MoJo

It has been suggested that you can have two eligibility computation periods. One for everyone but LTPT, and a separate one for LTPT. There is no requirement that you flip to the plan year (or calendar year) after the initial eligibility period - BUT, can you actually have two different eligibility periods? I would suggest that if you do something different for LTPT, you'd also have to track them under the regular eligibility rules, because, oh, well, maybe they may actually get 1000 hours, and you'd have to treat them not as LTPT. Also, who wants to track hours on successive anniversary dates for EACH individual that may be LTPT.... And Dr. Kerkorian visited himself and is no longer with us. The lawyer who represented him advertises a lot (as an ambulance chaser) and is raking it in. He's in Michigan (where I have a vacation home, so you can't miss him). Amazingly, he doesn't tout his successful (mostly) defense of the good Doctor Death....

As we are reading this, for non-calendar year plans, for those hire after 1/1/21 and before the beginning of the plan year that begins in 2021, a LTPT worker can enter the plan on the first day of the plan year that BEGINS in 2023.... As an example, consider this (which Davis and Hartman (attorney's for SPARK) said seems correct (absent further guidance): Facts: Off-calendar year plan with a 7/1 anniversary date. The first plan year for which the long-term part-time provisions apply is the 7/1/21 plan year (the first plan year starting after 12/31/20). The plan’s eligibility computation period switches to the plan year after the first anniversary year. The plan has monthly entry dates. The part-time employee in question is at least 21. Example 1: (Participant A) Hire Date 2/16/21 First computation period 2/16/21 through 2/15/22 (do we have to count this period because it begins after 12/31/20 but before the 7/1/21 plan year?) If yes…. Second computation period 7/1/21 through 6/30/22 Third computation period 7/1/22 through 6/30/23 If the individual works 500 hours in each of these periods, they will enter the plan as a long-term part-time employee on 7/1/23 If this is the answer, this individual enters the plan before the individual hired on 11/16/20 (example 2) If no… Second computation period 7/1/21 through 6/30/22 Third computation period 7/1/22 through 6/30/23 Fourth computation period 7/1/23 through 6/30/24 If the individual works 500 hours in each of these periods, they will enter the plan as a long-term part-time employee on 7/1/24

Good... Not sure what e-sign service is in use, but when we add a participating employer, we do an "addendum" (not a restatement) and it requires two signatures - and our e-sign process specifies in advance who needs to sign, and routes the document as specified, automatically. If the same person needs to sign as both, we set it up with signatures in two places, and it can't be complete until both signatures are completed. If it isn't completed with a period of time, reminders go out, and it's set up with an expiration date - and well before the expiration date, someone is reaching out to find out why the document wasn't complete. Pretty straightforward - and the only problem we had was finishing up cycle 3 restatements (we did about 2200 of 'em) was ONE client who couldn't sign, because he couldn't get internet service or phone service on his skiing trip to the Swiss Alps, and there wan no other authorized signer.... Poor guy..... 😁

Was the adopting employer also required to sign the restated document (i.e. two signatures)? Was the e-signature not set up to do that? If not, first, I would "blame" the recordkeeper, and make them fix it (and we usually recommend a VCP filing to get approval for a retroactive amendment to cure). However, being practical as well, did the CFO sign with intent on behalf of both entities? I'm guessing when asked (prompted) appropriately, the answer is yes, and now it becomes a documentation problem. Gather the appropriate documentation to prove it, then do a clarifying amendment to make the AA match what the employer already says happened, and move on....

With all due respect to Relius/FIS, we've found them not necessarily to be the end all/be all authority on what can be, or must be, in a plan document (we are a major modifier of the Relius document). In any event, our position is, if the plan doesn't allow pre-tax for a "source: then it can't allow Roth for that source, per the discussion above.

What's a "pay phone"? What's a "collect call"? 😆

The problem with having two elections as it completely defeats the purpose of automatic rebalancing. The moment the next contribution comes in - and with each and every "new money" in transaction, you destroy the value of the rebalancing. And then, when the next rebalance occurs, you destroy the value of your new money election. As far as I know (and i have personal experience with Fido and Schwab), no one does automatic rebalancing with dual elections. If someone really wants to do that - do a manual rebalance (fund to fund investment transfers) without changing your new money investment elections. Not sure why anyone would want to do that, but that's really the only way to do it.

I guess I would question why the participant has elections for new money that are inconsistent with elections for existing money? Actually, we have no "elections" on file for any participant when they reallocate their investments. It's a one time thing that occurs on demand - and those "elections" are not preserved. New money is (apparently) where the participant wants the money to go - and we rebalance to that election as well.

It does depend on the office of the DOL involved. Some may take their time - but our experience is that ultimately it will hit their radar. Usually, at least for the DOL office where we have substantial business, they tend to "batch" the invites and send them all within a short period of time, 18 months to 30 months after the filing. And yes, they are easier to work with when you are there voluntarily. On audit, they have teeth second to none.

According to the DOL, the DOL calculator is only to be used in two situation. First, when a VFCP filing is being made. Second only when the other methods of calculating earnings are less than what the DOL calculator provides (i.e., actual earnings are negative for the period in question). Absent meeting one of those two scenarios, in the DOL's eyes the calculator is inappropriate. Since you'll be checking the box on the 5500, the DOL **WILL** invite thee plan sponsor to use the VFCP approach - and we usually advise clients to kindly accept the DOL invitation.

David Levine from Groom said about an hour ago on a PSCA committee call that he thinks there is an argument that this isn't the case (albeit a little convoluted in his approach) involving language that does exist with respect to catch-ups that "notwithstanding any other section" - and then goes on to "authorize" catch-ups. I believe he is interpreting the "notwithstandy any other section" to also mean "notwithstanding the lack of any other section." He didn't provide the particulars - but be on the lookout ....

I've actually found that by being "consultative" (an overused word, to be sure) and explaining things to them to be a good client relations technique.... Something about striving to be a "trusted advisor" by giving them what they *need* instead of what they *want*.

Well, first, if you have clients who have lots of late deposits, then it's time for a heart to heart with them about the FIDUCIARY requirement of being timely. It really shouldn't be hard - and with automated payroll, electronic submission of contribution data, and ACH pulls of contributions (even for smaller employers) it isn't hard. Second, what one must remember in doing a VFCP filing is that you NEED to always provide payroll summaries (from a payroll provider or program) showing the date the contributions were withheld, deposit confirmation showing the date those contributions were accepted by the trustee, proof of lost earnings calculations (usually a screen shot of the DOL calculator page, and a deposit of lost earnings confirmation from the trustee. We did several hundred last year - and while the first few were a little glitchy, we found that having everything templated and checklisted resulted in speedy no-action letters. I don't like having to do them - but clients need to understand the rules - and if you check the box on the Form 5500 (which you MUST do if you have a late contribution lest it someday be deemed no timely filed as not being 100% accurate), you will get the DOL invitation.....

I don't see this example as being any more stern than those we've seen in the past. Keep in mind that each regional office can have a different letter in use. It was just a few years ago that the Chicago office got into trouble by sending a "very stern" letter, which caused some backlash - and they changed it. Our approach, by the way, is to ALWAYS accept an invitation from the DOL when they are so kind as to invite you to their party. A VFCP is generally not too difficult to prepare, and provided you give them the right information concerning the deposits, earnings deposits, and excise tax (whether paid to the plan under the exemption or to the IRS on a 5330), the no action letter is "cheap" insurance. ...just don't file every year or they'll think you are incapable of playing by the rules....

Well, first, did a plan exist? Communication to participants is an essential part of establishment of a plan. If not, then there may be tax fraud, depending on how contributions were dealt with. If a plan did exist, misuse of employee benefit plan assets is a FEDERAL felony (and Ill look for the cite). In either event, I would 1) advise them of the error of their ways; 2) resign immediately, and 3) consult an attorney about your obligations concerning having witnesses/having information/evidence of the commission of a crime. Part of me also would also anonymously alert the DOL (their website lets you do that) about this situation (and I resist that urge almost daily....)

It is a nightmare. I work for a recordkeeper, and we do it both ways (but my preference (from a semi-compliance, semi-legal position) is that the money go to the employer to be processed and a W-2 issued in due course. This has the advantage of ensuring all the correct holding is done, per the W-4 on file, and any state or local taxes are handled properly. We do issue W-2's (for business where we custody assets - in a group annuity way) and Matrix Trust Company can issue W-2's for assets held in a trust, but 1) it uses only defalt withholding rates, and 2) occasionally a 1099 is issued, which then has to be corrected. I will tell you as well, because the participant may request a rollover (not available for these), the "factory" will process a rollover, and then it get's even more interesting. Best bet, pay the employer to pay the participant.

As a recordkeeper, we do the same thing - dual elections from the start. At the end of the year, if the participant hasn't met the criteria to be catch-up eligible (402(g), plan limit, etc.) we move the money to the regular deferral bucket until they do meet the limit. This will be a huge problem though, when catch-ups for those making too much (in Congress' eyes) are Roth.....

Yes, it most certainly is a deselection game - and unfortunately, often the law allows things that we must implement to be in the RFPO pool, but not much uptake. Qualified Birth or Adoption distributions being one. Maybe 10% of our clients have adopted, and we've had a grand total of 4 such distributions since they have been available - with no repayments. Consolidation is inevitable, but fortunately we're in an acquisition mode. Just depends on who is for sale......

Just from a recordkeeper's perspective - the things that bother us most are those that slice and dice plans/participants/retirees based on differentiators that are difficult to implement/track/monitor. For example, we now need special systems support to track the enhanced catch-up for those 62 to 64 years old. We need to track last years income in connection with whether those catch-ups are Roth (some will be, some won't). We need to revamp the whole catch-up protocol - as we currently use the one-bucket approach and adjust at year end if a plan/regulatory limit isn't met (and what happens if you have a Roth catch-up, and the participant doesn't hit a limit? We need to track participant elections on Roth employer contributions (some will, some won't). Same for employers who elect to offer that feature. We need to track start-up to see which need to be auto-feature plans (under 10 employee companies are exempt, but they grow - so is there a "spring requirement"? Same for businesses in existence for less than 3 years. We use Omni - probably the most sophisticated r/k system around - and it will require significant updates to accommodate much of this (and FIS only does that for newer versions - which will require some r/k's on older versions to upgrade (at a cost). And then there are the payroll providers.... They are behind the eight ball as well.... The games has begun and our cost estimate for implementation is well into seven figures....

I like Cuse's suggestion to discuss with the estate representative whether they will be filing a claim, and if so, begin the process of determining between competing claims (culminating in an interpleader if required). Also, the estate may shed light on who the "natural bene's" of the descendent were. and if the named bene (the friend is not among them, that would raise suspicion in my mind). This one is a tough one. Not too much can be disclosed to anyone unless and until a determination of who at least a probable bene is - otherwise, it could be a release of NPI to a wrong party....

Ohh, if only......

I just had to laugh at this - not because david doesn't speak the truth - but rather 1) it's a "deselection game" being a recordkeeper, in that whether a plan sponsor want's a capability or not, advisors/consultants design RFPs with everything legal (and some that aren't) and if you can't check the box "yes, we can do that" you run the risk of being "deselected" and 2) we've already gotten inquiries from advisors through to our sales people asking when we will have this available..... We don't like this (Christmas Club accounts are impossible to administer in a recordkeeping shop) but we dislike catch-up Rothification even less (as do payroll providers).

Cost and complexity (distraction from running a business) are the two most often expressed reasons for not having a plan. Secure 2.0 will effectively increase costs and increase complexity. The answer to the OP's question is, in our humble opinion a resounding: YES.

If the plan allows for distributions of after-tax, he can effectuate the conversion by a distribution directly to a Roth IRA. Two ways to do it - in plan, and distribution (but only if distributable per the plan provisions - which applies to any pre-tax money to be converted as well).

Not to muddy the waters further (or actually, to state the obvious) - to whom would you issue the 1099 to? Until the court decides, you don't have a recipient who is responsible for paying the taxes....