Lou S.

I'm not aware of any restrictions beyond what the Plan may or may not allow on sources eligible for conversion. It may be that you need to set up a special source in the Plan something like "In Plan SH Match ROTH Conversion" so you can properly track any in-service distribution restrictions of the original source money.

It's been a while since I researched but if my memory is correct for HCEs you count the full amount for all testing including ADP, 415 and any other nondiscrimination testing, even if properly refunded.

Does the Plan require true up based on annual pay? If yes then you need to follow the document and give him a true up. The Plan can limit to compensation to while he is a participant but a non-deferring participant is still a participant. So if he entered 1/1 but didn't decide to start contributing until 7/1 he's still a participant as of 1/1.

Timing. 10%, let them figure it out with their tax return.

Yes it's possible that the plan could require 70 1/2, 72, or 73 depending on operation and conforming amendments. But my understanding is that if the plan document follows an older rule for RMD because of the document they can continue to make the payments but they are eligible for rollover and subject to the 20% mandatory withholding. Maybe I'm wrong in that understanding.

In this case it's all the same as the participant is 73 in 2023, is a non 5% owner, and has separated service in 2023. Under original age 70 1/2 rule, Secure 1.0 - 72 rule or Secure 2.0 - 73 rule, I believe you would get the same result in this particular fact pattern.

My memory was off on Self correction by amendment, you can't correct in-service by retro-active amendment to conform to operation, it's you can amend hardship retro active to conform to plan's operation, and only if it was primarily for NHCEs who were affected. So in this case the only "correct" way to fix is through VCP. Now if the client finds the resolutions he adopted in December 2022 terminating the Plan in December 2022 and gives them to you, I'll leave it up to you whether you want to walk away from the plan or play audit roulette. As for the failure to get Spousal consent, the fix is to get Spousal consent. If the spouse can't or won't consent the Plan is responsible for paying the spousal benefit.

Can you amend for in-service (assuming he is old enough) and get election forms completed (with spousal consent if applicable)? Then terminate the Plan? I "think" both of those issues are eligible for self correction under EPCRS. The other option which might be more prudent on your part is to refer him to ERISA counsel and then walk away.

I don't see a problem with it.

Did the new rules change the RDB? I thought it just raised the age from 72 to 73. So if he is 73 in 2023 and separates service in 2023 wouldn't he need a 2023 RMD with an RBD of 4/1/2024? Am I missing something?

I think that is the rule for a discretionary match. For a fixed match you can go over 4% but can't match on deferrals over 6% of pay. There are a few other conditions in the code but those seem to be the big ones.

It sounds like the match fits the exception §401(m)(11) and does not require ACP testing but you can double check to make sure you meet all the requirements.

No, you are using prior year testing and the prior year NHCE percentage is 0%. Probably should have amended to current year testing before the end of 2022.

Oh I agree it is very likely to get done. It's the timelyness of it getting done and the forthcoming guidance I worry about. I mean we are talking about a Congress debating whether or not it is a good idea to pay its past bills after all.

Yeah that is probably what will happen. However I think it might be important to note that it is the prior congress that passed the law and the current congress that will be responsible for approving the technical corrections and the nominal guy in charge of the current House was pretty outspoken against passing the law in the first place. Again I think it will get worked out like it usually does but given the acrimony and dysfunction in today's Washington I'm not sure it's a given.

I'll take a stab at it and I'm assuming a calendar year plan since you said calendar is stability period. This is how I would calculate it. Take the benefit at 9/1/2015 and adjust to 12/31/2015 at the AE in the document for 2015 (2015 table and rates) This becomes his protected floor benefit at 1/1/2016. Actuarial increase from 1/1/2016 to 12/31/2016 at the AE in the document for 2016 (2016 table and rates) Repeat each year until 12/31/2022 Actuarial increase from 1/1/2023 to 3/31/2023 at 2023 rates. Check each benefit to make sure you don't exceed 415. You "probably" don't, given the starting point, but the with 9 years of increase the 100% of pay limit could come into play. As for lumpsum. 3/1/2023 benefit from above times the APR using the 2023 AE and check against the 415 lump sum max.

Oh I think that it is a given that seller and buyer have different ideas about what was supposed to happen and how they want to resolve going forward. I was just hoping there might be some kind of road map on how to proceed. I mean I have some ideas but none that I know for sure are kosher so to speak so I think Bill Presson may have hit the nail on the head. But is anyone has gone through something like this before and would like t o share how it was resolved I'd be all ears. Thanks for everyone's input.

From a tax code stand point I agree with you. From a Plan Document and Custodial Account agreement and what each provider allows - read the document(s).

And as a followup since they are a wholly owned subsidiary if the Plan is in fact terminated the employees would be subject to the successor Plan rules and prohibited from starting a new 401(k) for 12 months following the final distribution of assets from the Plan? And I would assume this would apply to them joining a PEO as well?

Peter thanks for your input. Let's assume for now fees will be paid and that I will be asking for payment in advance or at least a retainer for anticipated services and assume that all fees for the prior year have been fully paid. And if that is not the case I'll finish up 2022 and resign, they can find someone else to close the Plan out. The Buyer acquired the Seller in a stock purchase and Seller is now a wholly owned subsidiary of Buyer, at least that's what I've been told. So Buyer now has authority. The position they appear to be taking is that the selling agreement had a clause that the Plan is terminated the day before the acquisition which was executed by Docusign by the Seller when they still retained authority over the Plan. Assuming their position is correct, it brings me back to my original question if the Plan is in fact legally terminated as of 12/31/2022, what do do with the January deferral and match that are clearly run through payroll, deducted, and deposited post-termination? This could have been avoided had they involved me at the time of the acquisition but they chose not to. So I don't really want to make their problem my problem but if I can be paid to be part of the solution, I am not opposed. As long as I know what the correct solution to propose is in this case.

Maybe I'm being dense but I don't see how you can exclude her. She has 10 years of service and will be eligible. Even if you could keep her out under some reason like the the 1 year hold out (which I don't think you can because you said she doesn't even have a BIS) you'd have problems in 401(k) since the entry would be retro active and how do you go back and retro actively let her do 401(k)?

Well new one for me. Have a client that was bought. Recently told "Oh hey we were bought as of X" where X is a date in the past. Part of the selling agreement which they just sent me had resolutions terminating the Plan as of date before acquisition. Not prepared by us. Buyer is taking the position that that is formal plan termination. Seller decides on his own that since they aren't in the buyers plan he's going to continue deferral and safe harbor match and deposits first 2 January payrolls to the Plan. What is the fix? Can this be self corrected? or does this require VCP? Do the deferrals after term date get paid out as like a 415 excess? they ran through payroll so will presumably be on 2023 W-2. What happens to the match that was deposited? Forfeit? Allocate as prior year contribution? Return to client as mistake of fact?

The IRS position is you have a 401(k) plan and required Form 5500 filing until you terminate the Plan. That is you have eligible participants who have not elected to defer. So you have a plan just with $0 assets. I would say the Plan needs to be formally terminated and 5500 would be required for 2022 and 2023 though those 5500s should be quite easy. Hopefully it's a small plan with fewer than 100 participants so you don't need an audit. Anyway that's the correct way to do in my opinion. If they don't want to do it that way and just want to walk away to save expense, you should formally resign and let them know what their requirements are but that you will not be responsible. A CYA letter so to speak.

Has a DB plan and wants to contribute more than 6% to the DC. With 401(k) they can contribute 401(k) limit plus 6% employer contribution.

Just one of the many things in Secure 2.0 where we need guidance but speculating it seems likely that the guidance maybe - amend out catch-ups (at least for folks over the $145K indexed) or amend in ROTH.