Belgarath

Here's my concern. My understanding is that the "notes" in a pre-approved document are an integral part of the document and approval, and not merely "comments" that are purely informational. So in this case, does this provision make them lose reliance, such that they need to go through VCP? At the very least, I'd have them amend the plan to a "normal" new comparability allocation election.

I think perhaps they are anticipating a retirement or retirements? I don't know the motivating factor here.

This may seem like a stupid question. Suppose a plan currently has a last day/1,000 hour requirement, but allocation requirements are waived for anyone who terminates after attaining NRA or Early Retirement Date. Now they want to amend the plan to eliminate this waiver. Clearly, if someone already terminated employment this year and has attained ERA/NRD, this amendment won't apply to them. But what if someone has attained ERD/NRA, but has not yet terminated employment? Is it ok to apply to them for 2022, or can it not apply to them until 2023? Is the determining factor the termination of employment - in other words, since they haven't terminated employment yet, is there no cutback? Or would you interpret it similar to a plan where there is a 500 hour requirement with no last day, so that as soon as you get 500 hours, you are eligible for that year? (So that in this case, as long as you have already attained ERD/NRA, you are eligible for this year?) I incline toward this latter interpretation, but I can see the argument for the "dark side." Granted that the plan is everyone in their own group, not a safe harbor, and not top heavy, so that it may be possible to exclude them anyway...

No, the provision for everyone in individual group was in the same section - they had to go by it to get to this one. Clearly intentional.

Coincidentally, I am just now reviewing a plan that came in for takeover. It is an IRS pre-approved Volume Submitter with an AA. Here's where it gets really strange - the allocation method falls under an election entitled, "Describe special rules for determining the allocation formula." It is then typed in: "The amount of such contributions to be allocated to the Accounts of each Employee who is eligible for Employer Contributions shall be a flat dollar amount or percentage of Compensation. Contributions may vary by each eligible class and/or employee, and shall be determined by the Employer." Directly beneath this election is a (my emphasis) [Note: any special rules must be described in a manner that precludes Employer discretion and must satisfy the nondiscrimination requirements of Code 401(a)(4) and the regulations thereunder.] I don't see how the allocation method satisfies the requirements of this Note, and there's no other election putting everyone in their own group, etc... am I missing anything?

Yeah - the DOL does a lot of good things, and they do a lot of bad things albeit with good intentions. And then there is this - which is both mentally arthritic, and actively obnoxious. Someone who was in charge of this should have their head handed to them on a platter. A classic example of regulatory overreach.

Also a FAQ which is a little easier on the eyes of some of us older folks... https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/vfcp-class-exemption-faqs.pdf

Ditto on previous comments. While I've been able to help some people, I have to say this board has been a net gain for me - I've learned so much over the years. There is also great comfort in knowing that other professionals struggle with many of the same issues, and there often isn't a perfect answer/solution. And, many a time when I'm chasing my own tail, someone looking at a question with fresh eyes sees the solution instantly, and I think to myself, "You darned fool, why didn't you think of this already!" Many times I have saved a great deal of time due to the helpful comments and advice available here. It's a great resource for experienced professionals, AND for newbies.

And to me, that's really the issue. This is what you'd use to politely, as Mike said, tell them to go fly a kite, in most situations.

Just out of curiosity - what would a "normal" charge be (if any) to add flavoring, if it is a separate itemized fee?

Not sure I'd make quite such a blanket statement. What if the VS still has, say, a 1,000 hour/last day allocation requirement?

Complicated indeed! I think IRS Notice 2007-7 may be somewhat helpful. Austin - doesn't 1.401A-1, Q&A-4(d) answer your first question if it is a spousal beneficiary? The 5 year clock doesn't restart. As to a non-spouse beneficiary, they can roll over to an inherited IRA, as long as it is a DIRECT rollover, as per IRS Notice 2007-7. The inherited IRA treatment if the non-spouse beneficiary under 408(d)(3)(C) means, I believe, that the "normal" rules apply - that is, the beneficiary may NOT treat it as their own IRA for purposes of minimum distribution rules, and they can't roll it into their own existing IRA. So, for RMD purposes, the non-spouse beneficiary who rolls it to an inherited Roth IRA account, as per 402(c)(11), you look to IRS Notice 2007-7 - see IRS Notice 20078-7, Q&A 17-19. There may be a good writeup of all this out there somewhere, but I surely don't know of one. What little understanding of all this garbage I gleaned only after considerable (as the British might say) "mucking about." Link to 2007-7 - https://www.irs.gov/pub/irs-drop/n-07-07.pdf P.S. - and it ain't like I feel totally confident in this stuff - if it were a real situation I'd have to spend a lot more time...

Going from memory, no. Basis recovery for Taxable Term costs can only be used if the policy is distributed to the participant, or surrendered by the trustee. However, caveat emptor - it has been a LONG time since I had any dealings with life insurance in qualified plans. You will hopefully get a response from someone more in tune with this.

I say 30%. The Plan Administrator interprets the documents (I realize they will do what you tell them to), but I don't see any reasonable conclusion other than 30%.

Thanks for the input.

Thanks Luke.

Individual made an election to defer the start date for payments to a date later than what was permitted in the document. Post-severance payments could be deferred, but not beyond age 65. Post severance payments for someone who retired later than 65 had to start within 60 days. This person retired after 65, but was mistakenly allowed to postpone payments until 70-1/2. So there's an operational error, and under 1.457-3(a), it appears that the plan, in both form and operation, must comply with the 457 requirements. When I'm grasping at straws here, I was wondering if, since such an election is PERMITTED under the 457 regulations (as you note) whether an operational error which nevertheless allows something that is otherwise permitted in the regulations, can be "forgiven" without endangering the status of the plan?

Ugh - just reviewing a 457(b) plan where there was an operational error a couple of years ago. Long story short, a participant who terminated employment was required, under the terms of the plan, to start receiving distributions within 60 days. Instead, participant was allowed to make an election to delay distributions to start at age 70-1/2. Under the excellent reference book by Peter Gulia, Garry Lesser, and David Powell (the 457 Answer book) it doesn't sound hopeful as to possibly correcting - limited at best even for governmental plans, and worse yet for non-profits. So my question relates to what is done in real life - aside from the obvious of seeking legal counsel. Seems like it could be ignored, and hope no one notices, or attempt to correct as best they can (start distributions now, and hope no one notices) or treat it as an ineligible plan, subject to 457(f) as of a couple of years ago?

Thanks - not questioning whether Section 125 deferrals are added back in. In this plan, they are. The question is whether EMPLOYER contributions to the HSA through the 125 plan are considered deferrals to be added back in to plan compensation.

Thanks. That's my opinion as well, although I don't feel overly confident about it! It at least seems reasonable...

Grrr - this seems sticky. Employer contributions to the HSA are a "qualified benefit" under the Section 125 proposed regs. (See 1.125-1(3)(J)). And under the W-2 instructions, excerpt below, they would need to be included in Box 12 with a code W. Assuming for the moment that the contributions, when made, are "reasonably" excluded from the employee's income, is this considered a Section 125 "deferral" which is added back in as compensation under the terms of the plan? I'm having trouble coming up with a definitive answer on this. Does the fact that 1.125-1(3) contains the language that the term "qualified benefit" means ..."any benefit attributable to employer contributions"... mean that it is treated as a deferral that is added back in? Anyone gotten a CPA decision on this question before? Thanks. Health savings account (HSA). An employer's contribution (including an employee's contributions through a cafeteria plan) to an employee's HSA is not subject to federal income tax withholding or social security, Medicare, or railroad retirement taxes (or FUTA tax) if it is reasonable to believe at the time of the payment that the contribution will be excludable from the employee's income. However, if it is not reasonable to believe at the time of payment that the contribution will be excludable from the employee's income, employer contributions are subject to federal income tax withholding, social security and Medicare taxes (or railroad retirement taxes, if applicable), and FUTA tax, and must be reported in boxes 1, 3, and 5 (use box 14 if railroad retirement taxes apply); and on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. You must report all employer contributions (including an employee's contributions through a cafeteria plan) to an HSA in box 12 of Form W-2 with code W. Employer contributions to an HSA that are not excludable from the income of the employee must also be reported in boxes 1, 3, and 5. (Use box 14 if railroad retirement taxes apply.) An employee's contributions to an HSA (unless made through a cafeteria plan) are includible in income as wages and are subject to federal income tax withholding and social security and Medicare taxes (or railroad retirement taxes, if applicable). Employee contributions are deductible, within limits, on the employee's Form 1040 or 1040-SR. For more information about HSAs, see Notice 2004-2, Notice 2004-50, and Notice 2008-52. Notice 2004-2, 2004-2 I.R.B. 269, is available at IRS.gov/irb/2004-02_IRB#NOT-2004-2. Notice 2004-50, 2004-33 I.R.B. 196, is available at IRS.gov/irb/2004-33_IRB#NOT-2004-50. Notice 2008-52, 2008-25 I.R.B. 1166, is available at IRS.gov/irb/2008-25_IRB#NOT-2008-52. Also see Form 8889, Health Savings Accounts (HSAs), and Pub. 969. https://www.irs.gov/instructions/iw2w3#en_US_2021_publink1000308298

Don't forget that top heavy does not apply to a 403(b). It can be an issue.

No no no - it wouldn't be in reference to deferrals, it would be sheer "coincidence" that it happened that way... you look good in an orange uniform, right?

I'll toss this out as a possibility - any chance that the plan provides for PS with everybody in their own group, and if so, would contributing the otherwise "missed" match in the appropriate amounts to those employees pass testing? Of course, even if this could work, might be issues if vesting for the PS is less favorable than for the match...

Aren't itemized deductions rather limited now? I know this is a CPA question, but maybe it is only itemized deductions for certain specific categories (property taxes, etc.) that are curtailed.