CuseFan

Also, for DC plans, is there any utility or advantage in retaining earlier commencement requirement and disconnect from the statutory RBD? For DBPs that are still required to provide actuarial increases from 70.5 to commencement at statutory RBD, I can see where the plan sponsor could want to retain a pre-SECURE required commencement date (and we did ask).

It sounded like most of the population was hourly but also full time (2080 hours) and the desire was to exclude a fair number of part time hourly employees. The "scheduled to..." classification would be even more blatantly abusive as some part timers could reach or exceed that through overtime. When it comes to exclusions, IRS is adamant that any hours-based (or disguised) criteria exceeding 1000 hours is a no-no.

Agree with Peter. I think this is the PA's problem, not necessarily the RK's obligation.

But not statutorily exclude any who work >1000 hours for a computation period. So if you are wanting to cover hourly employees who are credited with 2080 hours (aka full-time) while excluding employees credited with fewer hours (aka part-time), you would have to find some other legitimate non hours related business classification for which to exclude, assuming you can pass coverage as you say without those >1000<2080 employees. If all such employees worked in the same location, department, etc. exclusive of hourly employees you want/need to cover, that might work, but I would tread lightly as the exclusion of part-time employees who work more than 1000 hours is a specific NO-NO in the eyes of the IRS.

https://www.irs.gov/taxtopics/tc431#:~:text=In general%2C if you have,the year the cancellation occurs. IRS says 1099-C

Check the plan document(s) - I think hours of service for eligibility, vesting and allocation entitlement must include all hours worked for the employer (or all employers in a control group). For example, someone who worked a number of years over 1000 hours goes from excluded union to non-union status, they do not have to complete a year of eligibility as a non-union employee before being eligible and all their service counts for vesting. So anyone who otherwise satisfied eligibility requirements should be eligible upon having any compensation or being credited with any hours in an eligible class (i.e., non-union). This does create a headache for you, but if I'm working 2000 union hours "in the shop" but work an extra 200 non-union hours in the office, I'm entitled to non-union plan benefits on the basis of compensation paid for those 200 hours and allocation entitlement and vesting crediting of 2200 hours. These situations could be excluded by plan design, but would count in coverage and nondiscrimination testing as they are not statutory exclusions. I think it's no different than someone switching once from union to non-union, you just have the headache of that happening in multiple pay periods. I don't see how you can treat differently and continue to exclude that non-union piece, unless you argue they are still covered under CBA while doing non-union work? Maybe if the CBA provides accommodation and/or the non-union work is minimal, but I see potential abuse if that were allowed - using union labor for non-union work and avoiding both union and non-union benefits on those hours. Agree that having an attorney involved makes sense, I would want someone with both labor and ERISA knowledge, especially if the employer desires to exclude the non-union activity of union covered employees.

Maybe accelerated plan leakage - loss of assets on the RK platform = lower asset-based fee revenue? Responses might be masked differently, but honestly, how many RKs out there really want to make it as easy as possible to get assets off their platforms? The one legit reason might be cyber-fraud concerns, where potentially any account could be targeted for a withdrawal, not just those of separated or 59 1/2 in-service eligible participants. But if that is an RK's concern, then maybe they aren't doing enough cybersecurity now, so that may be a red flag. These are just my anecdotal thoughts from the recesses of my brain, for what they're worth, not any official position or expression of observed occurrences.

Effen is absolutely correct. If plan did not have immediate lump sum already, you need to add immediate annuity along with it. As noted, you need to state how that is valued - do you use ER factors to ER age and then actuarially reduce thereafter or just actuarially reduce if not ER eligible? We usually do the latter but some clients do chose the former. Also, be careful how you amend for the lump sum as you won't want a general lump sum feature (if you don't already have one) that needs to be included in a deferred annuity contract - makes placing/pricing contracts more challenging.

Plan termination would not work either because of the successor plan rules. Remember, distributions are different than plan to plan/trustee to trustee transfers.

Service providers to a company are either employees (W2) or contractors (1099) - how these people can be both is mind boggling to me. Sounds like kind of a shell game to be able count as employees for some reason(s) but not for others (include for H&W benefits but minimize payroll taxes - although not for recipients). Regardless, it is more the employer/service provider relationship (like who has control) that determines whether someone is considered an employee or independent contractor. You can ask the employer, it's accountant and/or attorney to answer that question for you and then choose to accept and act accordingly, or disagree and walk away.

I think there are various options, but the successor plan rules are designed to prevent premature in-service distribution of salary deferrals on plan termination. I don't think those should prevent a new plan or spin-off - however she wants to get her own plan - provided it does not result in a prohibited distribution. Two overlapping plans is a recipe for compliance mistakes in my opinion, and further complicates the situation if her husband's plan covers employees of his business.

Someone put on his consulting hat - nice response!

Not saying this is or is not legit, but minor children often have bona fide work in their parent's businesses (and not just sneaker factories in southeast Asia). I have seen one-year-olds on payroll as they appear in marketing materials and TV ads. They could be self-employed, think maybe the E-Trade baby/toddler - sure hope the little dude has a Roth IRA or 401(k)! - so why not an employee? Sure, there are child labor laws, and a red-flag warning that something "funny" is going on would be a plan design with 1000-hour YOS eligibility that somehow the 10-year-old satisfied but other employees did not. But agree you should want and get some assurance, whether from CPA and/or attorney.

I wasn't so much concerned with NHCE access to the same specific investment (LP), but having a similar investment environment, whether trustee directed or participant directed with or without a brokerage window. One plan or three plans, that is a BRF that must be nondiscriminatory. Owners get to individually invest in nearly anything they want (forget about the questionable investment) and employees all get to choose among Nationwide funds? And that isn't discriminatory? Are you saying because these owner plans only have rollovers that BRF is not an issue? If they have qualified ERISA counsel telling them this is all OK, then so be it - just doesn't pass the smell test for me that's all.

You don't get a free pass - you still have to satisfy coverage and nondiscrimination, so you'll need a DC plan to be aggregated. You get more favorable testing parameters and gateway satisfaction when aggregating with the DC plan and you do get 401(a)(26) relief.

I think EBECatty is spot-on. The $3/hour is definitely a CODA and the additional $1/hour, if applicable could only be a match. That does create a design problem in coordinating with any other deferrals or match (and potential coverage and/or BRF issue if you now have different matching formulae or match/no match deferrals). Unless, maybe if the employer would require everyone to make a one-time irrevocable election, and new participants to do the same upon eligibility, does that keep the $4/hour into the plan out of the deferral and match buckets? I don't know but that might be worth exploring with legal counsel. Regardless, I don't think this is supported in any pre-approved document, would need to be individually designed or through a pre-approved plan modification requiring d-letter submission - but get some ERISA legal counsel input before doing any of that. I would also put on your consulting hat and dig deeper into why the client wants to do this. There may be better ways to accomplish the objective. If it's because many/most employees do not appreciate the profit sharing, then scrapping the $4/hour PS for the $3/hour pay raise across the board might be the simplest way to go.

agreed

Still, if employees are not given same general investment opportunity as owners, isn't that discrimination in BRFs?

That was my recollection as well, and similarly (thankfully) had not had to deal with in a long time.

Just curious, how are assets in the employee plan #3 invested? Do they have individual brokerage accounts? If not is there a BRF issue?

Agreed, too late for 2022, you either give wife and daughter much less (or zero), give NHCEs more to pass, look at restructuring, or maybe an 11g to bump up necessary number of NHCEs (but not to create new HCE group). Also agree that individual allocation groups is the best/most flexible way to go and don't see a reason for nearly every cross-tested plan to be designed that way.

Agree with CBZ, as we had that exact situation with a university employee who was also a business owner and ended up doing a DBP because of the DC aggregation. I have no thoughts on the church plan side of the discussion.

Are you saying the participant must also self certify that "I am not a crook" in order to get the loan?

I looked at the FTW basic DB document, assume DC is same. In definition of year of eligibility service for elapsed time you count 12 months from the date of hire, and it says for periods shorter than 12 months you substitute such shorter period in that definition. The 3 months is satisfied 7/3 (7/2 - depending on how you interpret and there have been countless discussions on that in this forum) and entry is 1/1/2024. Note the document also says in aggregating elapsed time service for eligibility for non successive periods that 30 days equals a month.

I've been told we interpret in that fashion after a review of the regulations, but on a large plan adhering to the 4th month timing.