AlbanyConsultant

I'm not seeing anything specifically on this, so maybe that's my answer, but... Company with 7 regular full-time employees and 5 full-time union employees. Are they considered "normally employing" enough people to trigger mandatory automatic enrollment, or do we get to not count the union employees (presuming their retirement benefits are properly subject to their collective bargaining agreement)? Thanks.

That is something I literally never even considered. I will raise it to the UK company, but given that they intend to terminate the plan and pay everyone out in the next six months, I don't think that they are going to take this step.

Thanks, Peter. It was a stock purchase, so the UK company has all responsibilities. I know I don't know anywhere near enough law to know what that entails for the UK co to operate in the US. The UK people have been making all the decisions (for the plan and otherwise) since they made the purchase. At least functionally, they are as much in the know as any other US-based client. I am quite sure that all of my clients fully review the 5500s that I prepare for them and scrutinize every response to ensure that they are knowledgeable enough to sign the 5500. Yep, that's what I'm going with. LOL

US company was purchased by a UK company and we're winding the plan down. The US people are all gone - at least anyone in any management capacity. Can the person who is handling the plan at the UK company sign as Plan Administrator (and/or Plan Sponsor), or does that have to be a US citizen? All I can find is that it has to be signed under threat of perjury, which makes me think that the signer must be subject to US law... Thanks.

I have a very similar situation (though less fowl-based)... but the HCE owners do intend to participate. They also, unurprisingly, don't want to cover the visa employees. I suppose they're out of cluck?

Thanks!

A CPA that I work with asked me this question. I don't do 457b plans, but here's what I think is the correct response - figured I'd get the experts here to check me on it. He picked up a personal tax client who is a participant in government 457b plan. The person is an attorney who also owns 50% of a law practice. He is maxing his 457b deferrals ($30,500 in 2025). The law practice has a 25% Keogh (I didn't realize anyone still had a plan called a "Keogh plan"). Is there any interplay between the contributions that has to be considered? From what I can see, no; in fact, he could get a max employer allocation under the 457b plan (if allowable by the plan document), and then get his 25% under the Keogh. Can I get a confirmation or a correction? Thanks.

I've got a MEP that allows for self-certified hardships. A hardship request will go from the participant to the recordkeeper to us (TPA) to the MEP sponsor and then back to the recordkeeper for processing. Fairly standard. Found out today that the MEP sponsor will reach out to the adopting employer to say something like "hey, Participant is looking to take a hardship, maybe you want to talk to them about it", and sometimes they do and they arrange for a bonus or company loan so that the participant doesn't have to reduce their plan balance. I don't think I like this. I don't like that it introduces a possible level of unfairness (does every participant get spoken to?), maybe it blurs the line of investing advice ("don't take a taxable distribution, do this instead"), and maybe even some kind of privacy issue (though I'd think a participant should expect that they are requesting a hardship is pertinent plan administration information). But I can't say for sure if this is actually black-and-white wrong, or if it just feels icky. Thoughts? Thanks.

I think LTPTE determination starts on the employee's date of hire or 1/1/21, whichever is later. Kind of like plan eligibility: if you work a YOS (or whatever) before the plan starts, then you are eligible for the plan on the first day of the plan (ignoring amnesty dates and such).

Unfortunately, we're getting closer to the 1/1/26 buzzsaw of required Roth catchups for the Highly Paid Individuals (or High Earners, whatever). I get that it's allowed to not make these participants complete a new deferral election form if they have elected pre-tax deferrals - the plan sponsor has the authority to cut them off at the base limit and then take any additional deductions as Roth. And for especially large plans, that might be the most practical method. But what about smaller plans? Does it "feel" better to allow the participant to sign off on something, or is just a note telling someone "hey, this is what's going to happen" sufficient? I'd really rather not make this a 'case by case' thing because it's already enough of a pain to deal with. Thanks.

OK - all the usual pitfalls with insurance. Got it. Thanks. Well, the plan came from a low-cost, "do it yourself" kind of platform, so I'm sure that everything was properly reviewed and tested. *eyeroll*

@Peter Gulia, do you mind elaborating on this? In the few plans with insurance that I've seen (where it's employer money paying the premiums), the employer sends the money for the premium directly to the insurance agency and the difference to the rk of the rest of the assets. What's the difference here?

Taking over a plan where some participants have insurance policies (the broker "forgot" to mention that, grrrrr). I asked about PS 58 costs and the sponsor told me they were not necessary because the employee pre-tax deferrals were covering the premiums (being sent directly to the insurance company instead of to the recordkeeper). I've never heard of that, but I know very little about insurance other than I don't want to deal with it. Anyone want to confirm or debunk this? Thanks.

And, speaking of this [dead] guy, is he exempt from the new SECURE rules about paying out within 10 years?

Thanks. So we could use the eldest beneficiary's age in 2018 to determine the 2018 RMD, and then subtract one from the factor each year?

100% owner died in 2017 at age 90 - he was obviously in RMD status. His two sons (who became 50-50 owners of the business) were/are 50-50 beneficiaries of Dad's account. Dad's money is still in the plan (it's a pooled profit sharing only plan). The change in the SECURE rules is throwing me off. How do we determine the RMD factor for, say, 2025? It looks like the date of birth for the oldest son has been used, but I'm not sure that's correct. Thanks.

That is definitely the road I'm taking.

Sounds like the closing already happened (and the seller's plan was not terminated first). PE rep says that they "didn't consider" how the seller's plan would affect their own plan, which... sounds irresponsible. Like, is this their first time or something? That is an interesting position. Does the same apply (at least in their minds) if the PE has other businesses? In my head, I'm likening it to the controlled group situation where there's a foreign parent who also owns other US-based businesses. "Oh, it doesn't matter because we're not in the US." Yeah, but your other company is... Thanks to you both for the suggestions and ideas.

Just got told that a client was purchased by a private equity firm. Does this present any issues other than the usual ones when one company buys another? And of course the impact on the safe harbor 401k plan was not discussed pre-transaction. I mean, why would it be? *eyeroll*

I believe that you have to show that each deposit passes nondiscrimination testing... which could be a lot of extra (billable!) work. Actually, now that I write that out loud, I'm not so sure of it. Take the plan that deposits a flat 2% profit sharing each pay period to ensure that they'll meet gateway at the end of the year. Then we run the year-end calc and testing and determine it allows an extra 3% to the partners... can they not make that deposit? That seems incorrect. Well, anyway, I use the first part of this logic to prevent a lot of during-the-year-deposits.

The number of "solo 401k plans" that are referred to me that are missing restatements is disheartening. When I explain the issue and cost to correct it, almost every single one has elected to go back under their rock and hide (hopefully at least getting a current restatement, for their own sake). I have to presume that these solo 401k vendors are doing the bare minimum and sending the sponsor some kind of correspondence about a restatement... but no follow-up because their service agreement puts all the responsibility onto the sponsor. "But I saved a couple hundred bucks on administration!" Good trade-off. *eyeroll* Yes, this is a pet peeve of mine.

Plan allows for immediate distributions, and participant K separates from service and takes her money out ASAP. Now we're doing the annual admin, and she is due $40 in safe harbor nonelective. If the sponsor puts it into her account, it will get eaten by distribution fees; K will never see any of it. But I don't think that the sponsor should benefit from this situation. Is there a best practice for doing something relatively meaningful with this $40? Thanks.

We're still discussing how to fix 2024, but now I'm looking ahead to 2025... Employees get two paychecks per month: one of regular salary, and one commission. Can we write a deferral election form to specifically say that "I elect to defer X from my salary compensation and Y from my commission compensation"? I'm guessing that the document can't actually say Y=zero because that's really just an exclusion. But I'm thinking if the participants choose it (without being coerced or pressured, of course), then we can amend the comp exclusion out, and it's just the per payroll SHM on the deferrals from salary compensation. I acknowledge that this is kind of shady, and that an IRS agent might not love it under audit, but I'm thinking it's defensible (if the plan sponsor really wants to be that aggressive). How out of line is this thinking?

There are some threads here that come near this, but I can't find anything that really gets to this situation... especially with a safe harbor plan. Plan excludes commissions from the definition of compensation for all sources - deferral, safe harbor match (deposited per payroll with no true up in the AA), and profit sharing. For the first several years of the plan, the owner and child have had 50%+ of their total compensation paid as commissions, so 414s would always pass as most NHCEs have commissions of 10%-20% of total comp. Until now; in 2024, child is not paid at all, and owner restructured so that all his compensation was regular wages. Sure, I can point to the caveat in my letter each year that this is a terrible idea and only is valid due to the large percentage of commissions that owner & child take, and let us know if that changes... but now that it fails, what actually happens? There's no PS for 2024, so that's fine. There's no ADP test, so is there no effect on the deferrals? Plan sponsor insists that all participants understand that there will be no deferrals on commissions. For the SHM, I presume that I have to calculate it on an annual basis including all compensation. But here's the thing: that might end up lowering the deferral percentage and therefore the match (example: deferring $2,500 on $50,000 elig comp yields 5% and you get the maximum match; now if we compare $2,500 to $83,000 total comp, that's 3% and you get a lower SHM). What's the right way to proceed with this? Thanks.

OK, now I'm pretty sure it's optional. If I'm wrong, I'm sure someone will helpfully correct me.