austin3515

The red text is my anaylysis. From SECURE 2.0 “(11) REPLACEMENT OF SIMPLE RETIREMENT ACCOUNTS WITH SAFE HARBOR PLANS DURING PLAN YEAR.— “(A) IN GENERAL.—Subject to the requirements of this paragraph, an employer may elect (in such form and manner as the Secretary may prescribe) at any time during a year to terminate the qualified salary reduction arrangement under paragraph (2), but only if the employer establishes and maintains (as of the day after the termination date) a safe harbor plan to replace the terminated arrangement. It seems to me this is accomplished without regard to the effective date of the new Plan. The only stipulation is that there be a safe harbor plan in place the day after the termination of the SIMPLE. Nothing here precludes the Plan itself being effective 1/1/2024 (and thus the profit sharing component). We have met the requirements necessary to terminate the SIMPLE IRA and there are no other restrictions. From 408(p)(2)(D)(i): An arrangement shall not be treated as a qualified salary reduction arrangement for any year if the employer (or any predecessor employer) maintained a qualified plan with respect to which contributions were made, or benefits were accrued, for service in any year in the period beginning with the year such arrangement became effective and ending with the year for which the determination is being made. In my opinion, you can only read the text above to be completely obsoleted if the new provisions of SECURE 2.0 are met. That requirement simply must be considered as waived in the year a replacement plan is implemented. This reminds of me of something I learned a while ago – the law says ONLY what the law says and nothing else. There just isn’t anything in SECURE 2.0 regaridng when the replacement plan can be effective – ONLY that it be in place on the day after the term date of the SIMPLE. OK now everyone tell me what I’m missing!

I have about a million questions. I'm writing this as though I know these to be true but they are only educated guesses... 1) I presume the SIMPLE IRA contributions are from January 1st through let's say May 31st, be they Nonelective or Match. 2) Then, the Safe Harbor 401k contributions, be they Nonelective or Match run from June 1st through December 31st. 3) Profit Sharing / Gateway Minimum / Cross-testing / top-heavy minimums would all be based on comp data from 6/1/2024 through 12/31/2024 4) The 415 regs are crystal clear that ALL defined contribution plans are aggregated for 415 purposes so I would be targeting the 415 limits based on the sum of the above. My plan doc already says the 415 limitation year is always a 12 month period so no need to prorate the 415 limits. 5) I suppose I would need to pro rate the comp limit though? That could be problematic, so I guess I might need to have a 1/1/ effective date after all and just have the 401k safe harbor contriubtions effective June 1, 2024 and determine my top-heavy minimums as 3% of 12 months of pay, offset by any Safe Harbor, and SIMPLE IRA contributions. I think my point really is, there are so many answers to so many questions. HAs anyone sat down and tried to figure this out? Has ASPPA or Ferenczy or ERISApedia answered these questions at this level of detail? These are happening right now so we need a playbook...

As an example, Charles Schwab PCRA account (which is used by several RK's as the SDBA) has an application. On that application you can restrict the investments available in several ways, including options, individual securities, and even taxable vs non-taxable mutual funds (and several others). I've seen TD Ameritrade SDBA applications do the same thing. These applications are plan-level set-up applications, not the individual. I actually think it is the norm for these types of accounts. You're asking about the recordkeeper but that's not the right question. These elections are made with the brokerage account provider on their applications. The RK has no control at all over what happens inside the brokerage accounts.

Let em put it in there if they want it but I am not even thinking about LTPT on a plan with elapsed time. That's a bridge too far.

LOL... 99.99% bad, .01% good 🤣

That was just a crazy example where absent this rule the testing would be catastrophic, LOL. This is really kind of neat and may be a great reason to adopt the LTPT rules in certain cases.

Owners child works part-time and has not met 1,000 hours in 12 months, but they are now an LTPT. I can exclude LTPTs from ADP testing. So the kid can contribute 50% of pay, right? Is this too good to be true?? Maybe there is something that says otherwise but it's something that never even crossed my mind until I saw it happen this morning..

In my view the RMD rules for these palns are practically moot (not entirely). A Participant is not subject to RMDs while still employed. I've seen people defer payments until the year after they retire but no later. So someone could theoretically retire when they are 75, under your provision they get their first payment on the Required Beginning Date, and then presumably they elect either a lump-sum or perhaps some annual installments - the latter should really never be more than 10 on the high side. So it is true that in my example the participant could not defer their distribution until they turned 80 but the reality is people tend to want to get their money (and employers would prefer to part ways). Your same provision applies to someone who leaves when they are 45 by the way, I presume?

This is all wonderful news. I think probably 80% of my clients (i.e., the smaller ones) will not adopt this provision. Wonderful sentiment, but execution is so incredibly infeasible. And if you have less than 50 employees, you might have one person every 3 or 4 years eligible for this, and how many of them can actually contribute more than $30,000??? I just don't get it. This is wonderful for IBM and Microsoft and Amazon, but down here in the weeds it's the last thing anyone wants to deal with.

I've seen conflicting things on this. Is it 100% known yet whether or not this administrative horror show is mandatory or optional?

Having spoken to the client, I can assure the clients goal is to not owe any match during the period of time that elapses between their eligibility date and the date they first elected to make a contribution. That's the full scope of their goal.

Understood but the executive who maxes out in March 2023 gets a true-up of $8,00 (per my calculations for a client this morning). So you'll have tough time convincing my clients that the true-up was not for the CEO but rather the other employees who got true-ups of around $50 to $300 max.

Honestly I do not see this as being an administrative nightmare at all. Participant becomes eligible 4/1/2023, does not contrbiute. They sign up at 12% 7/1/2023, and the match is 50% of 6%. The client doesn;t want to match their comp for the 3 months before they signed up. This is not an irrational idea. The client wants a true-up calculation primarily for people who max out too early. This is all very insightful information but the one thing I have not yet seen addressed is whether or not it is permissible. I can't think of a reason it would not be. The amendment would need to be clear it impacts ONLY compensation paid prior to their initial enrollment, and not a start/stop scenario in later years. This not challenging to administer either as the client clearly knows what pay-date they first contributed from. Again this is not a safe harbor plan.

1) it is for a non-safe harbor match 2) the client wants an annual true-up but doesn;t feel like they should be obligated true-up for the portion of the year that participant was "too lazy" to fill out the forms. I'm paraphrasing but that is the logic. I am reminded of something I learned a long time ago which is clients want they want even if we don;t think they should want it 🤣 The question at hand is, is it legal. And of course I cannot run ADP/ACP testing based on that definition of comp. I would need comp as a participant based on the plan provisions to comply with 414s.

Participant's entry date is April 1 2023. They start contributing June 1st 2023. Client wants to have a plan provision that excludes comp prior to the first date they made any contributions. In the words of Kramer, my reaction was "You just blew my mind." I think this should be allowable (aside from the fact that my pre-approved document does not include this option, which I guess is a different matter on reliance, etc). Thoughts?

Not surprisingly (because I think FTWillilam is so awesome) they can do them all year long. The fees are very modest. I'm actually a little embarrassed I misinterpreted all of their caveats about processing deadlines at the end of January. In hindsight those deadlines obviously only related to hitting the 1/31 deadline. Thanks everyone!!

@Paul I that was the missing link for me, thank you. The red copy goes to the IRS not the participant. I get it. If FT can't do it we might work with another vendor for the one-offs, that's probably not a bad idea.

100% thats the problem. Our admin person will spend 45 minutes trying to get it to line up! I will ask FT but I thought they would not do the fulfillment piece post 1/31.

We do most of our 1099s through FT "fulfillment" service where the print/mail/ and send everything to the IRS. But after 1/31 we need to do them manually (for example when a client only tells us about it now). For years we have been ordering the IRS's red ink 1099s and trying to print the 1099s on those before mailing hard-copy to participants. Can someone explain to me why I am making my life so much more difficult even though I know from doing my own takes that taxpayers don't even send those to the IRS?? Are people sending this out just on regular whit paper?? If there was a compelling reason I would be all over it but if there is one I just can't see it...

Does anyone know how to request that the IRS abate the now 10% penalty tax on a missed RMD for 2023? I know no one knows if they will abate now that they have reduced it but I still think that the same logic of "don't stick it to an octogenarian living off of social security for a silly mistake" should still rule the day... Regardless I'm going to give it a shot but curious if anyone knows how it is done!

Thanks!! Very much so!

http://actuarialtools.com/cctable.html I've been using this site to pull the covered comp tables for years but the 2024 tables are not yet available. Anyone know where to pull them from?

From EOB, you are correct. I wasnt 100% sure if the ADP and ACP Safe Harbors had to be satisfied and the answer is yes. Now you could have a match that is 400% of the first 6% and I believe that would work. 2. Certain safe harbor 401(k) plans are deemed not to be top heavy. A safe harbor plan is deemed not to be a top heavy plan (even if the top heavy ratio, if calculated, would exceed 60%) if: (1) the plan consists solely of a safe harbor 401(k) arrangement, either under the 401(k)(12) safe harbor or, in post-2007 plan years, the QACA safe harbor, and, (2) to the extent there are matching contributions made to the plan, all of the matching contributions satisfy the ACP safe harbor prescribed by IRC §401(m)(11) or, in the case of a QACA safe harbor plan, the ACP safe harbor prescribed by IRC §401(m)(12) (which cross-references the requirements of IRC §401(m)(11)(B)). See IRC §416(g)(4)(H), as added by EGTRRA §613.

"The Employer retains the right to reduce or suspend the safe harbor nonelective contribution under the Plan. If the Employer chooses to do so, you will receive a supplemental notice explaining the reduction or suspension of the safe harbor nonelective contribution at least 30 days before the change is effective. The Employer will contribute any safe harbor nonelective contribution you have earned up to that point. At this time, the Employer has no such intention to suspend or reduce the safe harbor nonelective contribution." That's what our Corbel/Relius notice says. So it seems clear to me you can do it.

There is this thing from the IRS. IT' a good place to look and see if your fringe in question is even mentioned. The word "jury" is not found anywhere in this publication. https://www.irs.gov/publications/p15b