Belgarath

I haven't seen any official guidance on the following situation, and I wondered if there was something that I missed? Suppose a plan excludes "truck drivers" for all purposes. They are excluded even if they have satisfied the plan's 1 YOS/1,000 hour requirement. Plan passes coverage with flying colors. Now skip ahead to 2024 (*or possibly 2023 if SECURE 2.0 further complicates things). Must the LTPT truck drivers be allowed to defer? It seems like the grossest type of stupidity if they must be covered, while excluding people in the same employment classification who satisfy a 1 YOS/1,000 hour requirement. If there hasn't been any official guidance I've missed, anyone have a pipeline with some IRS folks for "unofficial" conversations that they might have had?

Not quite sure what you mean by 2 years. For example, was a deposit made to the SIMPLE = > 2 years ago, but nothing during the last 2 years? In that case, the rollover could be made. If the participant has never participated in the SIMPLE, or if that participation is less than 2 years from the date of first deposit to the SIMPLE, then no, he can't roll his 401(k) to the SIMPLE.

Thank you both.

Thanks Bri. Yes, I know this, but when I said last minute, I literally meant last minute. So to be more specific, suppose you can't send out the statement on or before 10/15, then which option do you use? I KNOW we will have a few of these (thankfully very few).

Curious as to opinions on this - suppose you have pooled plan, annual valuation only, and the client (on extension) doesn't get you data until the last minute. (Naturally, no one else has any such clients...) I guess you just have to send them late. Only other alternative is to send them out with duplicate of 12/31/2020 statements, with some sort of disclaimer, but I don't much like that option. Other alternatives/thoughts? This is preying on my mind, with a lot of folks on extension this year... Thanks.

Thanks Peter. Precisely as I thought, but it is always comforting to get confirmation from someone else!

Stupid question, but I just want to make absolutely sure I'm not missing something - not applicable to 457 plans, right? Gracias.

FIS pre-approved documents also modify the SPD if the election in the appendix is made.

New Cycle 3 document that we use defaults to the automatic revocation of spousal designation upon divorce. There is an OPTION in the Appendix to choose not to apply this automatic revocation.

Purely playing Devil's Advocate here, because I have no idea. Is it possible that particularly on some of the older annuity contracts that were used to fund these 403(b)'s, that the specific contract language contains such a requirement? There's a lot of wackiness in the 403(b) world.

For me, yes. I don't file many Determination letter requests these days.

First question - not too much - varies a bit year by year - maybe 3-4% on average. Had a huge VCP project several years ago that required more like 10-15, but that was an anomaly. As to your second question, I have no idea, and no way of even guessing.

RBR - yes, the 3% is required. The real question is whether you want to revert to ADP/ACP testing or not, and whether to preserve the top heavy exemption. Since due to an asset sale, you have the option to pay the required 3%, and preserve the safe harbor status for the short year, preserve the top heavy exemption, and avoid ADP/ACP testing. (I'm assuming no other contributions that would otherwise invalidate the top heavy exemption anyway.) If you don't choose this option, then you still have to pay the 3% for the short year, but you must test for ADP/ACP, and you lose your top heavy exemption since now it isn't a safe harbor plan.

I'm not sure if I'm understanding the thrust of your question correctly. In my experience in the industry, the vast majority of in-plan Roth conversions are, in fact, from pre-tax funds. The "mega back door Roth" is a niche used by a far smaller number of plans. But at any rate, the answer is yes, you can have a provision in your plan to convert pre-tax contributions, and many do.

I wouldn't report it regardless, but even if I were otherwise inclined to report it, I REALLY wouldn't report it when you don't even know if there's a PT involved. Just my 2 cents worth.

No problem at all from my viewpoint. Many documents (Relius, for example) you would just specify the effective dates of those changes in the Appendix. So you restate 1/1/2022, with one or more provisions in the restated document not taking effective until 8/1/2022, as noted in the Appendix.

FWIW, be careful if your client is using a payroll service and has Roth deferrals. We've had issues with this on occasion where the payroll service provider doesn't understand, and adds the Roth deferrals back into Box 1 so they are being included in income twice.

Thanks Luke. If you note in my response above, [I'm very inclined towards Lou's interpretation.] I agree with Lou (and you) in general, practical terms. I just don't believe that it is ironclad. As an administrative issue, would I use the more common sense approach and exclude them? Likely yes, possibly subject to facts and circumstances. It's mostly that over many years of doing this garbage, I've developed a ?healthy? fear of absolute statements where there may be room for interpretation. I've never seen this issue raised with the IRS at ASPPA conferences, etc. - are you aware of any such unofficial musings by the IRS one way or the other?

This issue is somewhat "gray" IMHO, and I have seen it interpreted both ways. The "not employed" language seems to leave some room for argument when the employee isn't officially "terminated" as in your exact situation. I'm very inclined towards Lou's interpretation. As a practical matter, how would the IRS even prove that the employee wasn't "terminated" if they audited. No hours, no compensation, etc. - I wouldn't classify it as a "high risk." If there's a lot of money at stake, might be worth getting an opinion from ERISA counsel, although even that isn't going to help if the IRS disagrees.

Could you provide a bit of clarification? Is this person a Key Employee? Or Non-key? Or Former Key? And when you say "in the last plan year" do you mean the last Plan Year PRIOR to the Plan Year for which you are performing the valuation?

I just use the document system. Last year they had some serious service problems, but I must say, the last 4 or 5 months the response time has been excellent. And while I don't particularly like the new portal system (probably because it is hard to teach an old dog new tricks...) it seems to be working fine. Took a little getting used to, but that's generally true of any changeover.

Justatester - a quick observation FWIW - when a DC plan is terminated on a date other than the last day of the limitation year, under 1.415(j)-1(d)(3), there is deemed change of the limitation year - in this case, a short limitation year is created. So the fact that the 415 limit was prorated seems correct to me.

With the caveat that I haven't dealt with insurance in plans in a very long time, I'd like to point out an item that is often overlooked when discussing this subject. While the taxable term cost can generally be recovered as basis when the policy is distributed, this treatment does not extend to self-employed persons. They pay the taxable term cost, indirectly, as they cannot DEDUCT this amount, but they don't get to recover it on the back end. Possibly this has changed since I've dealt with this issue, so if potentially applicable here, you'd want to investigate that angle. Many times the purpose of issuing "maximum insurance" is for a sole prop owner to max out (or for the agent to increase commissions) so it pops up more often than you might think.

Thanks Brian. Good stuff!

'Cause I found a pretty good discussion of the issue in EBIA. In addition to general discussion, reference to RR 2002-32 re Health FSA's. The information was sufficient for my purposes, so I didn't want people to waste their time. Thanks for asking.