austin3515

I did see that the IRS actually did publish a draft W-4 on which employees can estimate their qualifying tips and overtime to adjust their withholding. Additional research told me that as a technicality, amending the W-4 in this way does not affect the legal definition of wages for withholding--only a change to 3401(a) itself would do that. So the W-4 just allows employees to request lower withholding but does not exclude qualifying tips and overtime from the definition. I suppose 3401a could be viewed as a starting point, from which the employee can make certain adjustments. Anyway, that is what I learned from google and AI. Curious if anyone can validate. Were you all aware that when they said "overtime is tax free" they meant just the "half" in "time and a half"? So for example, if the pay is $10 an hour, $15 for over-time, it is just the $5 extra that is eligible for the deduction. I did not realize that. I'll bet there are millions of hourly employees who did not realize that. No one ever clarified (that I ever heard), and now the exclusion from income is 1/3 of what was communicated. Anyway, I definitely had no idea so figured I would say something to you guys!

If a plan uses the W-2 definition of compensation, then it is pretty clear that tips and overtime are included in Box 1 of W-2 and thus the exclusion of overtime and tips will not affect comp. But what about if the definition of comp is based income for purposes of withhdoling? If the IRS clarifies that qualifying tips and overtime are not subject to withholding, won't that create a problem? I am hearing that the IRS may do just that for 2026. I haven't seen anything written about this so I am very curious...

its funny because we use Relius but we've always used the 3 months of service and not worried about the difference. We're not calculating year end contriubtions for these plans. These are the larger plans that are doing pay-period match calculations, sans true-up. That's a general rule of course, never say never. If participant counts are off here and there that's not something I would worry about.

Unfortunately the months of service field on their system is a drop down where you have to pick a number. Our documents person came up with this though 1) Pick 3 months of service elapsed time for eligibility. 2) In the custom language addendum enter the following (paraphrasing, we are being more specific but hey trade secret!): For purposes of determining eligibility 3 months of service means 90 days of service. 3) In the SPD there is a custom language module where you can specify text that appears at the beginning of the Eligibility section before anything else ("Top"). In that custom language field you can type: "The term 3 months of service as used below shall mean 90 days of service." Still clunky but better than the fail safe language which will confuse anyone who reads it (because the obvious assumption will be that it is there because it is relevant).

uggh my bad. I think you are referring to my lack of consistency. It seems to be either 60 or 90 with the clients who are using this convention (or 30 of course). In paragraph e. (which is ____months of elapsed time) we enter the following exactly: “90 days of service –approximately 3 (three)” Then the SPD and the AA both say “90 days of service – approximately 3 (three) months of service” and the failsafe eligibility language won’t display.

I think I have a best possible solution. Not perfect, but ok and certainly better than what I'm getting today. In paragraph e. (which is ____months of elapsed time) we enter the following exactly: “90 days of service –approximately 2 (two)” Then the SPD and the AA both say “60 days of service – approximately 2 (two) months of service” and the failsafe eligibility language won’t display. I think that will work... Like I said not perfect, but good enough.

They said too bad so sad edit the spd in Word(non starter because we will never be able to edit every time we do a new amendment). Very disappointing. Tons of clients use days instead of months. No, the fail safe would never apply but the client is annoyed because the sentence makes no sense in the context. It’s literally the next sentence after “you’re eligible after 60 days.” Super disappointing.

We're asking them too 👍

We use FT Williams for plan documents (new to us) and we have a client who uses 60 days of service and not two months. We cannot find a good way to fit that in the document. IF we use the "Other" field, FT automatically includes the failsafe eligibiility language. It also does not give us the opportunity to elect Elapsed Time for eligibility. It seems as though the only way of electing elapsed time is to use something already hardcoded for months. And this employer has had the 60 days eligibility for 1,000+ employees for years so, no, they will not change to 2 months 🤣 Any suggestions appreciated!

The FT William pre-approved document allows us to select whether the Investment Fiduciary will be if not the Trustee. Has anyone ever seen this used to name someone other than the Trustee (my plan does not have a directed trustee). It looks like the default investment fiduciary is the plan sponsor. That doesn;t seem normal though because the norm is for the trustee to sign off on investment changes for example.

Oh well sure if there is someone who doesn't know what they are doing you can get into trouble. What I find shocking is that lawyers who do mergers and acquisitions for a living will frequently just ignore this topic altogether. I get it, there are a lot of moving pieces but bring in an ERISA attorney to focus on this (I mean if there isn't a solid TPA of course!).

For what? This is a stock sale, the have the 410b6C transition, and the entity has not yet adopted the Plan?

I guess our experiences are quite different. In my world, the acquired entity is rarely able to participate immediately in buyers plan. Often times the employees are told of the acquisition immediately prior to the acquisition (doesn't leave much time to enroll and make investment elections, even if the RK was able to get that new entity set up in time). And the administrative hurdles of adding new entities as participating employers means generally a month is lighting speed to get them onboarded (Census data, notices, banking info). These things take time in my world and only rarely take place immediately after the acquisition (Even if the sellers plan is terminated). And I am familiar with puts and 5 annual installments and the like, and I understand all of that. But this is an eye opener that literally no one sees what I am doing as the least bit productive or helpful. I'll do some more research.

I can't figure out where we are all getting out of line here. We all agree that the merger agreement controls. I am writing the merger agreement. For our documents, you just enter the merger effective date in the participating employer agreement (Corbel Prototype). What I am asking about is language in the effective date for the merger agreement and whether I can just say "coincident with receipt of the wire transfer." Everything you guys are saying I agree with. I definitely think it is me who is missing something here...

Is the bottom line here, what I want to do makes no sense? That's the message I am getting. If this makes no sense I'd be curious to here why this approach makes no sense. It doesn;t sound unreasonable to me.

Well if the main transfer of assets hits on 9/15/2025, then my merger effective date based on the language I proposed above would be 9/15/2025, and the residual "income" would belong to the surviving plan.

More typically in my experience, Parent buys Child. Child begins participating Parent's plan on 1/1/2026 (for example). Child's plan merges over a few months later (after a short cooling off period and blackout notices etc). Obviously the possibilities are endless but this seems to be the fact pattern I keep running into. For the reasons I explained above I tend not to have a merger effective date of 1/1/2026. But perhaps that is where we are differing. Probably you guys are merging the plans in on the same date Child begins participating in parent's plan (1/1/2026 in my example). I am treating the merger as a different event on a different date.

Just to clarify what does AA/PA stand for?

But I also agree with David Rigby? I am trying to have the merger agreements coincide with the asset transfer? I see a lot of merit to that approach. Perhaps I am on an island alone in that belief, but I am just trying to have the merger effective date coincide with the movement assets. So my question is does my proposed language meet that objective? Maybe there is something I am missing here, but what you guys are saying I agree with 100%.

It is relevant from an administrative perspective. I want Merging Plan;s 5500 to be based on Merging Plan's trust/custodian reporting. I want Surviving Plan's 5500 to be based on Surviving Plan's trust/custodian reporting. The merits of that approach can be debated but what is beyond dispute is that I prefer it this way, LOL. For starters, iff Surviving Plan is audited, the auditors probbly do not have to worry as much about that stub period since it will not be included in their financial statements (Reviewing SOC1s as an example, testing distributions for another).

A lot of participation agreements include a space for you to enter the merger effective date of a participating employer's plan (e.g. in the event of the acquisition of another entity's stock and the merger of their plan into the main plan). The challenge that is always there is we don't necessarily know exactly when the assets are moving (at least not in time to execute relevant documents). My preference has always been to have the merger effective date be coincident with the transfer of assets to simplify reporting and to not commingle the plans with 2 recordkeepers. Would an effective date of "Coincident with the transfer of assets from the trustee or custodian of the ABC 401(k) Plan, which is expected to take place on or about September 15, 2025." be sufficient?

For sure if that happened to me I would also let it lapse. Perhaps now that the IRS has been DOGE'ed that won;t happen...

I absolutely track my CPE but it is self-reporting the total number of credits in the cycle. Are they really expending a lot of entry reviewing the 300 of us who still have it? Seems like it would be a ridiculous waste of resources. [I am sure it is more than 300 but I assume not by much since they closed it off to new applicants.]

Great tip! I'll definitely sign up for these!

No, I used to work for a TPA but not anymore...