AlbanyConsultant

Interesting. I suppose that might be a reasonable thing to say if the match was discretionary - I'll have to check if this one is.

Something I would have been sure of yesterday, but now... Plan has been around forever and fails ACP this year. The 2023 match has not been deposited yet, but the affected HCE has plenty of match source money from previous years. The platform is refusing to process the refund because the contribution to which it refers has not been deposited. is that a reasonable position to take? Thanks.

If they just said that their contract doesn't allow it, that would be one thing. But to say that it's "illegal" is another. And the withholding thing is a separate matter entirely. It's clear that we are dealing with people who don't know the rules - either the regulations OR what their contracts specify. I'm a little concerned that it's taking so many levels of escalation to find even a passing familiarity with the law. I do agree that we have to work within the bounds of the platform's contract - if they can tell us what they are, that would be nice!

I found a somewhat related post here, but what I've got is a little different. One-person plan, Roth deferrals and profit sharing. The sole prop (who is age 50+) has 2023 net Schedule C income of $29,000, and he wants to max. My pension software tells me that his 1/2 FICA is $2,100 (rounding), therefore net compensation is $26,900. Can he do the entire $29,000 as Roth deferrals? I think it triggers the catch up rule that it can't cause a failure in the year allocated... but I've never seen it applied to 100% of compensation. If not, I can split it and make some as profit sharing, but it would be simpler to be able to have it all one money type. Thanks!

We're currently on hold with our client and a platform that I'll call This Retirement Platform. The plan has a terminated participant who has a less than $5,000 vested balance. It's an ERISA plan (there are ER contributions). It has taken us several DAYS to get someone to accept that this is legal. I wish I was kidding. Currently, TRP (by which I mean This Retirement Platform, of course, not naming names) is telling us that such an transaction (a) has to be medallion guaranteed due to "some 2020 law", and (b) must have 20% withheld because it's leaving the 403b plan - yes, even if we're sending it to a rollover IRA. They can't cite the actual authority for either of these positions oddly enough. Has anyone dealt with a retirement platform that has tried these tactics before? Any success pathways (other than "no, give me your manager") or tips to share? Thank you for allowing me to spill the Tea; it's a hard Row here, but I guess the Price was good at some point. Thanks.

First time I've seen this... Client sends me a Quickbook payroll detail with a line for Tuition Assistance in the "Employer Taxes and Contributions" section (the section that shows things the ER pays, like the company part of medicare, the company part of SS, 401k match, etc. I asked about it, and the client said that this was the up to $5,250 that the ee can get without being taxed. This was new to me, so I did some research and found this (I didn't keep where I found it, though; I just copy/pasted it to a Word doc): Anyone familiar with this kind of thing? "Reimbursement" is what I'm focusing on. The client has three employees getting this, all over the $5,250 threshold. Let's say one of them is at $7,000. Do I need to count $7,000 or $1,750 somewhere? I'm thinking "no", and I'd like to assume (ha! I will try and confirm) that no part of this is in the Gross Pay. If it matters, the plan uses W-2 comp and also excludes "taxable employee benefits" from comp. Any guidance is appreciated, thanks.

Thanks!

Allow me to rephrase: I tell them that the plan administration is much simpler and more beneficial to the owners if the staff are all paid out of only one entity, but they have to do what is legal and correct on the payroll side. I'm not qualified to determine if any company is a valid stand-alone entity; if questioned, I defer that to their tax attorney or accountant. I think that's outside the purview of plan consulting if they are representing to us that their business model is OK. I don't think that would matter here - I've got a W-2 and a zero (or negative) K-1. I believe that the consensus would be to ignore the K-1, though I think that's not actually in written regulation anywhere.

I've got this cute little MEP with two adopting employers - it would be a CG except that they are owned by different brothers. It would be an ASG except it's a construction business so it can't be. So MEP it is. In Co1, two brothers have a partnership that always operates at a loss. In Co2, all four brothers own an S-corp and earn $500K+ each. They finally have non-union employees who are becoming eligible. Presuming they listen to me and only pay them from Co1, then top heavy is a non-issue. No keys have any benefit in Co1's portion of the plan (because they never have positive income there). And... the fact that these same partners are putting away the max through Co2 is not a problem. Or is it? I've got something nagging at me about maybe there IS aggregation here, but I can't find anything in any MEP resource that supports that. If I'm only imagining it, that would be great. LOL

Interest rates may come down at some point. I've got a participant who is asking if they take a residential plan loan now for 20 years and the rates drop over the next two years, can they refinance the remaining unpaid balance at the lower rate? The plan does allow refinancing. I've seen several discussions here and have reviewed 1/72(p)-1. It seems like this is not well-defined. I mainly wonder if since there is no acquisition at the time of the refinance, is it limited to five years at that point? Thanks.

This is a very topical topic! I've got a 403b plan with 200+ participants that currently uses the "20 hours per week" exclusion... except that they don't currently have anyone working less than 20 hours per week, so it's been a non-issue. They are anticipating getting a "significant" number of per diem employees due to offering new services - no exact number yet. The plan has both a match (100% up to 4%) and an employer contribution (3%). I'm trying to convince them that removing the exclusion won't be a big deal - the likelihood of the people working 500 - 1,000 hours deferring (and therefore getting the match) is not great, and we can exclude the PD if we make the allocation class-based and if they are less than 30% of the total NHCE population (and that's even assuming they meet the one year to be eligible for the match and employer contributions). Am I overlooking something with this concept? Or should I just leave it alone because as long as they administer the 20 hours/week provision correctly (which they have pretty much no experience doing), this all becomes a non-issue?

The sponsor of a PEO MEP is bringing about a new client that already has their own 401k plan. It's a small plan, but very messy, with provisions that are not part of the MEP (e.g., vesting, distribution options). I'm thinking that we can't tell them to terminate the 401k and then join the MEP - that might run afoul of successor plan rules. But what about if we terminate the 401k and tell all the participants that they have to rollover into the MEP? Or is there another way around this (other than amending the MEP to allow for all sorts of strange things for this one adopting ER only)? Thanks.

I've come around to the idea that we don't NEED the actual SSN for participants with no account balance. What I am concerned about is (a) the client remembering to give us SSN for those with balances and the correct consistent unique identifier for the others (since that will take manual work and review), and (b) the plan sponsor letting the individual employees make the choice on an individual level (I don't want participants to start thinking they have control over the administration of the plan). Mainly, I don't trust plan sponsors, and I dislike participants. Oh, and I distrust the IRS/DOL. Other than that, I love this job. LOL

These people do not (as of now) have an account balance, so there won't be any 1099-R. If they do decide to defer, they would have to provide the SSN to the investment company to set up an account. They won't get an option at that point. So that solves the 1099-R issue. I certainly understand the plan sponsor's desire to try and keep private information private. But you can't let the inmates run the asylum. The employer has to be able to make certain decisions without input from the employees. Should they make the decision to share PII carefully? Of course - if seeing our security protocols would ease their minds, I have no problem sharing those. For the ~15 employees they have (though I don't know about turnover), it doesn't seem like it would be impossible to agree on a separate identification number and apply that. I like the idea of suggesting it as an additional manual task that requires a small charge. Thanks. All this is reasonable. And I'm not trying to be unreasonable about it. So, ultimately, there is no need for SSN to be used as a unique identifier as long as there is a different unique identifier and its only purpose is in our system. It has just become a convenience (as described in this humorous explanatory video here).

We're taking over a plan with deferrals and SHM only, and the sponsor is refusing to provide us with the SSN of participants who are not deferring. They initially didn't want to give us ANY data on them, saying that we didn't need it (sigh), but they are really digging their heels in with the SSNs. "We've asked the employees, and they don't want us to provide them". Is there an argument that we MUST get them? Obviously, we need some kind of entry to put into our pension software... but I suppose that could be a dummy number. I don't like the sound of that. I've outlined the main reasons that we would need the SSN (consistency in tracking, possible corrections, possible use of fund platform notice distribution services, it's just What It Is), but I have to admit that if I was an obstinate employer, they aren't exactly convincing that there's nothing a specific kind of random identifier number couldn't handle just as well. Any suggestions? Thanks.

For a calendar year NFP 403b plan, they want to make their deposit sometime in August (for Reasons). But they intend on filing their 990 at the regular deadline (5/15/24, 4.5 months after the end of the year). I know that in the for-profit world, this means that they can't take the deduction for it in the prior year, so they might run into a 404 issue in 2024. Does that apply to a NFP? Any part? Thanks.

I've got a PEO MEP. One of the members terminated their service agreement with the PEO effective 1/31/24. Is there some kind of timeframe or requirement that their assets have to leave the MEP? In case it matters: > There is a SHNEC deposited after we calculate it EOY. > They have not yet made arrangements for their portion to be spun off (no TPA or asset custodian chosen, etc.). > They have also not made arrangements for anyone to administer their spin off going forward, so I told them that they have to cease deferrals at least temporarily (because there is nowhere to submit them). I'm not 100% sure that is correct; is there a better option? I'm presuming this won't affect SH status since they will still all get 3% of full year comp when someone does the annual 2024 administration. Obviously, the PEO sponsoring the MEP would like them gone as soon as the product platform can get them out. Thanks.

I read that sentence as saying that you use the integration rate that fits with whatever you pro rated to. So in my case, 57% is in the 4.3% range, so I use 4.3%. If you were pro rating in, say, November, you'd probably still be above the threshold to get 5.4%. Thanks for the cite.

Well, if I don't have to resort to this, then I won't!

I'm doing a final PS allocation for a calendar year plan that was terminated 9/15/23. That was the final pay date before they were purchased, and all payroll stopped then, and the purchase agreement required that the plan be terminated as of that date. I couldn't convince them to let the plan run until 12/31/23. The PS formula is integrated at 80% SSTWB + $1. So for 2023, if it was a full calendar year, that would be $128,161. x8.5 /12 = $90,780.71 (or something like that, depending on when you add the extra dollar). The question is what to do with the integration level. This is below 80% of the annual limit, so do I have to use 4.3? Or do I get to still use 5.4% because it's 80%+ of the applicable limit once the pro rating is considered? My software gives me an error on the latter because 56.667% of the TWB is not at least 80%, but I know to always double-check things in tricky situations...

To answer some of the questions... This is a pooled plan, so no single participant individually is overdeposited. They look at their payroll for the month, multiply it by the percentage, and deposit that amount. Which is fine unless someone doesn't meet the hours requirement (in this case, someone left and came back so I told them the person was still eligible... but they ended up only coming back part-time and didn't meet 1,000 hours). "Forfeiting it" and holding it to credit the 2024 allocation is just a paper entry. I'm not sure there is an issue with non-deductible contributions because non-profits don't deduct. While almost a quarter of a century old (!!), I did find this discussion on these boards: https://benefitslink.com/boards/topic/4781-deduction-for-contributions-sec-404/ Kevin Donovan writes that it isn't applicable to an NFP, though there is a dissent where the Pension Answer Book is referenced (noted that the PAB has no citation)... and no further discussion. But since the PAB was brought up, I found an old copy (like, 10+ years old), and Q12:13 "Does the excise tax imposed on nondeductible contributions apply to tax-exempt organizations?" says that there is no excise tax applies if the entity has always been tax-exempt (there are additional caveats and such), citing IRC 4972(d)(1)(B), 4980(c)(1)(A), and a PLR 200020009. While I now believe that an excise tax doesn't apply, this is not a bad idea in general (if they were a for-profit) because the deposit was made due to a reasonable error in estimating compensation (well, eligible compensation). Thanks for the great answers, everyone. I think I'm going to suggest just leaving it in the plan as an excess deposit since there is no penalty to do so. Hmmm, I wonder if that will come back to bite me later when the NFP decides to front-load a large amount 'to be used next year'... nah, that would never happen, right?

I've got a NFP MP plan with an hours requirement to get the allocation. They make deposits during the year to estimate the annual contribution (it's a straight formula, so in theory this is easy to calculate each month). This year, they put in too much because someone ended up not working the required hours. So this is an excess contribution to the plan based on the formula, not the 415 limit for anyone (and not over 404, not that they have a deduction to worry about). Does it have to be refunded? Any penalty? I know the plan sponsor is going to want to let it stay in the plan; is that subject to an excise tax then? Thanks.

I'm so used to extending the termination date out to EOY that I didn't even think of pro rating the limits. Only 415 gets cut back? I'll have to have the purchase/sale document reviewed to see what it says, and then also to see if that's favorable for the owners. If they've already deposited their base deferrals for 2024, they could have already blown the pro rated 415 limit.

I've got a plan (only deferrals and SHNEC money) where the employer is undergoing an asset sale on 1/31/24. We were all set to terminate the plan on that date pursuant to the business transaction (so they can keep the SH for 2024). Today they asked if, since it's an asset sale and therefore they will 'retain the company' after 1/31, they can pay out bonuses after 1/31 through payroll (since they'll suddenly have a lot of cash and they are very nice to want to share it with some of their former employees) and how would it affect any plan calculations. It's not clear yet if they prefer it to be counted or not, but first I want to make sure I've got all the pros and cons right. I think that as long as the 'payroll date' is in 2024, it will get brought in as plan compensation under the post-severance comp rules (which are included for plan compensation). The employees are considered terminated on 1/31/24. Also, since they are retaining their entity (they are an LLC taxed as a partnership), they can effectively say it is open until 12/31/24 and therefore the plan also goes along with that. I'm fine with terminating the plan effective 12/31/24 - it might even give the partners some additional income if they collect money during 2024. But if they want to terminate the plan, say, 6/30/24, do they lose the benefit of the safe harbor since at that point, the plan termination is no longer connected to the business transaction? I suppose they could give a 30-day notice at that point - there are no active employees to get it, so they could just stick it in their files. I'm sure I'm overcomplicating this...

I asked Derrin about that section austin quoted and if/how that affects what he said in an ERISApedia webcast about 401k plans still having to go back to post-2020 years. I won't quote him directly since I don't know how much trouble I'd get in for that (I did just take an Ethics CE), but he reiterated that despite what that looks like it says, you go back to years beginning after 2020 for 401k plans and years beginning after 2022 for 403b plans.