Belgarath

Might push more plans toward Safe Harbor design.

Employer has a 401(k) Plan - Plan A. Employer, for reasons as yet unknown, (although I suspect sales commissions MAY have been a factor, but maybe not) established another 401(k) Plan as well - Plan B. Employer transferred most of the funds from Plan A to Plan B, but there was no plan merger agreement, no plan termination of Plan A, etc. The rest of the funds will apparently be transferred once there is no surrender charge. Can the employer just randomly transfer funds from plan A to Plan B? No option given to participants, it was just done - and no distributable event such as a plan termination. I'm thinking this has VCP written all over it, although I'm not sure what the "fix" would be. Am I missing something absurdly basic? Never have I seen anything like this...

Thanks Peter.

FWIW...As currently written, I'd go with the age 73 (being of an essentially conservative mindset on such issues). Why? 'Cause given two possible interpretations, I'd choose what is, to my way of thinking, the "safer" approach - don't miss an RMD! I have no idea how the summary would look - I'm nowhere near the point of that level of detail. And I frankly expect the IRS will either (a) even if unoficially, opine as to how this should be interpreted, or (b) have to live with either interpretation.

I think I know the answer, but thought I'd solicit opinions. Suppose you have a state where state withholding is NOT mandatory - let's use NY as an example. Can a plan refuse to do state withholding on a taxable distribution, since it isn't required, even if the participant WANTS to have state tax withheld? I know that many platforms will accommodate the request, but I believe it is not required. Thoughts? Thanks, and Happy New Year!

We already had a CPA telling our client that he'd have to have automatic enrollment/escalation in 2025. Completely ignoring the grandfathering... One of the aspects of this business that I hate - you have to spend a lot of time responding to foolishness. Oh well, I suppose that some of my questions to our health insurer are stupid questions, so perhaps I'm just as bad. But in the fantasyland that I've constructed for myself, I never ask stupid questions. And all my answers are brilliant. (Took me a long time to construct this magical place.)

Unbelievable. Some of these "advisors" need a swift kick. And the boots of the kicker should have crampons.

I agree it is a stupid provision. I can't imagine why any small employer would want to mess with this, and we would certainly discourage them from doing so. I'd ALMOST be willing to bet that we won't have anyone who decides to implement this.

Yup.

Perhaps it invites additional cyber-crime?

So funny, but I was in the middle of typing my response that it might slow down MY creation of new plans... Honestly, I haven't bothered to keep up on SECURE 2.0, as my mentality has been that I'd deal with it when it passed. Now I'll apparently have to deal with it. Retirement looks more attractive than it did a couple of weeks ago, but I can't QUITE do it yet.

I generally would agree with BG, but I'd be a little careful. The IRS generally assumes all terminations are involuntary, but that's a rebuttable assumption. So if the employer can prove to the IRS' satisfaction that these were in fact voluntary terminations (and not in response to some employer action) then yes, shouldn't be a PPT.

Thanks, and thank you for your patience.

Thank you both. But I'm trying to understand - ESOP, I get it that a S-corp CAN allow a stock distribution. I'm struggling with the concept, however, of how this is possible, even for "1 second" if the plan language clearly states that if the corporation is a S-corp, that distributions must be in cash? Even if the participant signed (incorrectly?) a "put" - isn't the put meaningless? What trumps what here?

Interesting question arose from out in the wide world, and I don't know much about ESOP's. Suppose you have an S-corporation, where the document clearly states that all distributions must be in cash. Seems straightforward enough. So if the corporation RETIRES shares (as opposed to repurchasing them) when someone terminates employment, there's still no share distribution to the participant, right? So that no NUA calculation would apply, even if there is a lump sum distribution? Isn't the net effect (to the participant) the same, whether shares are retired or repurchased - i.e. the participant never receives ownership of the shares, so there is no "put" option, and the participant just receives cash, as required under the terms of the document?

Are you talking about a PENSION plan, or a purely discretionary Profit Sharing Plan? At any rate, I think you want DOL regulation 2509.94-3, (c). P.s. - the (c) is if it as a PS plan. If you are actually talking about a DB plan, then it would be paragraph (b). But as to whether a CD could be considered "cash" - I'd opine, for what little it is worth, that it's verboten. I lean towards conservatism on such issues. Ultimately an ERISA counsel question as far as I'm concerned.

Thanks all!!! Very helpful.

Peter, thanks for the response. One additional question - does moving to a PEP automatically terminate the plan, causing a short plan year, and start a new plan 002? Or does the existing plan simply move under the "umbrella" of the PEP, administered by a PPP, still as plan 001? Gracias!

Couple of questions on this, as we aren't a PPP. We are TPA on a plan sponsored by a corporation, (a controlled group with one other corporation which signed on as a participating employer) where a financial advisor convinced them to move all the funds to a PEP. Fine. This happened a couple of months ago. (Calendar year plan.) We have been asked to complete the plan administration for the 2022 plan year. Is it ok for the PPP to farm out the administration to a TPA like us? In addition, any thoughts as to why we might not WANT to do this admin, or is it just carry on as usual - We've never been involved with a PEP/PPP yet. All thoughts appreciated!

It is a bit of a stretch, but what about a DC Pension plan, that wants to allow in-service distributions prior to age 62? If they can legitimately use an earlier NRA, then such a distribution could be allowed.

This might help. https://www.irs.gov/retirement-plans/choosing-a-retirement-plan-simple-401k-plan#:~:text=Under a SIMPLE 401(k,of each eligible employee's pay.

Thanks. Oddly, traffic was very light this morning. I think people are backing off the physical Black Friday shopping, and doing more of the Cyber Monday stuff. Just my unscientific opinion...

Hope you all have a wonderful Holiday break. Watch out for crazy drivers! There were already a lot of people in a heckuva hurry this morning...

When I was doing some random browsing, I saw something on this that made be do some additional browsing. There are MANY websites out there that say you are a HCE if you had more than $150,000 compensation in 2022. Now, while true, it seems to me that this is very misleading, as some of the charts, etc. would lead someone to believe that the THRESHOLD is $150,000, rather than $135,000, so that if you had, say, $145,000 in compensation in 2022, you would not be a HCE in 2023. Are others seeing this, or getting questions due to this type of information out there?

Thanks to you both.