justanotheradmin

The IQPA audit is completely separate from the IRS audit. The IQPA audit is performed by CPAs that the plan hires. Its not the same as the audit being done by the IRS. What plan year is the 5500 rejection letter for? What year is the IRS auditing? I agree with Lou S. - if the IQPA isn't being released because those auditors want to see the IRS audit resolved first, I suppose that's possible. But I don't see how that is going to speed things up with the IRS. Their stance would probably be along the line of "well the IQPA audit should have been done months ago before our audit even started, not our problem"

What does the plan document say? if the plan is a preapproved document there would almost certainly be a section (perhaps in a basic plan document) that governs. But generally yes, it ends up being cashed out to the Estate, and then it goes to whoever takes the estate. It is not eligible for rollover to any inherited IRA in that circumstance.

Thanks Lou. I'll see if a letter with that language (and the plan name and participant name etc) appeases the gods of the distribution services center

oh, I completely agree. but I don't see how arguing with an entry level customer service at Fidelity or anywhere else is productive. And since it seems to be coming up more frequently lately if there was some insight someone would have to help me appease the checklist that the receiving plan provider is using, I'm happy to try to do it. If they want a hand-drawn picture of a unicorn from a kindergartener and that's the only thing that would do, I would start volunteering at a local school to see who can draw a unicorn lol

Several times recently, distributions have been requested where the receiving retirement plan or IRA has requested a "qualification letter" from the sending plan. Sometimes the receiving plan is appeased with a copy of the IRS opinion letter, other times there is pushback. There is one right now where Fidelity is insisting the Opinion Letter is not what they want (the sending plan is not audit sized, so there is no audit statement, and while the assets are held with a custodian that does recordkeeping, not all plans pay extra for a certified trust statement either). What do they mean when they say they want a qualification letter? The receiving plan provider can't seem to articulate it, and it is holding up distributions. I don't think the sponsor (who is the named Plan Administrator) minds writing a letter saying they believe the plan to be qualified. They would be happy to. But is that what they want? At one point a receiving plan was saying the letter had to cover the qualification of the plan for this year (they didn't like the date on the opinion letter I guess, among other things). Anyone have a good resource or article or something that can help me understand?

I would think the match formula would have to retroactive to the beginning of the plan year (Jan 1 if calendar year), and on a full year basis. The removal of the auto enroll would have to be prospective (July 1 in your example) I would think. it does not address the auto enroll question you have, but example 2 speaks to the match increase. https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-plans-or-safe-harbor-notices I am undecided on the auto enroll part, which of course is linked to the match when its a QACA. I hope brighter minds give you their take.

tacking on to the funeral example: What say all you wonderful people? Facts: Funeral was 12/1/2022 Funeral expenses were paid via check (don't know who) on 12/19/2022 Participant is presenting now (two weeks ago, early May 2023) request for hardship. I know its facts and circumstances - Some possible analysis: 1. Its within 12 months so its okay to approve? 2. it was paid in cash so the credit card example doesn't apply, and since they were able to come up with the cash, there is no financial need and it should be denied? 3. Even if the participant gave a self-certification that the plan would typically accept (if following the update in SECURE 2.0) the plan admin has actual knowledge (see item 2) that there is no immediate and heavy need, so it should be denied 4. If the participant gives the full self-certification under SECURE 2.0 the plan admin should just call it good and approve 5. Something else?

A couple of thoughts - how many of the HCE are presently maxing out on Roth Deferrals? Are there employer contributions (match, nonelective ) made each year? If so, are the HCE converting those amount each year? The employees that are already taking full advantage of the existing provisions are the ones likely to utilize the after-tax contribution --> roth conversion option. It has not passed, but there have been proposals around doing away with the ability to convert voluntary after-tax dollars to Roth dollars, so while I don't know the likelihood of any of those gaining traction, I wonder if if it worth adding the provision if folks think it might go away in a few years. FWIW - I often see these types of provisions in owner-only plans where ACP testing is a non-issue. So not only for large plans. And personal pet peeve: I hate the term "mega backdoor Roth conversion" I know you didn't make it up, so not directed at you. It's 100% a marketing term and just an in-plan Roth Conversion.

Why was the 401(k) plan frozen and not terminated outright at that time?

I just recently (last month) had a very routine VCP submission resolved that was submitted in January of 2022. As far as I know it wasn't looked at until February of 2023. So I think they are working through the backlog, but it will take some time.

let me start by saying - I think the sponsor should just fix. But since they are asking additional questions I don't know the answer I thought I would see if folks here can point me to threads where this has been discussed. Participant submitted a 5% pre-tax deferral election in 2019. It was never implemented. They don't have a balance in the plan. Participant is now terminated and is requesting a distribution. The plan does have a safe harbor match provision, and the sponsor has no problem correcting the missed match. They are arguing that the participant has some culpability in the missed deferral and for not catching it sooner and the sponsor does not want to make the appropriate QNEC for that part of the failure. Any thoughts on a failure to implement that is 4 years old?

Thoughts? "After considering the public comments, the Agencies decided to adopt the proposed counting method change for defined contribution individual account plans by adding a new line item on both the Form 5500 and Form 5500-SF for defined contribution pension plans to report participants with account balances at the beginning of the plan year (there already is a line item for reporting the number of participants with account balances at the end of the plan year). Instead of using all those eligible to participate, defined contribution plan filers will look at the number of participants/beneficiaries with account balances as of the beginning of the plan year (the first plan year would use an end- of- year measure) when determining if they are eligible for small plan reporting options, e.g., the Form 5500-SF. Conforming changes are also made to the short plan year filings and the “80-120” Participant Rule instructions to reflect this new counting method. See Appendix C for details on changes to forms and instructions related to this audit related participant counting method change." https://www.dol.gov/newsroom/releases/ebsa/ebsa20230223 https://public-inspection.federalregister.gov/2023-02653.pdf https://public-inspection.federalregister.gov/2023-02652.pdf

The age old question- Why do they want to do this? Who is going to benefit from it? Even if it is technically allowed ( I wouldn't do it personally unless there were three months left in the year if there are any NHCE eligible for the plan), if its going benefit the HCE more than NHCE, I would say it its not allowed because it doesn't pass discrimination testing.

Someone should remind them - that even actual 'one participant plans' must file a Form 5500 for the final year. so they aren't going to get out of filing 5500s entirely. Unless of course they choose to ignore that rule along with the rest of the rules... The filing requirement is there for the final year even if the plan has always been under $250,000 and was not previously required to file due to being under that thresh hold.

Solo 401(k), Uni-K, etc are all marketing terms. Not technical terms at all. It is one of my pet peeves that people think these kinds of plans are special or exempt from something because they are called 'solo' plans. Not trying to rail against you, I know you didn't invent the term. Just expressing my distaste at some of the marketing and sales things in general. Those plans are regular 401(k) plans subject to the same rules, reporting, discrimination testing etc. I agree with the others, if the plan allowed for deferrals immediately you likely have a missed opportunity to defer, but it is document specific.

Correct. I anticipate plans will have to issue a 1099-R at year end for employer amounts contributed as Roth, the same as is done for in-plan roth conversions.

Are we assuming it is a brand new start-up plan as of 1/1/2023? Or a plan already in existence prior to the enactment?

Okay, upon closer reading I think I agree with all of you, but maybe not for quite the same reason, but I don't think that matters. I think its based in 402A(c)(1)(B), which was not amended under SECURE 2.0. "the employee designates (at such time and in such manner as the Secretary may prescribe) as not being so excludable." See below. I still think its pointless if that's all that it is. Plans could effectively allow that already. (a)General rule If an applicable retirement plan includes a qualified Roth contribution program— (1) any designated Roth contribution made by an employee pursuant to the program shall be treated as an elective deferral for purposes of this chapter, except that such contribution shall not be excludable from gross income, and (2) any designated Roth contribution which pursuant to the program is made by the employer on the employee’s behalf on account of the employee’s contribution, elective deferral, or (subject to the requirements of section 401(m)(13)) qualified student loan payment shall be treated as matching contribution for purposes of this chapter, except that such contribution shall not be excludable from gross income, (3) any designated Roth contribution which pursuant to the program is made by the employer on the employee’s behalf and which is a nonelective contribution shall be nonforfeitable and shall not be excludable from gross income, and (24) such plan (and any arrangement which is part of such plan) shall not be treated as failing to meet any requirement of this chapter solely by reason of including such program. (b)Qualified Roth contribution program For purposes of this section— (1)In general The term “qualified Roth contribution program” means a program under which an employee may elect to make, or to have made on the employee’s behalf designated Roth contributions in lieu of all or a portion of elective deferrals the employee is otherwise eligible to make, or of matching contributions or nonelective contributions which may otherwise be made on the employee’s behalf, under the applicable retirement plan. (2)Separate accounting required A program shall not be treated as a qualified Roth contribution program unless the applicable retirement plan— (A) establishes separate accounts (“designated Roth accounts”) for the designated Roth contributions of each employee and any earnings properly allocable to the contributions, and (B) maintains separate recordkeeping with respect to each account. (c)Definitions and rules relating to designated Roth contributions For purposes of this section— (1)Designated Roth contributionThe term “designated Roth contribution” means any elective deferral , matching contribution, or nonelective contribution which— (A) is excludable from gross income of an employee without regard to this section, and (B) the employee designates (at such time and in such manner as the Secretary may prescribe) as not being so excludable. (2)Designation limitsThe amount of elective deferrals which an employee may designate under paragraph (1) shall not exceed the excess (if any) of— (A) the maximum amount of elective deferrals excludable from gross income of the employee for the taxable year (without regard to this section), over (B) the aggregate amount of elective deferrals of the employee for the taxable year which the employee does not designate under paragraph (1).

One more thought - is the point of Sec 604 that an employer could say - the contributions are going in as Roth, unless you as participant elect otherwise? That now plans can make the default for employer contributions Roth, instead of pre-tax? That would still allow participants an election, just the flip of what was allowed pre-SECURE 2.0

Aren't all contributions to a defined contribution plan on the employee's behalf though? is it the "on the employee's behalf" wording in 409A that is the crux? I also don't see the point if it is ONLY at the participant's election. Plans could effectively (though perhaps not as streamlined) allow for in-plan Roth conversions. If that is the point then why have Sec 604 at all?

How are folks interpreting this section? I recognize it is optional, but because its effective now, there seems to me a lot of questions about it. Let's start with a basic 401(k) plan, that has a basic safe harbor match provision. There are two options coming up - The employer would make a blanket decision to have the safe harbor contributions as Roth. Can this be a yearly election? What if it's just the annual discretionary employer contribution (profit sharing) does it have to be in the plan document that the employer contributions for year 20XX will be designated Roth Contributions? Each individual participant would elect if they wanted the SH contribution made as Roth or not. For item 2- I'm not seeing anything in section 604 where the the participants get to elect one way or the other. Plus plans can already accomplish pretty much the same thing if they allow for in-plan Roth conversions. I think #1 is how I am interpreting 604, which will be useful for plans that have an auto-enroll feature where the default enrollment is a Roth deferral, so any match will also be Roth. I can see the plan issuing 1099-R at year end for the amounts of the Roth contributions that weren't Roth deferrals. What say all of you?

just being part of an ASG does not require a single plan. ASGs have multiple different plans for different entities all the time. As mentioned above, they just have to pass combined test. If it is a single ASG, then any plans of the employer need to be tested together. Sounds like you are proposing two DB plans(for the HCE), and one 401(k) plan(for the NHCE) for a single affiliated service group. I am not an actuary, but seems minimum coverage under 401(a)(26) would likely have a hard time passing, even if the benefits in the 401(k) plan were generous enough so that overall benefit testing with all three plans passed. I agree with the others, if the CPAs are sure its allowed, they should do the testing and admin for the three plans. And i'd be curious to know what actuary would sign off on it.

We don't have enough information to know. what is the document's definition of compensation W-2 reportable compensation? 415 comp? 3401(a)? What are the deferrals? pre-tax? Roth? Are there additional non-reported non-taxable amounts? Like HSA or section 125 dollars? Which generally aren't on the W-2 at all? And what are you going to use the compensation figure for, once you figure it out? A defined benefit accrual? safe harbor contribution? non-discrimination testing? different compensation definitions are often allowable depending on what it is being used for.

If they worked more than 800 hours in 2021 why weren't they let in as of 7/1/2022? 2022 hours wouldn't even have been available / known as of 7/1/2022. Unless the amendment said that the 800 hours only applies if over for 2022 and future years (which wouldn't make sense since you said others were let in 7/1/2022).

I don't think it's really a software question. Did the amendment change eligibility for only new hires? or existing employees too? Were other participants let in on 7/1/2022 because of the 800 hour rule? or were they held out until 2023 being forced to wait until they had 800 hours in 2022 or by July of 2023? If the amendment said for new hires only, well then the first possible entry with the 800 hours would be July of 2023. if the amendment wasn't specific, I would err on the side of letting the participant in.