CuseFan

The key is the separate recordkeeping/tracking. If staying under EZ filing threshold as long as possible is important then rolling out the VAT to Roth IRA makes sense. Keeping VAT in cash and rolling shortly after contributing will eliminate or minimize earnings, although those otherwise taxable earnings could be rolled to a traditional IRA if material and you want to avoid current taxation.

Such a modification likely does not make it an individually designed plan but is very likely the kind of modification that would require submission to IRS for an individual determination letter and which could not rely on the IRS pre-approved opinion letter for its determination letter. I agree with Lou that using the individual allocation groups is the best way to accomplish this, subject to satisfying coverage, nondiscrimination, et al, without annual additions year disconnect issue to monitor. That could be an issue if someone terminated early in the year immediately after declaration/entitlement with little current compensation - and people do stick around until they get their bonus (or profit sharing in this case) and then bolt, happens all the time.

Agreed, no amendment but excess (or desired portion thereof) needs to be transferred directly to the QRP. Jakyasar, you can amend to allocate all or a portion of excess to participants as you noted. Allocating on PVABs is only safe/nondiscriminatory if underlying PVABs were based on a uniform formula. I didn't think you could amend for those other discretionary options after your PPTD, you may have to push that back. You have a number of viable options, assuming you don't have an owner 415 issue to deal with.

Self-employed person/1099 contractor has a DB plan. The person contracted with one employer which no longer needed the services. The person provided no services and received no income for the year. The plan document defines credited service as elapsed time. Does this person get credited service or not? Compensation was zero so we aren't concerned for benefit accruals but need to know if service can be credited for 415 service and participation. My thought is that because the person did not provide any services that no service should be credited. I think this is different than if services were performed but expenses exceeded revenue resulted in zero net income/compensation, in which case I think you could/should credit service. I looked in the regulations but could not discern an answer, nor could I locate guidance elsewhere. Is my thinking correct/reasonable or flawed. Also, this is more than a one-year situation. Thanks

Was that paycheck included on employees' 2022 W2s? If not, which I don't think it would or should be since it was paid in 2023, then I don't see how they could withhold a 2022 HSA on 2023 compensation. I don't think it matters when the compensation was earned, it matters when it is otherwise available to the employee (absent any deferral election) and when it is paid. What if the pay period covered a week in 2022 and a week in 2023 - would you expect a split election between the two years to be executed? What about 401(k) withholdings? Did you have anyone hit the maximum earlier in the year? Then did they have deferrals withheld from this paycheck? With some pre-planning and consultation with your payroll provider, checks might possibly have been accelerate by a day to 12/31/2022 and then properly be accounted for in 2022 for all purposes. We had this exact situation two years ago, when the powers that be had to decide which year would have 26 bi-weekly payroll periods and which would have 27, and then delay or accelerate that final paycheck accordingly. Also note there is a one-week lag from earnings period to pay date, so even if that last paycheck was pushed into the next calendar/tax year, the compensation was attributable to the prior year. And all that was determined and communicated to employees during the third quarter of the first year in question.

and the loan availability

It has to be elected at the participating employer level and the document with respect to an individual employer's optional elections must allow. And remember, any other plans of the employer must also use the TPG election.

I think you must do the refund with 1099R reporting and the W2 reflecting the total deferrals. The W2 deferral reporting for the buyer's plan reflects what was deferred to that plan and should be totally independent of what went on at the seller level. That is, and others may know better and correct me if I'm wrong, but getting a refund/corrective distribution of salary deferrals from one employer doesn't give me more 402(g) room in another employer's plan. If they maxed out in seller's plan then anything deferred further in the buyer's plan puts them over the limit. BUT, then the individual can designate the plan from which their excess (>402(g)) gets distributed and I believe their ADP failure refund may also be applied toward their 402(g) refund - which indirectly does ultimately get you where you want to be, but with all deferrals hitting W2s and corrective distributions on 1099Rs.

Furthermore, the plan document certainly has provisions that say when an account balance may be distributed, as would the SPD. Point to those and the D-Letter/IRS Opinion Letter that those are IRS approved rules and as Bill said, they aren't tall enough to ride yet.

Yes, Peter, if the person was entitled to the TH allocation but took a distribution before such was deposited, that contribution must still be deposited and, to the extent vested, distributed. Same as any ordinary profit sharing - employer declares PS of X% of pay for all eligible participants employed at year-end, but doesn't deposit until 9/15 extended tax return due date. I terminate that March and take my vested balance (cash basis). Come 9/15 deposit, I need to get my X%. Can the employer make earlier deposits for participants getting distributions? Maybe, and doing so could alleviate tracking and paying these people two distributions, but then that must be tracked. Also, earlier access to that contribution may be a BRF subject to nondiscrimination.

Precisely, just went through all this with a colleague yesterday. Solo or HCE-only plans - no reason not to allow this. But any NHCEs - fugediboutit!

I expect the plan has language for correcting this that involves the refund/forfeiture method you mentioned. I would think a retroactive amendment that allows for this participation would be OK, but would it be temporary, i.e., only allow what has happened so far but then exclude again prospectively, or allow continued participation? Could allowing this participation to stand, and especially allowing it to continue, create an HR issue for the plan sponsor? Joe and I are both hourly, union, department X, location Y, whatever the exclusion criteria but he was allowed to participate and get employer contribution while I was not - I want mine!

Exactly. Each disaggregated component is a "plan" for coverage and nondiscrimination testing.

https://www.napa-net.org/secure-act-tax-credit-qas Found this with the applicable Q&A shown below. Note that 2.0 just expanded what was available on this. Q3: How do not-for-profit organizations receive the 403(b)-start-up credit for offering new plan? Is the credit applicable to non-profit organizations? A3: The credit is not applicable to tax-exempt entities because it is not a refundable credit. Therefore, the credit is not available for the adoption of a 403(b) plan. The types of plan that can qualify for the credit (for plan sponsors that are subject to taxation) are qualified plans under 401(a), annuity plans under 403(a), simplified employee plans under 408(k), and SIMPLE plans under 408(p).

10/15 for calendar year plans. Cut & pasted 1.415(c)-1(b)(6) below: (B) Date of employer contributions. For purposes of this paragraph (b), employer contributions are not treated as credited to a participant's account for a particular limitation year unless the contributions are actually made to the plan no later than 30 days after the end of the period described in section 404(a)(6) applicable to the taxable year with or within which the particular limitation year ends. If, however, contributions are made by an employer exempt from Federal income tax (including a governmental employer), the contributions must be made to the plan no later than the 15th day of the tenth calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year ends. If contributions are made to a plan after the end of the period during which contributions can be made and treated as credited to a participant's account for a particular limitation year, allocations attributable to those contributions are treated as credited to the participant's account for the limitation year during which those contributions are made.

My understanding is such employers have no 404(a) limit on their contributions to retirement plans, which has been discussed previously in this forum. I remember administering a 401k plan for a very generous larger employer that provided employer contributions in excess of 17% of payroll (pre-EGTRRA, when PS limit was 404(a) limit was 15%). However, tax-exempt employers do file informational returns (990's) and I believe their contribution timing is tied to those for purposes of employer contributions being considered for 415 purposes for the respective year. I remember looking this up ages ago but do not remember where I found it (maybe 415 regs, I'll take a look, unless someone else finds out sooner).

Another reason why IRS is trying to require e-filing of as many forms as possible.

What about transferring the platform assets to the pooled account (after total RMD is calculated by TPA), and then paying the split lump sum (RMD/nonRMD) all from the pooled account, is that a viable option?

A "plan" must pass both coverage AND nondiscrimination. A "plan" each of your mandatorily disaggregated components and any permissively disaggregated components. You cannot choose to test "plans" A and B together for coverage but separately for nondiscrimination, whether nondiscrimination is ADP, ACP or general 401(a)(4).

I don't know if the same rules apply to HRAs, but I know that 401(k) plans can have mandatory employee (pre-tax) contributions as a condition of employment and those are generally not considered employee salary deferrals, but rather treated as employer contributions.

I agree with CBZ's initial interpretation, and hopefully future IRS guidance will confirm/clarify before this becomes effective.

Agreed, but also know the minute there is an HCE, the match rate that includes that HCE must satisfy coverage. No problem if the lower rate, but this isn't just a set it and forget it design unless by design no HCE can be covered.

You cannot sponsor (in CG) any other plan if you have a SIMPLE. SECURE 2.0 will let you terminate a SIMPLE mid-year and replace it with a safe harbor 401(k) plan but not until next year (2024).

And as always, check the plan document, almost all plans have provisions for mistakenly included/excluded employees.

Ditto