Is there a codified rubric that says how IRS PNs must be assigned?

I have a MEP, do I have to have a PN that starts with a 3?

Where is the written guidance?

It is my understanding that the late adoption of the Cycle 3 restatement results in the plan losing its ability to rely on the preapproved document's IRS letter and the plan becomes individually designed beginning 8/1/2022.  Further, this can be self-corrected under EPCRS so long as all of the requirements for self-correction are satisfied and the individually designed plan is compliant as an IDP.  The employer may then rely on the preapproved document's IRS letter.  My question relates to timing.  It appears you must first correct any plan document failures then adopt a new Cycle 3 document.  

Assume the client presents us with a Cycle 3 document effective 1/1/2022 and signed 8/31/2022.  We review the prior document and find it is in compliance as an individually designed plan.  Besides documenting in a Board resolution the employer's intention to self-correct what additional steps, if any, must be taken?  

I apprecate your input.  Thanks!

We have had an unusual situation posed to us as a hypothetical issue, although I'm pretty nearly certain it is real - pretty hard to dream this up. A group of several large 403(b) plans (not a controlled group or affiliated services group) that were set up with intentionally identical provisions. The 403(b) documents required a Year of Service to be eligible for employer contributions. Plan uses 1,000 hours for a Year of Service, measures the initial computation period from date of hire to the end of the 12-month period. So far, so good.

However, no election was made in the adoption agreement as to whether subsequent eligibility periods switch to plan year, or remain on anniversary years. The adoption agreement is clear - one or the other should be chosen. But it wasn't.

The plans have been ADMINISTERED with subsequent eligibility periods changing to plan year. Given that there is an omission in the adoption agreement, this is good, as it is more favorable to employees (potentially earlier eligibility for employer contributions).

I don't believe this is a "document failure" in the technical sense for purposes of RP 2021-30. It doesn't, "on its face" violate a requirement of 403(b), I don't think. Thoughts on this?

Ignoring that aspect, and pushing a tenuous position - when the plan is amended to correct this, is a SMM necessary? Obviously, the safe and solid answer is "yes." But is there a valid argument to be made that since the employees have been treated consistently under the "change to plan year" option, that there's no material change that actually affects them?

Beyond that, there's no specific penalty for failure to provide an SMM.

I understand this is legal counsel territory, and that is what we are recommending.  However, curious as to thoughts on this, and the "risk" factor in taking the aggressive approach.

A client asked about making prevailing wage contributions to a 401(k) instead of paying wages.  It makes sense to save the FICA tax.  So there is no eligibility requirement, no allocation conditions, 100% vested and can be used to offset the employer profit sharing allocation if there is one.  I assume it can be included in nondiscrimination testing since it can offset PS. 

Of course this feature must be added in the Adoption Agreement.  My question is what else has to be done?  The client is already calculating the amount and paying as wages.  Does this change need to be in the service contract they are serving, the affected employees notified it will no longer be in wages?  Or can our client just make this change? 

I told the client to check with their legal counsel and/or tax advisor.  As far as us as TPA - it's pretty easy.

Tom

Hi. My employer offers multiple health plan options to employees. The employer is considering amending the health plan to prevent employees from making a mid-year change (moving from one plan to another) even if the employee has a Qualifying Event. The employer wants to avoid the opportunity for adverse selection. Is it permissible for an employer to implement a ban like this (where an employee, with a valid QE, is not permitted from moving from say the employer's Gold plan to the Silver plan)?

New  client comes to us and asks us the establish a 401(k) SH plan for them.  We generated the documents, safe harbor effective January 1, 2022 and client executed the document. 

We just learned that advisor aware that the client already has a 401k plan, which is not safe harbor.  

What options do we have now?  Can a client sponsor two 401k plans in the same year ( one safe harbor and one non-safe harbor)?

Curious to see if people are seeing the same thing as me with TIAA CREF.  I swear they are doing loan reporting for participant loans (NOT Plan Loans--if you work with TIAA you know there is a distinction) the wrong way.  As far as I can tell this is what they are doing:

1) Including deemed distributed loans in the ending balance of participant loans

2) Reporting loan offsets as deemed distributions.  Loan offsets of course should be included in the regular distribution item. 

I hope I'm wrong, but honest to goodness I'm pretty certain they are messing it up. And you would never know it unless you really dig (I did not because I had faith in TIAA, but the auditor is digging, and by golly I think they are correct).

Quick question regarding the PBGC payment.  I know it's due by 10/17/22 this year, my question is:

1) Does it have to be received by the PBGC by that date

or

2) Does it have to be postmarked that date

Thanks!  Have a few that waited till the last minute, so have to let them know if they have to overnight the check or just get it in the miail

I don't think I've seen any discussion on this...the notice says that the excise tax will not apply for distributions not taken in 2021 or 2022 under the 10 year rule. 

But I don't think they said when those distributions must be taken - that is, do they get pushed to 2023, or do you do the RMDs over the remaining 10 years, or what? Or did I miss something? The notice makes reference to the intent to publish final regs and I guess that's where the answers will lie. Seems weirdly incomplete though.

Hi

Not a 401k expert (barely novice).

Looking at a plan for 2020 and 2021.

Both years had deferrals deposited late. No VFCP calculations were made nor any adjustments deposited into participant accounts.

No 5530s filed.

How can this be corrected?

Thanks

Here are the facts:

Owner/participant retires 12/31/2021, dies shortly after.  
Plan fails the ACP portion of testing.  Owner is due a "refund".  Money has been moved to a spouse's account as beneficiary.  The transaction was treated as a "funds on deposit" and transferred to the spouse.  No 1099R was generated.

Question:  since the money has been moved, we need to make the distribution, whose ss# should the distribution be taxed under?  Also, since the "transfer" took place in Feb 2022, would the plan be considered to have been timely corrected? 

I will have ot find more information, but I got a request today asking for clarification on if two companies were a control group- there are partners who have common ownership; one partner owns 80% of a related business. They are wondering if he sells his interest, bringing it under 80%, will that be enough? I have a feeling that the other partner(s) have enough ownership to make this idea a non-starter. 

The businesses have seperate DC plans, and have been advised by someone else that they may need to amend those plans (I am assuming this is to provide substantially equal coverage between the two companies).  but I thought there was a grace period for that.

We submitted our plan to the IRS under VCP about 6 months ago and just found an issue completely unrelated to the VCP submission.  I do not see any requirements that we can't still self correct the recently identified problem, but wanted to see if anybody had a different opinion.  In my mind, since there isn't a specific exclusion, as long as the issue would otherwise qualify for self correction, I can.  Any insight would be appreciate - because maybe I completely missed an all cap requirement that says differently....

Have you seen any study about possible anti-selection (e.g., higher average mortality than the overall population or plan population) with respect to a Social Security Level Option?

Looking for guidance on how an employer applies the rate of pay affordability safe harbor to an employee that is paid both a salary (for work performed in one position) and an hourly wage (for work performed in second position).  My first thought is to just use the W-2 safe harbor, but the client wants to explore the other possibility.  I found language in the final regs allowing the employer to apply different safe harbors to different categories of employees but nothing about applying a safe harbor to an employee with two categories of pay.  Any ideas?

Question about preparing the attachment Schedule H/I Line 4a Schedule of Delinquent Participant Contributions.  Do you include the calculated lost earnings in the amount or is it just the late contribution amount.       The 5500 instructions only discuss the contribution.      I have someone telling me to include the earnings.

My understanding is that employee premiums paid toward self-insured group health coverage are considered ERISA plan assets, but may be held in the employer's general assets due to the trust-requirement relief. However, the other ERISA rules (fiduciary obligations, prohibited transactions, reversions, etc.) continue to apply to the employee premiums. 

Say the total premium for a month is $1,000, of which the employee pays $200. The employer sets aside $1,000 in an account in its name and EIN and there is no other indicia of ownership or rights by the plan. 

How do you determine the portion of the account that is plan assets subject to, say, the PT rules? Can you treat the account as using employee contributions first? Would this accounting restart every payroll cycle when new employee premiums are withheld?

Would appreciate any insights.  

Background: ERISA provides anti-alienation protection to qualified retirement plans; early Supreme Court cases deferred exemptions back to Congress, 1984 Congress allows QDRO's, 1997 Congress allows reimbursement for fiduciary breaches or criminal activity involving the Plan.  Mandatory Victims Restitution Act ("notwithstanding" any other Federal law) has otherwise been used as end-around of anti-alienation for variety of other restitution-based claims against 401(k) accounts.

1.  Has a MVRA based appeal been heard by the Supreme Court and what was the result if so?

More recently, appeals have sprung up concerning the mandatory 20% withholding and the 10% early withdrawal penalty.  Apparently, the IRS has opinioned that the 10% penalty does not apply in instances of forced distributions, easy enough to understand since that's a facts and circumstances determination anyway.  However, the caveat with MVRA is that the government is only "standing in the shoes" of the participant, meaning the participant directs the withdrawal to themselves, but the government receives the monies so demanded by the restitution order.  In general, the Plan is required to withhold 20% for federal income tax withholding, which shorts the restitution order; and since the participant is still the "recipient" before remanding the funds to the government, they're also stuck holding the bill for the taxable income!  So, where the participant is following court-ordered direction, they are then triple-penalized, 1) the restitution payment itself, 2) the restitution order is now short 20%, and 3) the participant now has to recognize taxable income often reaching hundreds of thousands of dollars, at a time when they are incarcerated, or otherwise destitute following liquidation of any available assets before reaching into their 401(k)

2.  Is anyone aware of a final resolution to any of the 20% withholding appeal cases?  Anything I saw noted them being remanded back to the originating district court by the circuit court to address these deficiencies.

(Caveat- Yes, I fully recognize that these are actions to correct a wrong committed by a convicted individual.  I'm merely looking for commentary or known resolution to the issues of MVRA abuse to circumvent the sacred anti-alienation provision and basic justification for ERISA; and any procedural establishments for handling the 20% mandatory withholding)

When pension $ are requested to be paid back retroactively due to policy change, etc. how are the pay backs treated at tax time.  I didn't see any prior year adjustments on the 1099R.  Some employees had the option of reducing future pension $ until paid back.  Others had the option of paying back lump sum.  How would the tax $ be adjusted on the lump sum pay back.  Would the 1099R show a reduced gross income in box 1 or would another document be issued for this pay back?

So I keep getting all of these email blasts about CARES Act Amendments being extended.  But apparently that only applies to the RMD waivers and not all the loan/distriubtion rules. Why in the world would anyone do half of a CARES Act Amendment?

This must be an oversight? Has anyone confirmed that this was intentional?  This is really not an extension at all...