Belgarath

The final regs allow this. Other than for possible administrative simplicity/consistency, is there any other good reason to do this? I can't think of one. Most of our clients (we are primarily smaller plan market) would prefer NOT to be forced into HPI status if not required to do so. Thoughts?

That's what we are doing...

We haven't done (nor will we) any formal quantitative analysis of this question. I CAN say that it is darned few, in general. An administrative PIA all out of proportion to the end results. Somewhat typical of many of the SECURE/2.0 changes...

Pre-approved plan document. Safe harbor nonelective. Eligibility is a checkbox which is for BOTH deferral and safe harbor. Per diem employees excluded. NHC per diem was allowed to defer. For correction, if it was under VCP, I'd comfortable at least ASKING to retroactively amend to allow the deferrals only, even though the IRS might reject it. But for self-correction, I don't see it as a valid choice - you are retroactively amending and waiving the exclusion, and therefore I think it has to be the full Monty. Any thoughts? Only one NHC, and not worth the cost to file VCP anyway.

Well, the contribution to the plan must come from the EMPLOYER. So as long as the individual can find an acceptable method to get these funds into the employer's coffers (check with their CPA) shouldn't be any problem.

Thanks Peter. I appreciate your technical points. But you are correct that I would not suggest/advise a client to ignore the proposed interpretation - that's for the legal/tax counsel to handle. For our mostly small clients, and the relatively few situations where this actually comes in to play, it is unlikely to justify the expense/risk to seek counsel. As a general rule, I favor discretion over valor when dealing with regulatory authorities.

Curious as to whether anyone with a "pipeline" or "contact" at the IRS has heard any rumors as to whether this foolish rule will be changed? It just isn't reasonable for someone who is a former LTPT and now a "regular" employee to receive a year of vesting credit for working 600 hours, whereas someone who started as a "regular" employee must work 1,000 hours to receive a year of vesting credit. Not to mention, of course, the administrative nightmare and client confusion...

Thanks Peter.

So, you have Plan A sponsored by Employer A. Employer B signs on as a participating employer, but not a CG/ASG and thus a MEP. Plan B winds down to one employee. Plan B is supposed to spin off, and then immediately terminate plan. Plan B employer never signs the paperwork to do this, and in the meantime, the one employee terminates employment, and the distribution is processed by plan A, where the assets were held. The question is, does the spinoff still need to happen, and a first and final 5500 form be filed for Plan B? There are no assets to spinoff, and the temptation is strong to just ignore it, but it feels all wrong. Anyone ever encountered such a situation?

Thank you both for your comments. The A Plan DOES exclude compensation prior to participation, so it simplifies this particular situation. The B Plan is going to be terminated, as far as I know, effective 12/31/25. There was originally some talk between the employers and their advisors abut merging the plans, but they decided against that.

This is a really silly situation, but potentially confusing. Corporation A purchases Corporation B during 2025. Corporation A sponsors a 401(k) plan that has true-ups. Corporation B's plan will be terminated, but effective December 1, the employees of corporation B will transfer to Corporation A. Corporation A credits service with Corporation B, so those employees will be eligible to defer in the Corporation A plan immediately. So, it seems that at least theoretically, there could be a true-up for these employees (fewer than 20) for the 1-month of salary deferrals in the Corporation A plan. Although the Corporation A plan calculates the match on an annual basis, they couldn't use compensation paid from another company while they were not a controlled group. Any disagreement with that? (As an aside - if they became a controlled group in, say, June, could/should the deferrals from that date be used in the calculation of a true-up in the Corporation A plan, even though those 2o employees were still employees of Corporation B?) Then we come to the ridiculousness. The Corporation A HR person is adamant that they don't want to make any true-ups for the former Corporation B employees. If we assume that the deferrals for these former Corporation B employees only start in December and are based only on salary/match in December, the potential true-up is negligible at best. Is there any way to avoid a true-up in this situation, if the calculations require it? It seems like an amendment prior to 1/1/26 could result in a cutback. I'm probably making this way more difficult than it is.

They won't lie, just "creatively describe." 😁

Similar to the 5500 preparer manual that Janice Wegesin used to do?

Thanks Paul. Day of the month, so the "person" is contending due date was May 10th, not May 31...

Brain cramp, and I just want to make sure I'm not crazy. Due to a plan merger, short plan year ends October 10th of 2024. If I'm reading the instructions correctly, for a short plan year, the filing due date is the last day of the 7th CALENDAR month after the end of the short year. This would mean due date is May 31, 2025. Right? Then a 5558 extension would extend the due date to August 15, 2025. Seems simple, but I'm getting some pushback, and I'm always willing to entertain the possibility that I'm a few cards short of a full deck.

Without doing additional checking, I'd say #001 and #002.

Got it! Thanks - it makes sense now.

So, as far as I can tell, an "applicable collectively bargained plan" means maintained under a collectively bargained agreement ratified before 12/20/2019. Does this mean that if the agreement is "re-ratified" - or more recent than 12/20/2019, then the amendment deadline is 12/31/2026, as opposed to 12/31/2028? It would seem so, although that doesn't make a lot of sense to me...

I'd just google it - there's been a lot of press about it. Biggest thing (IMHO) to watch out for is that it is subject to ACP testing, so often doesn't work in small plans, since generally utilized only by HCE's...

When in doubt, there is always the risk/reward factor to consider. Does this amount, if counted as a related rollover, make (or is it likely to make) the difference between top heavy status or non-top heavy? If it does make it top heavy, how much extra employer contribution will be required vs. non-top heavy? Is the plan a large plan subject to audit? If so, what does the auditor think? FWIW (nothing) my inclination is to count it as a related rollover.

I suppose a given funding institution might require or ask for something removing the deceased from their records, but absent that, it doesn't seem necessary to me. I'll be interested to see what some of the legal experts say. I'm not confident in my off-the-cuff opinion being correct...

I respectfully disagree with your interpretation. Basically, I'm assuming that your document is pre-approved language. If so, almost certainly it will have some sort of "fail-safe" language. For example, that if the Eligible Employee does not complete the stated hours of service requirement in the specified time period (in your case, 520 hours in the 3-month period) they will become subject to the 1 Year of service requirement. Which of course, is 1,000 hours. Where in 410(a) do you see anything where the IRS indicates that 520 hours in 3 months is unreasonable or unduly restrictive? As long as the plan is written such that you can't violate the age 21/1 YOS standard (or 2 years if 100% vested) you should be fine. I'm oversimplifying here, I know that...but I don't want to delve into every possible permutation!

Maybe I've got it all wrong, but I don't believe you are required to have Roth to allow catch-ups. It's just that if you don't have Roth, then the HPI's cannot do catch-ups. Am I missing something?

Thanks Peter.

Wow. So, non-profit 457 plan. A participant wants to donate a large sum of money from their 457 account back to the non-profit. Assuming the plan does not specifically provide for this (I haven't read the document, but I don't see how it could) it seems like a taxable distribution to the participant would have to be made, and then donated to the non-profit. I have no opinion on the possible charitable deduction side of things for doing so. Any thoughts on this one?