Can the cost of calculating the interest for late contributions (and preparing the 5330) be charged against the plan?  i.e. taken from forfeitures?

What about the cost of calculating interest for missed deferral opportunity?

I know the interest itself must be paid by the ER.

When a retirement plan allows a recordkeeper’s brokerage window:

Does the plan’s named fiduciary get reports on the details of which stocks, bonds, and other securities each participant buys, holds, and sells?

Or does the named fiduciary get access to a database with that information?

Is that reporting or access routine?

Or must the fiduciary specifically ask for those services?

Question 1

The way that  I read Section 602 (and the new paragraph 403(b)(17), 403(b)'s may only permit hardship distributions from elective deferrals, QNEC's and QMAC's.  Nothing else is listed.  No one seems to be saying that 403(b) plans that were previously allowing hardships from Employer Contribution accounts are no longer allowed to do so, so I must be missing something.  But the plain English words in (17) do not list any Employer sources besides QNEC's and QMACs???

Question 2

Sort of related to Question 1 - people seem to be saying that the hardship rules are now aligned for 403bs and 401ks, but 403(b)(7) plans (mutual fund funded plans) seem still exclude employer contributions, while insurance based programs do not (that's from my reading in the ERISA Outline book). I assume this is generally agreed?  I'm surprised it's not mentioned in many of the write-ups I've read because I've always found that particular inconsistency to be by far the most baffling provision in all of retirement plan law.

Pursuant to Section 603 of the SECURE Act and starting with the 2024 calendar year, if FICA wages in the previous calendar year (2023) exceeded $145,000, the catch-up contributions under IRC 414(v) must be made to a designated Roth account under the Plan. If a participant elected pre-tax 401(k) contributions in 2024 and the participant reaches the dollar amount permitted under IRC 402(g) in the middle of 2024 (i.e.- September, 2024), is it possible for the plan to be designed to withhold Roth 401(k) catch-up contributions for the remainder of the 2024 year (i.e., September-December, 2024) up to the IRC 414(v) limit (i.e., $7,500)? The SPARK Institute's  Comment Letter to the IRS (April 10, 2023) requests IRS guidance that permits this automatic spillover:

• The SPARK Institute requests confirmation that employers and plan administrators can rely on negative consent to switch employee elections from pre-tax elective deferrals to designated Roth contributions in order to prevent any existing election from violating SECURE 2.0’s requirement for Roth catch-up contributions.

I was just checking to see if recordkeepers and/or payroll companies have considered this automatic spillover as a feature that they are planning to build, support and administer in their SECURE 2.0 projects.  

Plan sponsor (S) of a calendar year 401(k) safe harbor match plan is acquired in a stock purchase by Buyer (B), which has its own 401(k) plan.  S's plan is NOT terminated prior to closing of the transaction.  All of S's employees will be hired by B upon closing, and will be immediately eligible to participate in B's plan.  S will continue to exist as a subsidiary of B, though without employees, and will retain the EIN it has now.  Can S's plan retain its safe harbor status for 2023, notwithstanding there will be no new money coming into the plan because S no longer has employees?  I know S's plan can't terminate post-closing without running into a successor plan issue, but must it remain in existence until 12/31/2023, at which time it would merge with B's plan, to be able to preserve safe harbor status for 2023?  Would merging the plans before year-end forfeit the S plan's safe harbor status for the year? 

I just recently started with a company and noticed that the company was grossing up STD and LTD premiums (adding the premiums into payroll and then deducting the same amount post tax), but it appears that the claims have been paid as if there was no gross-up (taxes were withheld and benefit was reported as taxable income) and the benefits broker has stated that the plans have always been quoted as non gross-up plans and that the plan documents would need to be updated to reflect this as being a gross-up plan.

So my questions are this:

-  What language specifically within the plan document(s) / contracts would need to change?  I've never tried to compare language on a gross-up vs non gross-up plan?  Is there typically language contained in the vendor contract the specifies if the plan(s) should be gross-up?

- For previous years, how or what type of correction should be done?  Not sure if it makes sense to issue W2Cs for everyone, especially when everyone has already filed their tax returns.  Can we simply make adjustments to the claims that were paid and that were improperly taxed.

- Anyone else experience this?  Any suggestions on how to move forward?

TIA

I hope BenefitsLink neighbors will help me learn something about a particular oddity regarding remedial-amendment cycles.

For optional changes a recent Act of Congress permits, a typical way a recordkeeper or third-party administrator knows what a plan’s sponsor adopted often results practically from the sponsor’s responses to a service provider’s solicitation of instructions. These sometimes involve not only express instructions but also implied assent to the service provider’s proposed default instructions. Even when a sponsor does not make or keep its own records, the service provider’s records of what it was instructed become a history that can support the remedial amendment.

It seems at least some big recordkeepers did not (in 2020-2022) ask, even in implied-assent form, whether a sponsor wanted to change the applicable age for a required beginning date from 70½ to 72, and again have not asked whether a sponsor wants to change it to 73.

Many plans’ documents still say 70½. If a service provider did not ask whether a sponsor wants an optional change in the applicable age for a required beginning date, how does one know what the plan provides?

(I recognize that what service a provider was or is obligated to provide need not, and often does not, refer to what the plan provides.)

Even if we expect 99.99% of sponsors would adopt all permitted changes to the applicable age, should service providers “go through the motions” of seeking a sponsor’s instruction (and proposing a default instruction) on the required beginning date applicable age?

Or are there reasons not to ask?

A takeover record keeper is asking for the Secure 1.0 amendment.  It is not due until 12/31/2025 correct?   I tend to doubt myself when institutions ask for things like this and imply that there should be one.  We've been providing the Secure and Secure 2.0 good faith amendments for terminating plans only.

Thank you

Tom

Hi, I have a Plan that expected to terminate and pay out benefits prior to June 30, 2023.  However, my document vendor (Ft William) doesn't yet have its Cycle 3 document ready, and says it won't have the doc until July sometime.

All the benefits have been calculated for a June distribution. This is a small, non-PBGC-covered Plan and we are not submitting to IRS.  Would you distribute anyway, and then update the document in July?  Or?  If we wait to distribute until after the docs are completed, we will have to recalculate everything.

Thanks in advance.

Hello, 

My client just recieved a NMSN for an employee on May 30th and the date on the NMSN in the top right corner is May 22nd (the date for which the letter was produced and sent I believe). The recieving department sent the notice to Human Reources (Also the Plan Administrator) in early June at which time the HR team deemed it was a legitimate notice. The earliest enrollment date would then be the first of the following month from my understanding, making the effective date 7/1?

The Medical Carrier agreed that this effective date was properly determined, however the Dental & Vision carrier is saying that we have to make the benefits effective on 5/22 since that is the date on the NMSN. The Employer didn't even have the notice on 5/22 so this seems incorrect. Has anyone heard of a carrier doing this? Maybe it's an inexperienced employee at the carrier that we are dealing with or maybe I'm interpretting the NMSN instructions incorrectly.

Any insight is greatly appreciated. 

The client employees few salaried employees and a bunch of hourly-paid employees.  Many hourly employees are scheduled to work 1200 -1400 hours per year.  Is it a "reasonable classification" to define the "hourly employees who are scheduled to work less than 2,080 hours per annum" as an "Ineligible Class"?   I do not need them for testing as my plan would pass the ABPT with very comfortable margin.  What are the issues with my thinking?  Let's assume there won't be any employees who are scheduled to work part-time but later show up with a gazillion of hours.

We are running into a situation with our recordkeeper involving the valuation date for QDROs.  In the past a determination date was some date in the past chosen by the participant and alternate payee, and was usually the date the participant and spouse were separated or divorced.  The AP's account was then valued by taking the balance as of the determination date, adjusting for earnings, contributions, withdrawals or whatever, and then splitting the account.  The APs account could then be administered just like any other account; payment could be requested or deferred, investments chosen etc.

Now the recordkeeper has unilaterally decided that the valuation date is the date of transfer so there are no earnings calculations needed.  This is not what our QDRO procedures or models provide and we have a number of DROs in process which are expected to stipulate the prior method when they are submitted to us for approval.  We are getting pushback from participants who want to divide the account based on a specific past date and who are unequipped to calculate several year's worth of investment earnings on their own.

The recordkeeper is calling their new process "industry standard" but in my years in the industry as a TPA the majority of my cases have used the prior method.  Do agree this is industry standard?  I have not been a TPA in 10 years so perhaps the industry has moved on without me knowing?

401(k) plan sponsor (S) is being acquired in a stock purchase by Buyer (B), which has its own 401(k) plan.  S intends to terminate its plan before the stock purchase transaction closes.  S's employees will be hired by B upon closing, and will be immediately eligible to participate in B's plan.  S will continue to exist as a subsidiary of B, though without employees, and will retain the EIN it has now.  The TPA for B's plan contends that the successor plan rule is violated thereby and proposes merging the plans upon or after closing instead.  I believe that if S terminates its plan pre-closing, the successor plan rule is inapplicable, even if S survives under its own EIN as a subsidiary of B.  Any thoughts on who has the better argument?

I also believe that S can terminate this safe harbor match plan mid-year without advance notice to participants and still have safe harbor and top-heavy protection for the short plan year ending mid-2023 because S is being acquired in a Code Section 410(b)(6)(C) transaction.  B's TPA says I'm wrong about that, too.      

Company is establishing a new 401(k) safe harbor profit sharing plan with EACA features.  The plan will have an effective date of 1/1/23.  I'm told no one will start deferrals until 7/1/23, which will also be when the auto-enrollment would start.  Notices would not have been provided to participants until recently (middle of June).  I know you can start an EACA mid-year for new enrollees only, but in the case of this new plan would that still apply?  Or would everyone as of 1/1/23 that hasn't opted in also be auto-enrolled?

Due to clerical error we had several late deposits for an employee in 2022 and 2023. I'm trying to fill out the form 5330 but i'm extremely confused on how to handle Schedule C Line 2. If there were multiple late deposits do I do one line per late deposit/missed earning amount or can I do a total? For the deposits from 2022 that weren't paid until 2023 do I need to put those on the form twice, or do I need fill out the form and submit it twice with those numbers? 

I'm the one who made the errors and am trying to avoid the $1200 fee associated with our ERISA people filling out the form on our behalf. I appreciate any help I can get as our accountant nor our plan consultant has been any help. For what it's worth the excise tax amount on the missed earnings is $17.66.

Does anyone have a view on whether the reduction of the excise tax to 10% for a distribution made during the "correction window" is retroactive? In other words, would an unpaid RMD for 2022 be subject to the 10% excise tax if the distribution is made during the "correction window" or does the correction window apply only to RMDs beginning in 2023? 

I know 403(b) Plans do not have to file a 5330 for late deposits of deferrals/loan payments.

But does one need to be filed for late ACP refunds?

We have just found 402(g) violations in a plan for both 2021 and 2022 and wanted to make sure their corrections are handled properly.  The violation occurred to only one participant, the same HCE, for both years, in a 27-life plan (the excess now totals about $6,000).  The violation can be self corrected within three years if it's considered significant, and even longer if it's insignificant - no VCP application is needed.  Is this accurate?  Thanks in advance for any guidance.

Client wants to match his employees deferrals dollar for dollar.  He needs to entice people to work for him.  In addition we need to build into this formula a SH match as well.  Can this be done?   Say 4% SH match + what... 100% company match over 4%?   Is it that easy?  (that just came to me)

Hello Pension Gurus,  I have a 401k Plan that had a participant listed as PRN on the census data.  In the filing of Form 8955SSA for 2016, she did not get put on the form with a deferred vested benefit.  And subsequent years, was completely missed.  I was hoping to do a DFVCP filing and pay the fee for a late filing on only the 8955SSA.  But I cannot find where you can submit this form alone, without also filing for a late Form 5500SF.  Anybody have experience in correcting an oversight like this?  Thank you for any information you can give me!