Anyone have a "contact" at the IRS to know, first, IF they are planning to release any additional guidance on this subject, and if so, WHEN might it be expected?

 I have a union employee that used to participate in a non-union plan.  The employee is still employed at the company but no eligible now due to being union.  They just processed a loan from the non-union plan for this union employee.  Is this allowed?

Loan policy says : "Any Participant that is actively employed may apply for a loan from the Plan."

This person is a Participant due to the fact (at least) that they have a balance. And they are actively employed (so, thus can have payroll deductions). However, they are in an ineligible class. The loan policy does not address that.

I'm not sure this is a valid issue but given my history with our company's SIMPLE debacle from 2020, I wanted to cover my bases.

We hired a new accountant for Q422 and they used the wrong election form for my 2023 deductions.  I chose 4% for the past two years and they used my 2021 election form which was a 3% match.

I realized this after my 6/15/2023 check (due to other issues with our FLEX program) and brought this to their attention.  They decided to make up for this difference by adding the missing amount to the next 11 checks until all missed deduction amounts are accounted for.

My question:  Is this the proper way to do this (or perfectly ok) or does the company need to go through a proper correction method (i.e. VCP)?

Thanks!

I have a potential client who has been "maintaining" a SEP for sometime. The owner has always been the only participant in the plan. There have been no contributions to the SEP during 2023. What would be the problems, if any, of starting both a 401(k) plan plus a cash balance plan during this year? I am sensitive to the word "maintaining" with regard to the SEP. If no contributions are made on account of 2023, does this imply the the SEP is not being maintained during 2023 and there should be no problems establishing the other plans?

Thanks for the help

Rick

I have a client that wants to shorten the eligibility for 401(k) deferrals to 60 days, but leave the Safe Harbor Match at 1 year.  I would think this would cause an issue with the testing, but I wanted to make sure I wasn't overthinking things.

Thanks in advance!

I posted a similar question not too long ago but I'm really reaching out to anyone that uses the same document provider and type of documents we use. Which are the FIS/Relius pre-approved IDP Plan documents.  We are trying to determine if there's an easy way to amend our plans that don't currently allow Roth Deferrals to allow them to comply with the Secure Act Roth catch-up provision for 2024. 

It seems there is no way to amend a FIS/Relius IDP to add Roth 401k deferrals, without losing reliance. We are trying to avoid restating since we recently restated all plans for Cycle 3. 

If you use these types of documents, are you restating the plan documents now to add Roth deferrals?

Employee (in Florida) did not enroll children in employer plan because they were enrolled in Medicaid.  

Employee lost Medicaid coverage for the children due to income level but the children are instead eligible for the state's "Medically Needy" program, which basically means that Medicaid will kick in once a (rather large) deductible is satisfied.

Does this constitute a "loss of Medicaid coverage" giving rise to a HIPAA special enrollment event?

Thanks!

Hypothetical Scenario

A cash balance plan has a provision that states participant and spouse must consent to distributions over $1,000. The plan terminates and the plan thought the spousal consent was the standard IRC $5,000. Lump sum benefits between $1,000 and $5,000 were paid out with participant consent, but not spousal consent. 

The plan realizes the mistake and wants to do a post-Date of Plan Termination amendment to change the provision to state a participant and spouse must consent to a distribution over $5,000.  

Reviewing CFR 4041.8 Post-termination amendments, it seems like an amendment is allowed that does not 1) decrease the value of the participant or beneficiary benefit and 2) does not eliminate or restrict any form of benefit.

To me, this post-DOPT amendment only limits a spouse's right to consent to the distribution. It does not decrease the value or eliminate or restrict any form of benefit. Would this type of amendment be prohibited? I would love to hear thoughts and opinions on this.

Hello -

I have a DCFSA participant requesting to reduce her annual election mid-year due to the fact that her child will be starting kindergarten this Fall. Since the participant knew that the child would be starting kindergarten this year, it doesn't seem like this would be an acceptable qualfiying event. Thoughts?

I have an independent insurance agent who sponsors a single member plan.  He tells me that effective 1/1/23 he now has another new business, a financial advisory business.  These 2 businesses reek control group to me since they can feed off of each other so I am inclined to say "control group".  Yes?

But to further my knowledge, does it matter if the businesses benefit from each other?  If he added an ice cream parlor to the businesses that he owns would that make the insurance business and the Ice cream business a control group?

Thanks

I know ESOP Trustees are required to invest ESOP cash (that is not used to buy company stock) in a "prudent" manner.  Other than cash instruments (CDs, CDARs, Money Markets, etc) where else are they allowed to invest cash?  Or maybe better stated, what investment options are allowable to the ESOP Trustees?

Thanks in advance for your feedback.  

Does offering a group health plan that only offers preventive services allow an ALE to avoid the 4980H(a) penalty?

The only definition of minimum essential coverage I can find is on the CMS website and states that a MEC plan includes "employer-sponsored coverage."   Providers of preventive care only MEC plans argue that such plans satisfy an ALE's requirement to offer coverage and avoid the 4980H(a) penalty. I see how you could get to this conclusion based on the statute, but it doesn't seem consistent with the intent of the ACA employer mandate. 

Is there any guidance from the IRS or other agency on this? What are your thoughts?

TIA! 

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