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!

A participant who terminated in 2017 applied for and was approved for a loan in March 2022.  The participant is making repayments on a quarterly basis outside of payroll.  The plan document states that loans are allowed to only active participants and repayments must be made through payroll deductions.  It turns out that the participant's termination date was not entered into the platform which was what enabled it to be initiated.  The Plan Sponsor discovered this during 2023 and wants to know how this gets corrected.  Thoughts?

Assume, for a retirement plan:

A beneficiary designation states that the participant has no spouse.

That statement is logically consistent with the employer/administrator’s records about the participant’s health coverage.

Nothing in the plan’s documents requires that a beneficiary designation (if it needs no spouse’s consent) be witnessed by, or acknowledged before, anyone.

The beneficiary designation is not made through the plan’s identity-controlled internet site.

For such a beneficiary designation, do you:

Require an original ink-on-paper form showing the maker’s signature?

-or-

Permit a fax, scan, or other copy as a possibly valid beneficiary designation?

For either answer, why do you require ink-on-paper, or permit a copy?

If you permit a copy, what controls do you use to guard against a writing that is not the participant’s act?

A plan has a trustee-directed profit sharing brokerage account and individually directed 401(k) accounts at a recordkeeper.  They allow for hardship withdrawals and immediate distributions upon termination of employment.  They are transferring the pooled PS into the individually directed accounts.  Do they need a blackout notice to make employees aware of period of time that they cannot take a distribution from pooled funds?  Or are pooled accounts entirely exempt from blackout notice requirements?  Thank you!

Am I correct in thinking that, since the determination for who is a high-earner for purposes of catch-up contributions is based on the calendar year, and catch-ups are generally determined based on the calendar year, then all plans with 2023 high-earners would need to have Roth available starting January 1, 2024 to allow catch-ups after January 1, 2024, even if the plan is an off-calendar year plan? 

Let's say I have a 401(k) plan with a 6/30 plan year end, and currently does not allow Roth.

I think I'm correct that the determination of the high-earners for purposes of determining whose catch-up must be Roth is still determined using the 2023 calendar year.  

So let's say I start the new plan year 7/1/2023 with no Roth provisions.  I come to 12/31/2023 and determine there are participants that earned more than $145,000 in 2023.  Some of those participants like to front-load their deferrals early in the year.  

Would I be correct that we could not allow any catch-up from 1/1/2024 to 6/30/2024 if we do not amend the plan before 6/30/2024, since we have high-earners in the prior calendar year, and no Roth option?

If we do amend the plan starting 7/1/2024, then everyone would then have the opportunity to make their 2024 catch-ups?

Thanks.

If an employer issued a forgivable loan to an employee (say, forgiven in three years if the employee continues working and if not, must be repaid), I had understood that the forgiveness would be included on a Form W-2 at the time of forgiveness and subject to withholding, FICA, etc. at that time.  I also understood that the alternative, if it was not considered a bona fide loan, is that the amount of the loan should have instead been included on a Form W-2 at the time of funding. 

Reading through some of the case law on this it seems like some employers are actually reporting the forgiveness on a Form 1099-C and not a W-2.  Any thoughts or guidance on this front?  I am concerned with the idea of an employer reporting through a 1099-C rather than a Form W-2 but haven't yet found the authorities on this.  Reporting at the time of forgiveness on a W-2 seems a safer approach.

Seeking opinions on this, and whether the Safe Harbor Notice (depending upon content) suffices.

The Notice must be furnished in connection with the annual open election period, or if there is no such special period, within a “reasonable time” before the beginning of each plan year; it notifies the Unenrolled Participant of their eligibility to participate in the plan, and the key benefits and rights under the plan, with a focus on employer contributions and vesting provisions, and provides such information in a prominent manner calculated to be understood by the average participant.

So, if your normal Safe Harbor Notice merely directs the employee to the Summary Plan Description for Employer contributions other than the safe harbor contributions, then absent further IRS guidance specifying otherwise, it appears that the safe harbor notice couldn't satisfy the requirement. On the other hand, if the safe harbor notice either includes the employer contribution already, or is modified to do so, then it would seem the safe harbor notice could qualify, perhaps with a few other alterations as well.

Any other thoughts/opinions? Are you planning to consolidate these two Notices, or keep them separate? I'm leaning toward separate as ultimately being cleaner and easier in the long run, not to mention that lots of plans aren't safe harbor, so would need a separate Notice anyway...

Does anyone have an opinion on whether the SECURE 2.0 one-time $50,000 QCD to a split-interest entity counts against the overall $100,000 annual limit?

Seems to me that the legislation doesn't clearly answer that question.

Does anyone have an opinion on whether the SECURE 2.0 one-time $50,000 QCD to a split-interest entity counts against the overall $100,000 annual limit?

Seems to me that the legislation doesn't clearly answer that question.

Thanks.

Pros, have a client that went and set up a 401k for his real estate brokerage business with a 1/6/23 effective date.  His intent was to set up a solo 401k.  Using a DIY 401k vendor, he ended up setting up a full-blown safe harbor 401k w SHNEC (EACA provision, 25% SHNEC, cross-tested profit sharing).  The only eligible employees are himself and his spouse.  His minor children are employees of the corporation but excluded from the plan due to age 18 eligibility requirement.  I would like to move the plan to a new vendor and drop the safe harbor provisions as they're unnecessary.  He's fully funded the plan for 2023 for himself and his wife (maxed EE deferrals and the max ER contribution--25% of w2)

Is there an issue with simply changing plan docs midyear to one without the safe harbor language?  Is there some notice that must be sent to covered EE's?  Thank you.

If a plan is found to have not properly included employees who meet the long-term part-time eligibility criteria, what is the penalty?

A plan sponsor is telling us that their union employees are getting non-union pay for small amounts of pay during the same pay periods as they are getting union pay - a couple hours of 'regular' pay, some bonus pay, some sick pay.  This is not being reported to the union hall, as they are saying it's for non-union work.

This isn't something I've knowingly seen before - if you're a union employee, I've always figured that your compensation was union unless you switched in or out of it during the year.  But I'm not a payroll person, and I'm no labor expert; is this really a thing?  I've seen it for prevailing wage work, but not for union people.

Do we need to be asking our clients if their union people are really 100% union?  Or at least putting that assumption in small font somewhere?

Thanks.

GM-

We have folks who move from regular benefits eligible jobs to non-benefits eligible jobs during the year.

401k plan compensation is W-2 wages +401(k) deferral less fringe benefits. Plan counts all comp not just comp from entry.

Question: Payroll has been sending wages every 2 weeks to our 401k provider including wages when the employee is in a non-benefits eligible position.

Do we count this non-eligible status pay for plan compensation? If you have a code section that addresses this please provide.

Much thanks!

Lexy

If a defined benefit plan offers lump sum distributions upon plan termination, does it also have to offer an immediate annuity under the J&S rules?

For example, a participant is age 45 and not otherwise eligible for a distribution until age 65.  Upon plan termination, the plan is amended to offer lump sums.  Does the Plan also have to offer this participant an immediate annuity?

Employers might have a range of views about whether a plan should allow a hardship distribution on no more showing than the participant’s certification.

But some employers welcome this opportunity to simplify a plan’s administration.

And a recordkeeper or third-party administrator that provides a service of vetting hardship claims (whether as the § 3(16) decision-maker, under a nondiscretionary procedure the administrator instructed, or as a preliminary look before the administrator decides) might welcome this opportunity to lower its operating costs.

Yet, some recordkeepers are unready to switch to the participant-certification regime, even with a customer plan administrator’s written instruction. They say they don’t want to implement the change until there is Treasury or Internal Revenue Service guidance.

What are they worried about?

Is any big recordkeeper allowing hardships on the participant’s certification?

I know 403(b) Plans don't file a 5330 for late deposit of deferrals and loans, but do they have to do one for late refunds of the ACP test?

Employer did not setup payroll correctly for deferrals at beginning of 2023.  I am working on the EPCRS fix.

The scenario:  The employee intends to get to 30,000 deferrals for 2023.  So the employee would likely get full deferrals for 2023 plus a QNEC for the Employer error.  This feels a little funky to me, but I am fine with it otherwise.

I'm not aware of any reduction of deferral limit because the EPCRS fix was done.  Am I missing anything?

What is your interpretation of the new automatic enrollment rules under SECURE 2.0 for a plan being established as a QACA?

Do the new rules (i.e., 3% minimum default; auto increases of 1% per year up to 10%, and not more than 15%, if default % is less than 10%) need to be applied to the plan, or can you abide by the old rules for QACA (i.e., any % for a default; auto increases of 1% per year up to 6%, and not more than 15%, if default % is less than 6%)?

Thank you in advance for your reply.