Awersome article from Groom Law.  But in a sea of bad news, this almost makes it worthwhile...  I haven;t seen yet if they fixed the issue where a top-heavy safe harbor match plan can avail themselves of immediate eligiblity and a 1 year wait to avoid blowing their top-heavy exemption. That would for sure be a disappointing exclusion but regardless this is pretty awesome for a lot of plans.

https://www.groom.com/resources/secure-2-0-hitches-a-ride-just-in-the-st-nick-of-time/

Hi

Looking at a CB document for someone. The formulation is written in a way I have never seen.

For accrual/pay credit, no service requirement i.e. 0 hours. Crediting period is "Each Plan Year".

For the formula within a group, they wrote "$2,000 however for any terminated participant during the year, they will receive 1/12th of the pay credit for each month they worked 1 hour".

How is this possible? Aren't the member of this group entitled to full pay credit since no service requirement?

What am I not seeing/confusing here?

Thank you.

Hi

All below are on a calendar basis. I have never seen this before. Hope there are some out there who have experience/knowledge on this.

Company X left PEO on 10/1/2022.

They want to set up a new combo plan for 2022 which will be 401k/PS plus CB.

How are the PEO contributions and salaries applied? How is testing done, just from 10/1/2022 (salaries and contributions)?

Are they supposed to be short plan years?

Anything else i need to be aware of?

Thank you in advance.

Wishing you all happy holidays and great, prosperous New Year.

The best think tank ever.

Some practitioners have suggested there might be practical difficulties about the SECURE 2.0 Act of 2022’s catch-up elective deferrals for ages 60, 61, 62, and 63.

Just curious, what are the practical difficulties?

I have a client who is paid 40k in W-2 wages from their sole proprietorship
We are going to defer the max amount of 20,500 to his 401k and do 25% profit sharing. This gets us to 30,500 in the 401k account. We were going to do an additional 9500 of after tax to get to 40k in his 401k this year but we wanted to see if there are other options around compensation. 
He earns additional pass through income from this s-corp. 
Is there anyway to consider this pass through income as eligible compensation for the plan purposes so that we can defer additional amounts (this could be in after tax) to the 61k limit rather then 40k? How would we have to structure the s-corp and plan to allow for this, or is that even possible?

Client got this email and wanted to know if it was legit.  Have others seen this?  You get an email from some account with hyperlinks and obvioulsy people are concerned it is a phishing campaign (ALL links were deleted before I pasted this in).  Curious to know if anyone else has heard of these going out.  This will ruin 2023 for us unfortunately. IT was awful the first time.  The 2nd time should be no different.

The email is as follows:

EBSA is modernizing the EFAST2 website authentication process. The existing EFAST2-issued User ID and password log-in process is being phased out and will be replaced by the unified single sign-on solution for U.S. government websites. enables users to securely log in to many government agencies’ services with a single username and password.

Beginning Jan. 1, 2023, all new EFAST2 website accounts will be created using the process. Existing filers may use their EFAST2-issued User ID and password to log in to the EFAST2 website until Sept. 1, 2023. This eight-month grace period provides a gradual transition for filers. However, existing filers may change to a account as early as Jan. 1, 2023.

Logging into the EFAST2 website is required to obtain new electronic signature credentials for the Form 5500 Series. It is also required to file the Form PR or to use IFILE, the government’s Form 5500 Series filing application. Logging into the EFAST2 website is generally not necessary for existing Form 5500 Series filers using

Thank you,

The U.S. Department of Labor

For a plan effective 1/1/22, under SECURE, does the document need to be signed by 12/31 or would the tax deadline suffice?

I have a client with a solo 401k who contributed the max deferrals for 2022 but would like to make after tax contributions to get to the 61k limit. Their compensation this year was 40k so can they contribute more then 100% of their compensation to their 401k in after tax dollars? 

I have a client who wants to match 100% of their deferrals is this allowed? 

If a client is looking to establish a solo 401k is there anything significantly different in the plan design, or can I use my standard FT documents and just only have one person in the plan. Am I missing something? I apologize for being so simple with this, I've just never done a solo 401k before. Thank you! 

I hate when I am asked this question.  A participant wants to take a distribution.  He is only 58 so he will be hit with a pre-mature dist penalty (1099-R code premature).  But simple question... if the doc allows for in-service distributions is there any reason he can't?  

Do we need to produce a Summary of Material Modifications for a 401(k) plan when the trustees are changing?

Plan has typical 1 YOS and age 21 requirement for eligibility, with dual entry dates following.  There is a small match, and an ADP & ACP test must be done every year.  The owner wants to know if it would be OK to amend the eligibility requirements to allow for a new employee's immediate participation and then amend the eligibility back to what it was.  I imagine it would be a much bigger issue if it was an HCE, but let's assume the new hire is an NHCE - can you amend a plan by adding a special entry date to the existing 21 & 1 provision such as 'in addition, all employed on 1/19/23 (the employee's DOH) will become participants on that date'?  It would also allow a couple dozen other employees to enter the plan doing it this way, but they're OK with that.  Thanks in advance for all help.    

I have a plan with a rehire. Previous employment was 2014-2016. At that time, the participant made deferrals and was 100% vested in profit sharing funds. In 2021, the plan changed profit sharing vesting from immediate to a 3 year cliff vesting. The participant has returned in 2022. The employer agrees that the employee is a plan participant upon rehire, but the employer is questioning the participant's vesting percentage.  

Is the participant 100% vested because that is where they were when they left OR

are they 0% vested because they had more than 5 consecutive 1-year breaks in service allowing previous vesting to be ignored (Taking all years with 1,000 hours into account when calculating the 3 years of service for the cliff vesting, they would have credit for 2015 and 2016, but still be at 0% as of 12/31/22)?

I'm struggling to figure out if a defined contribution plan can maintain a life insurance policies for terminated participants.  The EOB basically reiterates what's in Revenue Rulings 54-51 and 57-213, which essentially says a plan may not maintain "ordinary life insurance" {read "whole life"} after a participant "retires".  I'm not sure what "retires" means in this context.

The IRS preapproved document we use includes the standard IRS language, which is as follows:

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. If a Participant commences distribution with respect to a portion of his/her Account Balance, a separate Annuity Starting Date applies to any subsequent distribution. If distribution is made in the form of an annuity, the Annuity Starting Date is the first day of the first period for which annuity payments are made.”

Any insights would be greatly appreciated!

I would greatly appreciate anyone's insight on the below - 

The main question is what all entities are required to be included on part iv of Form 1094-C when a stock sale causes an entity to cease to be a member of one Aggregated ALE Group and become a member of second Aggregated ALE Group mid-year. 

A simple example scenario -  SellCo is one of a number of a wholly-owned subsidiary of HoldCo and is an ALE Members of the "HoldCo Aggregated ALE Group". Mid-year HoldCo sells all of the stock of SellCo to BuyCo causing SellCo to become an ALE Member of the "BuyCo Aggregated ALE Group" (which assume includes other wholly owned-subsidiaries of BuyCo). 

What I am specifically wondering is for the subsequent 1094-C which all entities are required to be listed in part iv of the 1094-C filed by SellCo. (Other Ale Members of Aggregate ALE Group): 

1.  All ALE Members of both the HoldCo Aggregated ALE Group and all ALE Members of the BuyCo Aggregated ALE Group, or 
2. only ALE Members of the BuyCo Aggregated ALE Group. 

I would greatly appreciate anyone's thoughts as I have come up empty handed on this (as well as any additional thoughts on whether this would impact the part III(d) Aggregated Group Indicator reporting.  

Under soon-to-be-enacted Internal Revenue Code § 414A, some new § 401(k) or § 403(b) plans must include an automatic-contribution arrangement.

For small-business employers not excused as too new or too small, could this new tax-qualification condition slow down creations of new plans?

Hello,

I want to ask for your thoughts on Secure 2.0 Section 109 Higher Catch-up Limit To Apply At Age 60, 61, 62, and 63.

Am I understanding that at age 64+ the higher catch-up amount is no longer allowed? Seems like that is exactly what the wording says, but just seems odd. Is there a reason for only allowing a 4 year window? If you are age 64+ in 2025 then this has no impact on you? Or am I missing something? 

Thank you

Good morning everyone!  Have an old client that had terminated the Plan back in 2017 (all participants had been paid out).  The problem is that they left a Forfeiture Account open, that remains open today.

Obviously we'll need to file Form 5500 for the back years, since there was still money.  The question is what should be done with that Forfeiture money?  There will be some expenses, due to the required filings, but how should the rest be allocated?  Does it need to go to the participants who had previously been paid out?  What if those participants can't be found?  The owner, who was one of the three participants, has unfortunately passed away.

Thanks everyone!