Gilmore

I saw an article in the Newsletter the other day regarding LTPT. The article said (paraphrasing), that in general the IRS has said that all years of service must be taken into account when determining vesting for an LTPT. Wasn't it SECURE 2.0 or some other more recent guidance that allowed 401(k) plans to not count years prior to January 1, 2021 for vesting? Thanks.

"Lost earnings" to me sounds like a late deposit from a prior year corrected in 2022. If they terminated in 2021 and took a full distribution before the end of 2021, and late deposit earnings were made after 1/1/2022, I would not count them in the 1/1/2022 beginning count.

Never used it, but some plans have an option for a "first few weeks" rule. Not sure if that is what they are looking at. That would be in the plan document.

I believe you can set up a safe harbor with a 10/31/2024 year end, and amend to a calendar year plan for 1/1/2025. As long as the first year, the short year (11/1/2024 to 12/31/2024), and the following year are all safe harbor there should be no concern for losing the safe harbor status. This way you can still get in some deferrals for 2023 if that is a goal.

I like everything Peter and Paul wrote and add, although probably not needing to as you probably already would know, to document everything.

I think you are correct as long as service is not measured using anniversary years solely. I also think rehires are going to be even more painful.

According to Publication 5717 you can create, edit, and view 1099 forms without software or service provider, download and print the recipient copy for distribution to payees (or client I imagine since that is what we would typically do), and maintain records of completed 1099s. I went ahead and applied for a TCC, which was the exact same process as the process to renew our TCC for 8955s. This way we can at least give it a look-see.

Your written authorization no doubt includes the disclaimer that the client is aware their hand signed form will be open to public inspection on the EFAST site. That usually causes most (not all) of our clients to opt for getting their own credentials.

We are a small TPA firm and each year we prepare about 40 1099Rs on behalf of our clients. We currently use FT William to prepare paper forms. I was looking into the IRIS system and was wondering if anyone has had any experience in using the system to prepare 1099s for their clients. Thank you.

Thank you again for this information. This goes back to my original example above. Not only a recordkeeping nightmare, but a potential employee morale nightmare for employees with different levels of vesting %s caused only due to the sequence of their years of service earned.

Thank you very much for this information Paul. I thought I had read somewhere that a former LTPT, now a full participant, would continue to earn vesting service at 500 hours and not "shift" to needing 1000 hours? Is that accurate or am I mistaken? Thank you.

An LTPT employee earns a year of vesting with 500 hours regardless of whether they are permitted to receive employer contributions. My question, for which I'm assuming more guidance is needed, is how is a former LTPT treated for vesting if at some point in the future they do meet the plan's "regular" eligibility requirements.

All our 8955s are FIREd. I'm going with "completely wacky".

BTW, the IRS penalty letter lists the old fees. It says, "We are required by law to charge $1 for each participant for whom a required registration statement is not filed. The penalty is multiplied by the number of days the failure continues. The maximum penalty is $5000."

One of mine had 1 A and 1 D. Filed on 6/20/2023. Also assessed a penalty of $660. So is that 1 D assessed $10 for 66 days, or both A and D assessed $10 for 33 days?

Went and did a quick check of the 8955s that have received letters so far and all have a mix of A's and D's. Thank you for passing along this information.

I hope this does not cause the IRS to consider not sending out some type of blanket response to their error.

Interesting Bri. Actually what I was thinking was something like this. My first year with the company I work 1000 hours so I'm a "regular participant" and I also have 1 year of vesting. Under the plan's 6-year graded schedule I am 0% vested. For the next three years I work less than 1000 hours. My co-worker for the last 3 years worked 500 hours each year, then works a year with 1000 hours. Now after 4 years we are both "regular participants" but now my co-worker (who used to be my friend) is 60% vested and I'm still 0% vested, even though over the last four years we've essentially worked the same number of hours, just in different sequence.

If a plan uses automatic enrollment, are employees that become eligible under the LTPT rules required to be automatically enrolled? Another question...has there been any change in the LTPT vesting rules with respect to a former-LTPT who becomes a "regular participant" and the number of hours that they must meet to earn a year of vesting? Is the hours required still 500 even if the former-LTPT has met the plan's normal eligibility requirements? Thanks very much.

We've received notices from clients that were FIRE'd in March, June, and July. Ugh.

For the first few that we received before AndrewZ posted the NAPA article we have already sent a reply to the IRS on our clients' behalf (they signed a 2848). Today I am sending out a correspondence to all of our clients for whom we FIRE'd 8955s since January alerting them to this issue and giving them the opportunity to have us respond directly or they can take a wait and see. We are a small firm so, while an annoying waste of time, we can manage.

Certainly best case scenario would be to amend the plan prior to the start of 2024, but does the amendment HAVE TO BE adopted by 12/31/2023. Or could you put Roth in place and adopt an amendment by 12/31/2024? I seem to remember from a webinar at the beginning of the year in which Derrin Watson quietly conjectured as to if Roth was only being added to conform to the requirements of SECURE 2.0, if the plan could adopt an amendment as late as 12/31/2025. Again, not that any of that would be the best course of action, but I'm just thinking ahead to all of the potential screw ups in 2024 and potential correction options.

We just received the penalty notice for a client whose 8955 for calendar year 2022 was filed on March 21, 2023.

We received a copy of the penalty notice from a client whose 8955 was FIREd on 6/26/2023. That's more than a month before the filing deadline (calendar year plan). Is this a harbinger of how the electronic 5558 filing is going to work? We just started receiving IRS letters admitting their 2021 5558 denials were incorrect, and now these 8955 letters start. Geez.

Thank you.