I have a client that set up everything for a 401(k) effective 5/1/22. It is unclear how much, if any, communication was provided to employees about the start of the 401(k) plan. The Plan Sponsor didn't actually start deducting any deferrals and nothing has been paid to the Custodian. They are interested in moving forward with it finally. What are the consequences of having a plan in place, but not using it for that plan year? What are the consequences of having a plan in place and not telling participants about it? How would you recommend that they move forward?

I have a small defined benefit plan that has been frozen to new entrants for a few years. It is no longer passing the ratio% test. Based on the numbers it would be a nondiscriminatory classification but is the set of employees hired before a certain date a reasonable classification? The formula is a safe harbor formula so the plan still passes 401(a)(4) by itself. Of course if i cannot get the sb plan to pass the average benefits tests I will move onto testing on a combined plan basis with the dc plan for which coverage will not be an issue. 

Do you guys just submit your refunds to the carrier (with or without earnings) and just have them withhold the 10%.

Or do you get the participant elect withholding?

Or, it is a timing issue, like with RMDs?  later in the year, we just process the RMDs automatically with 10% withholding because the plan (and participant) gets in trouble if it's not done by 12/31 (in most cases).  What if you complete the ADP test on March 10?  Are you waiting on tax elections from the HCEs or are you just sending int he requests and have them w/h the 10% by default?

Can an ongoing FSA prorate new employees to the maximum allowable FSA for the year?

Ie new employee is eligible 3/1, so their limit is 10/12*Full limit?

Am currently waiting for copy of the SPD/Employee Benefit Guide.

I read somewhere the flexible match notice is not need for the first year the plan adopts the cycle 3 doc with that language.

Can someone point me to the cite for that?  I don't see anything in my plan doc about it.

The client's Section 125 SPD says the effective date of a QLE (in this case, marriage) will be on a prospective basis whereas the ERISA SPD says the effective date of the new spouse's coverage would be based on the date of the event.  The employee submitted the necessary enrollment paperwork 10 days after the event.  I did some research and found that in these cases the employee is entitled to the benefit of the more generous of the 2 documents.  So, the ERISA SPD would govern in this case.  Then I was discussing with a coworker and their thought is the cafeteria plan document is the more accurate, unless it is the QLE is birth or adoption.   Does anyone have any thoughts on this?   

Let's consider a hypothetical situation.   We have a lovely couple, he is an independent 1099 ER doc, she has a one-person dental office running her business as a PC.  The husband happens to be very good with finances, budget planning and all the financial matters and handles those issues for his business and as a W-2 employee for the wife's dental office.  She is very good with marketing, internet media, licensing etc. and handles those aspects for herself and for the husband's business as a W-2 employee.  Am I dreaming that after Secure 2.0 change to family attribution rules that particular couple would be able to double-dip everywhere on retirement plans?  Two 401k plans, 2 DB/CB plans, etc.?

Someone age 65 retired from two local governments and has two 457(b) plans and is desirous of converting the two plans to after-tax.

The individual initially funded unrelated Roth IRA's way back in 2008 when Roths first came into existence.   Despite the huge tax hit to convert/rollover the accounts to after tax-If the distributions could be taken within five years with no 10% penalty.   O is there in fact a five hear holding period to eliminate any money being subject to the 10% tax?

So, usually Morty electrically signs the 5500 and has EFAST credentials under his name.

What happens if Lorena's name is on the 5500, but it's filed using Morty's credentials?  The software let it go through.

What are the conditions that trigger the requirement to surrender or distribute an individual life insurance policy held on behalf of a participant from a qualified plan after a participant terminates?

How does terminating before or after NRA impact whether a life insurance policy held in a participant’s account needs to be surrendered or distributed?

Our ASC BPD Section 10.08(d) says, “Life insurance policies under the Plan, which are held on behalf of a Participant, must be distributed to the Participant or converted to cash upon the later of the Participant’s Annuity Starting Date (as defined in Section 1.12) or termination of employment.”

And then Section 1.12 says in part, “Annuity Starting Date. The date an Employee commences distribution from the Plan.”  Do partial lumps, installments or RMDs trigger this requirement?

I’m also looking at the ERISA Outline Book which says, “Life insurance can't continue beyond retirement. Rev. Rul. 54-51 includes a requirement that for life insurance to be incidental, the policy must be converted to retirement income or distributed to the participant no later than the normal retirement date under the plan. Rev. Rul. 57-213 clarifies that the life insurance policy may be continued beyond retirement age, if the participant does not elect to retire. The IRS’ Listing of Required Modifications published for prototype plans provides that conversion or distribution of the policy is not required until the “annuity starting date” (i.e., the date distributions commence). Although not addressed by the IRS, it should be reasonable to allow insurance coverage to continue beyond the required beginning date under IRC §401(a)(9), if the participant has not terminated employment.”

Any guidance on this would be appreciated.

Hi

Here is another new one for me (the day is not going well with the firsts). This might be a ridiculous question but never dealt with before.

Looking at a DB plan - one lifer. AFTAP was never done so AB frozen a few years back. The plan never officially frozen - just AFTAP freeze.

Did a quick run and 401a26 fails, both annual and accrued-to-date. The software program is not providing an option for accrued to date at all.

I am thinking an 11-g amendment to provide meaningful benefit. I would not ask this question if the plan was hard-frozen but here the freeze is due to lack of AFTAP.

Can one do an 11-g amendment and increase the AB and overwrite the AFTAP freeze? Any other thoughts/comments?

I hope my question makes sense.

Thanks

A 403(b) plan’s definition of a Year of Service (YOS) is 1,000 hours in Eligibility Computation Period, and it switches to the Plan Year after that.

 The Plan Entry Date is “Immediate”

 So, if during an Employee’s initial year, they don’t get 1,000 hours, it shifts to the Plan Year.

 And, then, if they do get 1,000 hours in that next Plan Year, when is the entry date?  They satisfy the YOS on 12/31 (it’s a calendar year plan).

 So, are they eligible on 12/31?  The plan has participation comp.  Do they have just one day of comp for the Employer contribution?  Or do they get a contribution for the payroll that includes 12/31. That is the next year?

 Or do they simply enter on 1/1?

Hi

This is a first for me. Need to see what others did in this situation and if any permissible correction is available.

Frozen DB plan, one lifer. Do not know if married but to complicate, let's assume married.

Plan was underfunded under 417e so no excess issues and no 415 issues.

In December decides to roll over the assets into an existing SEP IRA without even hinting to me. Rollover happened on 12/15/2022 so termination resolution and distribution forms had to be executed before 12/15/2022 - neither of which is done.

DB account is still open with a few dollars.

What to do to correct all this?

Any expert opinion/comments appreciated (other than run away - seriously thinking about it).

Thanks

I'm trying to confirm if the new new law changes the RBD for a non owner participant in a qualified plan that turned 72 in 2022, and retired in 2023.

Is his RBD 4/1/2024 for a 2023 RMD under the old rules?

Or since he retired in 2023 his RBD 4/1/2025 for for a 2024 RMD?

Thanks

Let's say an employee makes $10,000 a year. He is not catch up eligible and he decides to contribute $9,000 as Roth in the 401(k) plan. He also would like to contribute $6,000 to a Roth IRA.

Since the 401k and Roth IRA contribution limits are separate, I believe this scenario is fine (even though he's contributing more than his total income for the year into the 401(k) and Roth IRA combined).

Do you agree?

Prior to SECURE 2.0 there was the 3-year credit of 50% of plan admin costs up to $5,000 for small employers.  I understand now that credit rate is 100%.  PLUS there is now a new credit of 100% or an employer contribution up to $1000 per employee (phased down after year 2.)

So a small employer starting a new plan gets both credits?  That seems to be what I am reading.  Is it really that good?  

Revenue Procedure 2021-30, Appendix B, Section .05(9) provides a special safe harbor correction method for plans that did not necessarily contain a automatic enrollment/increase feature. An "Employee Elective Deferral Failure" is defined for these purposes in Section .05(10), which includes a failure to implement elective deferrals correctly, "...including elective deferrals pursuant to an affirmative election or..." and then goes on to list the Automatic Contribution feature and the improperly excluded employee situation.

Section 350 appears to confine this special correction to plans with Automatic Contribution/Escalation provisions, or failure to afford an eligible employee the opportunity to make an election by improperly excluding them from the plan.

Try as I might, I can't get to a reading of this that covers this other currently allowable special correction. Section 3 says no QNEC required if the requirements of (2)(B) are satisfied with regard to a reasonable administrative error described in 2(A)(i) or (ii) - and neither (i) nor (ii) appear to cover the special fix for the situation I'm considering. 

Other thoughts/interpretations? Agree/disagree?

A participant has one set of elections for a current balance and a different set of elections for new money.

Has anyone ever seen an auto-rebalance procedure that would put all of the current balance into the investments elected for new money?

In other words, rather than rebalancing the current balance according to the current balance elections, this vendor assumes that "rebalance" means to invest all of the current balance as if it were new money. It simply provides no way for auto-rebalance of a current balance to be according to the current balance elections.

This is something I feel I need to alert clients about, but I'm curious if this vendor's practice is as unusual as it seems to be.

100% owner of plan sponsor owns a second company 100% which is not a participating employer to the plan.   He says there are no employees who would meet the plan's eligibility.  The ADP test fails for 2022 (which includes data only for the covered company.).  He wants to add his compensation from the non-sponsoring company which would help the test.  I believe the answer clearly is no.

(And yes we will get the census for non-sponsoring company to check this out.)

Tom

For qualified plans, the tax withholding certificate for non-periodic payments and eligible rollover contributions is Form W-4R. For non-periodic payments, if no withholding election is made, the default withholding is 10%. For periodic payments made in regular installments over a period of more than one year, to elect withholding Form W-4P must be used. 

For RMD's they are clearly not eligible rollover contributions and are arguably not non-periodic payments but rather are typically regular payments that must be made to the participant for a period of more than a year. Thus, it's my view that if a participant wants tax withholding on an RMD that the Form W-4P rather than Form W-4R must be used. In fact, Form W-4R should have nothing to do with RMD's because if it did, then if no withholding election is made the Form W-4R mandates 10% withholding which should never apply to RMD's Any comments?