justanotheradmin

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.

You'll want to read up on break in service rules, and rule of parity. Depending on the circumstance rehired employees can be made to resatisfy service for eligibility, and prior service disregarded. Your plan document (look at the basic plan document too if you have one) likely addresses that in detail.

Looks like it is signed? https://www.cnn.com/2022/12/29/politics/joe-biden-omnibus/index.html

I don't know how many sole props would want a short plan year for 2022. For example, if it is signed today, a sole prop would need a short plan year from 12/30/2022 - 12/31/2022 to utilize that provision for 2022. From a practical perspective (depending on the plan's definition of compensation) I don't think it will be useful. As others mentioned, this is really going to be a provision used in 2024 for 2023 plan years.

Generally yes, lost earnings on any corrective amount is required. See Revenue Procedure 2021-30. More information is needed if you have questions about calculating the QNEC for the missed deferrals and the missed safe harbor match amount. Revenue Procedure 2021-30 https://www.irs.gov/pub/irs-drop/rp-21-30.pdf Additional information can be found here: https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide

Hi Folks! I know that in some cases attribution through a retirement plan trust is blocked for purposes of determining HCE and Key status. Is the same true for determining 5% owner status for purposes of an RMD? If that's not the right question please let me know. ROBS plan - the participant turned 72 in the second half of 2022. Their account of course holds the employer stock. they are very much an active employee. I'm thinking the constructive ownership of §318 applies and an RMD is required. But I'm wondering if I'm missing something. Can anyone confirm or deny?

The original entities would still be a single employer for plan purposes. Just because unrelated employers are added doesn't change the original entities from a single employer to a closed MEP. Sounds like you originally had a single employer plan. and now you have a single employer(comprised of the original entities) plus a bunch of new entities that make it an open MEP.

Thanks for the responses to let me know I'm not off my rocker. I'd rather not name names. I don't know if the action is limited to a specific salesperson or is a broader issue for that entire company. So far the e-mails I've seen are all from a specific sales person in a specific region of the country. I did think of the ASPPA ethics angle, but from what I can tell the salesperson doesn't belong to any industry organizations or licensing organizations. So I don't have anywhere to report them. They are not an insurance company, but that is a really great thought. I'm not sure we have the same kind of clients. I know there is a place in the market for most every kind of service provider, but our style of service and fees are very different from this particular bundled provider. So I don't think it's where we typically would look for new business. I'm not opposed to data mining per se. Companies data mine 5500s all the time. I've seen evidence of it on other solicitations over the years. But using it to blatantly lie about their 5500, and throwing us under the bus while they are at it crosses a line.

My apologies if someone else has already brought this up on one of the boards. If so, please redirect me there. Have other people encountered this recently? What are your thoughts? This past week several of our clients have received e-mails from a large bundled provider attempting to drum up business. (we are a traditional TPA) The e-mail states in part "Your TPA is filing your 5500 wrong" and then goes on to explain that Lines 10e and 8f MUST match, and that they are opening themselves up to audit and penalties from the DOL. The e-mails have screenshots of the two lines from their most recent filed Form 5500-SF. I was outraged when I saw the e-mails. I'm just wondering if my outrage is a bit displaced, or perhaps a disproportionate response, because like many folks we are really really focused on getting everything done by 10/17 and things that I would typically be able to shrug off are getting under my skin. Clearly this has bothered me enough to make a post. Thoughts?

Can I tag onto this question? If the union and non-union plans are not permissively aggregated - and someone changes status during the year, and immediately enters the non-union plan. is the Top Heavy minimum to that employee based on only non-union compensation? Or full year compensation including compensation earned during the early part of the year when they were covered by the collective bargaining agreement?

If you know the employer's EIN you may be able to check here to see if there is a Form 5500 for a retirement plan https://www.efast.dol.gov/portal/app/disseminatePublic?execution=e1s1 You would input the EIN (without dashes). It is possible to search by name, but I find the results are less consistent. Absence of a Form 5500 doesn't necessarily mean they don't have a 401(k) plan, as there are a variety of reasons why it might not show up, but if there is one listed, you should be able to request a copy of the summary plan description(ask in writing). If they don't give you one, you should ask why - usually the only reason would be if you aren't an eligible participant.