"The Roth catch-up wage threshold for 2024, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in section 408(k) or (p)) for 2025 must be designated Roth contributions, remains $145,000."

Why aren't they telling me today what the 2025 limit is, since this rule is first effective in 2026??

Hi there,

Does anyone know if SECURE 2.0 withdrawals are considered protected benefits?  I find conflicting information.  Some recordkeepers are enforcing it as protected benefits but I'm yet to see official guidance.  I'm wondering how others are handling and/or interpreting this?

if a participant had took a couple distributions and would like to increase the benefit formula to reach 415 limit in 2024

1) should we project the distribution amounts from the distribution dates to 12/31/2024 or simply use the actual distribution amounts?

2) do you normally calculate the 415 lump sum (excluding the exiting distributions) first then back in the accrued benefit/ cash balance credit to reach max 415 lump sum? or do you convert the exiting distributions into accrued benefit then subtract it from the 415 limit? do you handle this differently between DB and CB plans?

3) are there any guidance or regs that can answer these questions?

thanks in advance!

I understand that the monthly threshold hours that an employee must work is fewer that 130  for purposes of an ALE avoiding the shared responsibility penalty for not offering that employee coverage.

But what is the monthly threshold for full-time status to determine whether an employer is an ALE?  120 or 130?

IRS Publication 5208 states that the threshold is 130 hours:

"Under the ACA, a full-time employee for any calendar month is one who has, on average, at least 30 hours of service per week, or at least 130 hours per calendar month."

https://www.irs.gov/pub/irs-pdf/p5208.pdf.

But, when asked this specific question in the 2014 JCEB Q/As, an IRS representative stated that the threshold was 120:

"The Service representative disagrees with the notion of using either the 130-hour monthly equivalency or 30 hours per week for the applicable large employer determination.  For the applicable large employer status, an employer does not use 130 hours.  The statute requires employers to use 120 hours.  So, for purposes of counting employees for purposes of the large employer determination, an employer counts how many employees worked at least 120 hours in a month.  Each employee who works at least 120 hours counts as one full-time employee.  It does not matter if the employee worked 121 hours or 250 hours that month, the employee counts as one employee."

https://www.americanbar.org/content/dam/aba/events/employee_benefits/technicalsessions/2014_irs_qa.pdf

(Note that my reading of the statute indicates that it does not say 120 hours per month; it says 30 hours per week.)

I recognize that Publication 5208 is more authoritative than an IRS representative speaking for himself, but can anyone point to anything that specifically states the rule?  Perhaps the IRS's thinking changed?

Thanks!

2025’s limits on some kinds of early-out distributions bear what to some might seem an incongruity:
$1,000 for an emergency personal expense;
$5,000 for a birth or adoption;
$10,300 when one is a victim of domestic abuse;
$22,000 if one had a loss from a federally declared qualified disaster.

BenefitsLink neighbors, any observations?
 

So anyone who is 61, 61, 62 or 63 as of 12/31/2025 can do the super catchup for a total deferral of $34,750.  Is it that simple?  Anyone know why SECURE limited it to that odd age group?  

Thank you

Pre-SECURE, QACA default rate had to escalate to at least 6% of pay.

After SECURE, starting in 2025, auto-enroll plans must escalate to at least 10% of pay.

So must a new QACA plan for 2025 escalate to 10% of pay, or is 6% sufficient?

Let's assume an individually designed governmental DB plan received a determination letter at some time in the dim and distant past. I believe post 2017, such a plan could no longer apply for a D-letter, absent a plan termination, merger, or some other unusual situation that I can't recall. 

Has that changed?

Dad owns 100% of Dad's company.  He did a full asset sale to Son (his son, age 21+), who has created a new company for this.  The employees are terminating with Dad's Company and are being hired by Son's Company.

Dad is terminating his plan effective 1/1/24.  Son is looking to start up a plan in early 2025.  Are we (they) going to run into the successor plan rules because of the relationship between Dad and Son?  There was no direct ownership by Son in Dad's Company, and there is no direct ownership by Dad in Son's company.

Thanks.

I have a non-profit client that provides a very rich taxable reimbursement program for its C-Suite.  They've been doing this for over 30 years. They provide annual amounts for which the execs can submit claims for reimbursement that vary based on title (CEOs get $80k whereas a VP may receive $20K). The reimbursement amounts are not limited to medical claims.  For example, execs can get reimbursed for payments to his mother's nursing home payments, CPA fees and legal fees.  There is no written plan, and only about half of the execs actually utilize the full benefits each year.  There are some who have never submitted any reimbursements. Because of the medical reimbursement, I'm certain there are GHP and ERISA implications as well as nondiscrimination issues under Code section 105(h).  I've suggested to the client that it's better to provide the amount as a discretionary cash bonus because of the medical reimbursement component and because the amounts are already taxable.  I'm receiving push back because the client has been advised that since the benefits are taxable, then the above ERISA, GHP, and 105(h) implications do not apply. They also do not want to actually commit to a specified bonus amount for those who have not utilized the funds. Is there anything else they can consider that wouldn't raise ERISA and other GHP issues?  Am I making a mountain out of a mole hill? Would there be nondiscrimination issues since the benefits are taxable?  Thanks in advance.

Plan was amended, HCE's limited to 4.5% deferral.  An HCE that termed deferred 28%.   So ADP test fails.  How do I correct?  Is there any basis for refunding the one HCE his excess and not count the refund in the ADP test?

We have a participant requesting a Hardship distribution based on:

Yes I am backed up on my bills specially my mortgage, car payment and daycare 

I'm probably overthinking this, but I don't believe it falls under the IRS Hardship rules.  I just wanted to confirm

Thanks everyone!

IRS Notice 2024-80

401(k) deferral limit increases to $23,500

415 limit for DC plans increases to $70,000

HCE threshold increases to $160,000; Key employee at $230,000

401(a)(17) limit increases to $350,000

Employer has been a participated  in a MEP for several years. Not an auto enrollment  plan

As of 1/1/2025 the plan will move to a PEP.

Does the move to a PEP trigger the Auto Enrollment requirement for 2025?  Or is the plan grandfathered since it was in place prior to the Auto Enrollment Requirement.

Getting different responses from recordkeeper and TPAs?

Thank you.

Hi

Sponsor has an existing 401k plan.

Wants to add a PS plan - separate plan.

Can the new plan exclude service for vesting purposes?

Never had a plan terminated in the past 5 years.

Hi, 

For plans that are terminating should the Plan sponsor complete the good faith amendment ( SECURE 2.0 and CARES)? what if they have not done the amendment? 

Thank you. 

Hi 

Looking at a possible take over for DB/DC combo

DB has a safe harbor integrated formula but does not pass ratio test on its own (not sure about ABPT as I am not yet provided the testing. Top heavy provided under DB plan.

DC has deferral and 3% NESH and passes 410b ratio test. No PS allocation.

If both plans need to be aggregated for 410b testing, do they need to be tested for 401a4?

I have conflicting guidance on this issue. So long as a plan allows, can anyone convert all or a portion of their 401k accounts (including all pre-tax sources - deferral, rollover, employer) at anytime?

Some suggest that only those eligible for in-service distributions (typically age 59.5) can covert to Roth. Others are suggesting that anyone can convert but only taxes can be withheld for those that are eligible for in-service.

This is obviously only an issue for active employees, not terminated employees. 

Client firm is a Real Estate Broker.   The Plan is a 401(k) Plan which covers ONLY the owner and wife, who are both active in the business and the only employees of the firm.   Outside of the Plan they are involved in various real estate speculations, and do rather well with these investments; which is why they want to expand their use of real estate under the 401(k) plan.  Currently they do have two real estate investment which are solely under the Plan (no involvement of business, or commissions to the firm, with annual independent valuation).  I note that they do have other investments under the trust so it is diversified.  Anyway, they now want to use the trust's real estate assets in a "cash out refinance" of the 2 real estate investments, to obtain funds which will be used to improve the properties, and possibly buy additional properties.  To clarify, it seems that what they are intending to do is get mortgages against the 2 properties (currently owned 100% by trust fund), and use those funds to improve the 2 properties owned, and perhaps to purchase more real estate under the trust.

It is expected that this will not involve any monies outside of the trust, and that all proceeds will remain in the trust.  However, I suspect this is a prohibited transaction since they are using the two properties owned as collateral for the mortgage loans they take out against those two properties.  I also suspect that this will be a PT for other reasons, but am not sure how or why.

I greatly appreciate any and all comments and suggestions.  Thank you in advance!

Does the “once in, always in” concept applicable to eligibility for elective deferrals also apply to eligibility for employer contributions, and if so, what is the legal authority requiring such treatment?

By way of background, we have a client that is a school (the “School”) that sponsors a 403(b) plan (the “Plan”). To comply with the universal availability and LTPT rules, the Plan provides that all employees are eligible to participate in the Plan for purposes of elective deferrals upon hire.

The Plan also provides for (1) mandatory employee contributions and (2) nonelective employer contributions to all participants who make mandatory employee contributions. From a cultural and employee relations standpoint, it is important for the School to continue to offer mandatory employee contributions and to provide nonelective contributions to all participants who make mandatory employee contributions. However, the School would like to impose an annual service requirement on mandatory employee contributions and associated nonelective contributions so that only participants who work 1,000+ hours in a year receive such contributions for that year.

This annual service requirement on employer contributions is important for the School because the School employs many individuals on a temporary/seasonal basis (coaches, summer camp counselors, substitute teachers, tutors, etc.), has many former full-time employees return to work with the School in temporary/seasonal positions, and has high rates of employee turnover. It would be extremely administratively burdensome for the School to make employer contributions every year to all employees who once worked 1,000+ hours in a plan year and who now work less than 1,000 hours/year.

Because we cannot use an allocation condition to impose an annual service requirement on mandatory employee contributions, we’re trying to find a way to impose an annual service requirement on these employer contributions through eligibility. However, we’ve received pushback from the School’s consultant and recordkeeper that the “once in, always in” concept applicable to elective deferrals also applies to employer contributions. While it’s clear that the “once in, always in” requirement of the universal availability and LTPT rules do not apply to employer contributions, we cannot find conclusive guidance as to whether or not Code section 410(a) imposes a “once in, always in” requirement on employer contributions.