Belgarath

It seems to me that a governmental entity can't be part of a controlled group? I haven't actually done any research on the question - just my assumption...

20 minutes ago, CuseFan said:

Mistake or not, the participant's actual election was executed, so I say have them fix it going forward and deal with it. Why is it always the collective "we" - plan sponsors, advisors, TPAs, RKs - that are asked to bend over backwards to accommodate a participant's mistake, poor judgment, or lack of attention? When is the participant held accountable for not doing what (s)he is supposed to and then months or years later comes looking for help on situation (s)he could have rectified almost immediately had (s)he paid the slightest attention? I'm sorry, but if I intended to make a PRE-TAX deferral from my pay and my income tax withholdings remained the same, I would have noticed and said something - if not after the first pay period, certainly within a few.

YES, YES, YES!!!

14 minutes ago, Basically said:

What I struggle with is if he puts off his 1st RMD (the 2026 RMD based on 2025 YE Bal) until  4/1/27 (the following year) and then he needs to take another one for 2027 based on the 2026 YE Bal, he is going to have 2 RMD payments hitting his personal account in 2027...  a lot of taxes to come up with.  Am I overthinking this?

You are correct, and you aren't overthinking it IMHO. But it has always been this way, just utilizing younger RMD ages prior to these new age changes. The "two in one year" issue is one that many people have avoided (and can avoid) by not postponing the first RMD. 

Hi Peter - hard to say - I never see the plans where everything goes well - questions only come to me when there's a problem, so sometimes my perceptions are a bit skewed. If I had to guess, I'd agree with Bri most of the time - maybe 80% we find it, 20% they find it internally. And the ones who discover it internally are usually the ones who have been through it and received our assistance with appropriate correction before!

Leaving aside the investment advisor, most of our small plans have either one or two Trustees. Just at a ballpark estimate, I'd say about 20% have only one Trustee, the other 80% have two or more. And no, for the 1-Trustee plans, I'd say there is no other fiduciary who would call attention to a breach.

1 minute ago, C. B. Zeller said:

A plan that consists solely of deferrals and matching contributions which satisfy the ADP and ACP safe harbors is exempt from top heavy. This is determined based on the contributions that are actually made to the plan on a year-by-year basis. A plan can permit non-elective contributions but will not lose its top heavy exemption unless non-elective contributions are actually made (or forfeitures allocated) in a given year. Likewise, making non-safe harbor matching contributions will also cause the plan to lose its top heavy exemption.

Pay particular attention to CB's comments here, especially the allocation of forfeitures part. I've seen plans where plan sponsors got badly burned on this.

With the giant caveat that I am neither an attorney nor an IRA expert (I'm a TPA)...you need to check under Florida law. Most (all?) states have some form of "Simultaneous Death" statute, where if both spouses die within a certain amount of time, the spousal beneficiary is treated as not surviving, so it passes to the contingent beneficiaries if named, and to the estate if no named contingent beneficiaries.

Other people on this board are certainly far more expert in these matters, and will probably give you much better answers! 

You might also find this helpful. https://www.irs.gov/retirement-plans/401k-plans-deferrals-and-matching-when-compensation-exceeds-the-annual-limit

Deleted post - information originally provided to me is incorrect.

Thanks - that was what my gut was telling me also, but SECURE/2.0 sometimes causes digestive ailments...

So, suppose you have a plan that doesn't qualify for any of the exceptions, so the SECURE auto-enrollment provisions apply. Plan is an ACA, but not an EACA, so will have to be amended to be an EACA, SECURE provisions, etc., etc. 

If the participant already has an election in place, can this be "carried over" under the updated SECURE plan provisions? Would your answer change if the election in place is LESS THAN the minimum 3%? 

Not sure I agree. that Revenue Ruling really was, IMHO, specific to tax returns, which of course a plan restatement is not. I think that technically, it is late.

Now, I have found that the IRS is generally pretty reasonable about things, and in this situation, it would take a pretty harda** reviewer to stick it to your client. But is it worth the risk?

Others may have different opinions.

I agree with the above comments. It WAS permissible under some documents back in the Jurassic era or something like that, using a "waiver of allocation" but the IRS did nix this a long time ago - I really can't remember what regulation or guidance took that option away. I do recall that when it was eliminated for everyone else, one company that I know of got a reviewer and approval letter where it was allowed. Annoyed the heck out of the rest of us...

Does anyone know of a good summary of what specific MANDATORY SECURE/2.0 provisions specifically do apply to a Governmental 501(c)(3) non-ERISA 403(b Plan? A small list, I know, but it would be handy to have.

Thanks.

It's way over $1,000. Your solution is probably better and safer.

Hard to believe, but there's a similar situation that has cropped up in a different plan, except that the plan in question does not allow rollovers into the plan from terminated participants, yet they allowed one to slip through. They DO NOT want to amend the plan to allow it. They want to force this money out of the plan. 

I'd say that they could do this as a self-correction, after first allowing the participant the option to do a rollover from this plan to an IRA, another plan, etc.

Agree/disagree? And then if the participant doesn't do a rollover, then it would be reported as a taxable distribution and subject to 20% withholding, etc.? Any other opinions?

That's an interesting point.

One item that occurs is that the in-plan Roth rollover would normally require a distribution fee to be charged to the participant's account. That said, I'm not sure most employers will be willing to go through the hassle with payroll/payroll providers, reporting, etc. Our clients already have enough trouble just properly allocating pre-tax and Roth deferrals to the correct account - I can only imagine the screw-ups if they attempted employer contributions as Roth.

I'm not a fan of the concept.

Just bumping this up - now that we've all been filing forms for 2023, any thoughts now?

All great advice. I'll also mention ERISApedia. A great resource, with some outstanding bells and whistles available.

Furthermore, the knowledge and generosity of their time and expertise among the many participants on this board has helped me immeasurably over the years. While I'm at it, yet another thanks to Dave and Lois Baker for doing such a great job in providing this forum!

Probably not a CG. But remember, even though there is no family attribution from siblings, there could be, for example, certain options to purchase some or all of the other 21%, that would count as "ownership" for these purposes. Most CG determinations frankly don't seem to take into account such intricacies, which is why we always advise clients to seek legal/tax counsel before making the determination. Or at least do a deeper dive into the rules.

P.S. I just read another post of yours where Cuse makes the exact same point with regard to options.

Thank you!

So if an employer with a 401(k) or 403(b) signs on with a PEP mid-year, I assume when the employer's plan is merged into the PEP, there is no required nondiscrimination testing for the period prior to the merger - in other words, the coverage/nondiscrimination testing is performed for for the entire year, and would be done by the PEP provider?

Employer A sponsors safe harbor plan. Employer B sponsors non-safe harbor plan. B purchases 100% of the stock of A, mid-year. Wants to merge plans more or less immediately. Since 1.401(k)-5 dealing with mergers, etc., is "reserved" there's no solid guidance on this subject. Given that, do you think it is permissible, since plan A uses the "maybe not" notice, to do the merger if the 30-day advance eliminating the Safe Harbor notice is used? Is it permissible to use less than 30 days (I can't really find any support for this, but maybe I'm missing something. Of course, the purchasing employer, in its merger documents and its plan, would have to address all the coverage, nondiscrimination, protected benefits issues, etc.

Both plans are calendar year.

We are the TPA for plan A, and naturally, we weren't told about this in advance, nor did the purchase and sale agreement address ANY employee benefit plan issues. Classic...

Appreciate any thoughts.

edited typo...

And yet another edit - apparently all employees of A have already been moved to B - no further pay from A will be made. And B's plan was already amended to allow immediate eligibility for A's former employees. So a 30 day advance notice ain't possible. It doesn't seem reasonable that in such a merger/acquisition situation that A's safe harbor would be blown and ADP testing required, but again, no firm guidance...

That's current. I'm assuming, of course, that it is an IRS pre-approved document. The new restatement cycle is fast approaching -  without double-checking, I believe it opens in January.