I know the Secure Act forces plans to include part-time employees in the Plan.  However, can a plan still explicitly exclude them as a group in the Plan Document as long as it passes all coverage testing?  I thought we could, I just wanted to be 100% sure.

Thanks!

Client's former spouse is a member of the NYC TRS Pension Plan, and refuses to sign the QDRO because the continuing benefit (the post retirement annuity payments following death of plan participant) awarded to my client is not multiplied by the coverture fraction that the other benefits (pre retirement death and annuity payments during the life of the participant)  are.

1)What specific point in the the law prohibits the continuing benefit from being multiplied by the fraction?
2)What is the logic behind the law that may prohibit this?

Thanks in advance.

Hi everyone,

We are currently working on ways to prevent unnecessary churn with our clients and one of the things we were looking at was making clients aware of the IRS Plan Permanency Rule that essentially states a plan must be established with the intent to be permanent,and if it is terminated within a few years, besides any of the approved reasons by the IRS, then they are at risk of violating that rule which could potentially lead to retroactively being disqualified.  My questions are:

1. Is this really something the IRS even checks? In my six years in the industry, which granted isn't a ton of time, this is something I previously never heard of before and I don't believe it's ever been communicated to any of my previous company's clients when they requested a termination. Are that many people just not aware of it?

2. One of the approved termination reasons is a change in ownership. Does simply selling your business fall under that category?

3. Lastly, is the 5310 form actually required or is that only if they essentially want the IRS's blessing that the termination reason is qualified?

The goal is ultimately to make them aware of this rule in the hopes they might delay the termination of the plan, and although it might not save a ton of business, I think it could definitely deter clients from terminating for reasons like " I just don't want one anymore" , or "my wife and I are going to rollover to an IRA (not Simple) and the employees will figure something else out"

Any feedback is much appreciated!

Decedent changed substantial IRA beneficiary designation to name his mental health therapist who he was having an illicit relationship with during his treatment. T.Rowe Price IRA beneficiary designation mixes up therapist's first and middle name and does not include date of birth and social security number. The form was submitted online, but seemingly "accepted" by T.Rowe Price. Therapist wants to claim the money. 

TRP did freeze the account pending litigation. Does anyone know if this stays RMD requirements or the 9-month disclaimer? What is your experience with incomplete beneficiary designation forms? 

Has anyone heard if FIS will be putting on any in-person or virtual seminars for the Cycle 3 Defined Benefit documents?  I attended one for the PPA and found it helpful but have not seen any buzz regarding Cycle 3. 

Thanks!

I'm new to Excess Benefit plans and have an issue I could use some guidance on. ISSUE: Participant in plan received their first statement after more than 20 years in the plan(statement provider sends annual statements to the ER for distribution). Statement said they would receive $20,000 per month for 5 years after retirement. Participant did NOT receive another statement for over 2 years. New statement , two years later, said one time payment of $20,000-(not monthly for 5 years). Participant questioned ER  as well as statement provide. Six months later ER instructed statement provider to replace the 2 year old statement to reflect a one time payment of $20,000 not a monthly payment for 5 years.

After further research, I am concerned that other eligible participants were excluded from the plan. The ER is publicly traded and has made statements in their annual report the plan is governed by ERISA. In house legal team does not believe there are any issues. I am concerned that there may be ERISA violations as well as 409 issues. Any thoughts or direction to codes would be appreciated.

Just wondering...

The 2-year restatement window for 403(b) plans is currently scheduled to open 1/1/2025.

If the restatement window for 401(k) plans opens 1/1/2026,then the two will overlap. Originally, (in a galaxy long, long ago and far, far away) I seem to recall that the "regular" pre-approved plan cycles were going to be timed such that they would not overlap, but I'm not certain of that.

This could create some challenges.

Do you know if anyone has suggested to the IRS (document providers, ARA, etc.) that the 2-year DC Cycle 4 restatement window not open until 2027, to avoid this overlap? And if so, even unofficially, was the IRS at all receptive to the suggestion?

In the event of a common owner that meets the definition of a controlled group buying multiple companies (some with plans, some without plans, some with safe harbor plans, some without safe harbor plans):  how long since the acquisition of any particular company with any particular plan does the new ownership structure have until they must test all plans together and presumably offer the plan to companies it has acquired without one?  Participant notifications?  Any help is appreciated.

Would it be fair to say that "FICA Wages" = Total Compensation less Section 125 premiums?  Lots of articles that throw around the term "FICA Wages" like "everyone knows what that means."

Had a spouse in 2005 who had a 457 Plan that was divided during our Divorce. I have my suspicions that my ex-spouse withdrew some of the funds from that account ... and I just would like to know what are some kinds of circumstances/reasons that allows someone to withdrew from a 457 Plan account?

The only participants previously covered in a 401(k) plan were owner and spouse, neither of whom make a deferral contribution for the year in question.  The plan is not safe harbor.  It turns out that because of a recently discovered ASG situation, 3 NHCEs of a member of the ASG have to be covered for 410(b) purposes.  Under the 11(g) regs, coverage should be corrected by retroactive amendment and a QNEC equal to the ADR of the NHCE group.  How do you determine the QNEC when there's no ADR for either HCEs or NHCEs for the year? 

There's also a cash balance plan affected.  These NHCEs will be retroactively covered, provided with a meaningful benefit under (a)(26) and receive profit sharing contributions in order to satisfy (a)(4) on a combined basis.  But how to correct the 401(k) component? 

Trying to write some formulas...

Plan Year End = 12/31. Participant is hired on 12/31/2023. Their first 12 months is finished 12/30/2024,which is year 1. Their 2nd year (assuming switch to plan year) is calendar 2024. Agreed?

And if their hire is 1/1/2024, and their 12 months is finished 12/31/2024, because that coincides with the plan year exactly, clearly we would not count the same exact 12 months, right?  I could see someone (especially a formula if one is not careful) mistakenly crediting the same 12 months twice because it counts both the first 12 months AND the first full plan year).

Having a discussion about the following:

Combo DB/401k plan, top heavy

For 2023, owner and spouse are the 2 participants in the 401k and only owner is in the DB (spouse does not work enough hours to be eligible - assume all kosher).

They hire an employee who will become eligible in both plans as of 1/1/2024. Employee makes big bucks in 2023 therefore HCE for 2024.

During 2024, employee will be 20% owner (not as of 1/1/2024 though). Let's say employee will be a 20% owner on 3/1/2024.

DB plan has 0.5% of pay formula and states all top heavy is provided under 401k plan. Employee will be in the DB plan for 2024 so no 401a26 issue.

401k plan's top heavy provision states for both key and non-key.

For 2024, owner defers max and employee will not defer. There will be no PS allocation. 

Employee is not excluded under the 401k/PS categorically.

So, does this employee need to get any kind of top heavy allocation for 2024?

What am I missing here?

Thanks

I work in HR benefits management and just got two odd letters from the Social Security Administration about two of our employees.  They were basically performance appraisals.  They asked questions such as "did the person show up for work on time?", "did they need extra assistance in performing their jobs?" or "did they need additional time to perform their duties compared to employees in similar positions?"   I have never seen anything like this before in my very long career.  One person is retirement-age but the other is not anywhere near old enough for OASDI benefits.  Does anyone know what on earth this is about?  Has SSA potentially "outed" employees who might be applying for or receiving disability benefits?

We have a client "Company A" who sponsors a 401(k) plan and recently purchased another business "Company B" via stock-sale late in 2023. Company B also sponsors a plan and that plan was not terminated prior to the close of the sale. The plans can't be merged mid-year, so we were planning on merging the two plans for 2025 and relying on the transition relief period through 12/31/2024.

We were just told that Company A signed on as Plan Sponsor of Company B's 401(k) plan, has moved all of Company B's employees onto Company A's payroll, and still has those same employees participating (deferring and receiving match) in Company B's plan.

What do we do here? My first thought would be that the employees who were moved to Company A's payroll would also move to Company A's 401(k) plan, but it's confused by the fact that Company A is now the Plan Sponsor on both plans. Did they knock themselves out of transition relief? If so, do they need to do a corrective amendment for the "carveout" of employees still participating in Company B's plan and now they need to pass coverage? 

Gotta love being the last to know with M&A

High earner under age 50 works for two employers. For 2023, he electively deferred $22,500 into one employer's 401k plan as Roth. In the other, he electively deferred $7,500 as tax deferred. He will have to have $7500 returned to him. Is there any ordering of such, i.e., Roth before tax deferred or tax deferred before Roth, that must be followed or can he choose whichever?

We have an audited plan that transferred to a PEP last year.  The assets transferred May 31, 2023, the PEP considered it a transfer of assets not a plan termination.  The auditors are doing a combined audit of 2022 and the for the short plan year period of 1/1/2023-5/31/2023 (when the assets transferred).  My question is... what is the due date of the Form 5500 for the short 2023 plan year? 

Thank you, 

Hi, 

I'm looking for some advise on Abandoned plans.  When a plan sponsor decides to terminate their 401k retirement plan as per regulation it need to be closed within 12 months from the termination dates however we have seen plan sponsor becoming unresponsive which ultimately leads to Abandoned plan.  

From a record keeper perceptive what will be challenges to maintain an abandoned plan? also on the regulatory part if any? Kindly assist.

Thank you

I'm checking the admin software on this which says the person is not key for 2023.  99% of our plans are small with owners/officers being the same and always >5%.  But now the top-heavy issue comes into question for a client with a non-owner officer.

Question:  For PYE 12/31/2023 the top-heavy determination date is 12/31/2022 and the plan is top heavy as of that date.  The employee in question is not an owner or officer in 2022 but became an officer 1/1/2023 (no ownership) and has $250,000 in comp for 2023.  I believe this person is non-key for 2023 and needs a top heavy contribution for 2023.  This is what our software indicates.  

Likewise if someone buys into a company in 2023 at over 5% (is not an officer) they would not be key for the year of their buy-in since the determination date of their status is the last day of the prior year. They would be non-key for 2023 and key for 2024.  (They would be HCE for 2023  however.)

Comments? Thank you!

"The Helping Young Americans Save for Retirement Act is a bipartisan legislation that aims to encourage savings by younger workers in defined contribution plans. The bill would allow employees aged 18 to 20 to contribute to 401(k) and ERISA-covered 403(b) plans after completing one year of service, although employers could exclude them from receiving employer-matching or nonelective contributions."

It's too much.  They need to give us a minute!  Does anyone have Brian Graffs direct dial/email address?  If so tell him Austin Powers will make himself available Congressional Testimony for as long as it takes to convince Congress that this has to stop.

https://www.mercer.com/insights/law-and-policy/bipartisan-bill-would-lower-dc-plan-eligibility-age-to-18/