AlbanyConsultant

I would love for them to move to full vesting, but they are holding firm on wanting to preserve the old vesting schedule if possible. If I hadn't just taken my Ethics refresher, I might have said "Whoops, not possible, sorry; have to fully vest them!". *sad*

Thanks!

emphasis mine What? I don't think I've seen it interpreted that way.

I think this hits the nail on the head. Thanks. I'm thinking that I can write the amendment to "only" look back to 2021 because it's still more inclusive than the current rules. Unless, of course, it only catches HCEs.

I had forgotten all about this; I didn't find any good answers. I think in the one case I was discussing, they decided to not amend prior returns so it ended up being a non-issue for me. I was happy to hear that!

The biggest obstacle to these is that the plan sponsor and the broker never realized that VAT is subject to ACP testing. So while the owner might have the extra bucks to contribute as VAT, the employees likely won't (and there's no reason for them to 'defer' as VAT as opposed to Roth) and therefore the testing fails. Even including SHM in the ACP test may not be enough to pass. I only use this with one-person plans; I have yet to encounter a situation where it will work otherwise. I'm sure they exist somewhere, just not that I've seen. And for a one-person plan, depending on the compensation it might just be easier to do it as profit sharing and then convert it.

I may have out-clevered myself. We have a bunch of plans with a YOS, 1000 hours eligibility requirement. To avoid LTPTE issues, I suggested that an option was to change the definition of YOS for eligibility to 500 hours. Still gets to keep employees out for 12 months. As I'm writing an amendment to implement this, I realized that this could be more sweeping than I realized: does the plan sponsor have to go back to each person's DOH to see if they meet the new requirements? The EOB says that if you are making eligibility more stringent, you have the option to grandfather in the prior eligibility requirements for those who have already met them (and there are threads on this board that support that). So... if I'm making them more loose, do I also have that option? It seems reasonable. And if I do... then can I limit the looking back to plan years starting in 2021 (basically, the LTPTE period)? Since I'm making the plan more inclusive than it needs to be, I'd think that is OK, too (making good language for that is not easy, but I'll figure it out). I don't want to have to determine if someone worked 550 hours in 2010 and has been at 400 since then. Thanks...

Relatively confident. The MEP passes payroll data including hours each pay period, so the RK would track it just for this transferred source and update vesting automatically. Would I prefer that it all have to be 100% vested? Sure.

That wasn't particularly helpful. Under "Special Vesting Rules", we have 14.05 deals with the 'transfer of assets' (if you have an ASC document, that's what I'm reading); the relevant part is: Subsection (d) outlines "Qualified Transfer"; the Participant getting to make their own decision regarding transferring or not seems to be an important part of this, and they are not getting that right, so it seems that this isn't applicable. That's why I was hoping there would be some kind of rule like if the one plan itself was changing vesting - it spells out who must get the option to keep the old vesting schedule. I'd love to take the lack of specificity to mean that we can bring over the old money and keep it according to the old plan vesting schedule... but at the same time, I wouldn't be heartbroken if something clearly said "must all follow the better vesting schedule".

Hi. I've got a stand-alone plan that has 6-year vesting (2/20). They are merging into a MEP run by a payroll/benefits firm that has 100% immediate vesting. What happens to the vesting for these people? For new money, I presume that it follows the MEP vesting. What about the old money? Thanks.

My understanding is that for a plan started before SECURE 2.0 (and therefore grandfathered in for not being required to have automatic enrollment if over 10 employees), if they add an automatic enrollment provision voluntarily, then LTPTEs are not subject to the automatic enrollment. I don't see anything in the proposed regs that counters this. Am I correct with this? Thanks.

We generally write our plans' loan policies to say that in the event of a participant termination, the loan can be rolled out of the plan - this way, if the participant finds a new plan that will take it (which is a big "if" in its own right), they can transfer the loan to the new plan, establish payments, and not have to deal with the extra taxation. It's a rare moment where I care about the participant. LOL Thankfully, it doesn't come up very often. But we just learned that one recordkeeping platform that we work with will not play nicely with this - their policy is to default the loan due to non-payment and then 1099-R it. They claim it is due to a system limitation. Obviously, we have to issue new loan policies to all these plans to say that they cannot do this. So... could this be a protected benefit and therefore not allowed to be cut back? I figure that since loans themselves are not, then the disposition of them shouldn't be, but I thought I'd see if I was overlooking something. Thanks.

What? Something clearly stated in the instructions? Inconceivable! LOL Thanks.

OK, this one is on me - I started a new 403b plan for a NFP that was winding down their 401k, and I accidentally used plan number 001 in my document. Of course, the 401k plan is using that number, so I should have used 002. Therefore, 002 was not extended for the 12/31/22 5500-SF. Whoopsie. Isn't there a thing where you can use the corporate extension instead of the 5558? And doesn't an NFP have an initial filing date of 5/15, which then gets extended until at least 10/15? This sounds familiar. Is it available for a NFP? Thanks.

I've got a MEP where two of the adopters have to leave the MEP immediately. It's a 3% safe harbor plan. Do they make the 3% SH based on 1/1-9/30 compensation to the MEP, or can it be set up so that the entire 2023 SH is made to the spinoff plan? Thanks.

My co-worker who understands MEPs best is retiring. The rest of us have picked up enough to be able to run them, but are there good resources for in-depth information? I've already got the sections in the EOB tabbed... Thanks.

When running cross testing and need to use the average benefits percentage test, do you have to pass using the same method as you passed 401a4? Ex: pass cross testing only by using the annual method imputing permitted disparity, but one rate group is at 50%. In the ABPT, only the allocation method with permitted disparity is over 70%. Since I have "a" passing method, am I good, or do I have to make the two line up so the same method is used for both tests? Thanks.

Thanks! And interesting side notes. I think in my case, the 5% spouse is not even paying the bills... but I'll double-check.

I came here to ask this almost same question... except that I'm looking at the 3% SHNEC. It's a MEP where the new company started up in 2022 and immediately joined the MEP (with immediate eligibility for deferrals and 1 YOS/semi-annual for the SH). Owners and some employees were hired in June 2022, and the rest (including a daughter of the owner) in Sept/Oct 2022. The only twist I have is that HCEs are not eligible for the SH. If the daughter does not defer in 2023, I think in that year I can satisfy the rules because the only HCE in the otherwise excludable group won't be deferring. For 2022, I think they are doomed. One of the owners deferred $15K in 2022... and only took $28K in compensation (the rest was on his s-corp K-1). Since everyone is otherwise excludable, the HCEs are in that group and therefore it has to be testing. And it's going to be top heavy because none of the employees deferred anything substantial... so at least I'm going to call the 3% TH a QNEC and help with the ADP a little. Anything else I can use or look at? I was really hoping that HCE exclusion would help. I agree with not designing a plan this way, but sometimes we don't get to change provisions on a takeover (like this). @pmacduff, I can't quote the reg, but in the EOB it's Chapter 11, Section XIV, Part I.6. I'm looking at the example in 6.a.1)b) for the SHNEC version.

I'm working with a partnership that is split 95%/5%. I'm being told that the 5% partner isn't really an employee - they perform no services for the entity. I think that I'm able to exclude them from any plan consideration, yes? Does your answer change if I add the detail that the two are married to each other? Thanks...

Thank you!

Maybe because I see this so rarely now, and partially because I mix up my 415c and 402g deadlines, but... Just got word that a sole prop who had already deposited $27K in pre-tax 401k deferrals for 2022 is going to have a negative Schedule C net income. This is the double-tax situation, where when it is distributed it's taxed for 2022 and then again in 2023 because it was refunded after 4/15/23... ? Thanks.

The plan document for the ERISA 403b plan says that distributions are only allowed in lump sum payments. However, the RK is allowing participants to take RMDs in installments or annuities (and in excess of the RMD amount, which is a separate issue). Is there an overriding provision somewhere that allows this regardless of what may be in the plan document? Or am I going to have to amend my document to line up with the RK (which is probably the easier solution, but I am interested in the actual answer, too!). Thanks.

Fairly typical situation: someone at the plan sponsor misinterprets the eligibility rules, and New EE is allowed to defer long before the eligibility provisions allow. The plan sponsor is OK with correcting this via a retroactive amendment (it's just one person and this is the first time it's happened for this plan). The plan is a 3% SH that we calculate (and they deposit) after the end of the year, and the plan is also top heavy. 1. If the amendment is limited to allow the affected participant to defer only and doesn't 'bring him in' for any other contribution (including the safe harbor), is the plan still a valid safe harbor plan? 2. If yes to #1, then might we also lose the top heavy exemption? I've got a sense that an EPCRS SCP correction shouldn't cause a failure in the plan, but that seems like it shouldn't apply here because we're still doing administration for the year in question. Obviously, the simple answer here is to make the amendment say that he's eligible for the safe harbor as well (especially since he's going to get 3% as top heavy minimum), and that's usually what we do, but I'm just making sure of their options. Thanks.

Ah - it's my limited understanding of all the nuances of elapsed time that is what is tripping me up. Thanks!