k plan until March 18/19, after the plan termination date. Does this present a problem?

-  Our plan also has a true-up provision, I'm not exactly sure how soon we would be able to calculate and deposit the 2024 true-up contribution, but it would be weeks, maybe months after the plan termination date...is this OK?

- IRS determination letters.  I know this is optional, but curious to know if most plans seek the determination letter when closing a plan.  For those that wait for the determination letter, how long does that typically take?

Any other thoughts or things that I should be concerned about with the closing of the 401k plan?

TIA

In Texas v. Garland, No. 5:23-CV-034-H [document 110] (N.D. Tex. Feb. 27, 2024), the court holds that the Consolidated Appropriations Act, 2023 is not an Act of Congress because the House of Representatives lacked a constitutional quorum on December 23, 2022 when the House voted on the Senate-passed bill.

SECURE 2022 is division T of that Consolidated Appropriations Act, 2023, Pub. L. No. 117–328 (Dec. 29, 2022), 136 Stat. 4459 (2022).

The court’s orders, even if all stays expire or otherwise end, do not act on division T. Rather, the court enjoins only the U.S. government’s enforcement of the Pregnant Workers Fairness Act against the State of Texas.

Yet, until there is a final decision of the Supreme Court of the United States:

Might a plan sponsor that dislikes SECURE 2022’s added or extended provisions about long-term part-time employees (not challenging the provisions enacted in SECURE 2019) assert that the Treasury department’s Internal Revenue Service cannot require those provisions as a condition for a plan’s tax-qualified treatment?

If, next year, a person who would be eligible if added ERISA § 202(c) is law is denied her elective-deferral opportunity, might the plan’s administrator argue that a judge must dismiss the participant’s complaint because it fails to state a claim on which relief could be granted?

About permissive provisions a plan sponsor likes, one imagines neither the Labor department nor the Treasury department would assert that a SECURE 2022 provision is not law because such an assertion would be contrary to at least the litigation position of the United States.

Texas v Garland (Is SECURE 2022 not law).pdf

The guidance seems to indicate only employed participants may avail of hardship distributions, as the directing code section and treasury regulations seem to deliberately refer to "employees" in contrast to "participants". 

Have an on-going traditional 401(k) plan (calendar year) can it be changed to a safe harbor 401(k) plan (with SHNE contributions) effective for this 2024 calendar year or do we need to wait until 2025?

Thanks.

Not the most ideal situation but trying to create a solution to help support some operational failures.

our base plan document allows us to add on an administrative policy around the order in which deductions are withheld from payroll to avoid under deferring or over deferring. We also have plans that are missed as sometimes there is not enough of a person's pay to allow for their mandatory and voluntary deductions.

This does not appear to be a big item in plans documents or that a lot of plans have this. The thought is to adopt a policy in case the deductions are more than their pay, but I do not see any official ERISA guidance. Our plan compensation and to make our plan work, we need to have employees making deferrals. 
 

any thoughts or challenges? Anyone see where if not enough funds, 401k loans are withheld before their elective contributions? 
 

thank you

The sponsor of a PEO MEP is bringing about a new client that already has their own 401k plan.  It's a small plan, but very messy, with provisions that are not part of the MEP (e.g., vesting, distribution options).  I'm thinking that we can't tell them to terminate the 401k and then join the MEP - that might run afoul of successor plan rules.  But what about if we terminate the 401k and tell all the participants that they have to rollover into the MEP?

Or is there another way around this (other than amending the MEP to allow for all sorts of strange things for this one adopting ER only)?

Thanks.

What is a reasonable to await processing of a rollover request (ACH) by an insurance company, in this case Nationwide?   Paperwork, all in order, submitted to Nationwide 3+ weeks ago and nothing but crickets.  My former employer says Nationwide is having issues from a January system conversion and rollovers are taking weeks.   

I've never been on this side of such an issue.  Is waiting weeks normal?  What if the market had tanked?

A recordkeeper recently presented to my client (a plan’s sponsor, administrator, and trustee) the recordkeeper’s draft of a “SECURE 1.0/CARES Interim Amendment”.

Some choices are filled-in with the recordkeeper’s presumptions. Other choices are deliberately uncompleted, but specify a default if no box is marked.

While recognizing that this amendment need not be done until December 31, 2025, the recordkeeper suggests completing and signing it now. Here’s my question:

Is there any disadvantage in waiting until the last few months of 2025 to do this amendment?

Is there any advantage (beyond removing the risk of forgetting) in doing it now?

What opportunities are gained or lost by waiting or acting now?

(If it matters, this client never uses the recordkeeper’s draft of a summary plan description or a summary of material modifications.)

BenefitsLink neighbors, I welcome your ideas.

While I’m not a procrastinator when it comes to plan amendments (I delivered other clients’ SECURE 2019 amendments in early January 2020), I recognize that I don’t know enough about the practicalities involved.)

401k plan making a corrective distribution in 2024 based on error in past plan years.  Default beneficiary provisions are different in current plan document than the plan document in place at the time of the error.  Default beneficiaries (where no beneficiary designation is made) in previous document: spouse, children, parents estate.  Current plan document: spouse, estate.  Which provision controls?  

I have a 37 year old homebuyer who wants to take a distribution from her ROTH  401k -  buying her first home.  Is there a  dollar limit (besides 100% of her account) that she can take?  Is this exempt from the 10% penalty if it's her first home?   What if it's her second home?

Offering employees the ability to pay for their share of health premiums on an after-tax basis is administratively burdensome, and it would be advantageous to eliminate it. Doing so of course raises several issues, the most immediate ones I can think of:

1. Can a benefits wrap plan that incudes section 125 limit the payment of medical and dental to pretax only so long as the plan otherwise offers participants a choice between taxable and nontaxable on some other benefit(s), such as disability premium payments?

2. Other than the possibility that some employees might benefit from an income tax deduction on their premium payments if paid on an after-tax basis, are there any other potential benefits to employees by making after-tax benefits available?

3. Can this be eliminated mid-year or is it better to have it take effect the following year?

4. What other issues might be lurking for the unwary?

Thanks in advance for any insights!

I am working with a single employer pension plan that is looking to terminate their plan. The plan is PBGC covered and will be terminating as part of a standard termination. The plan provides for an annual post-retirement COLA based on CPI and capped at 4.0%. I know that typically a COLA such as this is considered part of the accrued benefit and cannot be amended out. The catch is that the definition of the COLA in the plan document states that the COLA will cease on plan termination. As best I can tell this language has always been in the document and they have received FDLs. I will be pointing them to their attorney for a final opinion, but has anyone come across this? Any thoughts or opinions on whether it is permissible to stop the COLA at plan termination?

Hi

Asking for a friend as I do not work with plans that have union employees

DC/CB combo.

Union employees excluded from CB

Union employees only eligible for 401k deferral+SH and excluded from PS (both union and non-union are covered under one plan)

Does union employee get a gateway?

Can they be tested totally separately?

Any insights are appreciated.

Thanks

If neither an appropriation nor a continuing resolution is enacted by March 8, the Treasury department’s government-shutdown plan takes effect.

That includes no work on writing regulations or nonrule guidance.

That further slows guidance on SECURE 2022, SECURE 2019, and open projects unrelated to either SECURE Act.

Also, a shutdown affects IRS customer service.

Hi, I am doing calculations for contributions to a solo 401(k) for the first time. While I followed the rules for these calculations, I am still not sure if I did them correctly or if I am missing anything. I have a Qualified Joint Venture (QJV) with my spouse, and I also have a full-time job with a 401(k) there. Our goal is to maximize contributions to the solo traditional 401(k) and make mega-backdoor Roth contributions for the rest of the funds.

Contributions to 401k from my full time W2 job are the following: 
Employee Contributions: $21,531.52 (aggregated across retirement plans)
Employer Contributions: $8,074.32 (does not aggregated across retirement plans)

Spouse does not have W2 job but materially participate in QJV. 

QJV income (before any taxes) for me and my spouse: $167,462 

QJV income for each of us: $167,462 / 2 = $83,731.00
Earnings subject to self-employment tax: $83,731 * 0.9235 = $77,325.58 
One-half of the self-employment tax: $77,325.58 *  0.0765 = $5,915.41 
Net earnings from QJV income:  $83,731.00 -  $5,915.41 = $77,815.59 

And here are calculations for contributions:

Are those look correct? Do I miss something? Thank you in advance for any help.

Plan A is a 401(k) with a SHNE contribution.

Participant A terminated in 2020 and returned to work for the same employer 12/3/2023 and client wants a cite that the SHNE must be made for this individual, who is now a participant as of his date of hire.

Are the contribution that qualify for the employer contribution portion of the Start-up contribution tax credit based on:

1. Contributions actually made during the tax year you are taking the credit for (2023 credit uses only eligible employer contribution actually paid prior to 12/31/2023)

2. Contributions applicable to the 2023 regardless of when they are paid. (Inclusion of contribution for 2023 that are either paid in 2023 or as a receivable payment in 2024)

The draft instructions for form 8881 which were just released this month would not seem to be clear.  The instructions use the language "made by an eligible employer for the first tax year during which the plan becomes effective with respect to the eligible employer and the succeeding 4 tax years." 

Can a new small employer claim the tax credit for qualified start-up costs in the first year of the company's existence?

Assume - Employer begins operation in 2023 (No employees prior to 1/1/2023)

Employer starts their new plan during 2023 and pays start-up costs for plan design, documents and plan installation during 2023

Can this employer take a start-up plan tax credit for 2023 for qualifying start-up costs?

Concern is that one of the requirements to take the credit for qualified start-up costs is that you have to use the number of employees of the employer who received at least $5,000 of compensation from the employer during the tax year preceding the first credit year.  A new employer has no preceding tax year to make this determination.

Would seem to be two options:

1. There is no credit available in the first year if a new employer establishes a new plan in its first year of existence.

2. For new employers you would use the current year to make the determination since there is no preceding year.

It would seem without some revision to the instructions or other guidance from the IRS that the credit would not be available for the first year.  This would not seem to be the intent of the law but how it should be applied based on how for form 8881 and instructions were drafted.

This post's inquiry entails if § 416 minimum contributions routinely have § 404(a)(3) limits waived. 

https://www.irs.gov/pub/irs-tege/epche903.pdf

I'm struggling to locate a copy or link for Bulletin 95-1.  Can anyone help?