So can I conclude that what the LTPT rules found in the Secure Act 2.0 are saying is this :

•  If you work between 500~ 999 hours for 2 years then you become eligible to make a salary deferral contribution
•  And... If a LTPT employee does make a deferral we don't need to include them in the ADP test
•  And... they are not eligible for the SH contribution or a profit sharing NEC 

What it is doing is giving them (LTPT ee's) the ability to put some money away for themself if they want when normally they wouldn't be able to due to plan eligibility requirements?  With no real effect on testing?

AND, should the LTPT'ee become eligible eventually (because they meet the plan's eligibility requirements due to working more than 1,000 hours) they would enter the plan as normal?

Wow.  @Carol V. Calhoun has posted (12/04/23) a thoughtful treatise/practice note on Substantial Risk of Forfeiture.

https://benefitsattorney.com/articles/substantial-risk-of-forfeiture/

Can anyone recommend a company that offers E&O insurance specifically for TPA firms? I am having trouble..

 

Thank you!

Now that a plan with Roth 401(k) amounts can be amended so after 2023 no during-life minimum distribution is required from those amounts, is there a remaining reason an individual might prefer contributing to a Roth IRA rather than to a Roth 401(k)?

Or is a choice between Roth 401(k) and Roth IRA in equipoise?

Assume the amount the individual can afford to contribute is less than the IRA limit.

Assume investment choices and access to investment advice do not favor an IRA.

Hi

Setting a new plan effective 1/1/2023 and want to exclude service prior to inception for vesting purposes.

Prior plan was terminated during 2017, all assets distributed in 2018 (10/15/2018) and final 5500 was filed in 2019.

If I recall correctly, year of termination should be used i.e. 2017 and therefore plan termination was more than 5 years since 1/1/2023.

Thus, the new plan can exclude YOS for vesting prior to 1/1/2023.

Agree?

Happy holidays to all.

A friend established a Keogh/HR10 in 1984 for his self-employed, sole-proprietor, no-employee business. He has filed informational 5500 returns properly as required. Charles Schwab and Co., Inc. is his plan document provider and account custodian. He does not have a copy of the original plan nor intermediate restatements for the first 30 years, but has all restatements since 2015. Contributions stopped in 2002.

 He wants to convert the account to a rollover IRA. He believes (as the administrator of his Keogh) to do the conversion he must have all restatements and original plan document in his possession.

 Only by trying multiple support calls to Schwab, lengthy through their tiers of expertise, can he sometimes get one more plan restatement that is missing, sometimes not.

 

He is quite anxious about exposing his retirement account to disqualification, and would like to avoid penalty if possible. Is his situation a) ignorable – he does not need original and all restatements, b) do you know of a knowledgeable, direct Schwab contact for his situation, c) amenable to the IRS employee plan compliance resolution process (Rev. Proc. 2021-30 and later, voluntary correction program), or d) how does he find a third-party retirement plan administrator (TPA firm) that could provide historical Schwab Keogh plan restatements? Or other options?

Is a new registration statement required where a portion of a top hat plan is spun-off in connection with the spin-off of a subsidiary whose employees participate in its parent's top hat plan?  

If a plan is hard frozen (i.e., no additional accruals on account of continued service or increases in pay), can terminated vested participants whose benefits currently exceed the 415 limit increase with the future increases to the 415 limit up to the time when benefits commence?  Or is their benefit amount as limited by the current 415 limit locked into place?  I believe it's the former  

The IRS published the long-awaited grab bag of clarifications on some of the outstanding issues in SECURE 2.0.

Those who cannot spend the holidays without some technical reading, check out https://www.irs.gov/pub/irs-drop/n-24-02.pdf

Specifically, this notice addresses issues under the following sections of the
SECURE 2.0 Act:

• section 101 (expanding automatic enrollment in retirement plans),
• section 102 (modification of credit for small employer pension plan startup costs),
• section 112 (military spouse retirement plan eligibility credit for small employers),
• section 113 (small immediate financial incentives for contributing to a plan),
• section 117 (contribution limit for SIMPLE plans),
• section 326 (exception to the additional tax on early distributions from qualified plans for individuals with a terminal illness),
• section 332 (employers allowed to replace SIMPLE retirement accounts with safe harbor 401(k) plans during a year),
• section 348 (cash balance),
• section 350 (safe harbor for correction of employee elective deferral failures),
• section 501 (provisions relating to plan amendments),
• section 601 (SIMPLE and SEP Roth IRAs), and
• section 604 (optional treatment of employer contributions or nonelective contributions as Roth contributions).

Enjoy the holidays!

A participant starts making ROTH-401(k) contributions. Participant is over 59.5 but not yet age 73.

Before he reached the 5 year aging rule he dies also before reaching age 73.

Are the earnings taxable to the beneficiary?

Can the beneficiary rollover to an Inherited ROTH-IRA? if yes how quickly must the beneficiary exhaust the ROTH? Does the answer change if the beneficiary is a spouse v non spouse?

Beneficiary is spouse and is over age 73. Can she roll to regular ROTH IRA and treat as her own thus escaping all RMD requirements while alive?

Beneficiary and Participant were married less than 1 year at time of death but she was beneficiary for many years before they were married and I assume for IRS purposes the fact that they were married at time of death is the only relevant piece to the tax questions and ability or inability to stretch the distribution as long as possible.

I may have out-clevered myself.

We have a bunch of plans with a YOS, 1000 hours eligibility requirement.  To avoid LTPTE issues, I suggested that an option was to change the definition of YOS for eligibility to 500 hours.  Still gets to keep employees out for 12 months.

As I'm writing an amendment to implement this, I realized that this could be more sweeping than I realized: does the plan sponsor have to go back to each person's DOH to see if they meet the new requirements?

The EOB says that if you are making eligibility more stringent, you have the option to grandfather in the prior eligibility requirements for those who have already met them (and there are threads on this board that support that).  So... if I'm making them more loose, do I also have that option?  It seems reasonable.  And if I do... then can I limit the looking back to plan years starting in 2021 (basically, the LTPTE period)?  Since I'm making the plan more inclusive than it needs to be, I'd think that is OK, too (making good language for that is not easy, but I'll figure it out).  I don't want to have to determine if someone worked 550 hours in 2010 and has been at 400 since then.

Thanks...

For decades, practitioners relied on CCH/Wolters Kluwer, RIA/Thomson Reuters, and other tax law publishers to make a book to explain (and put into Code sections) Congress’s recent tax Act.

Last December, CCH decided not to publish its customary “Law, Explanation and Analysis” on SECURE 2022.

BenefitsLink neighbors, are you aware of any publisher’s book (not electronic-only text) on SECURE 2022?

And the daylight hours start s l o w l y getting longer again. Woohoo!

I've not heard this term.  What's the difference, if any, between this "mega" 401(k) and a 401(k) that allows for both Roth deferrals and employee voluntary contributions?

Hello. I have a situation where an S Corporation sole shareholder set up a SIMPLE IRA plan for himself and his three employees in April, 2022 using his financial broker. In 2022, he deposited 14,000 for himself into this plan with money from his savings account. There was no payroll withholding for this plan for the owner or his employees. He never notified payroll he even had this plan. He was funding this plan through his financial advisor, who I recently learned turned over his signed Form 5304 to someone else.  Fast forward to December 2023, when his payroll service was asked how much he could contribute for 2023? Since there was no knowledge of this plan's existence, the answer was "What plan?". 

My question is what happens now? I have an owner with 14,000 in a SIMPLE IRA that got there without payroll, nothing for any employees, and no matching. If the money is removed it will come on a 1099-R as taxable, plus it will be less than two years since it was deposited which is one penalty, early withdrawal which is another penalty, and then the penalty for the whole plan being administered incorrectly.  Since this 14,00 was already taxed, how do we fix this where the money isn't taxed all over again?

I have asked several professionals about this but I can't get any answer. I just hear this doesn't happen. 

Thank you in advance for any insight. 

 

Hi Folks! 

The IRS has updated Form 8881, but I don't see updated instructions. Has anyone seen some? Or know when they might come out?

Another question - what is the point of Part II, Line 10? how is it different from Line 9? And the two lines are supposed to be added together for Line 11? That section appears to be unchanged from earlier years, so I'm hoping someone else can explain it to me.

Thanks!

I need to find the DOL reg or whatever it is that says something along the lines of, if the investments of more than one plan are commingled and available to pay teh benefits of all plans than it is considered a single plan for auditing purposes.  Does anyone know where the actual reg is??

Hi

DB plan, one lifer, EOY val.

Plan is slightly underfunded but creating a large required contribution which will make it over funded.

Can I switch to BOY val with the above status?

Thanks

We are in a bit of a pickle :). We are the TPAs for Company A. Company A is a safe harbor match plan (calendar year).

Company A purchased Company B back in May of 2022 and never told us about it (of course).

Company B has their own plan (non-safe harbor), they DID tell their service provider about the acquisition back in 2022. The service provider said NO PROBLEM you have 2 years due to the transition period thinking they had until May of 2024. Company A finally decided to get us in the loop, and we just told them guess what the transition period ends in a week.

Needless to say, we're scrambling a bit. We can't merge as of 1/1/2024, we can't get the prior service provider to amend company B's plan to a safe harbor match plan for 2024 (understandably i guess). So now what?

The plan is to merge Company B's plan (non-safe harbor calendar year plan) in to Company A's plan (our client, safe harbor match, calendar year plan). We're thinking the best option is to amend company A's plan to add company B as an adopting ER and bring all the employees of company B on to company A's plan as of 1/1/2024. Freeze Company B's plan i guess and take it over and then merger it as of 1/1/2025....