WCC

You have probably already thought about this, but I will ask... Is the participant catch-up eligible? Could that be the reason the payroll system allowed this individual to exceed the document limit of 10%?

It is not exempt since the CODA was effective after 12/31/2022. Must be an EACA. https://www.irs.gov/pub/irs-drop/n-24-02.pdf Q. A-1: When is a qualified CODA established for purposes of determining whether the qualified CODA is excepted under section 414A(c)(2)(A)(i) of the Code from the requirements related to automatic enrollment (that is, whether the qualified CODA is a pre-enactment qualified CODA)? A. A-1: For purposes of section 414A(c)(2)(A)(i), a qualified CODA is established on the date plan terms providing for the CODA are adopted initially. This is the case even if the plan terms providing for the CODA are effective after the adoption date. For example, if an employer adopted a plan that included a qualified CODA on October 3, 2022, with an effective date of January 1, 2023, then the qualified CODA would have been established on October 3, 2022 (that is, before December 29, 2022), even though the qualified CODA was not effective until after December 29, 2022.

I listened to a webinar today presented by a well-known industry expert. He made a comment about SECURE 2.0 Section 603 that surprised me. He made the comment that to simplify the administration of Roth catch-ups, a plan sponsor could amend the plan to only allow catch-ups in the form of Roth for everyone. I thought I must have misunderstood him because to me the proposed regs and final regs seem very clear that this is not allowed. However, when questioned, he commented that he believes the IRS will allow this and the third party document providers are preparing for this. Does he know something that no one else knows? Has anyone else heard rumors of the IRS taking this stance? Thanks

CuseFan - excellent memory!

A 401k plan is a designed based safe harbor for both ADP and ACP testing; however, the plan allows after-tax contributions. The plan includes the match with the after-tax contributions to satisfy the ACP test (passes ACP just fine). My question is, how should Schedule R question 21b be answered (or 5500 SF 14b)? The question references both deferrals and match, without after-tax, the design would satisfy ACP. Thanks 21b If this is a Code section 401(k) plan, check all boxes that apply to indicate how the plan is intended to satisfy the nondiscrimination requirements for employee deferrals and employer matching contributions (as applicable) under Code sections 401(k)(3) and 401(m)(2). _ Design-based safe harbor method _ “Prior year” ADP test _ “Current year” ADP test _ N/A

The ASPPA courses: Retirement Plan Fundamentals and Introduction to Retirement Plans are excellent. ERISApedia is also excellent, there are a lot of recorded webcasts on many different topics.

No. A match of 100% on the first 6% satisfies the ADP and ACP safe harbor (assuming no allocation conditions, vesting rules, notice requirements, etc. are satisfied). The 4% rule you reference comes into play when a discretionary match is funded in addition to a safe harbor formula. If there is a discretionary match in addition to a safe harbor match, then to satisfy ACP safe harbor, the match cannot take into account more than 6% of pay and the match contribution cannot exceed 4% of pay.

Not that I am aware of. I think I have spoken with what I would consider all the "big" recordkeepers and they are all asking for an indicator file. From my perspective most RK's want the information for targeted communication campaigns. Whether that is messaging specifically placed on the employee portal, emails or letters.

I would like to make one comment to this statement to confirm my understanding. I agree that the timing is irrelevant. However, I don't believe the Final Regulations change the nature of a catch-up. Meaning a catch-up is still an amount that exceeds a limit, but any Roth deposit may satisfy the requirement. For example, let's say a 401k plan document is written to not match catch-up contributions. In January 2026, a participant (age 55) funds $8,000 Roth and $0 pre-tax February - December the participant funds $24,500 pretax. $0 Roth The Roth dollars satisfy the rule, but they are not catch-up dollars. The final $8,000 pre-tax dollars are still the catch-up dollars and stay as pre-tax. Therefore if a plan uses a pay period match formula, the Roth dollars are matched, the final $8,000 of pre-tax is not. This may be semantics, but I would change the statement to say: The first Roth dollar deposited can be used to satisfy the Roth catch-up requirement.

Yes, for catch-up eligible participants with FICA wages in excess of $150,000

https://www.irs.gov/pub/irs-drop/n-25-67.pdf The Roth catch-up wage threshold for 2025, which under section 414(v)(7)(A) is used to determine whether an individual’s catch-up contributions to an applicable employer plan (other than a plan described in section 408(k) or (p)) for 2026 must be designated as Roth contributions, is increased from $145,000 to $150,000

Interesting question, thanks for sharing. I just have thoughts for discussion and no direct answer that I can back up. The plan document will need to be amended to say contributions will be deemed from pre-tax to Roth. Therefore, if the terms of the document are not followed, then I would assume an operational failure occurs. In this case, the employee was not told pre-tax elections would be deemed. So my thoughts are either (1) the terms of the document are followed meaning deeming happens now and the participant agrees to the deeming since they not told timely or (2) the plan administrator returns their ineligible catch-up if the employee opts out of deeming now. There is no missed deferral opportunity because the employee reached 402(g) with only pre-tax dollars. So even if they were given a notice about deeming, the only choice they had is to opt out of deeming. They could not have increased their deferral rate to receive more pre-tax dollars. I don't see where a QNEC would be owed in this case because there is no missed opportunity.

My interpretation is as follows: since this is a plan that uses separate elections, presumably the "catch-up" source is capped at the catch up limit $7,500 (2025). I understand what justanotheradmin says about when a catch-up is technically a catch-up. This has always been a problem with separate election plans (e.g. plans that don't match catch-up so they incorrectly don't take into account deferrals made under the "catch-up" election). But if you have and will take the position the "catch-up" is a catch-up, then I don't see why it would revert back to pre-tax catch-up once the catch-up limit is reached. I think the effective opportunity language in the final regs say they can make a different election anytime. Since you are deeming them on the first pay period, they can opt-out or choose pre-tax catch-up since they are also contributing "regular" Roth. How you will actually do this automatically on a large scale is yet to be seen. they need to have an effective opportunity to opt out. So presumably they have the choice on the 12 pay period to continue having 10% PT and 10% Roth withheld. Ideally payroll would make the calculation change when pre-tax reaches 401(a)(30), not when the total deferrals reach 401(a)(30). But if payroll can't do that, then it will likely need to be a manual process. Yes, because the limits start over in 2027 and deeming now looks at the 2027 plan year. They would then contribute 10% as pre-tax and 10% as Roth until you deem again in 2027. This assumes there is no deferral election activity in between.

Suppose a controlled group has two 401k plans - A and B. The decision makers told both plans not to add super catch-ups. Plan B ignored the direction and added super catch-ups. For sake of argument, decision makers refuse to add super catch-ups to plan A. How does one fix a universal availability failure? Does plan B have to be amended retroactively to remove super catch-up and therefore remove/distribute any super catch-up deferrals? Or is plan A forced to add super catch-ups? Thanks

I don't think the example you posted uses the word "first", it just say's "up to". The below paragraph from the preamble to the 415 regs is what I have relied on when this question comes up. You are not required to count compensation on a FIFO type accounting basis. (unless your document says so) https://www.federalregister.gov/d/E7-5750/p-111 "As noted above, the final regulations provide that a plan cannot take into account compensation in excess of the section 401(a)(17) limit. In addition, the final regulations provide that elective deferrals can only be made from compensation as defined in section 415(c)(3). However, in applying these two rules, a plan is not required to determine a participant's compensation on the basis of the earliest payments of compensation during a year."