Belgarath

You work without certified census data? Yeesh, I wouldn't go out on that limb...but I expect that's maybe not quite what you meant?

There's always something new in this business, isn't there? Do they certify to you, in writing, that these people work there, and that their W-2 (or Schedule C, whatever) is "x" amount, that supports the contributions? If not, (and this is just me) I'd resign post-haste. I wouldn't want to knowingly be complicit in tax fraud. Sounds like a pretty unusual situation...

Thanks Peter - we had already reached out to ask these very questions, but as yet have received no answers.

Gracias.

So I'm struggling with this - distribution from a Defined Benefit plan - participant wants to roll into a Roth account in a Governmental 457(b) Plan. I'm thinking it must be rolled into the 457(b) plan as non-Roth, then converted as an on-plan Roth rollover. But that seems stupid - can it just be rolled directly to the Roth account in the 457(b) (and of course reported as taxable)?

Without having time to go into details, I'll just say that I personally find the "20 hour" exclusion to be an invitation to disaster. Nearly guaranteed screw-ups at some point. Like you, I try to always have a plan allow deferrals for all...

Assuming the employee is a NHC, this can be corrected by a retroactive plan amendment. See Revenue Procedure 2021-30, Appendix B, Section 2.07(4)

An excerpt from IRS Notice 2018-95 - and short answer is that in your example, you can exclude them under the "20 hour" exclusion. Emphasis is mine. The provision imposes three separate conditions for an employee to be excluded from making elective deferrals under the part-time exclusion: (1) a “first-year” exclusion condition, (2) a “preceding-year” exclusion condition, and (3) the OIAI (“Once In Always In”) exclusion condition. Under the first-year exclusion condition, in order to exclude the employee from making elective deferrals, the employer must reasonably expect the employee to work fewer than 1,000 hours during the employee’s first year of employment. Under the preceding-year exclusion condition, in order to exclude the employee from making elective deferrals in an exclusion year ending after the first year of employment, the employee must have actually worked fewer than 1,000 hours in the preceding 12-month period.

See the following excerpt from IRS Notice 2020-52. the situation at =hand is this: SH nonelective plan, and the HCE's are excluded from receiving the SH contribution, although a "discretionary" SH contribution may be made on their behalf. They want to amend plan to exclude bonuses for Non-owner HCE's. No problem doing this with a 30 day notice, as the bonuses wouldn't be paid until close to year-end (2022) anyway. I'm curious as to opinions on whether the 30 day notice is required in the following particular situation: No notice - just amend currently with no notice (if it ever comes). I think it is, to be safe, but maybe I'm being overly conservative. III. CLARIFICATION OF REQUIREMENTS FOR REDUCING CONTRIBUTIONS MADE ON BEHALF OF HCEs As described in section II.B of this notice, contributions made on behalf of HCEs are not included in the definition of safe harbor contributions. Accordingly, a mid-year change that reduces only contributions made on behalf of HCEs is not a reduction or suspension of safe harbor contributions described in §§ 1.401(k)-3(g) and 1.401(m)-3(h). However, a mid-year change that reduces only contributions made on behalf of HCEs would be a mid-year change to a plan’s required safe harbor notice content for purposes of section III.B of Notice 2016-16. Therefore, in order to satisfy the notice and election opportunity conditions of section III.C of Notice 2016-16, which apply generally to changes that affect required safe harbor notice content and are not reductions or suspensions of safe harbor contributions, an updated safe harbor notice and an election opportunity must be provided to HCEs to whom the mid-year change applies, determined as of the date of issuance of the updated safe harbor notice.1

Well, that's the crux of the question. I've only seen this a couple of times, and both times they would have been considered eligible "wages" for plan purposes, and as you mentioned, under 415, the allocation would be based on the limitation year to which they relate. Unless the restorative amount was for an otherwise excluded wage category (a bonus, for example) then I'd say you would include it as eligible wages for the plan/limitation year in question.

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.