Belgarath

This is a little difficult to answer without specific dates of hire, DOB, and plan provisions as to eligibility computation periods - stay with anniversary years from DOH, or flip back to plan year for second eligibility computation period? Also, if the person never worked 1,000 hours in a year, how the heck are they not considered part time? But in general, at a guess that there was 500-999 hours in each of 2021, 2022, and 2023, and that employee was at least 21 in or before 2023, then the employee should have already become eligible as a LTPT as of 1/1/2024. Also, all that is REQUIRED for a LTPT is eligibility for DEFERRALS. There are a lot of intricate details to the LTPT rules (far too many!) - you should get yourself a good TPA to assist you with your plan administration. Good luck.

https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2025-01 Now maybe it is just me, but how is this preferable to using, for example, Penchecks, or Millenium Trust, or whoever? Seems MORE difficult to me, but maybe I'm missing something.

Thanks Paul. Yeah, we dump this back on the client, to determine (hopefully) with their tax counsel. Then they tell us. This gets way into the realm of individual tax/legal advice, which my designations don't permit. I will say that generally, in my limited experience with this specific question, rightly or wrong the answer is "no, this isn't a fringe benefit." I have my doubts that the client has in fact asked tax counsel, but that's not my problem.

Hi Paul - it is interesting, but the current language of 200.431 doesn't include the word "vacation." I know this only because I just had to look it up as we just received a question on this. Here it is. Emphasis is mine. I note that (b) does leave room for interpretation... § 200.431 Compensation—fringe benefits. (a) General. Fringe benefits are allowances and services employers provide to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave, employee insurance, pensions, and unemployment benefits. Except as provided elsewhere in these principles, the costs of fringe benefits are allowable provided that the benefits are reasonable and are required by law, an organization-employee agreement, or an established policy of the recipient or subrecipient. (b) Leave. The cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: (1) They are provided under established written leave policies; (2) The costs are equitably allocated to all related activities, including Federal awards; and, (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the recipient or subrecipient or a specified grouping of employees. (i) When a recipient or subrecipient uses the cash basis of accounting, the cost of leave is recognized in the period that the leave is taken and paid for. Payments for unused leave when an employee retires or terminates employment are allowable in the year of payment and should be allocated as a general administrative expense to all activities or included in the fringe benefit rate. (ii) The accrual basis may be only used for those types of leave for which a liability as defined by GAAP exists when the leave is earned. When a recipient or subrecipient uses the accrual basis of accounting, allowable leave costs are the lesser of the amount accrued or funded.

And to Bill's points 4 and 5 above: whenever I start feeling like wallowing in self-pity, I look at the first line of IRC 401(a)(4), and then curse the IRS for the incredible volume of regulations issued for this requirement: (4) if the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). Of course, the flip side of the coin is that without all the onerous regulations, I'd be standing in line for the soup kitchen...

I'll just add that especially in the small plan market, the SHNE is VERY commonly used instead of the match as it does count toward satisfying the "gateway" contribution, (if gateway is required) whereas the match does not.

If check written and sent in December, it is a 2024 1099.

They definitely are not deferrals. No deferral election was signed - this is just a payroll error. As you note, they are loan repayments, and are credited to the plan as such. The W-2, if it shows these loan repayments as deferrals is wrong, and should be corrected.

Agreed. There's no deferral election if employee just writes a check to the plan, which must happen under the 415 timing regulations that BTG referenced above if they want to count it for prior year.

And?

Boo! Hiss!! Tom, good to see your name on the board again!

This was precisely the issue that concerned me. Seems like an employer is between a rock and a hard place. Retire and let someone else worry about it?😁

Hi Ilene - I had a question on this. Section 332 of SECURE 2.0 waives the normal limitation on rollovers from a SIMPLE IRA within two years of initial participation by providing an exception to the 25% additional tax if an employer terminates the qualified salary reduction arrangement of a SIMPLE IRA plan and establishes a 401(k) plan. Such rolled over amounts are then subject to the distributable events set out in section 401(k)(2)(B) (restrictions on employee deferrals). However, as this provision is merely an exception to the tax for new participants, can the general distribution rules for rollover contributions (that is, it is allowable to request a distribution at any time for rollover contributions, if the plan permits it) continue to apply to SIMPLE rollovers by participants who are subsequently beyond that two-year participation window? See IRS Notice 2024-2(G-4). The IRS Notice doesn’t specifically state this – however, it seems like the only reasonable conclusion. It would be completely unreasonable to have the 401(k)(2)(B) restrictions continue to apply AFTER the applicable “2-year” period has passed. However, reasonableness (or at least my take on what is reasonable) doesn't mean the IRS would agree! Thanks.

Hi Peter - thank you for the information. No, I'm not helping anyone, nor have I had an inquiry on this question - just anticipating the possibility with 403(b) restatements starting next year. I could see this question possibly coming up. Happy Holidays to you!

Ignoring the fact that some of these ostensibly non-ERISA deferral only plans don't really qualify as non-ERISA... Let's assume they qualify. Mandatory auto-enrollment in 2025 shouldn't apply, correct?

Thanks Peter. In this case, there are matching contributions.

So, back to the future. It seems like under a combination of the previous guidance, and the IRS Notice 2023-43, it would be possible for an IRS pre-approved 403(b) Cycle 1 nonamender - a public school system - (but one who had previously adopted an appropriate document for the original 2009 deadline) to use SCP to adopt that Cycle 1 document, with appropriate amendments for Hardship and CARES? Or, do you interpret that VCP is required? I'm inclined toward the former, but it does seem a bit nebulous.

I had an early mentor in this business who told me, "Don't try to make sense of it, just accept it for what it is and act accordingly. If you try to make sense of it, you'll drive yourself crazy!"

I vote for VCP.

Hi Peter - this one. The employer is, to be kind, useless, and has been in complete disarray for months. We shoulda dumped them a long time ago, but the bosses don't like to cancel clients... We don't know yet if the accounting firm will have an issue with this - just preparing for that possibility. Gracias.

So, employer does binding resolution to terminate plan as of (x) date, no new contributions, etc., etc. Notification to employees is sent, specifying that date as the effective date of the plan termination. However, PLAN was not amended to terminate by that (x) date. Arguably, the resolution can suffice, at least temporarily, to legitimately establish plan termination date, and plan can subsequently be formally amended to terminate, update for SECURE, etc.? Or is that a hard no? We always do plan amendment by the day before the formal termination date, but I believe that facts and circumstances can allow otherwise if the resolution, notification to employees, etc., are sufficiently detailed. Thanks.

It is a fantastic resource, and has been run so well, for so many years. A rarity these days. Thanks so much for all your hard work!!

Thanks for the response.

THANK YOU RBR! Now, two additional questions, if I may impose further. Does TIAA, in your experiences with this type of situation, provide some sort of statement, etc. that the annuities comply with this? Or if they don't automatically, will they if you request? I realize the client can ask TIAA this question, but I thought I'd just see if you had already dealt with this question. Thanks again - your response was very helpful (and TIAA was not, although it was years ago when this last came up, so things may have changed since then).

We got a question on a situation where this occurred. The employer wants to know if they can get a refund. Large plan 5500. I've never even had a discussion with anyone who has seen this specific situation. First, in a situation where a form has been filed late, but not under DFVCP, I've seen a good deal of discussion where the recommendation is to file an amended form ASAP, checking the box that it is being filed under DFVCP, and filing ASAP under DFVCP. Folks appear to have had success with this, even if a CP283 has been sent. Agree/disagree? But now the question is whether that option is still available if the employer already paid the CP283 penalty? And if so, how does the employer go about requesting a refund? Sending what we used to call the "tear stained " letter? If so, I think they need to engage the services of someone with direct negotiating experience in such situations. Appreciate any thoughts.