RatherBeGolfing

It sounds like they are trying to say that Part-Time Employees are excluded, but a PTE that works 1,000 hours in the first year or 500 hours in 3 consecutive years will not be excluded. My concern with this language is that the 1,000 hours is limited to the first year and the 500 hours for LTPTE is 3 consecutive years which was later changed to 2 consecutive years. Is it also applied to all contributions? Is there another provision limiting LTPTEs to deferrals?

We are going to party like its 2027. This is going to be process-heavy, and it does not make sense for us to have one set of rules for 2026 and then change them for 2027. We will likely find issues in 2026 that will inform us on revisions for 2027, but we want to stay consistent. Side question, is anyone considering a defaulting catch-up to Roth, and requiring a participant to opt out? It is clear that a participant must be allowed to make pre-tax contributions in order to designate them as Roth contributions, so you can't require that catch-up can only be made as Roth. But default with an opt-out to pre-tax with appropriate notices and disclosures could limit the need for corrections.

A lot of early articles were drafted using an AI summary of the final rule I bet... I had a few different ones summarize for me and all said 2027. Its not always best to be first to publish!

Recent thread on this. In short, you must comply with the Roth catch-up requirement in 2026 on a reasonable and good faith basis, and you must comply with the final rule in 2027.

I would agree with this interpretation if all notices were consistent. For example, If you have the information necessary for the communication in the SPD, but then have a subsequent annual notice with more generic language like "The Company may, in its sole discretion, make a matching contribution on your behalf...", it would be an issue.

@Peter Gulia the IRS uses the term "communication" rather than "notice". The timing of the communication is no later than 60 days after the last discretionary match has been deposited for the plan year. I don't see how you can comply with the timing requirement by simply putting it in the SPD. Are you anticipating distributing an SPD each year after the last deposit for the year? There is no model communication, so any communication that satisfies the required elements (timing and content) would suffice. Also, there is no statutory or regulatory requirement for this communication. The notice requirement language was included in Cycle 3 plan documents as part of the compromise discussed above. Failure to provide the communication (if required by the plan document) would be an operational failure.

Ferenczy Benefits Law posted a flashpoint yesterday highlighting that the Roth catch-up mandate is still effective in 2026. Link to article Shoutout to @Ilene Ferenczy *Edit to add that Spark also released a summary stating that good faith compliance is required for 2026.

Indeed it is, thanks Bill.

Ok. Well, the 5500 is the easy part. EZ for years when no employees were covered, otherwise SF. The user fee is capped at two years, so the penalty for late 5500s shouldn't exceed $2,500 assuming at least two EZs and two SFs (2x$500 +2x$750).

If you are just asking which form to file, you file an EZ for the years it was a one participant plan, and an SF or (5500 with Sch I) for the years when it was not a one participant plan. I would take it to an ERISA attorney ASAP. Can he even afford to "save" the plan considering all the issues?

Yea, I'm seeing a lot of people say that the final rule permits or allows a plan to incorporate Roth cacth up prior to the applicability date using a reasonable, good faith interpretation. I have yet to see anyone say that you must comply with the statute prior to the applicability date. It sure sounds like you would still have to comply though...

So.... They don't need to extend or modify the administrative transition period because there is now a final rule with an applicability date?

I agree.

It's scary how many plans don't do this. We also require photo ID, verify bank account ownership for ACH, and more. People are sometimes unhappy with all the hoops we make them jump through, but most accept that we are trying to protect them as much as we are protecting ourselves.

The reg does not refer to small or large plan. The safe harbor is available to plans with fewer than 100 participants. The methodology for counting participants for audit threshold purposes does not impact the availability of the 7 day safe harbor. Your plan does not qualify for the safe harbor.

Yea, but you would need to spend the money on development if it was enforced, so does forcing the IRS to enforce the law change anything? I think that is what Peter is hinting at in his question. What is the injury if enforcement means you need to spend the money anyway? I dont disagree with you with you though...

My recollection is that the IRS/Treasury did not technically have the authority to delay it in first place, but no one would challenge them on it since we all needed the delay. Who is injured by nonenforcement, and is there a remedy to cure it? Good question. Congress does have oversight, and the executive branch could order the agency to enforce the law. I think we have a better chance of winning the powerball than someone challenging another delay

I'll raise you the 10x in penalties that "paid for" S1.0 Last I heard from the DC folks was that no one expects a delay at this point.

Not that I have seen. FWIW, I draft my documents using forfeitures to pay fees first, then offset contributions, then any other permissible use. I do have some docs that first offset contributions, then pay fees, but those are getting phased out. This is not necessarily in response to these forfeiture lawsuits Taking your hypo a step further, wouldn't there still be discretion in how the document was drafted? *edited for clarity

Like @Paul I said, the amendment should be drafted in such a way that it only applies to this person. "working out of the country" is to broad in my opinion, and could apply to future hires.

That works for the purpose of adding them now. I still question whether the employee should have already been in, and may be an issue for past years.

Us resident? Citizens and residents are generally subject to US taxation even when working outside the US. That aside, was she an employee or contractor prior to this? This is not an HCE right?

No, but it may help shed light on the remote work situation. If they were a US citizen living and working outside the US, its possible that you should have gotten a W-2. The fact that you worked outside of the US does not mean that you don't get a W-2, there are other factors that determine that. Depending on the circumstances, its quite possible that they have already met eligibility and should have been in the plan already. I think the issue is much more complicated than what do we need to do get them into the plan immediately.

I dont think we know what their status is. My initial read of OP was a citizen or resident who worked remotely from outside the US. Its also not clear whether the employee had US income. As an employee? As a Contractor? Paid by whom? Taxable where? A US citizen? US Resident? Foreign national without resident status? What does technically mean in the context? Were they on company payroll? were they a contractor? Or paid by someone else? *edited for clarity

This is actually a really good question... Off the top of my head, I want to say that you determine the related employer status for the tax year on the last day of the tax, not for a portion of the tax year. Assuming the plan excludes comp prior to participation, right? @Belgarath hypo is more interesting if it does not exclude comp prior to participation as it really cuts to the question "does the transaction date matter"?