Forgive me if this has already been discussed.

If a 401(k) loan is made from pre-tax funds and the loan becomes due upon termination of employment, the loan offset is taxable unless rolled over. If the loan is made entirely from Roth funds, I assume the portion of the offset attributable to principal is tax-free, but the portion attributable to interest ("earnings") is taxable (if not rolled over) -- unless it's a qualified distribution.

Am I looking at this correctly? Thanks.

How much notification does a 403(b) need to give participants if they are amending the Plan to go from a mandatory matching contribution to a discretionary?  Is it 60 days?

Thanks!

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Is there any reason a participant who has been 'temporarily laid off" is eligible for a distribution?

I don't know the company's definition of 'temporarily' but he was apparently told he can take a distribution, but I feel like employee is not truly terminated.

The plan has a Profit Sharing contribution (new comp) with allocation conditions of 1,000 hours and employment on the last day of the plan year, with a waiver of these conditions in the event of death and attainment of Normal Retirement Age (NRA).

While generating the Coverage Test, if a participant is reported as death and having less than 500 hours during the current year and received a Profit Sharing contribution, should this individual be treated as a benefiting (i.e., non-excludable) employee for coverage testing purposes? Or else, this employee needs to be excluded in coverage because of less than 500 hours? 

If there are no allocation conditions in the plan and death participant has less than 500 hours and everyone receives a Profit Sharing contribution, what is the applicable method of excluding in coverage test for less than 500 hours?

Could you also point to the relevant Treasury Regulations or other official guidance that explains this treatment in detail?

A single member business guy setup a plan (Solo) and rolled into the plan old pension money he had from when he worked somewhere else.  He is telling me some of the money is Voluntary After Tax contribution money... not Roth deferrals.  He took a distribution from the VAT money rolled into the plan.  Do you treat VAT distributions the same way you treat Roth distributions?

Thanks to all in this forum for their help as I bumble through our NQDC plan.

We are approaching the first vesting cliff at the end of this year.   The vesting occurs basically at 12/31/2025.

Since the value of the plan is based on underlying investments and not a fixed interest rate and could move quite a bit by year end, I plan on using the Lag Method to report the FICA earnings.  I anticipate this will be run through payroll around the end of January or more likely the end of first week of February.

I know that for the Lag Method, I have to report not only on the vested balance but also add interst to the vested amount.  From what I have read the amount must be increased by interest through the date on which the wages are treated as paid, at a rate that is not less than the January Mid-Term AFR .   

ILLUSTRATION

For purposes of illustration, assume that an original award of $50,000 several years ago is valued at $62,000 as of 12/31 based on credited earnings.

Vesting will be credit on paydate 2/7/2026.  

Mid Term January AFR rate is 3.8%

Calculation 

Vested Amount at 12/31 - 62,000

Multiplied by AFR Rate -  3.80%

Equal Annual Interst - $2,356

Multiplied by Days until Reported  / 365 days in year -  38/365 = .1041 - 31 days in January plus 7 days in February until paydate

Equals Interest to be added to Vested Amount - $245.28

Vested Amount ($62,000) plus Interest ($245.28) = $62,248.28 = Total Amount subject to FICA 

1) Is my understanding of the Lag Method correct?

2) Does my method of calculating interest make sense?

Thank you as always for any guidance and feedback.

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For a § 403(b) participant who’s 61, has 15 years of service with a qualified organization, and sufficiently little past contributions, is $39,500 [$24,000 + $12,000 (age-based catch-up) + $3,000 (I.R.C. § 402(g)(7))] her elective-deferral limit?

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The Plan defines W-2 compensation to exclude reimbursements and fringe benefits, which is fairly straightforward. However, do some plans treat a taxable pay advance issued under a signed agreement and repaid over multiple payrolls, as eligible Plan compensation?

While it technically aligns with the definition of eligible compensation, complications may arise if an employee reduces their contribution election after deferring into the Plan using the advance. Additionally, if a team member leaves early, the company may initiate a clawback, withholding the remaining balance from their final paycheck but possibly no reduction of 401(k) contributions. Does that mean we have to remove the previous 401(k) contribution from the Plan? 

It sounds to me the easiest way to move forward is this pay advance not be considered eligible compensation due to the downstream impacts and operational headache of the clawback or advance payment. 

Thanks. 

Has anyone updated vesting information in the Voya recordkeeping system?

This is my first time handling a vesting update for a plan on Voya. I’ve just completed the compliance testing and vesting calculations for one of the plans.

The plan includes an employer match with a 6-year graded vesting schedule. Since this is a calendar year plan, I’m unsure whether I should update vesting as of the current date or through 12/31/2024, which is the end of the plan year and the period used for the calculation.

When I attempted to upload the file using an "as of date" in seperate column by updating 12/31/2024, I received an email from Voya stating that the update failed.

Has anyone else encountered this issue? What might be causing the error, and what’s the correct process to ensure the vesting update is accepted by Voya?