austin3515

Well they have a 100% of 4% safe harbor match. And then an additional 4%. That's a stellar 8% and I don't have to tell you that's a heck of an employee benefit. So if the owner can get a few thousand bucks more legally by applying the 4% as a cap, they're not going to sweat the possible confusion for their 6 employees (in this case only one of whom would be capped). Anyway thats where this idea and logic is coming from... Not sure if it changes your view of the situation.

But you are not really matching 80% of the first 6% in that case. I am matching 80% on the first 6%. The owner contribute 5%, so 80% of his 5% is 4%, I don't see why you don't just communicate the match as 80% of the first 5% because that's what you are actually doing in this case and you would be withing the rules. Because the document is Rigid Discretionary and has 6% hard-coded. Thoughts?

I cant imagine the right answer to the plan sponsor making a mistake is to force the rollover to be cashed out. Return the funds to where they came from, a Roth IRA. Thats the correction. And for something as straightforward as this I would argue it is an eligible inadvertent failure. I know the IRS gave some guidance o nwhat that means and I confess I did not read it before posting this, but by golly this has to fit in there.

I know but the question is does the cap operate to cap individuals at 4% OR does it preclude the match formula from being more than 66.66% of 6%? This is the language in my Adoption Agreement (Corbel 401k Non-Standardized): If the "ACP test safe harbor" provisions are being used (i.e., Question 28.b. is selected), then the Plan will only take into account Elective Deferrals up to 6% of Compensation in applying the matching contribution set forth below and the maximum discretionary matching contribution that may be made on behalf of any Participant is 4% of Compensation. Honestly thins language to me says I can do an 80% of 6% match as long as I cap each individual at 4%.

I had to look it up on the IRS chart, and yup Roth IRA's cannot be rolled to Roth 401k accounts. Wicked dumb but there it was.

Isn’t this the kind of thing that can now be self corrected at any time under SECURE 2.0? I’m not sure but I thought you would be able to.

There must be some record keepers out there reading this. It would be great to know how you all are handling this. It seems like if the withdrawal and election are not coordinated you’re going to get a lot of tail chasing…

Business owner only contributes 5% of pay. If I do an 80% match on the first 6% of pay (plan uses Rigid Discretionary, so 6% is hard-coded), the owner gets a match of 4% of pay (80% of the 5% he contributes). There are a couple of participants who contributed 6% of pay or more. Am I prohibitted from using a match of 80% of the first 6% OR a, I simply required to impose a cap on the NHCE's of 4%? I can't believe I've never seen this scenario before!

Interesting question but it seems but it seems hard to believe that a RK would allow such an election without a concurrent election to stop contributing...

If the plan has a sophisticated recordkeeper that is tracking eligibility AND deferral elections then obviously it is doable. Even better if there is a 360 bridge. But the reality is many employers do not have that kind of capability available to them. So for example, there might be a recordkeeper, but they may not be tracking eligibility because the requisite data to do so may not be exportable from payroll in a useable format. Without full censsu data the RK cannot track eligibility and if you can't track eligibility than the RK cannot track auto enrollment. Oh and even if the RK can track eligibility and deferrals the employer has to be super meticulous about always checking the RK for any deferral elections that were made (because emails get lost, missed and diverted to junk). That's really hard to do if you have 15 employees (perhaps 5 contributers?) and one change every other year. Bottom line is all but those with the most robust reporting capabilities really must use the 10% approach because the reality is they cannot track auto enrollment/increases on their own (i speak in general terms obviously some people can do this). And I promise my description of the technology requirements above excludes a LOT of plan sponsors. ergo a LOT of employers should be using this 10% approach.

Same. There is zero chance that a small employer is going to be able to track automatic enrollment, much less automatic increase. This is not my assessment alone – this is their assessment as well. They are very busy making widgets, and hopefully making money. This is not how they want to spend their time.

Oh boy I did not catch that (I wait for smart people like y'all to read them and tell me what they say, more efficient!). From Ferenczy, give this article a read for sure. https://ferenczylaw.com/flashpoint-and-not-a-moment-too-soon-in-fact-a-little-late-mandatory-automatic-enrollment-guidance/?utm_source=brevo&utm_campaign=Flashpoint Mandatory Automatic Enrollment Guidance&utm_medium=email I thought that the government would interpret the rules to permit a plan to exclude those who were participants when MAE came into effect from the automatic enrollment. Derrin was less optimistic. Derrin, it turns out, was right … for the most part. While the MAE Regs require the broader enrollment, the Preamble clarifies that, if the plan did not apply MAE to participants who were already in the plan but did not make an affirmative election, they must do so by the first plan year for which final regulations are effective (e.g., 2027). Moreover, the default deferral rate for these employees must be computed as though they had been subject to MAE since 2025. The complexity of administering this timing, and for participants to understand it, will likely be a source of confusion and operational failures. It may make sense just to cover the right people under the MAE provision sooner rather than later. [1 point for Derrin, half a point for Ilene, -1 for anyone that has to track this.]

Our Relius Doc as well. To put it more generally, yes, if your pre-approved document has the option. A lot of the more simplified "bundled" providers will not include that option.

Let's talk in laymens terms. They wanted us to do a sweep as of 1/1/2025, not just prospectively?

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?