Belgarath

Thanks.

Effective for plan years beginning 2024, this also was changed by Section 315 of SECURE 2.0.

Ours (IRS pre-approved) specifically states that it is due for the plan year beginning AFTER the end of the plan year in which the document was adopted. So, assume calendar year plan, adopted in 2021, it would be due for the 2022 plan year. If adopted in 2022, then need to do one for the 2023 plan year.

I assume the LTPT rules will override the 20 hour exclusion (for deferrals), thereby making the 20 hour provision even more difficult to administer than it already is? (As an editorial comment, I despise the 20 hour rule anyway, but that's a separate issue.) Anyone have any particular observations on this issue?

Also worth noting that effective 2024, the community property attribution rule is changed. See Section 315 of SECURE 2.0.

I swore I wasn't going to think about 2.0 today, but when I let my guard down, things pop into my head. Curious as to thoughts of others. Many plans revert to calendar year for service counting after the initial eligibility period. If you handle the LTPT employees the same way, then they could come in even faster than strictly required? Suppose DOH is 11/1/2023. From 11/1/23 - 12/31/2023, works 100 hours. From 1/1/24 - 10/31/24, works 600 hours. So if service counting reverts to plan year, then employee would have two years of service crediting, and enter on 1/1/25. Alternatively, if plan uses anniversary years, this employee likely wouldn't end up being eligible until 1/1/26. I'm not clear as to whether the plan can "carve out" these employees via the SECURE 2.0 Amendment, and use anniversary years just for LTPT? I'm assuming the answer is no, but I haven't done any analysis on that question. Assuming it is not possible (or even if it is possible) would you change your plan (or LTPT portion of the plan, if permissible) to anniversary date service crediting? I wouldn't... too complicated, and these people generally aren't going to defer regardless, so if they end up entering earlier than strictly required under the law, big deal. Of course, I'm on a seriously overloaded 2.0 circuit at this point. I shouldn't think about this garbage on a Friday....

Suppose a plan that is participant directed merely adds another mutual fund as available. Doesn't change any of the alternatives already available. Is there a 30 day advance notice requirement before the new mutual fund can be available?

There is some good stuff, but also a lot of crapola. I agree that some of it is absurd from an administrative standpoint. What I hate about this type of thing is that there are always a few clients who insist on one of the useless options, and there are always "advisors" who try to puff up their importance by convincing a client that they simply must have one or more ridiculous provisions, and "Why didn't your TPA advise you to do this?" Etc., etc. - while recognizing that transition is always difficult (remember TRA 86, EGTRRA, et al) there is still an inordinate amount of garbage here. Why doesn't this legislation help ME retire?!!!

How much money is at stake? Might make a difference in the extent of the investigation/effort. Is the beneficiary form a legitimate PLAN provided beneficiary form? If yes, is this form available on a website for just anyone, or are the controls such that it would at least be very difficult for a criminal to obtain it? Is the website able to determine the IP address of the computer that was used to request the beneficiary form if requested on-line, assuming it was requested relatively recently? (I'm just tossing out random thought, as I'm a technological dinosaur, so I don't know what information can be legitimately gleaned.) It may sound silly, but perhaps start with the return address on the envelope, if it was sent by mail? If it is a legitimate address for the same person who is claiming to be the beneficiary, perhaps a search of public records could be initiated by a commercial service, to possibly find out if there is a relationship? Any way to check to see if the beneficiary's SS# is a legitimate #? Is there any basis for filing an interpleader request? Basically, I'd refer this to ERISA counsel anyway, so I'm no help!

A tax-exempt entity eligible 457(b) plan is "unfunded" promise to pay. The employer, if they so choose, can never contribute a dime of the required nonelective contributions until it is time to actually make a distribution. Since the employer "owns" the funds, then unless held in a Rabbi Trust, the employer can deposit or withdraw funds from a corporate account that, while used as setting aside 457 funding, is nevertheless owned by the employer and can be used for any purpose. In my limited experience with tax-exempt 457(b) plans, most employers utilize your method of contributing to a "segregated" account, with various interest crediting methods, etc. But there's no deadline for the employer nonelective contribution deposits, although I believe it would be reported on the W-2 Box 12 for the year "allocated." You'd want to double-check that, as I'm not certain without checking myself. Perhaps some 457 experts on this board can provide you with additional (and/or better) information.

Well, since the IRS doesn't really recognize scriveners errors, I'd say you are stuck with VCP? Maybe go the pre-submission conference route, if the IRS agrees to it? I really have no feel for what kind of leniency the IRS might allow in terms of fixing this without blowing up the TPG election for the other 10 plans. On an initial scan, doesn't seem like SECURE 2.0, Section 305, will bring you any joy either. Good luck!

Or, the agent doesn't understand the technical details. Possible that the policy had the cash value "stripped out" by the Trustee via a maximum loan, and deposited this into the annuity, leaving only the value of the Taxable Term Cost in the life policy, which was then distributed to the participant. No taxable distribution if the only value in the policy represents previously taxed TTC. Not saying this is what happened - only that it could have happened this way. Caveat - I have blessedly had nothing to do with life insurance in plans for well over a decade, so either things could have changed or my memory could be faulty. P.S. - I'm also making an assumption this participant is not self employed or an unincorporated partner...

Thanks Peter. In this case, the document is clear enough - if the gross up isn't considered part of the taxable fringe benefit, then it is "normal" w-2 comp, and it is NOT excluded. We're deferring to the CPA on this question anyway, but I've never had to consider this specific issue. The plan sponsor doesn't have any particular desire to exclude this payment - just wants to determine what approach is correct. So it sounds like you lean toward it NOT "attaching" to the actual fringe benefit? Thanks again.

Suppose employer provides a fringe benefit which is taxable. Further suppose that the employer provides a "gross up" on the taxable fringe benefit. Finally, let's suppose that this particular fringe benefit IS excluded for plan purposes, and that fringe benefit taxable amount is $1,000, and the "gross up" is an additional $250. Is the "gross up" considered part of the taxable fringe benefit, and thus excluded for plan purposes? Or, is it considered separate, and therefore normal plan wages since not excluded?

Just some general thoughts: It seems a little early to be making decisions on these items, without truly knowing what is involved in processing such transactions, for both the recordkeepers and the TPA's. And how is a fiduciary supposed to make an informed decision on such matters until these things are known, and communicated to the fiduciary? That said, I generally am squeamish about the idea of a plan sponsor/fiduciary disfavoring such distributions by charging a higher fee. However, that's just my general bias, not backed up by any specific information. I also generally favor keeping distribution fees the same for different types of distributions if possible, for administrative ease and clarity as much as anything else. Again, I just feel like it is too early to have a reasonably informed opinion - the recordkeepers/TPA's are going to have to charge as much as they need to, and this could be structured in many different ways, to THEN be analyzed by the fiduciary as to whether the fees are reasonable and appropriate. I dunno - I'm just blathering here... P.S. - I do seem to recall that when Roth first came out, some recordkeepers/TPA's charged more for a Roth distribution than for a taxable distribution. Seems like that is pretty much gone now.

I'm going from MEMORY, such as it is, but I seem to recall that pre-2023 service is disregarded for eligibility under the SECURE 2.0 LTPT 2-year rule. But I'd have to re-read it - I don't have much confidence in my memory on this, as I wasn't looking at this specific scenario.

Peter - I thank you for the compliment. Very classy and kind, even though demonstrably untrue... I did initially ask for the name/number of the program, but as yet have not received a reply. In this case, it turns out that it is unlikely to matter much anyway. It is good to know, however, that if it ever comes up on a case that matters, we can refer the client to you. Sadly, most of them are too cheap to engage counsel in about 98% of the situations where we recommend that they do. Pennywise and pound foolish. Or, as we salt mine slaves at a prior large employer used to say of the management bean counters, "They'll step over a $20 to pick up a $1."

Aaargh! And here I was hoping we didn't have to worry about LTPT until 2025. And FWIW, I just had your interpretations confirmed by a "big name" in this business. I hadn't read the actual Section until you brought it up, and sadly, I had to agree. I liked the summary I had read earlier, (which just pushed it off until 2025), a whole lot better...

Good point. Does anyone doing a lot of NY business happen to know the answer to this? (This really comes up in the context of a plan using brokerage accounts - the recordkeeping platforms do their thing anyway so it isn't an issue on those, but the brokerage firms don't do a darned thing, so this becomes an issue.)

First, thanks for the comments. Peter, they will live and work in the USA. RBG, they work over 1,000 hours. 'Cuse - I get your point, but since this is an area about which I know essentially nothing, it requires legal counsel to be safe - I certainly wouldn't take this approach without blessing of counsel. I probably would never have even thought about this issue except that a couple of years back, a somewhat related question came up specifically regarding H-2A employees, and client's legal counsel opined that they could not be excluded by class. Anyway, it turns out that this is a tempest in a teapot. Employer has 1 YOS eligibility, and a 1,000 hour/last day allocation requirement, 6-year graded vesting, and almost all of these people leave before the end of the second year, so even if they fail coverage and have to make contributions for half a dozen of them, they will either be zero or 20% vested. Employer is not a "generous" type, so that's how this came up.

We don't get this issue much here in the Northeast. An employer (not agricultural) is apparently hiring some foreign workers under some program (name/number of program as yet unknown, other than it is not H-2A). Wants to exclude them as a class, subject to coverage testing. Although this is a labor lawyer question, any thoughts as to whether it is generally allowable to exclude, as a class, foreign workers under various work/Visa programs, again, subject to coverage testing? P.S. - it appears that all of these workers will be from Mexico. It seems to me that an exclusion that has the effect of excluding only employees of one nationality would be a violation of some discrimination regulations.

One of the chinks in the armor of SCP is that employers are supposed to document how they will prevent this error from happening again. We, of course, explain this to them, but I don't believe they all do it. Or, if they do, they then don't follow the procedure...

Hi BG - I THINK that the date in Peter's PDF that you are referring to is for SECURE 310. The hardship certification issue at hand is SECURE 312, which I read as being effective for plan years after the date of enactment - so for calendar year plans, effective 1/1/2023.

Of course, when 2033 rolls around, I'll be retired, so whether they fix it or not won't really matter to me... a pleasant thought! As to the SPD issue - Peter, your diligence does you great credit, and I admire that! But I'm lazier, and unless something changes my mind, I won't be worrying about a current SPD/SMM attempting to address this issue yet. When it comes to restating Cycle 4 documents (and probably Cycle 2 403(b)), or SECURE Amendments, if the IRS hasn't provided guidance, I (or my replacement here) will worry about it then. We use pre-approved documents anyway, so the document providers may or may not address this issue. Perhaps I'm taking too relaxed a position on this...

It ain't going to be fun. The solution? Buy lottery tickets!! Odds of winning are about 1 in 320 million or so, and the jackpot is 600 million or so. So if you buy 320 million tickets, you are guaranteed of winning and making a huge profit so you can retire!! (I'm using government accounting mathematics.)