austin3515

I did see an attorney do it that way. Personally I think this is short sighted because a) the verbal gymnastics involved in adding that provision will be signficant (loss of reliance on pre-approval?). And what if they leave you? Will their new provider understand what you were doing? Take over your language correctly? I just really think it's going to be a lot more isolated than you think. Maybe if you had a significant outlier plan or something, keep that in your back pocket. But if you amend "hundreds" of plans this way, long-term someone else messes that up. I'd peronally hate to have a long-term complication to solve a short-term problem. I've thhought aboutt his the same as you for a long time. That's where I landed, obviously it's a gut call!

Yes you do. But that’s a one time search and most clients doing this are smaller. And if tracking vesting years based on 1,000 hours your limited to people who have zero vesting years. but the large non-top heavy plans we almost exclusively switched 401k eligibility to some short elapsed time (or they were there already). There will be some research but expect it to be limited. this one time project is a small price to pay to avoid LTPT rules…

That is actually not true for 1/1/2024. IT's laughable how complicated this is (examples assume calendar year plan): 1) For the original SECURE Act service before 2021 is disregarded. So you need THREE 500 hour years to be an LTPT for 1/1/2024. 2) SECURE 2.0 reduced it to two years BUT they disregarded service before 2023! So 1/1/2025, anyone with either 3 consecutive years between 2022 and 2024 will be eligible and anyone with 2 consecutive years in 2023 or 2024 will be eligible (I suppose that should be the same list of people). And it's even more complicated than that of course because everyone's first 12 months of employment is the first year needing review. [edited this paragraph for correction 12/29/2023] The estimated rate of compliance nationwide by yours truly is somewhere between 2 and 3%.This was legislative malpractice. I will point out that Derrin Watson mentioned on an LTPT training that you can utilize hours equivalencies (190 for each month is my suggestion) which will take almost all of the guess work out of the eligiblity reviews (you can use it exclusively for applying LTPT rules). You can predict the first day of which plan year someone will be an LTPT based solely on their hire date (assuming you can comfortalby assume they will work at least 1 hour in 3 out of any 12 month window). BTW, why would the IRS disagree with that position and make it harder for people to have access to payroll deduction contributions? Wouldn't that be a hoot considering the point of the law in the first place! I've basically told my clients "do this or your going to sink." And anyone who says the recordkeepers will track it I'm sure has underestimated how much information they need. One recordkeeper sent an email out last week that basically said "if yo uwant us to track you need to tell us how many consecutive years they have" or something like that. And what if your client moved to the recorkdeeper in 2022? Or what if they didn;t have a payroll bridge with all the necessary data until 2023? Tell me pessimism is not justified... [I will point out that my firm went absolutely full-tilt for 3 months to amend plans to avoid these rules].

Thanks! That's what I needed!!

Saving that one! Thanks Carol!!

I need to find the DOL reg or whatever it is that says something along the lines of, if the investments of more than one plan are commingled and available to pay teh benefits of all plans than it is considered a single plan for auditing purposes. Does anyone know where the actual reg is??

We are amending a lot of plans to have 500 hours of service instead of 1,000 hours to avoid the LTPT rules. Vesting will remain at 1,000. I want to be able to accumulate and track how many plan years a participant has 500 hours of service (so same approach as vesting, just with 500). That's an easy way for us to review eligiblity for accuracy because we see for exaple who never hit 500 hours of service. Anyone have a suggestion for which field to use for that? The LTPT fields do not turn on unless the person is ineligible for the plan. The "Service" figure on the "Service Tab" (so the first one) seems like my number one contender but it seems to impact the determination of otherwise excludables (it codes people as OE's too early). Curious if others are thinking ahead on this or have other thoughts.

On upon a time I knew the formula to fix this. BUT if you go into DER, Account Data, and start futzing around with "Prior Years Distribution $" I am almost postive you're going to get that dollar amount to move. You can probably figure out with a little high school algebra how much each $1 of Prior Years Dustributions moves the vested balacne and thus back into what value will fix it. The formula is based on the formula in 6.5(h) of the Relius/Corbel Basic Plan Doc. I included the screenshot. The formula should be from the regs. If you plug this formula into Excel you can figure out what the entry needs to be. I think it might be a negative number too.

Then I guess this is meaningless and I agree vestng at NRA. Only because I have seen it many times before, I assume they copied a document from another client and forgot that language was in there. It's totally irrelevant.

I have deciphered the text!! The first paragraph just blanket says you're 100% vested at normal retirement age with NO service requirement. The 2nd paragraph says, the first paragraph does not apply if you leave before January 1, 2026. The two combined is the vesting requirement. I'm willing to bet the NRA in the Plan is 1/1/2026. so for example, January 1st following the year in which you turn 65. and the participant turns 65 in 2025. The vesting on January 1st is only to make sure its a 2026 taxable event since the participant will have theoretically retired and have no more income. I saw the same approach to vesting once before. It's classic legal non-sense designed so that you have to pay someone $500 an hour to tell you what it means. If there is another purpose it beats me.

Something you should never see in a 457f plan for example is: Contributions wil become vested based on the 6 year graded. But a participant will forfeit everything if they leave before 10 years of service. If your document has wording that even approaches that, then it makes no sense... Not sure if you copy and paste text so we can see what you mean but that might be helpful.

OMG it is screaming out for a flowchart.

These rules are completely insane. What are others using as a practical tool for sorting this all out? There must 15 to 20 pages in the EOB. Has anyone created a user friendly guide to answer the million possibilities?? I'll spend 45 minutes sometimes trying to figure all of this out for a particular scenario. To me there should be a website where you ask: How old was the Participant? How old was the beneficiary? Was the beneficiary the spouse? And on an with all of the other variables (RMD before death, after death) and tell you what the rules are. Has anyone done this yet??

From the general description of the match, it sounds as if neither plan is a safe harbor plan. correct Does the salaried plan use a true-up? No it does not. Pay-period only. Good question though... So that is BRF in favor of the largely NHCE group. Do both plans match (or do not match) catch-up contributions and/or after-tax contributions? Yes aside from timing it's the same exact match (no after-tax money). Is the rate of match at all levels consistent for all employees? (This one may be a challenge due to the 1000 hour/last day rules for hourly employees.) Same match formula but to your earlier point the match is "better" for the folks who get only a year-end match, and that group is disproporationately NHCE.

Division A has match going in every pay-period because these are basically salaried office workers. The vast majority of the HCEs are in division A. There are a bunch of employees with more sporadic work schedules and the client does not want to provide them with the match unless they work 1,000 hours and meet the last day requirement. 1) Straight coverage, my ratio %age fails but a hair, but my Average Benefits Test passes by a mile, 2) If I treat the timing as a BRF then I am still good because even if I treat the pay-period match as a BRF I'm over the nondiscriminatory classification threshhold. Am I thinking this through correctly?

There is no more a requirement to do a sweep then there is to be aQACA or add hardship distributions. There just is nothing in the statute that even suggests a sweep by inference or subtlety or anything. I guess it’s just frustrating for me that there wouldn’t be more agreement on this. There are not that many words here so I am surprised at other interpretations of this straightforward text.

HEre is the QACA Language (401(k)(13)(C)(i): The requirements of this subparagraph are met if, under the arrangement, each employee eligible to participate in the arrangement is treated as having elected to have the employer make elective contributions in an amount equal to a qualified percentage of compensation. Clear as day for a QACA. No such language exists for this new SECURE 2.0 EACA Requirement.

Its the same language as the statute. Can you please explan why the automatic enrollment provision requires something more than EACA when it only says it has to be an EACA? There are no modifications that I can see to the "EACA" requirement (like a requirement to include ALL eligible employees). Compare that with a QACA there is a clear statutory requirement to cover all eligibles.

On a webinar and they said something I didn't think was right. SECURE 2.0 only says that as of 1/1/2025 the plan must be an EACA. An EACA need not be applied to all eligibles - it can be applied only to new hires (ok I don't get the extra time for my ADP test). On the webinar they felt that the best reading was that the auto enrollment had to be a sweep on 1/1/2025, and pick up all eligibles. But to me it is clear as day that only new hires must be subject. the statute: "An arrangement or agreement meets the requirements of this subsection if such arrangement or agreement is an eligible automatic contribution arrangement (as defined in section 414(w)(3)) which meets the requirements of paragraphs (2) through (4)." Nothing in paragraph 2 through 4 has anything at all to do with the groupings of who needs to be auto enrolled.

"he credit allowed for the taxable year under subsection (a) " I asked a prominent ERISA attorney if he agreed that this reference to paragraph a) adopted the same language in paragraph a about paid or incurred, and he did not believe so. At the risk of being audacious I would suggest it is the only thing we have to go by.

My favorite Benefitslink quote of all time. I saved this for 16 years now!!

I guess it would be nice of the IRS to just tell us that logic is their position. And then what if you flip flop positions, is that ok? Can you claim 2 credits in 1 year, one based on cash basis and once based on accrual? I just think the timing of the credits needs to be explained.

Ya know I went back and red the code and it seems like it says "paid or incurred." You can interpret the word incurred in at least 2 ways as far as I can tell, so not sure, but it certainly does indicate that it might not necessarily be the same taxable year in which it was paid. I'm actually surprised I can't find anyone commenting on this question. IT seems pretty obvious that it should be addressed. That word incurred I think is too open. For example, I am doing admin for 2023, but I'm not doing the work in 2023. Was the expense incurred in 2023 or 2024? If I say it was incurred in 2023 I can take the credit in 2023. I use my fees as an example becauise it's based on the same exact rule. And what if a contribution is discretionary? Is it incurred in 2023 if a choice was made in 2024? Isn;t that different than a safe harbor nonelective built into the document where it was clearly incurred with each passing paycheck? I have no answers but I think I'm asking the right questions! I know, I know, we need guidance...

Er Contribution for 2023 funded in 2024. The tax credit is towards 2023 taxes, right?

Here is the screenshot in Relius: