austin3515

Maybe I missed it above, but I always point to the uncomfortable scenario where even a 50 year old taking out a 30 year loan might be a tad unrealistic since they will be an octogenarian by the time they are done. I don't know about y'all but I'll be living near the beach sipping Pina Coladas at noon long before then if everything goes according to plan 😂

Follow up: How do you guys feel about a participant whose vested account balance is $0 (0% in profit sharing only) on a recordkeeping platform where the forfeiture has not been processed. Terms of the plan say this participant is "Deemed to have received a distribution which triggers the forfeiture." I say they are not counted. Exhibit A in my legal brief is that if this was a pooled/trustee directed plan we wouldn't even ask the question, so using a recordkeeper should not change the answer.

5500 Instructions for Line 6g. Enter in line 6g(1) the total number of participants included on line 5 (total participants at the beginning of the plan year) who have account balances at the beginning of the plan year. Enter in line 6g(2) the total number of participants included on line 6f (total participants at the end of the plan year) who have account balances at the end of the plan year. For example, for a Code section 401(k) plan, the number entered on line 6g(2) should be the number of participants counted on line 6f who have made a contribution, or for whom a contribution has been made, to the plan for this plan year or any prior plan year. Defined benefit plans do not complete line 6g. A Safe Harbor Nonelective receivable is a "contribution that has been made to the plan for this plan year or any prior plan year." The rub here is that it doesn't specify WHEN you determine if the the contribution has been made. Is it implied that it is as of 12/31/2024? I think that is one reasonable interpretation personally. Note that they could have specified but did not. Worth noting that a safe harbor nonelective contribution is not due to be funded until the last day of the next plan year. So the funding theoretically might not even be done by the time the 5500 is filed, let alone by the last day of the plan year. Let's say the Plan indicates that the Safe Harbor is discretionary for the HCE's and that decision is made on December 15, 2025 (calendar year plan). What would I enter for participants with account balances as of the last day of the Plan Year for 12/31/2024 when I file my 5500 tomorrow, even if I wanted to count "receivable only" people as participants? My logic here assumes that the participants with account balances reported at the end of the year and the beginning of the year are the same. So really the counts of participants with balances is the count as the ball drops in Times Square (if you are on the East Coast). And I also use logic and ask myslef, is _____________actually counting receivable only participants when they are doing a cash basis 5500?? (Fill in the blank with any number of large plan providers out there.). I mean the answer is just for sure no. I've never asked ________ but I'm reasonably confident of the answer, which I guarantee is more based on systems limitations than a divine understanding of the 5500 instructions.

So you think that provision creates a balloon payment on the loan, and that is basically synonymous with a provision that says you cannot continue to repay your loan after you terminate. So the only reason to NOT have that provision is if the RK is repaying loans through ACH debits. this definitely sounds right!

Maybe once upon a time I knew the answer to this question but I wanted to ask because it just came up as a question on a call. We use the Corbel PT formatted Adoption Agreement and thre is an option for loans that basically says "all outstanding loans will become due and payable in their entirety upon severance of employment..." Can someone please explain to me why I have been checking that box on all of my plans for 20 years 😂 It doesn't change when it's taxalbe. I assume it doesn't affect a loan offset? Or maybe that's it.

Yes Kelsey I'm sure made it to the very last page, read the commentary and everything!

I am not ashamed to admit I did not make it to page 63 😂😂😂

https://www.thebenefitofbenefits.com/2025/09/clarifying-confusion-over-effective-date-for-roth-catch-up-contributions/ Apparently there were some articles out there with bad info...

My understadnign is no. W2 reportinb (Box 1) is completely unchanged. The participant is eligible to claim a deduction on their 1040. Same for overtime. I realize not all plans use the W-2 definition of wages but the same logic applies. This is solely a new deduction for people to claim. it is does not eliminate income.

I've misread that rule the same way you did, LOL. 9.5 months after the end of the year is October 15th. I've definitely fallen into the trap of "oh half way through the 9th month is 9.5 months." 9.5 months is ALL of September and half of Octboer. I assume you are talking about the deadline for missed deferrals on a plan with auto enrollment, correct? As for lost earnings, I think the easiest and adequate approach is plan rate of return. I wonder if your client and a client of mine had the same payroll systm. Literally the exact same thing happened to my client. It was bazaar and I kept asking how could this be?? But it be. It was a big correction for me, spanned a few years. Real nightmare. Had to recalculate the match too.

I agree with justanotheradmin. If the 100 hours is required in the first 12 months, you need to be careful because your document likely says "or else 1,000 hours in a plan year" and that's when the LTPT stuff will kick in. Please clarify.

yeah the checks have been cut and sent out to the participants probably a few weeks ago. Participants walking into HR is what set everything off. For sure checks have been cashed.

That's one so far, LOL. Just for the record what John Feldt says of course is 100% accurate. I have often described that there is in my view a spectrum of right and wrong. 0 is everything is done perfectly. Having a SIMPLE IRA for the employees in Company A, and maxing out the sole employee of Company B (who is the sole owner of both A and B) via a SEP for Company B clocks in at a 10 on this spectrum (maybe even an 11!). To me two identical SIMPLE IRA's for Landscaping Co and Real Estate Co is a 1 or a 2. In fact I would explain how there is really one plan in this scenario because a SIMPLE IRA is just a bunch of IRA's anyway. That 2nd Adoption Agreement? That was just an administrative workaround to get the naming right so the employees don't get confused. And I would mention banking information too. I have worked with a lot of people who believe the spectrum of right and wrong goes from 0 to 1. 0 being right and 1 being wrong. A Non-Highly is over-funded by $10? This must be corrected because it is wrong (and by the way, the TPA needs to charge $250 for all the extra work which clients will definitely appreciate). I would posit that there are ZERO plans out there who can boast perfection. I could probably come up with a dozen examples of these imperfections that a TPA will never know about in less than 10 minutes, things that are not detectable (Safe Harbor Notice actually sent? SAR sent? SPD to new participants? ALL deposits timely? That's 4 in 10 seconds). It is of course reasonable for a TPA to ASSUME the client is doing what we tell them, most of my examples reflect the reality not all of them will.

The "smart" thing to do was a stinking profit sharing allocation in the amount of available forfeitures. It is understood this was an unforced error...

So this happened. RK is saying the form that the plan sponsor signed is enough and likely constitutes an amendment. We're talking very small dollars here for a relatively small group. Not my favorite use of time, but if its legal not worth hiring the dream team of attorneys to fight it. So that's where my head is at on this one. And no it is specifically in the document today but also not too late to do an amendment of some kind.

The recordkeeper basically said the 415 regs cross reference the 1.457-2(j) definition of a participant for who can receive an allocation of forfeitures. I was not able to find that cross-reference. This is 1.457-2(j) (j) Participant. Participant in an eligible plan means an individual who is currently deferring compensation, or who has previously deferred compensation under the plan by salary reduction or by nonelective employer contribution and who has not received a distribution of his or her entire benefit under the eligible plan. Only individuals who perform services for the eligible employer, either as an employee or as an independent contractor, may defer compensation under the eligible plan.

We are being told that it is acceptable to reallocate forfeitures on a per capita basis to anyone with an account balance, even if their 415 comp is zero for the current and prior plan years. Has anyone come across this before? If so what is the basis for allowing it? Curious as to why it works. I have heard this from a big recordkeeper and an ERISA attorney has confirmed it is also doable.

I would just say that people do not know when they are going to retire when they are even 40 years old, let alone 25. If you're getting to be 55 and 60 years old, absolutely you should be sharpening your pencil. 65 seems as good a guess as any is what I mean. I also would say that your date of retirement probably is not as important as how long you're going to be among the living :). So if you're life expectancy at 65 is 25 years (God bless!) then I would say your investment strategy would probably be the same whether or not you stop working.

Bruce1 not sure what the motives are here. 1) Is it the names? So for example if one company is a landscaping business and the other is a real estate agency perhaps the employer names would be confusing. I'm sure others would think I'm way off base but if you kept all elections perfectly identical (including the same provider) and had two "plans", the term "no harm no foul" does come to mind... The IRS rule is obviously to make sure both companies are treated the same. What would the IRS correction be if two identical plans were used, one for each entity? Everyone was eligible for the same SIMPLE. To all of those who say "What is the big deal it's just a name" I would only say they may very well have a reason where if you heard it you might say "oh that's a good reason, I get that." 2) Is it banking? I would assume the financial institutions can handle this.

From ERISApedias text book (which I highly recommend--I found this in no time using their AI feature!). Corrective Distributions After April 15. If excess deferrals (and income) for a taxable year are not distributed by April 15, the taxation and distribution rules change drastically. First, distribution of the excess deferrals is not permitted after April 15 unless a normal distributable event under Code 401(k)(2)(B) (i.e., age 59-1/2, hardship, termination of employment, or disability) occurs. Second, for tax purposes, undistributed excess deferrals are treated as if they were proper elective deferrals when contributed. This means that they are taxable income to the participant when they are distributed. The effect of these rules is that uncorrected excess deferrals are taxed twice: first in the year of deferral and then when distributed. Excess deferrals that are not distributed by April 15 also are treated as employer contributions for purposes of Code section 415 when they are contributed to the plan. [Treas. Reg. section 1.402(g)-1(e)(8)(iii)] Example: Suppose that Roberta (from the prior example) did not receive a distribution of her excess deferrals before April 15, 2018. The excess deferrals would remain nonexcludable in 2017, and would be part of Roberta’s taxable income in that year. The $2,500 excess that was already taxed may not be distributed from the plan to Roberta until she experiences a normal distributable event under Code section 401(k)(2)(B). In 2022, Roberta attains age 59½ and can take a distribution of elective deferrals from the plan. If she removes the $2,500 at that time, it is taxable income in 2022. (The exemption from including the distribution of excess deferrals in income that existed if the distribution is taken by the following April 15 evaporated when the distribution was not timely made.) As a result, Roberta is effectively taxed twice on this amount – once in 2017 and once in 2022.

I think the problem is the IRS has not answered the question explaining what this means. We are left to guess. I like your chances a LOT more doing this exact thing via -11g which as I mentioned below includes a far lower bar which the IRS has already informally blessed. From the 2010 ASPPA IRS Q&A: A company sponsors a discretionary profit sharing plan that has tiered allocations and utilizes cross testing to show nondiscrimination in amounts. Owners are allocated a contribution equal to their 415 limit. All other participants are allocated a contribution equal to 5% of compensation, which satisfies the gateway minimum. The Plan fails nondiscrimination testing. The plan could have passed by providing a 6% contribution to all eligible participants, instead of a 5% contribution. Is the plan sponsor obligated to correct the failed testing by contributing more to the current participants, or is it permissible to put in a corrective amendment and permit entry and provide a 5% contribution to an individual who was previously ineligible (assuming that would permit the plan to pass nondiscrimination testing)? Either proposed correction is possible, but both probably require an amendment to the plan that satisfies Treas. Reg. § 1.401(a)(4)-11(g), in both form and timeliness. In form, such an amendment generally either confers additional benefits to existing participants or existing benefits to additional participants. In either case, the amendment must be both “definitely determinable” and nondiscriminatory.

For the plans I was referring to where I am doing the LTI disclosures outside of Relius, I found a way to export all of the amounts that I needed into an Excel spreadsheet. I was never able to automate the calculation (nor did I need to because I could pull them from Relius).

I don't know you have to offer a QDIA as the default for auto enrollment... We were just on a webinar where that was what they said. HEre is Ilene's write-up from a while ago. https://ferenczylaw.com/flashpoint-and-not-a-moment-too-soon-in-fact-a-little-late-mandatory-automatic-enrollment-guidance/ The QDIA Requirement and Plans with No Participant-Direction The MAE rules require that the automatic enrollment structure meet the requirements for an eligible automatic contribution arrangement (“EACA”), including both the permissible withdrawal provision and the requirement that there be a QDIA for automatically enrolled participants. This begs the question: what about 401(k) plans that don’t provide for participant direction of investments? This question is not answered. The MAE Regs reiterate the QDIA obligation, without much elucidation. This clearly requires practitioner comments. Until the final regulation is issued, Ilene and Derrin think it would be a reasonable interpretation of the statute for a trustee-directed plan to invest automatic deferrals in QDIAs, without expanding to allow participant direction of investment. Actually, maybe it is ok. I just don;t know what that last sentence means. Is it as I suggested that you can have a balanced allocation and meet the rule? I am pretty sure that is what she is saying. A balaced fund is listed as one of the available QDIA's (target date funds being another).

414A(b)(4) An eligible automatic contribution arrangement meets the requirements of this paragraph if amounts contributed pursuant to such arrangement, and for which no investment is elected by the participant, are invested in accordance with the requirements of section 2550.404c-5 of title 29 [ie., a QDIA], Code of Federal Regulations (or any successor regulations). Are pooled trustee directed plans gone for good? That's too bad because they were a real cheap way of getting a small 401k plan in place. Participant direction is expensive (investment advice, recordkeeping, etc). Also what if the pooled plan was invested 50/50? Isn't a 50/50 option eligible to be used as a QDIA?

-11(g) benefit requirement: (ii) Benefits not reduced. Except as permitted under paragraph (g)(3)(vi)(C)(2) of this section, the corrective amendment may not result in a reduction of an employee's benefits (including any benefit, right, or feature), determined based on the terms of the plan in effect immediately before the amendment. That's a lot different than a statutory requirement to increase accrued benefits. Again the point is taken that what does any of this mean in the context of a discretionary contribution, however, I like my chances much better based on the -11(g) language, especially since there is a lot of history on using -11(g) as described (including IRS Q&A's where they said it was acceptable--some ASPPA thing right?). Anyway I kinda like my "Suzie gets 7% amendment" where Suzie is not presently eligible for an allocation. That seems like the winning ticket to me. Not sure if anyone else sees it differently.