Belgarath

At least under SECURE 2.0, if a goof is made, it can be corrected with "only" a 10% penalty. Some small consolation, anyway... And I agree that the plan sponsor should make the formal decision as to whether or not she is "retired."

I think I need a visit to Dr. Kevorkian...

Assuming that your plan document allows this type of flexibility, absolutely fine. I'd suggest that you make sure the employer doesn't have employment agreements with one or more employees that state something other than what is mandated in the plan document - I've seen situations where the plan documents specify one thing, but the employment agreement states something else, and then it's time for ERISA counsel...

Fine, but that isn't the question. The question was regarding HCE determination, not Key and Top Heavy.

Not only CAN the employee # 2 participate, employee # 2 MUST be allowed to participate, assuming #2 has satisfied the eligibility requirements under the SIMPLE document. Take a look at the instructions on the SIMPLE document, "Which Employers May Establish and Maintain a SIMPLE IRA Plan."

If I'm reading your post correctly, this participant would have been born on or after 1/1/1951? If so, then RBD is based on age 73. Assuming born during 1951, then age 73 would be during 2024. So RBD for the 2024 year could be as late as 4/1/2025.

Thanks. It turns out I was provided with a whole lot of incorrect information - after receiving the correct information, all of the above is negated. But, thanks for the reminder about the pre-approved language!

Update - the information I was given that led to this post was mostly all incorrect, so I'm deleting it so people don't waste there time. My apologies.

Without doing any research, I believe that it would be separate lookback years for the different plans. Does the PS/DB by chance use the calendar year election? That would at least make it easier to keep track of who is an HCE and who isn't, although it might potentially have other ramifications - ask the cash balance actuary!

Re first question - "because it does." I'm not being snarky or difficult - my early mentor from back in the 1980's told me "not to try to make sense of everything, or I'd make myself crazy. Just accept that this is how it is." I thought that seemed like good advice. But I went crazy anyway... Re second question - the very term "SECURE 3.0" triggers panic attacks, nausea, and deep disgust. But, if there is a SECURE 3.0, then yes, this would be a wonderful provision to be included.

SHA - what is your role in this? TPA, investment advisor, friend, whatever? If you are skeptical about the advice being given here (which is reasonable - as CB Zeller says, free advice is worth what you pay for it) then just give this client your thoughts (perhaps the advice you are being given here, or not, as you choose) TO BE DISCUSSED WITH THEIR OWN TAX/LEGAL COUNSEL. That way you are being "helpful" without being responsible, assuming you use appropriate caveats.

Hi Bill - have they given you any indication about even a guesstimate timeframe? Ours is "near future." I'm not blaming them, mind you - I pity their situation! I pity mine, too...

I believe that 415 and W-2 are NEARLY identical, with the exception of non-qualified deferred comp distributions unless the plan provides otherwise, and treatment of certain stock option situations. Also maybe tips. A long-winded way of saying I agree that what you describe would be 415 comp.

I agree with Rocknrolls2. I find this whole matter extremely complex, but my understanding of IRC 408A(d)(3)(F) is that it is meant to prevent someone from making an External Roth rollover to a Roth IRA (as in your situation) and then attempting to withdraw this amount under the "normal" Roth IRA first-in-first-out" rules without having to pay the premature distribution penalty if it would otherwise apply. As Rock explains, since this person is not otherwise subject to the premature distribution penalty, being over 59-1/2, it wouldn't apply in this situation. Personally, I'd advise the client to confirm with tax counsel. And I offer no opinion whatsoever as to whether converting to Roth IRA is wise or unwise - that's a very individualized decision.

Since terminating plans are forced to amend for compliance even though "regular" plans have a greatly extended remedial amendment compliance period, seems like this may be a challenge. Coming up with a comprehensive plan termination amendment is quite a tough assignment. Any thoughts about how reasonable the IRS may be about a "good faith" plan termination SECURE 2.0 Amendment? I'd like to think that any "reasonable" attempt at such an amendment would be a case of, "Pass, Friend" without any minute scrutiny for perfection.

Just curious as to what most people do. In general, for plan allocation purposes, do most documents you see INCLUDE all or most categories of "post-severance comp" or EXCLUDE all or most categories of "post-severance comp" FWIW most of the plans I see INCLUDE it. I'm reviewing a potential takeover where it is all excluded, which brought this question to mind.

Never mind.

deleted - never mind.

I don't have a citation, but IMHO, you need the notice for 2023. Not that difficult to do anyway - why take a chance?

I think you are dreaming. As I understand it, the SECURE 2.0 fix is to disregard community property ownership for attribution between spouses, which would have the effect of allowing them to use the spousal noninvolvement clause. In your situation, each spouse works for the other's business, so the spousal noninvolvement clause would not be available. There's also a change to the attribution through a minor child to the other spouse. This isn't a complete "technical" explanation... P.S. - see SECURE Act Section 315.

Seems correct to me. Of course, the employer can't deduct the 50,000 contribution, so the ACTUAL net benefit won't be quite so high as 50,000. I'm sure some clever CPA's somewhere will do a chart of the "net" benefit at different brackets compared to the benefit from taking a deduction instead. Also, I have no idea if taking these tax credits will adversely affect other deductions/credits that might be available for other items/purposes. Again, that's a CPA issue.

Gracias. That makes me feel better.

Revenue Procedure 2021-30, Appendix B, Section .05(9) provides a special safe harbor correction method for plans that did not necessarily contain a automatic enrollment/increase feature. An "Employee Elective Deferral Failure" is defined for these purposes in Section .05(10), which includes a failure to implement elective deferrals correctly, "...including elective deferrals pursuant to an affirmative election or..." and then goes on to list the Automatic Contribution feature and the improperly excluded employee situation. Section 350 appears to confine this special correction to plans with Automatic Contribution/Escalation provisions, or failure to afford an eligible employee the opportunity to make an election by improperly excluding them from the plan. Try as I might, I can't get to a reading of this that covers this other currently allowable special correction. Section 3 says no QNEC required if the requirements of (2)(B) are satisfied with regard to a reasonable administrative error described in 2(A)(i) or (ii) - and neither (i) nor (ii) appear to cover the special fix for the situation I'm considering. Other thoughts/interpretations? Agree/disagree?

I think what you may be looking for is 1.410(b)-7(d), 1.401(a)(4)-9(a), and 1.401(a)(4)-1(c)(4). And possible subsections for special situations, cross references, etc...

Ah - yes, I didn't read OP carefully enough. My bad.