DMcGovern

I recently watched a webinar in which the speaker (Stephen Forbes) indicated that plans using elapsed time will be required to have LTPT eligibility requirements in the document. Thoughts?

To continue the quote from that article, "The bill follows the trend of expanding access to DC plans and may be incorporated into a larger package of retirement reforms. It also includes provisions such as requiring one year of service, not mandating employer contributions, providing nondiscrimination testing relief, and excluding younger workers from the plan audit threshold for five years." Larger package of retirement reforms?! Yikes How many eligibility provisions can one plan have and not be a total compliance mess? 🤪

Many thanks to Tom and Paul for the responses!

Controlled group has two companies ("A" and "B"), each with a 401(k) plan. The plans are currently operating as QSLOBs. As a result of a purchase agreement, the QSLOB status will cease to exist and they plan on terminating the B plan and merging the accounts into the A plan. Would the exclusive benefit rule apply to the forfeitures in the B plan? If so, does it only apply to forfeitures that occurred immediately prior to the termination of the B plan?

We moved from Datair to ftwilliam and have been very happy. We have some large plans that also had the issue of stalling, taking FOREVER to calculate. I had one plan that I used to schedule an all-nighter to get it processed. Had to babysit it so the calculations wouldn't stop, and didn't want to slow the system down for others to get their work done. This plan now takes about 8-10 minutes to calculate in ftwilliam!

I emailed the author to request a cite as to why the self-certification only applies to the first hardship withdrawal in a year and she responded with this: It is referenced in the guidelines for audit under administrative guidance that was given after Secure Act in 2019. Please see below. Substantiation Guidelines for Safe-Harbor Hardship Distributions from Section 401(k) Plans (irs.gov)

"Could they be waiting for Congressional action via technical corrections? The problem is in large part statutory at this point, no?" I did see where it was part of the open letter to Secretary of the Treasury Janet Yellen and IRS Commissioner Daniel Werfel that addressed the technical correction needed to allow for catch-up contributions. I suppose they could be waiting on this before addressing other issues with this provision.

I'm not seeing anything mentioned in the regulatory agenda regarding Secure 2.0 section 603 for Roth catch-up?

Company is establishing a new 401(k) safe harbor profit sharing plan with EACA features. The plan will have an effective date of 1/1/23. I'm told no one will start deferrals until 7/1/23, which will also be when the auto-enrollment would start. Notices would not have been provided to participants until recently (middle of June). I know you can start an EACA mid-year for new enrollees only, but in the case of this new plan would that still apply? Or would everyone as of 1/1/23 that hasn't opted in also be auto-enrolled?

This comes from a CPA we work with. I'm not familiar with SIMPLE plans, so hoping others here can help. The client had a SIMPLE 401(k) plan, with the 3% match. The owner somehow managed to start automatically sending money from her personal checking account to the SIMPLE plan on a monthly basis. Normal contributions were made through the company, no excess from that. No match was made on the personal funds. It started in September 2022 and she discovered the error recently. About $5500 in 2022 and again in 2023. Can this be self-corrected by removing the personal funds with earnings?

This comes from a CPA we work with. Their client had a SIMPLE 401(k) plan, with the 3% match. The owner somehow managed to start automatically sending money from her personal checking account to the SIMPLE plan on a monthly basis. Normal contributions were made through the company, no excess from that. No match was made on the personal funds. It started in September 2022 and she discovered the error recently. About $5500 in 2022 and again in 2023. Can this be self-corrected by removing the personal funds with earnings?

Thanks, Bill! I did check the basic plan document as well. It doesn't address how loan payments are applied to sources (or anything on payments at all). I was concerned that these repayments would affect funds available for hardship or in-service withdrawals. Those are not allowed until age 59 1/2 so I think the distribution side of things is ok?

Thanks for the replies! I checked the loan policy, it does not address how payments are applied. Adoption Agreement just allows for loans. All sources are 100% vested, so vesting is not an issue here. The participants are allowed up to 4 loans (ugh!) and many of them have more than 2 loans. I guess this isn't a problem in the end, it's just different. Thanks again!

I haven't seen this before, but I'm hoping it's not a problem. This is for a large 401(k) plan that is administered by a major payroll/benefits company. The funds for new loans are withdrawn from several sources, no problem with the amounts taken. The loan repayments are what I'm questioning. In most cases (if not all) for the repayments, principal is only applied to one source - the profit sharing source. No principal is applied to deferral, roth or safe harbor match until the loan balance in the profit sharing source is paid in full. For example, a participant took a $3200 loan - 75% from the deferral source, 12% from the safe harbor source, and 13% from the profit sharing source. The payments show that only interest is credited back to the deferral & safe harbor match sources and the profit sharing source is credited with all the principal repayment and some interest. Is this ok? I have only seen repayments applied back in the same manner as they were withdrawn. Thanks!

I started looking into SECURE Act (1.0) for this question. Section 112(D) Special Rules, (ii) 12-Month Periods states: "12-month periods shall be determined in the same manner as under the last sentence of Section 410(a)(3)(A). (emphasis added) Here's a link to that section: https://www.congress.gov/bill/116th-congress/house-bill/1994/text#HC55DED3AE9484080ABD306FA8E518F6A I don't find that specific section in 410(a)(3)?? I find little "a", but not capital "A" section. Can someone please point me to that?

Notice 97-45 defines the word "plans" to include any employee benefit arrangement that references 414(q) for its internal nondiscrimination testing. All plans of the employer must make the election to be effective; if they don't all make the election, it isn't available to any of them. The plan(s) may be amended mid-year as long as it doesn't adversely affect a participant's accrued benefit (anti-cutback rule).

see IRS Reg 1.415(c)-2(g)(5)

Welfare plan, the first year for one of the benefit plans included commissions & premiums for 2 years in their schedule A. The following year, no Schedule A information was provided (since it was already reported the prior year). There will be a Schedule A provided next year. For the year commissions & premiums are zero, do you file a Schedule A or skip a year?

Client has an auto-enrollment 401(k) plan. They did a QNEC for a group of participants for missed deferral opportunity a few months ago and just realized some of them received an amount that was too high. All impacted participants are NHCEs. I'm not finding a correction for this. Let the participants know of the error and forfeit? Thanks for your help!

You may want to do a search on ROBS within this system. There are a number of posts on the subject.

Thank you so much for your information, Nate!

I'm just not feeling comfortable about this one and would appreciate other's thoughts. Company M is an LLC taxed as partnership. Two owners, 50/50. Only one of the owners (Owner A) is actively working for Company M, the other owner works for a different company. Owner A also owns 91% of Company K. I'm told Company K has no employees. Company M only has one employee (Owner A), all others are independent contractors receiving 1099's. It is a software development firm and the website shows 12 people as "employees" (supposedly all but the owner are 1099 contractors). Owner A also has a owner-only 401(k) plan with an investment firm and wants to open a cash balance plan with us. Also found out that Owner A established residence in NY and very recently became a US citizen. He has since returned to France and wants to use his address in France for the plan document and 5500. It's been difficult to get details on this, so my comfort level is low. Other questions I should be asking or information I should request? Any help is appreciated!

Plan only does deferrals and safe harbor match. One employee met the one year wait, but not enough hours; sponsor let her in anyway. Found out the following year, so did a corrective retro-amendment to let in the NHCE for deferral & SH match early. Does this take away the top heavy exemption?

Wouldn't the partner's earned income need to be adjusted for 414s testing? See Treas. Reg. 1.414(s)-1(g)

Here's a flowchart from the IRS that may help. I don't know the date on this and it wouldn't cover all the factors to consider, but could start a conversation on it. IRS flowchart on ASGs.pdf