Belgarath

Thanks all.

Interesting question. We don't really handle DB plans any longer, but have a couple of "legacy" plans that we handle, working with an outside actuary, of course. Participant in one plan is VERY old, but still working. Unmarried. Has now designated his children as primary beneficiaries, in equal shares. The plan is silent on whether multiple beneficiaries are allowed. The actuary has opined that administratively, it isn't a problem to appropriately calculate and split the death benefit amongst the beneficiaries. If the Employer (Plan Administrator) writes up a basic policy stating that multiple beneficiaries are allowed, do you see a problem with it? Seems to me that in the absence of a clear document provision/directive one way or the other, that it should be ok? P.S. I should have mentioned - these are governmental plans, if that makes any difference in your opinions.

And just to add to the above, although the IRS has never issued any formal guidance on an acceptable "de minimis" percentage, a widely accepted (or at least utilized) percentage is 3%.

I haven't tried it with an earlier date, and I'm speaking specifically about the 403(b) documents. P.S. I have submitted a ticket on this - we'll see what they say... Just fyi - to paraphrase, since different people use it in different ways, they won't be updating it. So, just make sure you manually correct the SPD to accurately reflect the appropriate dates. Not a big deal, just a minor pain.

I appreciate the comments. I fully intend to probe as to WHY this inquiry came up. David - I agree - almost certainly a reason for this sudden request. At a guess, either one or two people, or perhaps they are hiring a new class of employees, etc. (Currently, they have 100% immediate vesting.) But this is one of those clients who is very smart, very detailed, and a "prove it to me" type - very nice, but he will absolutely insist on an answer to the original question as to if he CAN do this. Once I confirm that for him, then we can get into why he wants it, and then if he should or shouldn't have it. And no, I certainly didn't take your comment as any sign of disrespect - never would have even occurred to me. I've seen your professionalism on these boards for a long time! Thanks.

I have to send in a ticket to inquire about this. But, if you are restating effective, say, 1/1/2025, but you have one or more provisions in Appendix A with a different date (for example, adding Roth provisions effective 1/1/2026) the Reference guide, and more importantly, the Summary of Plan Provisions do not properly reflect this - has to be edited manually.

Cliff vesting at 18 months.

This question involves a 403(b) plan, but should apply equally to other DC plans. So, employer wants to change to a 18-month cliff vesting schedule. Not sure this would necessarily work using the standard 1,000 YOS for a year of vesting. An employee could easily have 1,000 hours in less than 6 months in year 2, then terminate, so the "18 month" requirement wouldn't work. So, what if they use elapsed time. Seems like using one of the "other" options in the adoption agreement, and using elapsed time, you could use 1.5 years (and yes, service spanning could come into play) but I think this would be allowable. Am I missing something? (And I'm not opining as to whether this is advisable or not, just if it is allowable.) Any/all comments are welcome!

Re-upping. The form is still the 2019 form. Has anyone heard anything more about this ridiculous thing?

Gracias!!

Thanks. I'm struggling with the tax implications. Suppose the $17,000 excess deposit, which wasn't deducted, came from a personal savings account. Wouldn't this represent non-taxable basis, so that only the earnings, if any, would be taxable? Seems like double taxation otherwise.

I'm a little bamboozled on this one. Schedule C income is, say, $2,000. Owner "defers" and deposits $19,000 in December of 2024. Accountant tells her she has to distribute it, and Fidelity transfers it to one of her personal accounts, and tells her there are no tax implications whatsoever. Now, I don't see how this can be classified as anything other than a 415 excess, to be corrected under EPCRS. Excerpt from 2021-30, Section 6.06(2). Excess Allocations that are attributable to elective deferrals or after-tax employee contributions (adjusted for Earnings) must be distributed to the participant. For qualification purposes, an Excess Allocation that is corrected pursuant to this paragraph is disregarded for purposes of §§ 402(g) and 415, the ADP test of § 401(k)(3), and the ACP test of § 401(m)(2). If an Excess Allocation resulting from a violation of § 415 consists of annual additions attributable to both employer contributions and elective deferrals or after-tax employee contributions, then the correction of the Excess Allocation is completed by first distributing the unmatched employee’s after-tax contributions (adjusted for Earnings) and then the unmatched employee’s elective deferrals (adjusted for Earnings). Normally, this distribution adjusted for earnings would be taxable. But, since it isn't deductible in the first place, is she only taxed on the earnings, if any?

Ah, so I DID misunderstand the question. If it is for coverage testing, then yes, I think you have to pass the ratio percentage test. The IRS position, as I understand it and unless it has changed, is that each person in their own group is tantamount to naming individual employees, and is not a reasonable classification under 1.410(b)-4(b).

If I understand your question correctly, I'd say no. For 1.401(a)(4) rate group testing, each "group" must pass either the ratio percentage test, OR the average benefits test. The average benefits test under 401(a)(4) is a two-part test: (a) the nondiscriminatory classification test, and (b) the average benefits test. To pass the nondiscriminatory classification test, the coverage ratio must at least equal the midpoint between the applicable safe harbor percentage and the unsafe harbor percentage. The "reasonable classification test" does not apply - under 1.401(a)(4)-2(c)(3)(ii). The nondiscriminatory classification test including including the reasonable classification test is deemed satisfied if the ratio percentage test for the rate group satisfies the midpoint test. So the 410(b)-4(b) problem you mention never enters into the nondiscrimination testing, 'cause when you pass the midpoint, it is deemed satisfied.

I've actually wondered if due to staffing/funding cutbacks at the IRS, they will devote more audits to small, "easy" plans 'cause they don't have the resources to handle as many large plan audits. Just a random depressing thought that occurred to me...

No. Hopefully it will stay that way!! What year(s) were audited, and how many participants, and with what results (if known)? Was there anything "unusual" about the plans that you know of?

Nope. It is a governmental plan. (Public school)

A lot of 403(b) plans are governmental. Previously, they could have a discretionary match with almost no restrictions on who, when, how much, etc., since there isn't any nondiscrimination testing. Now that it is more restrictive, for a governmental plan, is there anything wrong with using the nonelective contribution, with everyone in their own group, and "coincidentally" the only people who get a nonelective are those who deferred? Smells funny, but would be easy to do...

Thanks all. No, I would never even consider giving a client an opinion on something like this. We make sure we get the answer IN WRITING. I expect they are going to take the approach (rightly or wrongly) that there is no CG, but we'll see. I just wanted to have some notion of the issues at hand.

I don't really understand the intricacies of "private equity platforms." Let's use the following description as an example. Acme Capital Partners manages a middle-market private equity platform. The team has invested capital in a broad spectrum of industries for over two decades. So, if Acme buys a company or companies, wouldn't this constitute a parent-subsidiary controlled group? Or, do they not actually OWN one or more companies, but just provide capital? Or maybe both?

Elon Musk.

Why couldn't he contribute as normal pre-tax, then immediately do an in-plan Roth rollover? Maybe easier than messing with the employer contribution as Roth?

Filing Authorization For the 2024 Form 5500 Name of Plan: EIN / PN: Plan Year Ending: December 31, 2024 PART I Authorization of Practitioner to Electronically Sign and File I hereby authorize XXXXXX to electronically sign and file the above-named return/report through EFAST2. I understand that in granting this authority: • I must manually sign and date page 1 of the Form 5500 and provide a scanned copy of that signature page to XXXXXXX before the electronic filing can be initiated; • XXXXXXX will retain a copy of this written authorization in its records; • XXXXXXX will notify the individual(s) signing below as plan administrator/employer about any inquiries and information it receives from EFAST2, DOL, IRS, or PBGC regarding this annual return/report; and • A copy of my signature, as it appears on page 1 of the Form 5500, will be included with the return/report posted by the Department of Labor on the Internet for public disclosure. • XXXXXXX shall not be deemed an administrator or other fiduciary with respect to any Plan solely on account of the services performed under this authorization. This authorization is applicable only to the filing for the above-named Plan and applies only for Plan year end stated above. Plan Administrator: ___________________________ Date: ____________ PART II Acknowledgement of Receipt of Authorization On behalf of XXXXXXXX I hereby certify that the firm will use the authority granted only for the express purposes described above; that the firm will not disclose confidential information to any parties other than the DOL, as required for EFAST filing; and that the firm will take reasonable steps to assure that confidential information provided by the Plan Administrator or Plan Sponsor is protected from unauthorized disclosure. For XXXXXXXXXX: ________________­________Date: ____________ The designated service provider must retain this authorization.

SECURE 2.0, Section 317, specifies that it is the time for filing the return of such individual for the taxable year..."(determined without regard to any extensions)"... Caveat - I did not check to see if any subsequent guidance modifies this. I see Paul already replied. My response was with regard to deferrals only.

Thanks.