I have a plan that in 2021 had 1 eligible NHCE that did not defer, and that person terminated employment in 2021.  In 2022 there are no eligible NHCEs. Even though the ADP Test is based on Prior Year testing with the 2021 NHCE ADP% of 0%, can the test can still be deemed to pass because only HCEs are eligible/participating in 2022?

I have a client who acquired companies with two very old VEBAs.  The VEBAs are trust documents and received favorable IRS determination letters on their Section 501(c)(9) status years ago.  The VEBA trusts have been amended from time to time to appoint successor trustees.  The client plans  to move all retirement and welfare trusts to a new financial institution. The new trustee insists its standard trust document must be used for the VEBAs and will not agree to incorporate or even attach the old VEBA documents that received the IRS ruling. The new trusts are boiler plate and contain no description of the original VEBA members or benefits (e.g., retired union employee; retiree health benefits).  The new generic trusts  state the trust  document plus the employer's welfare plans constitute the entire VEBA. I am concerned that the original IRS letters will no longer govern the VEBA's tax-exempt status if there is no provision of the original trust left and no description of eligible  members or benefits in the new trust documents. Note that the employer maintains a retiree health plan document, but the VEBA funds only certain members' (union) benefits. The new trustee insists obliterating the old document will not affect the VEBA's tax-exempt status.  

I appreciate that a VEBA can be amended and that a new IRS ruling should not be necessary simply to name a new trustee. However, i feel that the original VEBA documents that received the favorable IRS letters should at least be incorporated by reference ( at least to the extent they don't conflict with the new trust provisions). 

Any thoughts? I have considered amending the original VEBA trusts to incorporate the new trust documents (essentially doing through the back door what the new trustee won't allow through the front door). 

Defined Benefit plan.

Actuarial Assumptions for all purposes (not just lump sums) :  mortality rates = applicable mortality table.    interest rates = applicable segment rates.  The stability period is the calendar year.

Normal retirement age = 65 and NRD = 9/1/2015   Participant's actual retirement age = 73 with a commencement date of 3/1/2023

Benefits were frozen before the participant reached age 65.  The plan states that benefits are actuarially increased with interest and mortality from normal retirement date to date of actual retirement.  

Assuming the life annuity at age 65 is $1,000 per month, what is the monthly amount beginning at 3/1/23?

I have seen at least 3 methods - based on the 2015 rates, based on 2023 rates. or based on a different rate for mortality and interest for each year.  As an aside, how would you determine the lump sum at age73?  Do you start with the first five years or year 9?  Of course these rates should match the rates used for any optional form.

Thanks to anyone who is bold enough to answer because I'm so confused at this point. 

1099R was issued with a Code 1 for a 2022 distribution but the Participant is claiming they would qualify for the disability exception to the 10% penalty tax.  My understanding is that even though the Code 1 was used, which specifically is titled "Early distribution, no known exception.", you could claim eligiblity for the waiver of the penalty tax.  i.e., we don't have to issue an amended 1099-R.  Is this correct?  Can anyone point me to anything explaining how this is done? I assume it is straightforward.  This must happen on a fairly regular basis.  

Seems like different practioners in our industry see these differently. When changes were made to EGTRRA making these available, the counsel we used at our firm indicated that you could have MORE THAN 1 Owner on these.  Some others see it differently.  How does everyone see that?

The Term "Solo" is just really a marketing term or gimmick, from my perspective.

For example, if Jack and Dave own 50% each of ABC, there are no other companies that are owned by them, no common-law employees who reach 1,000 hours, then they could have ONE Solo(k) and both participate in it, correct?  To go a step further, if they're spouses work for the company and get a W-2, they could also contribute, correct?

Also, if you have 4 separate owners at 25% each (and not CG or ASG issues), they could all set up ONE Solo(k) and each participate, correct?

Plan has discretionary match and currently the document election is to compute match with each payroll period.  Sponsor is asking to amend the plan to be a Plan Year election to allow for true up.  Now in February 2023, is this something that can be retroactively amended for 2022 plan year? 

Does an auto-escalate notice have to be provided 30 days in advance? Thanks in advance.

Setting up a new 401(k) Plan effective 1/1/2023.  The Plan covers a workforce that is entirely HCE, with one exception.  There is an employee who had 10 years of service but was terminated in April 2022.  She was then rehired in mid-January of 2023.  It also appears that she did not have a Break in Service in 2022 as she did have over 500 Hours.

This person would NOT be HCE for 2023 since her pay doesn't reach the pay threshold given her termination.  (She will be HCE in later years by pay level.) It is hoped that she can be excluded from the Plan in 2023 for testing purposes.  Since we have to include past service for eligibility, the only way we see where exclusion might be possible is using the fact that she was not in the employ of the firm on an Entry Date.  This could be achieved if we use a single Entry Date of January 1 following 6 months of service.

I don't believe this will work since she did not have a Break in Service as she had over 500 Hours in 2022, so she must be allowed entry on her date or reemployment.  Is this wrong, or does anyone see a method where she could be excluded?  Would using a 2 year wait for profit sharing entry limit her to only the Gateway, for example?

Well new one for me. Have a client that was bought. Recently told "Oh hey we were bought as of X" where X is a date in the past.

Part of the selling agreement which they just sent me had resolutions terminating the Plan as of date before acquisition. Not prepared by us. Buyer is taking the position that that is formal plan termination.

Seller decides on his own that since they aren't in the buyers plan he's going to continue deferral and safe harbor match and deposits first 2 January payrolls to the Plan.

What is the fix? Can this be self corrected? or does this require VCP?  

Do the deferrals after term date get paid out as like a 415 excess? they ran through payroll so will presumably be on 2023 W-2.

What happens to the match that was deposited? Forfeit? Allocate as prior year contribution? Return to client as mistake of fact?

I have been trying to work with Empower regarding the first half of the 2022 year when plan assets were still at Mass Mutual from the previous Hartford platform.  The data they provide is only available as a .txt file, and changing the extension to a .dat file does not work.  Relius gives an import error stating that “Fatal error in The Hartford link.  Incorrect file format.  Fixed position file with linefeed only must be used."  They have stated that the extension change should work (it doesn't), and that because the data is from another company (which they bought), they "cannot convert files obtained from another company."  Outside of manually entering all the transactions for the first half of 2022, has anyone found a way to import this data correctly?

I'm looking for some direction, response, something to point me in the right direction.  Currently have a 401(k) that due to a change in ownership has resulted in an Affiliated Service Group situation.  Confirmed ASG.  Therefore, we must test the two different companies owned as one.  Coverage will fail.  The HCE/owner who is my client is willing not to participate so that coverage will pass but we need to find something appropriate outside the plan for savings purposes for him.  I need options.  Thought of non-qualified immediately but it's an LLC and he's a partner so my understanding is that there would be no current tax deduction for him.  Can someone suggest other options for this employee outside of a qualified plan?  Thank you.

I am curious how comfortable practitioners using Grouping with 410(a)(4)?

For example, one owner, one employee.  If employee's MVAR is 12% how comfortable is to give the Owner MVAR of 13.80% (=12 x 1.15)?  What is the interpretation of "significant" from the https://www.law.cornell.edu/cfr/text/26/1.401(a)(4)-3?

Combining SECURE 2019 and SECURE 2022 changes, a sole proprietor may establish, retroactively, a plan (up to her tax-return date with extensions) and may make, retroactively, an elective-deferral election (up to her tax-return date without extensions).

(Let’s leave aside the BenefitsLink discussion about whether that’s practically useful for 2022. Imagine a sole proprietor with calendar tax years, and a plan and § 401(k) arrangement that, when retroactively adopted, are effective January 1, 2023.)

Am I right in thinking the situations in which a proprietor might want a § 401(k) arrangement are:

the proprietor is 50 or older and classifying a portion of a contribution as a § 414(v) catch-up elective deferral enables a contribution up to $73,500 instead of $66,000; or

the proprietor’s deemed compensation is less than $264,000?

Is there another situation in which an elective deferral allows a proprietor to do something she could not do with her nonelective contribution alone?

(Please ignore Pennsylvania income tax.)

I have a plan that tests the adp/acp using prior year testing

I ran the test for 2022, and fail.  However if i test using statutory exclusions I pass. 

The plan was not tested using statutory exclusions in 2021.  So the NHCE average when i did 2021 shows 3.46% but when i run the adp test for 2022 using stat exclusions, it changes the prior year to 3.70%.      I understand why...

Question is, can i switch back and forth using statutory exclusions from year to year if needed?

Thank you!

Shoe company based in the UK and has US employees. The US operations have an EIN and US address based in Portland. The owners reside in the UK and are not US citizens. All US based employees are US citizens and earn W2 compensation. They are wanting to set up a 401(k) plan with ADP and the ADP sales rep is telling them that they can indeed do this. Our hesitation is that there would be no US citizen who would serve as the plan’s trustee.

I'm reading a previous post from 2020 that speaks to this. In reading the treasury reg, specifically 301.7701-7(d)(1)(v) Example 5, it seems that it is permissible to use a directed trustee, as provided by ADP but I am not sure if I am missing something. Our other hesitation is due to receiving conflicting, and gray area guidance from other practitioners.

I’m sorry but I am thoroughly confused at this point. If the plan uses a directed trustee, does that satisfy, both the “control” and “court” tests and can they set up a plan?

Sorry for my ignorance, we just want to do what is right.

CB/DC plans. The CB plan froze in 2022 and no participant earned a CB accrual for 2022. The top-heavy minimum is provided in the DC plan. Due to the CB plan freeze the DC plan TH minimum will be 3% rather than 5%, correct?   Top-heavy has always been provided in the DC plan. The DC document is ftwilliam.

Can a 401k plan continue to function without Roth in a post-SECURE 2.0 world?

Ignore the 'corner cases' where no one defers any catchup (whether because they defer low or there is no ADP failure recharacterized) or no one earns more than $145K (seriously, $145K?  Like we needed another limit to track?).

If someone earning $150K is required to make their catchup as Roth, then the plan has to allow Roth deferrals, right?  I know we don't have all the answers yet, but it seems unlikely that there will be a special carve-out we can use to not amend the typically older plans that never had Roth in them before to allow Roth deferrals.  And that amendment would have to be in place before any regular Roth deferrals are allowed, because the SECURE 2.0 amendment coming to a document near you in 2025 will only cover the catchup amounts.

I - and I'm sure most of us - have a whole segment of plans that just want to keep things nice and easy, and I'm looking for a way to do that here... and not finding it.  I'd rather the plan run smoothly than charge for correcting plan errors, personally.

Existing company is a Corp owned 51% by the Grandfather and 49% by the Grandson.  They sell cleaning products to the Restaurant Industry.  The Grandson would like to start a new Company, as an LLC.  The Grandson would be 100% Owner of the new entity.  

• New LLC owns IP and charges a royalty to Corp (Existing Company)
• Corp produces and sells products covered by the IP
• Grandson is employed by Corp (Existing Company) as an officer and is possibly a director 

Would this be considered an ASG or can the Grandson start a 401k PS for his new Entity without regard to the Corp (Existing Company)?

Just to make sure, have there been any updates from the IRS regarding the RMD life expectancy tables? I'm well aware the RMD age increased to 73, but I'm wondering if we use the same expectancy tables as we did for 2022.