austin3515

What does it say about future plan years? Anything?

Unless you don't do a sweep and the IRS says your plan is disqualified. Seems unlikely but who knows.

I have done a lot of research on this and talked to more than one attorney and this seems to be landing as follows: 1) When mandatory auto enrollment is being added to a plan that was effective before the EACA was effective, a "sweep" is not required. This can happen when either a) new plans established after 12/29/2022 with auto enroll mandated 1/1/2025; OR b) when a new plan is not subject to auto enrollment right away because of the <10 Employee exception and the new business (3 year) exception. 2) When mandatory auto enroll applies to a new plan on the effective date of the Plan, a sweep is required. The law is less clear to me here, but if a Plan's Elective Deferrals are effective 7/1/2025, then there must be an active EACA on that date. So everyones plan entry date is 7/1/2025 and if no one is enrolled on 7/1/2025 then the plan did not include an EACA on 7/1/2025. That part I think is straightforward enough regarding why a sweep being required makes sense. I had suggested in one conversation limiting application of the EACA to people who would have become eligible on 7/1/2025 even if the Plan was effective years ago but no one liked that idea (and thus not doing a sweep). I personally think it works but I don't want to go too rogue. I am somewhat surprised that there is not a lot more conversation and a lot more articles on this very topic. This is going to be front and center really now as we establish new plans. I am curious to know if anyone has come to these same conclusions or something different. Too bad the IRS is letting us squirm without any guidance. To me, to sweep or not sweep is the most important question facing our industry today. Please discuss!

I am of the same opinion as you 👍

I am asking them why it's "ok" to do it without a signature anyway. The Adoption Agreement is signed, etc. I'm ust surprised its not even referenced in the Consent documents or even incorporated by rerenced in the Adoption Agreement or anything. Where this started is that cash balance cycle 3 documents have no space for employer signatures anywhere and no option to add it. Anyway we are new to FT and I am just plain curious as to why its ok.

I see that now, thanks! Nothing for QDRO's right?

We just started using the FT William 401k docs. I was somewhat surprised that neither the loan procedures nor the QDRO procedures has a place to sign. Similarly, there is no incorporation by reference of either one in the basic plan document or the Adoption Agreement. Nor are they approved/adopted as attachments to the resolution/consent to action. I was just curious if anyone had pondered this before. I had asked FT "Where are these procedures actually adopted by the Employer" and their response was basically that the IRS had approved the appoach (which obviously is true!). I mean I trust them of course but would be happy if there was a straightforward answer to this question...

I answedred my own question but I thought this was interesting enough to share: Participant takes a loan from the 401(k) Plan to pay for the higher education expenses of their dependent or themselves or their spouse. Why does this not qualify as a "Qualified Student Loan"? Answer: SECURE inddicates that the following definition applies to qualifying student loans: 221(d)(1) Qualified education loan The term "qualified education loan" means any indebtedness incurred by the taxpayer solely to pay qualified higher education expenses— (A) which are incurred on behalf of the taxpayer, the taxpayer's spouse, or any dependent of the taxpayer as of the time the indebtedness was incurred, (B) which are paid or incurred within a reasonable period of time before or after the indebtedness is incurred, and (C) which are attributable to education furnished during a period during which the recipient was an eligible student. Such term includes indebtedness used to refinance indebtedness which qualifies as a qualified education loan. The term "qualified education loan" shall not include any indebtedness owed to a person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer or to any person by reason of a loan under any qualified employer plan (as defined in section 72(p)(4)) or under any contract referred to in section 72(p)(5).

Well i will say if they got rid of the auto enrollment rule that would be ok with me (I would be over the moon actually). Auto enrollment already exists and the related infrastructure. IT was only a question of whether it was mandatory.

I've been talking about that as the worst possible outcome of all. Hundreds of millions have been spent on this across the industry. I personally have spent tens of hours discussing it over the past 2 years with clients, adding Roth etc. I will lose my _________if that happens with any of these rules, and I hope Empower and Fidelity and the rest of them will join me.

I'm not sure I even know what that means. I'm telling my clients to follow limits. What have they agreed to not enforce?

I'm not questionning whether or not the limit works as described, I'm only bemoaning the fact that they chose this one limit to handle differently (yes I know Congress wrote the law and the law says what it says). But again, we have to agree that this is most unfortunate and will necessarily lead to confusion. I mean talk about a nuance. This is defintely going to trick people.

I get all of that, but literally every other limit relevant to 2025 activity was just released. Save this one. A "guru" confirmed what you guys said above. But it is wholly inconsistent with every other limit ever released for 50 years of ERISA. It's just never been done this way. Surely everyone can agree that that is unusual? For example, the HCE threshold is precisely analegous. If you make more than $160K in 2025 your an HCE for 2026. There is literally no difference for this Roth comp threshold in terms of how it is applied.

"The Roth catch-up wage threshold for 2024, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in section 408(k) or (p)) for 2025 must be designated Roth contributions, remains $145,000." Why aren't they telling me today what the 2025 limit is, since this rule is first effective in 2026??

yeah i came to the same conclusion. (9) Required distributions.— (A) In general.—A trust shall not constitute a qualified trust under this subsection unless the plan provides that the entire interest of each employee— (i) will be distributed to such employee not later than the required beginning date, or (ii) will be distributed, beginning not later than the required beginning date, in accordance with regulations, over the life of such employee or over the lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary). And then 402A as amended by S2.0 basically says that 401a9 is implemented without regard at all to the Roth accounts. So any distriubtions from Roth are not from the employees interst in the Plan for purposes of 401a9. Interesting question but I agree with you.

Participant has $100,000 total, $50,000 Roth and $50,000 pre-tax. Their RMD is $5,000 based solely on their Non-Roth Account (made up number, don't try and recalculate!). Can they take the $5,000 distribution from their ROTH account to avoid the taxation?

Where I personally land is that we all seem to agree that the law does not say there is a requirement for a sweep. You only have people who are saying it was "probably what they meant." I fail to see how anyone can be faulted for applying what the law actually says. Now if you limited your EACA to anyone whose last name started with a Z I'd be concerned for you.

I didn't fill in the whole process but for those who opt out, the plan sponsor has to go into the website and document an affirmative election for 0%. I know Empower for example permits that. I've been using a simple opt out form like this for a while for a client with auto enroll, but a large group of field workers who never use computers for work, and who would not want to be auto enrolled in general. They all sign my little one pager opting out and then the sponsor records it on the website. This prevents the recordkeeper from entering the auto deferral on payroll. Its not great to add the extra step, but it's a lot better than the alternative.

The biggest issue by far is that to opt out, one has to a) read the materials; b) comprehend the materials; c) have the ability to login in to whatever website it is that requires the election; d) have the technology to do that login. That excludes a huge swath of the population. Mind you I have clients who successfully completed MEDICAL SCHOOL who are excluded from this class. The traditional employer who adds auto enrollment (other than by mandate) has robust employee communications, not a huge amount of turnover, employees making well above minimum wage (let's say more than $50,000). Then, when they get auto enrolled, they were already aware, and they're not worried about paying the rent. IF they were, HR had the time to help them opt out. Everything at MacDoodles is the complete opposite of this.

Thank you Peter! I want to offer some context here. I am really concerned about this going into 2025. The following example is not at all unusual. Clients for 20 years have said "I cannot add auto enrollment, this is not right for my demographic." And they were right, they knew their employees. Let's assume an entrepreneur owns 50 MacDoodles and has 100 people a year become eligible. They ALL make minimum wage (or within $2 or $3 an hour of minimum wage). Let's assume the Employer is not as "aggressive" as I am proposing they should be in giving every opportunity to opt out. Does anyone disagree that rather than being over the moon that their employer cares so much about their retirement years, the employees will instead be calling payroll to find out what moron messed up their paycheck which is now a full $15 less a week? providing these people with instructions on how log into some other website is just not going to cut it. We all need to find a solution for this. This will not go well, I promise you. This is a disaster waiting to happen for a client like this.

You might say the only thing they are opting out of is automatic enrollment. That's probably a better way to put into words what I am trying to do.

Peter does "re-write" require the plan sponsor to "check" everyone to see if they opted out regardless of this language though, right? My goal was that after the employee finishes their onboarding employee paperwork (I9/W4 etc) they have a very short list of people who would be auto enrolled. So the goal is to allow people to make a broad statement that they don;t want to be auto enrolled - either because they don't want to contribute at all, or want to pick their own rate.

A lot of bigger companies use onboarding/hr systems that guide people through filling out employment paperwork. And some of them have a very low paid demographic for whom a "blind" application of auto enrollment would result in a nightmare for clients. People making minimum wage have trouble paying for rent and groceries. How do we feel about a form with the following options (paraphrasing)? The point would be to get them to respond and make it easy for them to opt out. There are often language barriers and technology challenges, etc. By intialling here _____________,I confirm that the following statement applies to me: I understand the automatic enrollment provisions of the Plan and I do not wish to be automatically enrolled in payroll deduction contributions, nor to have my contributions automatically increased each year. If and when I decide to contribute to the Plan I will make an affirmative payroll deduction contribution election. If no election is made above you will be automatically enrolled in the Plan as described in the Automatic Contribuion Arrangement Notice.

You could consider it profit sharing if there was an objective of not taking money away from someone. Subject of course to any allocation conditions and nondiscrimination. Obviously if there is a vesting schedule on profit sharing etc. you'll want to move the money to their profit sharing money type. We've been pretty accomodating to clients who do not want to take amounts (especially small amounts) away from NHCE's. I know if we had overfunded someone's account by $100 I would not want to go to that person tell them I screwed and take $100 from them. Most (but not all) of my clients have shared that sentiment...

Well here we are with 3 months to go. Any more clarity here? This is insane that this question is not answered. It's go time...