MWeddell

Check the plan document. Most, but not all, plan documents require that an employer affirmatively becomes a participating employer before its employees become eligible. However, there are some plans where employees of an employer that is in the same controlled group as the adopting employer become eligible without any further action. If you find that the employer needed to affirmatively become a participating employer, than Former Esq. answered your question correctly: your client will need to make a VCP submission, not a self-correction.

Thanks for circling back to tell us the answer, Peter.

I agree with Bri, that one may add an in-plan Roth rollover or conversion feature in the middle of a plan year for a 401(k) safe harbor plan. Not that I make a habit of correcting typos, but that's Notice 2016-16 in Bri's post. Footnote 1 of Notice 2016-16 references an earlier notice that provides for only temporary relief to add an in-plan Roth rollover feature to a 401(k) safe harbor plan in the middle of the year. It is superseded by Notice 2016-16.

I agree with BG5150. The uncommonly late matching contributions affects 415 and 404 timing. If the match is made to the trust more than 12 months after the end of the plan year that contains the date as of which the match is allocated, then the match is not included in the ACP test per Treas. Reg. Section 1.401(m)-2(a)(4)(iii)(C). Before the Dec. 2004 revision to the 401(k) / 401(m) regulations, the regulations proceeded to clarify that one had to test the match as if it were an employer nonelective contribution subject to a 401(a)(4) test, not to be tested together with any other contributions.

Also welcome to the forums, ABeach.

I agree with your refinement of what I wrote. I wasn't intending to mislead but missed this nuance.

Left unsaid is that disbelief is a rational response until evidence is presented to the contrary. Are there are any studies claiming that those who have used "predictive equity analytics" have outperformed index funds? If so, how did the studies control for any publication bias?

Most, but certainly not all, clients will want to also obey IRS positions instead of intentionally operating a plan contrary to IRS guidance. You have summarized Code Section 411(a) and its regulations accurately. I do not claim that the vesting schedule change would violate Code Section 411(a). The link I provided uses a different rationale for explaining its conclusion. In the example, a participant who has 1 year of service and is 0% vested on a 2-6 year (20% per year) graded vesting schedule is an a plan that is generally switching to a 3-year cliff vesting schedule. The IRS concludes that the participant must have a vested percentage of 20% after earning his/her second year of vesting service. Obviously it's fine if you or BG5150 disagree, but I certainly wanted to alert readers of this thread of the IRS' more restrictive position.

I'm disagreeing.

The IRS position is that one can't make a vesting schedule more restrictive for existing participants. https://www.irs.gov/retirement-plans/change-in-plan-vesting-schedules

I have a law degree. I am quite familiar with the fact that a court on a motion to dismiss is ruling whether the allegations are sufficient, not on whether the underlying facts are true. My post from last Friday consisted almost entirely of quotes from the two documents that Peter provided to lessen the possibility of any "misunderstanding" or that I was "incorrect."

Thank you, Peter, for attaching both the complaint and the court's opinion denying defendants' motion to dismiss. Complaint, paragraph 18, states: "Participants have no choice over how their money is invested. Instead, the Plan has a “one-size-fits-all” investment strategy which every participant is tied to." Similarly, paragraph 30 states: "The Plan in this case offered no single asset class options nor any multi-asset class options tied to a participant’s retirement date or risk tolerance. Instead, it offered only one investment option with an investment mix determined by Defendants." The complaint, beginning at paragraph 33, alleges that it violated ERISA because "Defendants adopted an inappropriate one-size-fits-all investment strategy for the plan." Beginning at paragraph 38, the complaint also alleges an ERISA violation because "Defendants' investment strategy was also poorly executed." Too much was invested in cash and the cash investments often earned zero or very low returns. The opinion is consistent with the complaint, stating that the Plaintiff "alleges that fiduciaries of the Plan were imprudent in their consideration of (or their failure to consider) the participants’ varying interests and needs in the Plan’s allocation structure and investment choices, and that these failures were compounded by a failure to review and revise those choices over time."

Here are my details. The case of Toomey v. DeMoulas Super Markets, Inc. is a proposed class action lawsuit that is in the process of being settled for $17,500,000. Allegedly, DeMoulas required all participants in its profit-sharing plan to invest their entire account balances in a single fund that was primarily invested in low-earning fixed income securities. This was alleged to be a breach of ERISA's fiduciary duties. This is an example of how there may be liability in having just one fund offered to participants of a qualified defined contribution plan so that participants do not have any control over the risk / expected return tradeoff of their investment portfolios.

If someone could reliably predict the direction that the stock market will take in the near future, that person would not be selling their secret to others. In other words, don't believe the hype.

Given that the third party provider is changing, there will be a new call center phone number and a new website. The safe harbor notice contents must include "How to make cash or deferred elections, including any administrative requirements that apply to such elections." It seems likely to me that you'll have to provide an updated safe harbor notice at least 30 days before the crossover date but that this is a type of mid-year change that is permitted by IRS guidance.

I agree with Bill's post above. I was wrong before. The IRS regulation (thanks, Bill, for quoting it) contrary to my recollection does depend on what the plan's provisions are. The regulation states that all five requirements must be met. (iii) is not met. Therefore, we can't use the "exclude terminated employees with < 501 hours of service rule" from (v). Strongly consider switching to using a last day of the plan year snapshot date testing method to circumvent the testing difficulty.

The plan document typically doesn't tell us who is included or excluding from the testing population. That's a matter of looking at IRS regulations and other relevant guidance. Yes, you can exclude those not employed on a snapshot date if you are using a snapshot date testing method. Yes, you can exclude terminated employees with less than 501 hours of service if you are not using a snapshot date testing method. The resolution of these questions doesn't have anything to do with the fact that the plan assigns each employee to his/her own allocation group. I still feel like I'm not communicating well with you, Bird, so I apologize if I've misunderstood your question again. I feel like I must be missing some nuance.

I would not advise a client that the cost of preparing the initial plan document can be paid from plan assets. (I would also say that the final decision must be made by the plan fiduciaries.) From https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/advisory-opinions/2001-01a:

Sure, you may exclude them, depending on how the plan document provision is worded. Why not? You might be indirectly imposing allocation conditions, but the nature of having each participant in his/her own allocation group gives the employer discretion in that regard. However, I don't usually work with this plan design, so collect more opinions from other posters.

The match formula is uniformly available to all eligible employees so you don't have a benefits, rights or features current availability test to perform. You may have an issue regarding the effective availability of the match rate given the unusual shape of the match formula. I don't REALLY think it is an issue, but there's enough potential that there is an issue that I'd make sure to mention it to the client in writing along with a suggestion that client consult with its legal counsel. You also may have an issue that the plan document does not specify a definite, predetermined allocation formula for the matching contributions. IRS enforcement of that requirement is quite lax. We've discussed it in another thread recently on these boards. As long as you have an opinion letter on the plan document and the employer hasn't converted the plan to a custom-designed plan, then don't worry much about this issue. You already are aware of the ACP test's application.

Treas. Reg. 1.411(a)-11 is what you are recalling. If the plan document so provides, no consent needed for distributions made after the later of age 62 or normal retirement age. It's been a long time since I've seen a plan designed that way.

Agreed. However, if the distribution is < $200 (including any eligible rollover distributions made previously during the tax year), then one doesn't have to offer a rollover election or obtain consent, so the distribution really can be made without sending anything to the participant first. Treas. Reg. Section 1.401(a)-31-1, Q&A-11.

There may be a BRF issue. It depends how the facts play out. I can imagine a couple situations: (1) Calendar plan year. Uniform matching formula today. Match for some, not all, employee suspended on 12/1 so some employees have a match available for 11 months and others have a match available for 12 months. Snapshot date testing method is not used, perhaps because there are concerns that 12/31 might not be representative. One has to perform a BRF test on the available match rate. (2) Plan also accepts traditional (non-Roth) employee after-tax contributions. Match is suspended for some, not all, employees. Now the eligible employees for the 401(m) portion of the plan include employees eligible to make after-tax contributions only and other employees eligible to make after-tax contributions and receive matching contributions. One has to perform a BRF test on the available match rate.

Yes. Depends on the content of the plan document and/or any amendment that will be made to it. There are coverage or BRF testing implications too.

Interesting discussion. I've looked into it more, spurred on by MoJo's forceful challenge, and now it is as clear as mud to me! The DOL has ruled on this issue before. ERISA Opinion Letter 96-01A concerns whether a Puerto Rican law is pre-empted by ERISA "insofar as it may be applied to prohibit a pension plan from requiring the repayment of plan loans through payroll deductions." The DOL writes: "Although the Department's previous opinions did not address the specific issue presented here, which concerns the discretionary methods by which a plan chooses to operate a participant loan program, we reach the same conclusion." The DOL concludes: "Therefore, it is the position of the Department that, to the extent P.R. Act 17 is interpreted to prohibit the repayment of plan loans through payroll deductions to employee benefit [*7] plans covered by Title I of ERISA, it is preempted by section 514(a) of ERISA." While there have been subsequent DOL rulings addressing that ERISA pre-empts state withholding laws regarding plan contributions, most recently a 2018 DOL Information Letter, none of the subsequent rulings address plan loans. It is possible to distinguish ERISA Opinion Letter 96-01A as applicable to the specific Puerto Rican law in question, which expressly affects pension plans, not perhaps not might not pre-empt other states' wage withholding laws. Note, however, that that argument depends on the wording of the specific state statute, not on the difference between contributions and loan repayments. The issue has been discussed at least a half dozen times in threads on these message boards. Of the threads I reread, the best prior discussion is from 2001. It addresses ERISA Opinion Letter 96-01A and MoJo also participated in that discussion, arguing his view even more persuasively: I still lean in favor of not honoring the participant's request to revoke the payroll withholding based on DOL Opinion Letter 96-01A but the issue is certainly muddy enough that I would refer the client to consult with its legal counsel.