austin3515

FWIW I have the opinion of a very well known pension guru that although you can never guarantee the IRS would agree with it, it should be reasonable to assume that the last day / 1,000 hour rules are reasonable business classifications. They also agreed that if we arbitrarily brought in one of them to pass a rate group (not to pass the ratio percentage test) that that would blow that position up and average benefits for coverage would not be available.

BG is this it, from 2015? 7 Participants in own Allocation Group Question: A plan document provides that, for allocation purposes, each participant in his/her own group. There is one participant who will be receiving $0 contribution. Does this preclude the plan from using the average benefits test to pass sec. 410(b) coverage (we know it doesn't preclude the use of that test for general nondiscrimination testing)? The issue is that excluding someone by name is an unreasonable classification for purposes of the average benefits test (Treas. Reg. sec. 1.401(b)-4(b)). Proposed Answer: It's a facts and circumstances determination. If in a single year a single participant fails to receive a contribution, it is not considered to be an exclusion of the individual by name and, therefore, it is not an unreasonable classification. If, however, a participant receives a zero allocation consistently for a period of years, the plan's allocation procedures may be considered a de-facto exclusion by name, which is an unreasonable classification for purposes of the sec. 410(b) average benefits test. The plan would be forced to satisfy IRC sec. 410(b) by meeting the ratio percentage test. IRS Response: To be discussed from podium

Awesome! What year did you ask the question (if you remember)? I can try and download the Q&A,

This seems really surprising because so many practitioners eliminated allocation conditions to add flexibility. This would seem to me to be a very significant disadvantage for this approach. LeEt's assume my coverage ratio is 50%. And Belgarath, my question assumed bringing in the term was to pass a rate group, not to pass the ratio percentage test.

Damn good question from someone in the office: Plan has no conditions but they exclude people from getting an allocation if they have less than 1,000 hours or term before last day (not top-heavy). But, the plan is now below 70% for coverage. I realize there are Terms with Breaks because last day/1,000 hours is not the "sole" reason they're not benefitting. But can I use the Average Benefits Test based on the conclusion that excluding people who have less than 1,000 hours or are termed is a reasonable business classification? Follow-up: Does the answer change if I bring one of them in to pass a failed rate group test?

My consultation is this proram is a pain in the neck and not worth the time or the effort. Same policy for 15 years on thousands of plans and it hasn;t failed me yet 👍

But do I have RSVP 👍 That;s the question. And telling clients to be better is a dangerous client relationship technique in my experience so I'll probably tread lightly there. But again $750 in fees (at least) for a $150 interest calculation for a 4 day late deposit is just way out of whack in my judgment.

I can't put my fingers on it now, but in the old later the last paragraph made it 100% clear that response was voluntary. "The purpose of this letter is to give you an opportunity to self-correct" was the language I wasn't crazy about.

I have generally found the VFCP experience to be horrible. They nitpick you like crazy. And the clients who have a lot of late deposits are teh same clients where nothing ever ties out. Our fees have to be at least $750 to do the whole thing which is nuts for a deposit that was 4 days late and interest of $150 (or less).

Client got a letter from DOL about late deposits. The old version made it clear that no response was required. This has a little more of the "respond or else we're coming for you" interpreation. Has anyone else gotten this letter? This is the first one we have received. If this is the new version of the old approach it would be tempting to use the same solution (not respond). Curious to know if this is just a new template to get a higher response rate or they are really coming after clients who do not respond.

yeah it was a credit card limit. the fee was $4,000 so that was pushing them over their cap.

Funny you say that because I did ask him to try the ACH method. I was also surprised that it even let him pay with a credit card with no apparent mark up since Uncle Visa would take a cut.

I have a client who has not been able to process his payment since Friday, and has a tried a few times. Anyone know if the site is down? He finishes entering all of his info on the DOL side, he goes to the IRS pay.gov site and enters all of his credit card information and then it tells him there was an error processing.

If you call a lack of guidance hypochondria then sure I'm a hypochondriac. We've seen the IRS side in favor whatever their deepest convictions are of the meaning of something (whether we agree with them or not (best example was that QNECs couldn't be funded with forfeitures)) with zero regard for what is practical and/or. So I'll feel better when I hear it from them. Now if you'll excuse me I have a hang nail and I believe it requires some stitches so I've just called an ambulance 🤪.

I never started a thread like this for any other legislation. This is different. It's insane. It's impractical. I promise you when I tell clients they have to auto enroll and auto increase participants they are not going to start a plan. Heck half of my new start-ups are SH Match based on the idea that participation will be lousy. That and the fact that automatic enrollment is completely beyond the <50 population. I have clients with 300 employees who could not handle auto enrollment (generally because they have enormous amounts of turnover). We are not overreacting. IT is every bit as bad as we say.

That is the case as far as I know. If you contribute $15,000 and have $5,000 recharacterized as catch-up, you need to be taxed on the $5,000 AND have the money moved to the Roth source. It's on the list of bazaaro world requirements. Am I wrong about that? I hope so!

Good call! The train has indeed left the station!

I'm a little nervous that so many people are factoring this in for retirement... Someone in my office is saying the same thing. There might be a mass exodus of talent as a result of this too. Quite frankly if I was 64 I'd probably retire too.

The poor recordkeepers and payroll providers have to program their systems starting now to be live 1/1/2024 with no guidance. And since we STILL have no guidance on the LTPT rules I am not optimistic that the guidance will reach us in any sort of time frame that will be of any use when we most need it. We need it by the end of April at the latest. This LTPT thing especially needs tons of clarifications.

Absolutely perfect choice of words.

Listening to a presentation today on SECURE 2.0 and I left with the impression that this is literally impossible to implement. Anyone else? Between Roth as catch-ups, match as Roth, mandatory auto enrollment (with Auto Increase to boot), 37 new distribution options that you can only take once every 3 years. Sure I'm exaggerating but only a little. I just can't see implementing this stuff with a small service business that has 25 employees.

That was helpful!!

Mine was a copy/paste from an article FYI

OK but at what point does the plan administrator conclude tey do not have actual knowledge to the cotnrary? If I was a 3(16) I would conclude it doesn;t make any sense for me to opine on the actual knowledge to the contrary piece because why would I? Anyway I love this new provision and I can;t wait to find out how to use it!

Of note here is that the plan administrator must therefore be the one signing off on these distributions. Not sure how that will go over with the folks who went down the 3(16) rabbit hole (we did not).