AlbanyConsultant

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!

Is it oversimplifying the concept that plan with an elapsed time eligibility provision is not subject to the LTPT rules? I seem to have picked that up somewhere, and I haven't seen it debunked at any webcast. Thanks.

I think I'm getting confused with how this works and tracking all the moving parts... Calendar year 401k, SHNEC, PS plan for a partnership that we took over this year. As we're reconciling it, we notice that the 2021 employer contributions were not deposited in 2022 - presumably they were deducted. We've always taken the position that the SH has to be corrected so that has to be deposited ASAP with corrective earnings. Fine, that's easy. On PS... since the deposit was not made by 9/15/22, the deposit is subject to be counted in both the 2021 and 2022 annual addition limits. But it wasn't deposited in 2022 at all... so there's no effect on 2022? I assume this now becomes a SCP issue (it's small enough overall in the plan - we'll get to that in a minute)... and so even when they make the deposit now in 2023, it's under SCP and I don't see where that affects their annual additions limit (I just assumed it should, but most corrections don't). So I must be missing something. It must be somewhere that this would count towards the limit, otherwise any plan that missed the deposit deadline would just wait it out a couple of months and correct via SCP. [Yes, the SH would also be in the same 'count towards annual additions' as the PS. And, in fact, some of the partners' deferrals are in the same boat, too, so they've got late deferrals to add on top of this.] So... I think it should be that all the missing 2021 deposits have to be made now, and they will offset either the 2022 or 2023 annual additions limit (their choice) by participant. That feels right. Nice to see that in black & white, though... or to have the actual right answer, either way. Thanks.

Completely agree that service in the union counts as "service" for our plan definition - we had always assumed that if a person was "union" then all their compensation was paid through the union and therefore they met the exclusion for collectively bargained employees (and obviously if they switched to a non-union position, that service counts towards eligibility). It's the finding out that this plan is paying their union employees some non-union wages at the same time they are getting paid union wages that is the novel thing for us. Well, it's only 40+ union employees (vs. the 3 office employees) going back 15 years to the start of the plans (yes, DB and DC). How bad could this be? *eyeroll* And maybe some attorney fees just for good measure. It's a shame the prior TPA is out of business...

It's our first year with the plan, and they said "we have X number of union employees", and as usual union employees are excluded from the plan. We were going to let it go at that (i.e., they are union and were with the union all year long, so we were going to take it as read that they are able to be excluded) until we saw the payroll report that showed these employees with "regular" compensation and we asked for more information. In our experience, to the best of our knowledge, in all our plans, if you have been a union employee for the entire year, then all your compensation has been union compensation (or, at the least, all your hours have been union hours). Maybe we've just lived a charmed life that way. Or you don't know what you don't know you don't know. We would never have thought this was common. I would think that there could be a difference between getting non-union pay and working non-union hours. But in the case I've got here, they clearly are saying that at least some of these people do have non-union hours worked. I'd love to refer them to an attorney to get this reviewed, because it will probably be much easier to correct if they are administering it incorrectly on their end (as in it should be all considered union pay and they owe past money to the union hall) than to fix the plan for the past 15 years.

A plan sponsor is telling us that their union employees are getting non-union pay for small amounts of pay during the same pay periods as they are getting union pay - a couple hours of 'regular' pay, some bonus pay, some sick pay. This is not being reported to the union hall, as they are saying it's for non-union work. This isn't something I've knowingly seen before - if you're a union employee, I've always figured that your compensation was union unless you switched in or out of it during the year. But I'm not a payroll person, and I'm no labor expert; is this really a thing? I've seen it for prevailing wage work, but not for union people. Do we need to be asking our clients if their union people are really 100% union? Or at least putting that assumption in small font somewhere? Thanks.

I thought I had seen this discussed here previously, but I'm not finding it... We offer plans the ability to have our participant loan fees (both initial set up and annual maintenance) paid directly from the accounts on the recordkeeping platform, or some plan sponsors offer to pay the fees themselves (usually when there are few loans, or it's a tight-knit group). And then sometimes this kind of thing happens, where the plan sponsor was paying the fees... and then at some point they decided that was stupid and started having the participants reimburse the employer for those loan fees on an annual basis once they got our invoice (it's itemized enough to show the fees for the loan charges, so it's not hard to figure out who the loan charges are for, especially for a small plan). Of course, they don't tell us they are doing this until it is mentioned accidentally in a conversation and my distribution team person has her eyes pop out of her head. She offers to change the plan so that the fees come from the accounts, and is told that, it's OK, this works for us. So... does it, really? The loan policy DOES include our loan fee in the amount that is being charged to participants (both at setup and annually), so maybe it does... though it does say that fees are deducted from the accounts from which the loan is taken, which is not correct, so we'd have to modify that. But it's not on their 404a5 fee disclosure from the recordkeeper - only the recordkeeper's loan fees are shown. And I don't think they'll let us add our fees there unless we are charging them from the plan accounts. So my overall gut feeling is that this is danger zone territory. Or, does the fact that this is handled "outside the plan" make this a moot point? That feels wrong just typing that, but I think that's their rationale.

If the participant isn't electing to withhold anything now (understanding that withholding isn't mandatory on a hardship), can the amount taken still be grossed up to include an amount to cover taxes to be paid later? I see discussions here on how to actually figure out how much is an appropriate amount to gross up - we're going with a simple 20% of the amount requested, for better or worse. But I don't see anything that says that if you're not electing to have the taxes withheld now, that takes away the ability to have the distribution increased for the taxes that will be due, so long as you're still under the amount that you have available under the terms of the plan. Right? Thanks.