Belgarath

With no research or deep thought, my inclination, IF the current vested account balance exceeds $7,000 (assuming you switch to $7,000) while excluding rollovers, then the money stays in the plan. If less than $7,000, excluding rollovers, then force the distribution. Yes, there's a prior operational error, but it really is a no harm no foul situation - participants haven't lost anything. Clean it up using the appropriate rules going forward, and let bygones be bygones. Others may disagree.

I've decided that from my purely personal TPA viewpoint, SECURE/SECURE 2.0 are misnomers. I call it TERISA. (The Early Retirement Incentive Stupidity Act.) The timeframe keeps getting shorter...

Funny, my Dad said the same thing - but fortunately, I didn't listen. However, the man has the most prodigious vocabulary of anyone I've ever known. I'm with you - I'd rather know less, and use the dictionary more.

Post hoc ergo propter hoc, ipso facto, mephitis mephitis, illegitimi non carborundum, non sum dignus, all to say I have no idea. I took 1 semester of Latin in 7th grade, and by the time I got to 5th declension plural ablative, decided it was a language fit only for masochists. But seriously, I think Bill and Bird have it covered. Bufo Americanus.

Too bad - those were always VERY helpful. I had a tendency to prefer the RIA version.

No, I don't think it matters based on that assumption. Of course there may be a possibility of a match in the 401(k). Assuming no match, I'd still vote for maxing out the Roth IRA first - that extra flexibility can be a wonderful thing. When you want available funds for that once-in-a-lifetime opportunity for the cabin on the lake, the ability to access a chunk of money without paying tax on the distribution is a pretty important feature. Just my personal bias - at my advanced age it doesn't make any difference!

Tax treatment of distributions? FIFO for the IRA?

And the daylight hours start s l o w l y getting longer again. Woohoo!

If you give me Ohtani's contract, I would be THRILLED AND DELIGHTED to pay any and all taxes that might be due. Overall taxes are whatever, so what if they are, say, 60%? If I "only" get 40% of my $700 million, I'm still getting $280 million. Of course, that would be a big cut from what I make in the TPA business... I wish I had a tax problem like this - I think I could handle it.

That's a great idea!!!

Update - IRS letter was dated 11/16, with 12/16 response deadline. I don't know what day client actually RECEIVED the letter, but I believe it was after Thanksgiving. They only sent it to us on Wednesday. Client called the IRS yesterday to request a two-week extension on the deadline. DENIED. Not very user-friendly...

Obviously, if there's something due to an error WE made, we wouldn't bill! Other than that, yes, we are billing for our time, although sometimes you have to exercise some judgment depending on the client, and we can't always bill for all of our time. But we aren't giving away as much as we used to. Fixed typo.

Anyone else received one of these? Client submitted a fully completed and signed 5330 for late deposits of 401(k) deferrals. Client received an IRS letter, from Ogden. No form #. The letter states that the 5330 was unsigned,, doesn't say whether the PT was Discrete or other than Discrete, didn't give the amount of the PT, doesn't indicate whether you corrected all of the PT's. Of course, ALL of these items were completed, and completed properly. They give you the option of checking the boxes and completing a couple of items, and signing a declaration that the form is true, correct, and complete. BUT, they tell you NOT to include a copy of the original for 5330, unless you are correcting/amending it, which of course you aren't, because it was correct and complete in the first place. So, you are left with the choice of completing their form, or calling, which is likely to take hours and probably get wrong info anyway... If this was an automobile, I'd be suffering from road rage...

I agree with Bill and Paul. Most plans (at least that I've seen) do, however, contain some sort of clause that deferrals will begin as soon as "administratively feasible" - so there is some reasonable latitude, but consistency is important.

My take? Ok to distribute under SCP, yes to double taxation, no to 5330, no to premature distribution penalty.

I feel your pain. I spent over 1 hour last week trying to determine an answer to one of these. ERISApedia has their distribution e-source, which is excellent, but nothing I've seen offers quite the user friendly simplicity you mention. If someone does develop one, they sure as heck should charge for it. Someone with a mind that works like a flowchart may come up with one eventually.

Ok, thanks. I was beginning to doubt my sanity, although I suppose that ship has sailed... Or like the song says, "It's getting to the point, where I'm no fun any more, I am sorry..."

I have seen this statement, or similar wording, in several places, and I think I must be misunderstanding something. If the pre-approved plan language for eligibility allows for, say, "3 consecutive months of service from the Eligible Employee's employment commencement date and during which at least 250 hours of service (not to exceed 1,000) Hours of Service are completed. If an Eligible Employee does not complete the stated Hours of Service during the specified time period, the Employee is subject to the 1 Year of Service requirement..." So, if an employee works less than 250 hours in that first three month period, they become subject to the 1 year of service requirement. Suppose they work 600 hours during the next 3 (or 2) consecutive plan years. Why would they not be considered LTPT? The LTPT rules will only affect 401(k) plans whose eligibility requirements require employees to complete at least 500 hours of service in a 12-month period to participate. 401(k) plans that require fewer hours - or none at all - will never produce a LTPT employee, making the new rules moot.

It's hard to say without knowing what you are really asking. If you are referring to an "in service rollover" from a taxable account to a Roth account, yes, this is allowed, and is a common provision. Of course, your specific document must allow Roth deferrals, and must provide for such an in-service rollover/transfer, but that shouldn't be a problem. If you are referring to something else (can't quite imagine what it might be) you'll have to explain.

Thank you both! Very helpful!!

This only tangentially related to cafeteria plans, but I don't know what other forum to use. We have a retirement plan customer who has asked us what the 2024 Federal Child and Dependent Care Tax Credit is, so she can determine whether to use this, or use the Dependent Care Assistance Account in her 125 plan. (Don't ask me why she doesn't get this info from her 125 plan administrator, except that perhaps she "handles" 125 admin on her own...). Anyway, trying to assist her, within limits. But the information I'm finding is WILDLY variable, and the IRS forms 2441, and Pub. 503 are from 2022! Some of the information I'm finding says that the Federal Child and Dependent Care tax credit has been greatly enhanced, and that it is available to be applied against qualifying expenses of up to $8,000 for one qualifying dependent, and up to $16,000 for two or more. And, the tax credit can be up to 50%, sliding down to 20% based on income, rather than the previous maximum of 35% sliding down to 20%. Does anyone know of an accurate source to determine the correct answer? Or does anyone know the answer already? Thanks!

Thanks Appleby. Do you have a citation for the automatic excise tax waiver if the beneficiary(ies) don't take the RMD until sometime the next year? I can't remember where I saw that. If it is going to take you any time, please don't bother - I'll look it up myself. I'm just being lazy... I think I've got it (As Eliza Doolittle said) - 54.4974-1 (3) Automatic waiver for failure to take required minimum distribution for the year of death. Unless the Commissioner determines otherwise, the tax under paragraph (a) of this section is waived automatically if— (i) A distribution is required to be made to an individual under § 1.401(a)(9)-3 or § 1.401(a)(9)-5 in a calendar year; (ii) The individual who was required to take the distribution described in paragraph (g)(3)(i) of this section died in that calendar year without satisfying that distribution requirement; and (iii) The beneficiary of the individual described in paragraph (g)(3)(ii) of this section satisfies that distribution requirement no later than the tax filing deadline (including extensions thereof) for the taxable year of that beneficiary that begins with or within that calendar year.

Starting to work my way through this. Welcome news that certain class exclusions can apply. But, they cannot be a proxy for for an age or service requirement. Consider the following: plan currently excludes interns. ALL interns work between 500 and 999 hours. My reading is that this exclusion would not be valid, and LTPT rights would need to be granted to interns that otherwise satisfy the LTPT age/service requirements. Agree/disagree? Now, if interns work various numbers of hours - some 500-999, some over 1,000, and interns are an excluded class, then it should be permissible to exclude them from LTPT requirements. Agree/disagree? Thanks.

I couldn't agree more!!

Looking waaaaay ahead (except that time flies when you are having fun) - any bets on whether you think the IRS may delay this somewhat to allow providers to draft documents that take advantage of relatively late IRS guidance on SECURE/SECURE 2.0 items? Or will we just get stuck restating a document that already has a TON of changes? I think I might just have to retire a little earlier than originally planned, to avoid that next restatement cycle... Pre-approved Plan Providers: Submission Period for 4th Cycle Defined Contribution (DC) Opinion Letters The IRS asks pre-approved plan providers and mass submitters to wait to apply for a 4th remedial amendment cycle (RAC) DC Opinion Letter until the IRS announces the opening of the one-year on-cycle submission window. The 3rd pre-approved DC RAC ended on January 31, 2023, which means that the 4th RAC began on February 1, 2023; however, the submission window has not yet opened. We expect to issue an announcement later this year that opens the on-cycle submission window from February 1, 2024, through January 31, 2025.