We have a CB plan terminating with excess assets. The CB benefits are offset by a DC plan. Upon plan termination, excess assets will be allocated in a non=discriminatory manner. The question is how we properly account for DC balances in computing the allocation of the excess assets.

I would think, that so long as the allocation of the excess could be reflected in a formula that would still pass 401(a)(4), taking into account the offset, it should pass. The alternative would be to allocate assets to all participants, even those who never had a positive benefit in the CB plan due to the offset.

Guidance on this seems sparse or non-existent. Thoughts?

We did a proposal for a CB plan for a sole prop, effective for 2015.  Since few if any brokers understand cash balance plans, I insisted on going on the call.  Broker refused to have us as TPA attend initial sales call sold plan to a physician 2 NHCEs who have been terminated for years and are fully vested.

Physician was told by broker that he could contribute $250k per year.  Small wonder why he did not want me on the sales call. The contribution was close to the max in the range, but still short of the max PVAB for plan years prior to 2021.

For 2021, plan definitely overfunded.  Client on extension for 2022, I quote a $0 as plan definitely overfunded, with a -11% ROR.

Client over 70, not sure, but can he rollover a portion of the overfunded to an IRA and possibly make a contribution?  Would just kick the can, I realize.

Alternatively, freeze the plan and establish a PSP for 2022 as long as the contribution made and the plan dated prior to the due-date of the extension?

Of course another alternative is to drop the client entirely, as a waste of my time.

Secure 2.0 Roth Catchup contributions.  The information indicates that it applies to taxable years beginning after December 31, 2023.  Since catchup is a participant contribution and they used the word Taxable years, does it impact the catchup do to plan limit, 415 or ADP Catchup in early 2024?  

Example:  Plan year is 2/1/23-1/31/24.  Plan fails the ADP test.  It is my understanding that any catchup due to and ADP failure become catchup as of the last day of the plan year.    With secure 2.0 does that mean, anyone over the $145k threshold, their ADP catch up must be Roth?  If so what do you do if they did not make enough contributions in 2024 to cover the ADP catch up amount.  

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Plan is a 401(k) Safe Harbor Plan that includes a New Comparability Profit Sharing Allocation.  The Key Employees only "participate" in Deferrals and Safe Harbor Matching.  Due to the inclusion of a life policy which has premium paid by Profit Sharing Contributions, there is one Non-Key who get a Profit Sharing Allocation.  Does the inclusion of this Nonelective Contribution to one Non-Key Employee (which does provide Minimum to this person) require that a Top Heavy Minimum be provided to other Non-Key Employees?  I suspect the answer is "yes" since the Plan is doing a contribution above the "Safe Harbor Contributions", even though that contribution only goes to Non-Key Employees.

If I do an in-plan rollover of my 401k account to a designated rollover account in the same plan, is it taxable in the year I do the direct rollover since I am converting pretax money into after tax money?  

Good morning everyone.  I know someone can have primary and secondary insurance, but we have a participant in a self-insured Plan asking if they can take out a second policy from our Plan to help diffuse some of the costs.  The argument is that you are allowed to have two plans, but I can't seem to find anything that says the primary and secondary can't come from the same Plan.

Does anyone have any guidance?

Thanks in advance!

A new one for me

Client has an existing fully funded DB plan.

For 2022, I was told that the schedule c income would be 60k.

Suggested a new 401k set up for 2022. Did so and deposited full deferral prior to 12/31/2022.

I just got the net c and it is $600 (thankfully db has no required contribution).

So, now have a 27k deposit as of 12/31/2022 but no income to support it.

What to do?

I understand that an in-plan rollover to a designated Roth account of employer securities is treated as a distribution for the net unrealized appreciation (NUA). What are the implciations of that treatment? 

When complying with the new Roth Catch-Up Contribution provision of SECURE Act 2.0, do plan sponsors need to add Roth as an available option for all participants in the plan? It seems like they should, however we work with a plan sponsor that does not want to make it an available contribution type in the plan.  Is that permissable?

In 2022, a 401(k)/PSP client transferred from a pooled account to individual accounts as Vanguard.  During the first part of the year, they funded deferrals and also made additional deposits to the account which were used to fund the employer safe harbor match at year-end.  The safe harbor match amounts were not calculated based upon a specific time period or earmarked for any specific participant, This is how they had always done it and I see no harm in it.  Those employer deposits throughout the year earned money while in the pooled account.  After the transfer to Vanguard, these funds were placed in a suspense account and continued to have earnings.  The total suspense account, which was comprised of actual money deposited + earnings, was used to fund the annual safe harbor match once it had been calculated based upon full year data.

Is it ok that they use the earnings to fund the required safe harbor match contribution?  I assume they definitely cannot deduct the earnings portion because they did not deposit it, but am now questioning the use of the earnings altogether to fund the contribution.  If we were talking about forfeitures, I know those earnings are used to fund contributions all the time, but is this different?

Thanks!

Accountant filed the 6/30/2021 5500 late to stop the running of penalties. Do you think it can be refiled under DFVC program with outstanding 2022 5500 now since no notice has been received yet? The accountant wants to 

Is it oversimplifying the concept that plan with an elapsed time eligibility provision is not subject to the LTPT rules?  I seem to have picked that up somewhere, and I haven't seen it debunked at any webcast.  Thanks.

Plan has immediate eligibility.  However, Part Time and Seasonal Employees are excluded.  Obviously if the employee in these groups complete 1,000, they were eligible for the plan. There seems to be different opinions if the LTPT rule applies to groups specially excluded from the plan.   

Question, if the plan specially excludes a group (part time and/or seasonal/interns etc.), does the new LTPT rule apply to this group.

Thank You.

I have a client (Company A) that sponsors a 401(k) and a DB plan.  A couple of years ago they acquired another company (Company B) that sponsors a 401(k) plan.  The transition period funder 410(b)(6) has now expired and they may have a testing issue unless they can obtain QSLOB status.

In testing for QSLOB status, both companies meet the 50 employee requirement and the administrative scrutiny requirements under 414(r).  Next up is the Gateway test under 1.414(r)-8 which is causing a potential problem.  I believe that each of the 3 plans has to satisfy 410(b)(5)(B) on an employer-wide basis, and can do so by each having a coverage ratio greater than the unsafe harbor percentage.  While each of the 401(k) plans satisfy this requirement, the DB plan unfortunately does not.

Based on this, does that mean Company A fails to be a QSLOB based on the DB plan's coverage failure?  Or can Company A's 401(k) plan at least be tested on a QSLOB basis since that plan does meet the coverage requirements and the sponsor satisfies all of the other QSLOB requirements.  In that case at least we'd be good for the 401(k) plan and the DB plan could then explore other options (hard freeze or open up to new entrants).

A colleague suggested that Company A as a whole could be tested on an employer-wide basis, not each individual plan.  The argument being that it's the QSLOB itself that needs to be tested, not the plans of the QSLOB.  But that did not sound correct to me.

Any suggestions are welcome.

A participant makes a subsequent deferral election. Before the 12-month period before it will be effective elapses, can she void that subsequent deferral election and make a different subsequent deferral election or is she locked in until the 12 months expire?

I need some assistance determining the Vesting Percentage for a former Employee, please.  This client has revolving door of employees and sometimes makes determining what service qualifies for vesting a little complicated and need some help in making sure I am counting vesting service correctly.

The employee in question has Original Date of Hire was 6/25/2014 and he worked 1,000 hours in 2014.  He termed in January, 2015 and was Re-Hired in November, 2016 so neither of 2015 or 2016 plan years did he work the 1000 hours. He termed on 5/20/2017 having worked his 1,000 required hours for the year 2017.  He was Re-Hired on 9/18/19 but worked less than the hours required during the remainder of 2019.  Now he has termed again on 7/1/2023. I believe he gets vesting service credit for 2014, 2017, 2020, 2021, 2022 and 2023.  Does that sound right?  

This was just released thru BL today.

Issue Snapshot — Deductibility of employer contributions to a 401(k) plan made after the end of the tax year | Internal Revenue Service (irs.gov)

Not a 401k expert.

Example 5 is an interesting one, is it correct though?

SECURE 2.0 section 317 states for plan years after 2022.

What am I missing here?

Thanks

Beginning with 2024, new Internal Revenue Code § 401(k)(16) sets up a new kind of individual-account retirement plan—a starter 401(k) deferral-only arrangement.

For relief from top-heavy treatment and from actual-deferral-percentage nondiscrimination constraints, the price is providing no contribution beyond elective deferrals, and limiting them to $6,000 (or $7,000 for those 50 and older).

Under which conditions would an employer prefer a starter 401(k) over sending payroll deductions to Individual Retirement Accounts?

Is it about saying, in recruiting workers, that the employer has a “401(k) plan”?

Under which circumstances would it be rational for an employer to pay (instead of letting participants bear) all or some of a starter 401(k)’s plan-administration expenses?

I understand that not all plans allow for in-service distributions.  And I understand that you must die, become disabled, be terminated or reach retirement age.  But all that aside, can a participant request and can a plan make an in-service distribution to an active participant that isn't considered a hardship in-service distribution?  Of course the payout would be taxed and coded early.   Is this possible?