With the new rules, must plans allow all participants the ability to make Roth deferrals?  Or can a plan just have the Roth only for when it's required for catch-up?

2 hypothetical scenarios so making things up:

Scenario 1: A QRP receives 105k in excess assets from a DB plan and will allocate in 7 years. It is invested in a 0% interest bearing account.

Year 1 must allocate 15k (1/7th of 105k) so end of Year 1 balance is now 90k

What are the Year 2 and Year 3 requirements assuming minimum will be allocated

Scenario 2: Same as above with the exception it is invested in an account that will have 10% return

Year 1 must allocate 15k but now end of Year 1 balance is 99k

What are the Year 2 and Year 3 requirements assuming minimum will be allocated?

Thanks

Internal Revenue Code § 414(v)(7)(A) sets $145,000 (inflation-adjusted) as the limit on a preceding year’s FICA wages for a participant not to be constrained to make age-based-catch-up elective deferrals as Roth contributions.

Here’s the “Cost of living adjustment” provision: “In the case of a year beginning after December 31, 2024, the Secretary shall adjust annually the $145,000 amount in subparagraph (A) for increases in the cost-of-living at the same time and in the same manner as adjustments under [I.R.C. §] 415(d); except that the base period taken into account shall be the calendar quarter beginning July 1, 2023, and any increase under this subparagraph which is not a multiple of $5,000 shall be rounded to the next lower multiple of $5,000.” I.R.C. § 414(v)(7)(E) https://www.taxnotes.com/research/federal/usc26/414?highlight=414.

Assuming all relevant years are calendar years:

I estimate that, for 2025 FICA wages to drive how § 414(v)(7) applies for 2026, the $145,000 will become $150,000.

BenefitsLink neighbors, is this likely?

Or would a § 415(d)-method calculation come out differently?

Two related companies filed their MEP 401(k) plan's single 5500-SF annually over many years. The common ownership ended, and the MEP split into two separate plans effective March 31, 2024. I am trying to understand how to handle the 2024 5500-SF reporting for one of the companies - the one that became my client just recently. 

Was a short plan year filing due for the MEP? I do not think one was done. Can either company file a full year 5500 for 2024? What should be considered in order to make these determinations?

On Jan 1, 2024 we implemented a loan policy that allows a loan on the amount of 50% of vested balance not to exceed $50k.  When our recordkeeper updated the system to reflect the new loan policy, they did not include the 50% of vested balance part.  We had 12 employees in 2024 take out loans in excess of the 50% of their vested balance.  Some loans were 90% or more of the vested balance.  This is 100% fault of the recordkeeper as they have admitted.   What recourse do we have against the recordkeeper?  What options for corrections do we have.  The recordkeeper showed us one option where the participant will have 60 days to pay back the excess or it will deemed a distribution.  Has anyone else experienced this type of failure?

I have a question as to whether this spin off 401k plan is grandfathered or not for purposes of the mandatory automatic enrollment. Plan adopted a PEO on 2/1/2023. Plan spins out into its own single employer plan on 1/1/24. Is the plan required to adopt the mandatory AE provision under Section 101 of SECURE 2.0? Thank you!

What websites do folks prefer to use when looking up actual text of code and regulations? 

Last year my preferred one became Bloomberg https://irc.bloombergtax.com/public/uscode/toc/irc

Because it included the full cite on each line and I did not need to scroll up to figure out if it was (k)(9)(ii) or whatever. But that seems to have gone away. At least it doesn't display for me. 

Does anyone else use a free website that has that particular formatting? I really got used to having it. 

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Our client currently has a money purchase plan. They no longer want the money purchase plan and want to replace it with a 403(b) plan. Would it be considered a merger? Or do we have to terminate the MP plan?

Are there any special considerations when doing this? 

Provider is telling us that we cannot change the investment provider mid-year. So for example, let’s assume it is February and the pan sponsor wants to move from Fidelity to Charles Schwab (neither Fidelity nor Schwab are involved here they are just an example). We are being told nope not an option you can’t leave us until January 1 next year. I believe it has something to do maybe with form 5305.

Even if there is something that is technically true about this it just seems bizarre that a sponsor would be hamstrung from making a change for better pricing / service because of a technicality. Have others heard of this? Are they being too literal or risk averse? This would basically mean the sales process for SIMPLEs is shut down for the first 7 or 8 months of the year…

In determining whether a one-participant plan has exceeded the 250,000 threshold, all one-participant plans of the *employer* must be aggregated.  Does the *employer* include members of an affiliate service group?  There are one participant plans sponsored by different members of an affiliated service group.  Citations to the statutes or instructions are helpful but not necessary.  Thank you.

A plan sponsor is looking to adopt a retroactive amendment effective 1/1/25 to change their safe harbor match plan to be a safe harbor nonelective (3%) plan, primarily because of the gateway test benefits for their profit sharing. Are they legally allowed to reclassify the safe harbor match contributions they made from 1/1/25 to now as non-elective, essentially using it as a kind of credit when they true up at the end of the year? That would result in everyone having gotten a 3% contribution for the plan year. On one hand, my instincts say that adopting the amendment as of 1/1/25 would mean the safe harbor match provisions would no longer have been in place, so it wouldn't have to stay as match, but on the other hand it feels like it could be sketchy as it was made under a different contribution source structure. Anyone have insight on this?

I vaguely remember reading that you no longer needed to file a Form 5558 and that the extension was automatic.  Am I mis-remembering something?  Or is it that they can now be filed electronically for the 2024 Plan Year, as opposed to sending the paper filing?

With the deadline on July 31, I wanted to make sure I wasn't just imagining something.

Thanks in advance!

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A  client has proposed to limit reimbursement for advanced behavioral analysis therapy to individuals who are age 16 or older. This therapy is intended to benefit individuals with autism. This proposed action thereby prompts the following questions:

(1) Is advanced behavioral analysis considered a preventive type of therapy or procedure which is required to reimbursement in full under the ACA?

(2) Is this therapy considered a mental health procedure subject to protection under the mental health parity requirements?

(3) Is there any other reason that prohibits or precludes the client from adopting a minimum age requirement as a condition to being eligible for reimbursement for advanced behavioral analysis, whether or not required under the ACA?

Thanks in advance.

Can someone please confirm that employer contributions to a nonqualified plan are subject to FICA taxes at the time they vest?  

We recently found out our payroll isn't applying FICA taxes to our employer contributions to our NQDC Plan (in our plan employer contributions are always 100% vested).  They claim this is correct, so I'm second guessing myself.  My understanding is FICA taxes must be paid under the "special timing rule" when contributions to a NQDC Plan vest, even employer contributions.  If they aren't applying FICA upon contribution (or, if later, vesting) we'll have to apply FICA to the employer contribution part of the distribution later, correct?

With the passing of these laws, clients have many new options to consider and implement.  Does anyone know of the required employee communcations regarding these?  For example if a client wanted to implement the domestic abuse distributions would this need to be communicated to all staff?

A 403(b) plan received two rollover checks from a 401(k) on behalf of a participant age 74.

Check #1: Pre-tax deferrals ($4,915)

Check #2: Non-Qualified Roth basis ($10,447) with earnings ($590) [First Roth contribution = 2024]

The 403(b) was informed that the participant's 2025 RMD for the 401(k) was not distributed to him prior to the rollover.

The participant is not eligible to make regular contributions to the 403(b).

The 403(b) has not cashed the checks yet because it does not want to deposit ineligible amounts. It is wondering if it can return the checks to the 401(k). 

What is the cleanest way to correct this?

One of our client’s is a doctor who sponsors a DB Plan for his medical practice.  The plan is not terminating and is not covered by the PBGC.  We are in the process of cashing out several terminated participants.  One of these former employees has a benefit worth much more than $7,000.  She is married and has received her distribution election forms.  However, she is not cooperating and will not return her forms.  In accordance with statute and with the plan document, the default form of benefit is a joint and survivor annuity.  We have checked with several insurance companies, all of whom offer the desired annuity.  However, every insurance company wants a signature from the participant.  This is a catch 22 because this participant is not cooperating.

⦁    Does anyone know of an insurance company that will provide an annuity for the benefit of a terminated participant without the signature of that participant?

⦁    I have heard that the PBGC now permits limited use of their Missing Participant Program for plans that are not covered by the PBGC.  This plan is not covered by the PBGC and this participant is not missing.  Does anyone have information or experience using the PBGC Missing Participant Program for this type of situation?

Thank you.

Michael P. Burkow, EA

401k America, Inc.
(909) 591-1724 X. 418
michael@401kamerica.com

Company X sponsors a 401(k) plan. Participant A terminates employment in 2025 with an account balance of $6,985. X directs X's account balance to be cashed out. A couple months later, based on favorable investment performance,  a check is issued to A for $7,055. Has the 401(k) plan committed an operational failure by issuing a check to a former employee for more than the cashout threshold?