30Rock

Yes I agree. This tiered formula is more complex than I thought, and I see the need for very clear document language so the tiers can be properly administered. Thank you so much for your help!

I was re-reading your comment above. The match is annual but does not have a 1000 allocation requirement. So it can be funded per payroll with a true up at year end. The movement on the tier is based on whether you complete 1000 hours in a plan year. So I could receive a match each pay period but at year end if I did not complete 1000 hours then I do not accrue a year of service for purposes of gaining another tier. So I stay on my prior tier. There is no pre funding issue. Agree?

So looking at 2024 plan year only, when does the tier 1 match start or accrue - 12/31 or as of the date they complete 1000 hours? Let’s say this employee completes 1000 hours on 9/15/24 and is deferring. It’s an annual match but funded per payroll then a true up is done at year end.

Let’s say he enters the plan on June 28 but does not have 1000 hours until 9/15. The plan administration is to credit the tiers on each 12/31 so that on 1/1 the person starts the match at tier 1. I think it would be too complex to credit each newly eligible at various times in the plan year when they happen. To hit 1000 hours. And the plan uses annual based compensation but funds it more frequently. It sounds like maybe this person is due a true up at year end? Would a better design be to have tier 1 start at 0 years, or use anniversary years to determine at least for the first tier 1? Thanks!

Sounds good thank you!

Is there a violation of minimum participation rules here, or is there additional testing required with the following plan design? An ERISA 401k calendar year plan has 1 year of service/1000 hours for eligibility (anniversary year then switch to plan year) and a tiered year of service match formula with tier 1 drafted as follows 1- 7 years 25% match (8-14 years 50% etc), and Year of Service for the match formula defined as 1000 hours in the Plan Year (in practice credited at year end), are there any minimum service/participation concerns under ERISA? Example employee completes eligibility on June 26, 2024, with an entry date of June 28, but is not credited with 1000 hours of service in 2024 until 12/31 and then 1/1/26 receives the first match. Seems a plan design flaw but trying to determine exactly what the issue is? Appreciate your thoughts!

If an HCE participates in plan A and plan B which are in a controlled group and has Compensation of $200,000 in each plan and a 2% employer contribution, how much gets allocated to each plan account? I realize that for 2025 the 401(a)(17) compensation cap is $350,000 so it appears the maximum contribution should be $7000 across the 2 plans? Does one plan allocate $4000 and the other $3000? Thanks!

401k plan adopts a QACA and uses the LTPT exclusion for deferrals, and they will not be eligible for the safe harbor contribution. Once the LTPT has become eligible to defer, are they subject to the auto enrollment rules or can the plan be drafted to exclude this LTPT group in a QACA? This is a pre-enactment plan not subject to the 2025 mandate. Thanks!

Calendar year 401k plan has a discretionary annual match with a last day allocation condition and DDR waivers, does not have 1000 hour allocation. Client would like to change mid-year to a payroll based match - when we amend the plan to remove the last day and add payroll period (not sure if it is retroactive or prospective) but do we need to protect the DDR waiver group? Technically since last day has not been met nothing has accrued. Thanks!

By governmental I do not mean the federal government. It is a healthcare plan funded/controlled by the local state municipality. It is not 501(c)(3) - they have a 401(a) plan and a governmental 457b plan. The 401a allows partial lump sum and installments, but not lump sum. I just thought that was strange. They are deconverting to the recordkeeper I work for. That's all really,

So possibly the current recordkeeper set the plan up this way on purpose to force annuity payouts. We are taking this plan over, and I just noticed this unusual provision. Thanks!

I guess what I was questioning is that there will be no ability for a rollover of the entire account balance? Just period rollovers of certain partial payments or installments of less than 10 years?

What are the consequences if a Gov. 401(a) plan has only partial lump sum and installments as distribution options for terminated employees? I assume no ability to roll their account balance out of the plan? Thanks!

Thank you!

If a 401k plan is terminating for example as of 5/31/25, all account balances are required to become 100% vested. But when do the remaining forfeitures have to be reallocated - is it as of 5/31 or can forfeitures remain after this date to pay expenses such as mailing fees, etc. It seems like they should go to participant accounts as of the termination date? Thank you!

Does anyone has experience with merging a non ERISA church 401k or 401a into a Non ERISA Church 403b plan? This is permitted under Code Section 414(z) as implemented by the PATH Act of 2015. I am interested in the mechanics of how to do this - lets say the 401k is the existing plan, but the Church wants to have non ERISA 403b plan. Would the client need a Board Resolution, along with a new 403b plan into which the current 401k can be merged? I believe there is a requirement that all accounts that are merged be nonforfeitable - i.e. fully vested. I realize there are no regulations on this issue to date. Any thoughts would be appreciated!

Thank you!

Is there any remedy if an employee states that they made a Roth election in 2024 by mistake and it should have been pre-tax? The enrollment system is online, so it is possible they mis-read the entry. I am aware of this regulation below that states Roth is irrevocable. But what if it was a matter of an online error? Can the plan sponsor direct the recordkeeper to move it to the pre tax source and then record the 2024 W2 correctly? The rules of IRS Reg. section 1.401(k)-1(f)(1) and (2) for designated Roth contributions under a 401(a) plan apply to designated Roth contributions under a section 403(b) plan. Thus, a designated Roth contribution under a section 403(b) plan is a section 403(b) elective deferral that is [IRS Reg. 1.403(b)-3(c)]: Designated irrevocably by the employee at the time of the cash or deferred election as a designated Roth contribution that is being made in lieu of all or a portion of the section 403(b) elective deferrals;

Yes thank you. I thought I heard that additional changes were made by SECURE 2.0?

Does anyone know if SECURE 2.0 made changes to EPCRS that can now apply to governmental and non-governmental 457b plans? Thanks!

That sounds good, thank you very much!

Hello - I understand that the IRS has a one-year rule where all assets in a terminating plan must be distributed within one year following termination. Is there flexibility here - for example, we have a plan that technically has made all distributions, but now we have received a few uncashed checks. We are getting close to the one year period - do uncashed checks count against this one-year rule and we could have a failed termination. It seems more administrative - now we have to search for the participants, and then decide what to do if the search fails. So again, we may go past one year. An attorney told me once that the IRS does not really take action against a plan if there is good faith efforts applied. Any thoughts?

What I want to know is if the IRA custodian reports that the taxable amount is not determined and it is up to the IRA owner to calculate the taxable amount using the pro-rata formula/rule - i.e. Total Basis divided by the balance in all Traditional IRA's/SEP/SIMPLE as of 12/31 of the distribution year = % x all IRA distributions = Tax Free amount and the balance is taxable and reported on the 1040. Or, does the IRA custodian do something else? Thanks!

We have a situation where force out amounts from qualified plans were rolled over to a non-Roth IRA and the rollover contained after-tax amounts and pre-tax amounts. When the IRA owner later takes a distribution, how does this get tax reported on the 1099? Thank you!

I am thinking it may be a Section 125 Cafeteria Plan issue - can an employee elect out of MERP coverage and elect for the employer contributions to go to his 401(a) account?