With the various new optional and required changes taking effect January 1, 2024, how are other TPA firms preparing for this?

More specifically, are you reaching out to every client and telling them about the changes coming and discussing with them each individually about amending their plans to accommodate the changes (Roth catch up contribs, LTPT employees, etc)?

Trying to develop a plan for our firm and would GREATLY appreciate others sharing what their firm's strategy is on this.

Thank you so much!

I just want to make sure I haven't missed any updated guidance on the following specific items only. Thanks.

1. Only contribution REQUIREMENT is to allow the eligible LTPT to defer.

2. IF the employer chooses to contribute match, PS, SH, (mix and match), to those who are SOLELY eligible due to LTPT rules, these people may still be excluded from coverage, ADP/ACP, and 401(a)(4) nondiscrimination testing.

3. For top heavy purposes, their account balances will be included in the determination if the plan is top heavy or not, but they are not required to receive a top heavy contribution.

4. No gateway required, even if employer chooses to give them profit sharing.

Example: 12/31/2022 payroll is deposited to the plan on 1/3/2023. The deposit includes deferrals, employer contribution, and loan repayments. We enter the deferrals and employer contributions under 1 (b) Receivables lines 1 & 2 on the schedule H and we usually enter the loan payments under (c) "other" receivable. We then lower the overall loan balance under C General Investment (8) Participant Loans by the receivable loan payment. However, I'm not sure if this is correct. Just curious on how everyone else handles receivable loan payments on the schedule H?

Thanks!

Looking at a plan, and it doesn't seem right to me.

The plan charges a fee to terminated participants who leave funds in the plan. $100 per ppt per year. The recordkeeper also pays revenue sharing to the TPA.

The Revenue sharing now equals or exceeds the TPA fees, and the $100 per ppt per year charge is being put in a "forfeiture" account, and the client is being told to offset required match contribution by the balance in the forfeiture.

As Archie Bunker once said, "I smell something stinko in the city of Denmark." This fee doesn't seem to qualify as a "forfeiture" as that term is defined.

So, what can be done with these amounts? Maybe I'm being unnecessarily conservative in my viewpoint. What do other folks do?

A Form 5500 Schedule H or I question asks: “Was this plan covered by a fidelity bond?” The form has boxes for Yes or No, and a line to state an amount.

How does one answer this question if a fiduciary obtained the insurance before the administrator signed the Form 5500 but after the reported-on plan year ended? (Assume the fiduciary does not buy retroactive coverage.)

Does the past-tense “was” refer to any time in the past?

Or does “was” in context suggest the question refers, somehow, to the reported-on plan year?

How does one answer the question if the fiduciary obtained the insurance during the reported-on plan year (so the plan was uninsured for some portion of the year)?

Am I right in guessing the usual software restrains a user from answering both Yes and No?

For the line that calls for a coverage amount, does one report the amount that applied as at the beginning of, or the end of, the reported-on year? Or is it the highest coverage amount on any day in the plan year?

Plan has 3-month wait for deferrals and 12-month for safe harbor match plus semi-annual entry-dates.  I realize the <1 year deferrals would need to be ADP tested but that is not an issue since can use the statutory exclusion, plus there are never any HCEs in that group.  No other employer contribution is made - no regular match nor profit sharing. 

This plan is not top heavy thankfully but I thought I read something that if this plan were top heavy, the funding-safe-harbor-only top heavy exemption would not apply to those not eligible for the safe harbor match.  Does that sound right?  

Thanks in advance for your comments.

I have clients seeking to simplify the administration of the SECURE 2.0 Roth requirement for catch-up contributions made by participants earning more than $145,000. One potential way to do this is to require all participants (regardless of compensation) to make catch-up contributions on a Roth basis, but it's not clear to me whether that would be permissible. 

May plan sponsors require all catch-up contributions to be made on a Roth basis? More generally, how have you advised clients who are concerned about the complexity of administering the new Roth catch-up requirement, but who don't want to eliminate catch-up contributions from their plans?

An employer with less than 100 employees who earned at least $5,000 in 2021 adopts a MEP in 2021.

On 6/1/2022 they spin out of the MEP and adopt their own 401(k) plan, covering essentially the same employees.

Would I be correct that company's participation in the MEP would disqualify it from the start-up tax credits for any year (2022 or after)?

Would I also be correct that assuming the company continues to employee less than 100 employees, they would still be able to qualify for the "Employer Contributions" credit beginning with the 2023 plan year?

Thank you.

The Plan document says the following:

Eligibility. Rollovers may be accepted from all Participants who are Employees as well as the following
(select all that apply; leave blank if not applicable):
a. [X] Any Eligible Employee, even prior to meeting eligibility conditions to be a Participant

Does this leave any discretion for the Plan Sponsor to not allow rollovers from employees who have not met the plan's eligibility requirement?  Or must they allow the rollover?

Thank you all as always  for the insights. A DB Plan where the owner and his wife are participants is terminating. The owner passed away and his Beneficiary is his wife.  Therefore, the wife is entitled to two IRA rollovers (one since she is a participant in the db plan she therefore has a DB benefit, and one rollover as beneficiary of her husband's benefit). The rollovers to the IRA are approximately 1.7 and 2.3 million respectively. ...Is there any reason to rollover each benefit separately, or can one amount of 4 million be rolled from the DB to her IRA? Thank you.

Typically, if the plan allows, deferrals and Roth plus earnings are available for hardship distribution.  

We have someone asking if they can do a Roth conversion of profit sharing for example.  I don't think that then qualifies as a "safe harbor" hardship source - does it?  I realize they could amend the plan for in-service on profit sharing at 60 months or 2 years aged deposit.

I’ve moved from the 401(k) to this board AMDG’s question:

“Self-certification is now permissible for governmental 457(b) plans, but the 457(b) regs are not as formulaic as the 401(k) regs regarding the events that constitute [an unforeseeable emergency]. Pending IRS guidance, it seems reasonable to me for a gov’t plan sponsor to adopt the 401(k) self-certification service model for its 457(b) plan, especially as EPCRS applies differently (basically, no risk of plan disqualification). I would love your thoughts! Thanks!”

Here’s some information, and some of what I think.

Internal Revenue Code of 1986 § 457(d)(4) provides:

“In determining whether a distribution to a participant is made when the participant is faced with an unforeseeable emergency, the administrator of a plan maintained by an eligible employer described in subsection (e)(1)(A) may rely on a written certification by the participant that the distribution is—

(A)  made when the participant is faced with an unforeseeable emergency of a type which is described in regulations prescribed by the Secretary as an unforeseeable emergency, and

(B)  not in excess of the amount required to satisfy the emergency need, and

that the participant has no alternative means reasonably available to satisfy such emergency need. The Secretary may provide by regulations for exceptions to the rule of the preceding sentence in cases where the plan administrator has actual knowledge to the contrary of the participant’s certification, and for procedures for addressing cases of participant misrepresentation.

An unnumbered flush paragraph at the end of § 457(b) provides:

“A plan which is established and maintained by an employer which is described in subsection (e)(1)(A) and which is administered in a manner which is inconsistent with the requirements of any of the preceding paragraphs [§ 457(b)(1)-(6)] shall be treated as not meeting the requirements of such paragraph as of the 1st plan year beginning more than 180 days after the date of notification by the Secretary of the inconsistency unless the employer corrects the inconsistency before the 1st day of such plan year.”

And here’s the rule or regulation § 457(d)(4)(A) refers to:

26 C.F.R. § 1.457-6(c) https://www.ecfr.gov/current/title-26/part-1/section-1.457-6#p-1.457-6(c).

I think (but advise no one):

Until another Treasury final or temporary rule is published, effective, and applicable, a State or local government employer may rely in good faith on its reasonable interpretation of the statutes.

Several interpretations of § 457(d)(4) are at least reasonable.

That a participant may self-certify she faces a situation particularly or generally described in § 1.457-6(c)(2)(i) seems at least a plausible interpretation of the statutes.

Observe that § 401(k)(14)(C) refers to “a financial need of a type which is deemed in regulations prescribed by the Secretary to be an immediate and heavy financial need” while § 457(d)(4)(A) refers to “an unforeseeable emergency of a type which is described in regulations prescribed by the Secretary as an unforeseeable emergency[.]”

As always, a government official, participant, service provider, or anyone affected by the question should get her or its lawyer’s advice.

Last week, a BenefitsLink discussion considered whether self-certifying claims for a hardship distribution might be good or bad.

Advantages: Self-certifying might remove unwanted discretion; simplify claims procedure; lower plan-administration expense; and help employers avoid information one would prefer not to know or even have access to.

Disadvantages: Self-certifying might weaken retirement savings (and might lower an investment or service provider’s revenue); and might speed impostor thefts.

https://benefitslink.com/boards/index.php?/topic/70898-form-for-relying-on-a-participant%E2%80%99s-written-statement-that-she-has-a-hardship/

A hardship is not the only kind of claim for a before-severance distribution a plan may permit a participant to self-certify. Others include:

an emergency personal expense distribution [§ 72(t)(I)];

a qualified birth or adoption distribution [§ 72(t)(H)];

an eligible distribution to a domestic abuse victim [§ 72(t)(2)(K)].

If a plan’s sponsor or administrator is considering not allowing § 401(k)(14)(C) self-certification for hardship claims, are there reasons to treat differently these other claims?

Hello,

What would be deemed the RMD for a participant from a DB plan, Age 79, who is receiving $2,948.26 in the form of a Life with 5-year Certain annuity, and, who also receives a single sum distribution of $43,342.26 as catch-up payment for underpayments in the past, all in the same calendar year 2023? One issue at hand is, if he is allowed to roll over all or part of the single sum that he is receiving?

Your response will be greatly appreciated.

Thank you.

I just want to make sure I'm reading this correctly in the Plan Document for a client.  Here is the excerpt, regarding the true-up for the Safe Harbor Match:

Notwithstanding the foregoing, if the Employer elects to contribute and allocate separately ADP Safe Harbor Matching
Contributions for an Allocation Period of less than the Plan Year, a true-up will be required unless ADP Safe
Harbor Matching Contributions with respect to any Elective Contributions made during a Plan Year quarter are
contributed to the Plan by the last day of the immediately following Plan Year quarter.

So if the client is funding the match on a payroll-by-payroll basis, a true-up for shortages is not required correct?

Has any big recordkeeper yet made available (if a plan-administrator customer asks for it) a form for relying on a participant’s written statement that she has a hardship?

hi! If a SH plan has a missed deferral opportunity and requires a corrective QNEC - does that then remove the top heavy exemption? I'm curious and can't really find anything that says yes or no on this. I'm leaning towards YES because regs state that it's top heavy if it consists of anything besides deferral and the safe harbor contribution; BUT would it really cause a failure if you correct your plan? I can't wrap my head around this. 

Thank you!

Client sponsors a cash balance plan and is solely owned by a Parent entity.  All employees are employees of the Client and receive W-2s from the Client.  Prior to August 1, the Parent was neither the plan sponsor nor a participating employer in the pension plan.  On August 1^st, the Parent sold 100% of the stock of the Client to a third party Buyer.  Following the closing, Client and Parent are no longer part of a controlled group.  Immediately prior to the sale, the Client and Parent both signed resolutions that, effective August 1, transferred sponsorship of the plan from Client to Parent, and removed Client as a participating employer in the plan.  Parent is now taking steps to terminate the plan.

Clearly, all compensation and accruals for January 1 through August 1 for employment with Client should be counted under the plan.  However, no 204(h) notice was provided to employees giving them notice of the August 1 change in plan sponsorship.  Does the Parent still have to include post-August 1 compensation until a 204(h) notice is given and its timing runs out?  Or, are they just treated as having terminated employment because their employer no longer participates in the plan?  There was no amendment to freeze or change benefits, although the change in plan sponsor has that effect because none of the employees work for the Parent and all employees remained Employees of client.  

Thanks for any thoughts.  The change in sponsorship is not a PBGC reportable event because the plan is fully funded, and the parties will treat the transaction as a partial plan termination and fully vest all participants.  

We've had several client receive letters from the IRS approving the 5500 & 8955-SSA extensions through 8/15/23. The 5558 was submitted for calendar year plans Ending 12/31/22, but the approval letter states the Tax Period as "October 31, 2022" and "File your return by AUG. 15, 2023". Has anyone else seen this? Is this another IRS computer error?

We are currently on Datair and looking at other options.  We are looking at Ft Williams (given we use their document & 5500 system), ASC, and possibly Relius (but unlikely given costs).  One concern is the processing of huge plans.  Currently, we have issues with Datair stalling during busy season when someone is importing or calculating a huge plan.  We do not want to relive this.  We also would like a program that provides some reconciliation options between the accrued balance on the software and vendor ending balance by participants.  Do you have any of these retirement software companies and can you provide pros & cons?