CuseFan

Great questions. The regulations use the words "in existence". If you adopt a plan now that is not effective until 4/1, is it in existence now? I wouldn't think so but who knows? If you adopt after 4/1 but have effective 1/1 (for PS anyway), is it in existence at 1/1? Maybe yes, maybe no, but it's treated as there for tax and other purposes. Other constructs often refer to the later of the adoption date or effective date but I don't know if I'd hang my hat on that. The safest bet is making it all effective 4/1. I'd spell out the options, lack of regulation clarity and the associated risks and benefits of each option and then let the client decide.

I found this an interesting issue and so I googled and found a nice summary here: https://www.paychex.com/articles/payroll-taxes/what-is-on-demand-pay There are other provider summaries as well. This seems to indicate constructive receipt doctrine, but that tax withholding still happens when the regular pay check is issued. Say my bi-weekly pay is $2,000 and $500 is typically withheld each payroll period for taxes and benefits (medical, 401k, etc.), and I get a full $1,000 advance mid-cycle, then my regular check will net $500 (and maybe less any fees if those get charged to the employee). I'm not sure how else that would work unless they treated the $1,000 advance as a paycheck and then applied withholdings - but that makes it complicated for employee who is targeting a specific amount and must calculate withholdings to gross up the requested amount. I think this only becomes a TPA issue if an advance is paid before year-end on a paycheck issued and otherwise taxable in the following year. I would hope plan/benefit design would prohibit that potential nightmare.

How is that person statutorily excludable? That only applies if the person terminated with 500 or fewer hours and did not benefit by reason of such. You don't need to increase CB accrual, you do need to include in testing and you do need to provide gateway. You can credit the average NHCE ENAR toward this person's gateway. If TH is provided under DCP and requires year-end employment, I don't think this person needs TH, but gateway requirement makes that a moot point.

It's easier for canned software to present all pieces of an if, then, else scenario rather than deliver select results based on logic and relevance.

Correct, to aggregate for coverage and nondiscrimination the plans must have the same plan year.

I think employment contract language has no bearing on the qualified plan (e.g., when such contracts try to provide immediate entry into a plan that has eligibility requirements). The real question is whether or not this is an employee election which can be modified or if pursuant to the contract it is irrevocable. If it is the latter, then I do not think it is a salary deferral, which opens up other potential issues. If the compensation is being properly subjected to FICA et al and then deferred to the plan pursuant to the employee's election and ongoing discretion, no issue. Has a separate salary deferral election been executed for this or are they relying on the contract for such?

If all rate groups pass ratio percentage test (=>70%) then average benefits test in not needed. If any rate group is under 70% then you need average benefits and deferrals (and match, if applicable) enter the equation. Don't forget to look at restructuring.

It might be a card issue, that it can't be used for certain things or certain vendors, especially if a corporate card. I had trouble like that in the past doing my ERPA renewal but then successfully processed my payment with a different card.

If you are a member of an organization with a code of conduct (e.g., ASPPA) and/or subject to Circular 230, I would consult those resources concerning professional and legal obligations.

To address this issue, yes.

I'm not commenting on QDRO related issues, but this is not an issue for cash balance plans in general, nor for any other defined benefit plan with a lump sum option. It is an issue for pension plans that amend for a limited time lump sum window during which a participant must decide between a lump sum or annuity.

A document should never allow a participant to elect a distribution based on a prior valuation date, that's just asking for this trouble.

As noted - two separate issues: (1) NRA definition in plan document which has specific statutory requirements and (2) funding assumptions which must be reasonable. For (1) - anything before age 62 must prove/satisfy typical industry standards, not expectations at the company level. If law firm partners typically retire at 62 or later, then 55 doesn't work even if the partners are 40 and said they don't plan on working past 55. Which, if that is the case, then 55 as the assumed retirement age for funding valuation is certainly reasonable. I think you have troubling issue with the former here but not the latter.

We had clients execute an internal Plan Administrator memorandum (and give us a copy) with the applicable effective date if they had intended to provide Coronavirus Related Distributions (CRDs) when such were available and would think similar methodology would work for this.

First, any person who is not an owner and is an independent contractor providing service to the business(es) is not an employee and cannot be covered under a plan sponsored by either business (other than a nonqualified plan). Any plans, whether defined benefit, profit sharing and/or 401(k) will have to satisfy coverage (and unless a safe harbor of some sort) and nondiscrimination. There are a plethora of design options, but if they want the simplest likely most efficient arrangement then a safe harbor 401(k) was likely the best option. However, having just terminated a 401(k) last year I believe they need to wait a year to adopt a new one. As long as non-owner employee is eligible and there are no other contributions then there should be very little administrative burden for the owners - timely remitting contributions and signing annual 5500 filings. If owners want more than salary deferrals and safe harbor (whichever type), then there are more design options that bring more complexity and the potential for nondiscrimination testing. If they are satisfied with the lower SIMPLE contributions, that is certainly an option as well.

Once the vested balance is subjected to FICA/Medicare, only subsequent vested contributions are further subject to such, but not future earnings.

Yes, you can amend the 401(k) to immediately cover whatever specified acquisition group you want, and then lose the 410(b) transition period. If you can satisfy coverage for the 401(k) on that basis with the SIMPLE people not excludable but not benefiting, no worries. How about testing by parsing out those otherwise excludable?

I only deal with DBP termination submissions. The last three were: Submitted 9/30/2021 - D-Letter 4/13/2022, so 6 1/2 months with some questions/responses in between. Submitted 4/25/2022 - confirmation of receipt then nothing but crickets. Submitted 10/18/2022 - confirmation of receipt but still too early to expect anything. All were individually designed, long frozen, timely restated last applicable cycle, timely interim amendments, excess assets - so no differentiating factor to highlight timing, maybe just the (un)luck of the draw or one time of year is more favorable? ESOPs can be complex animals with their own issue, especially if not a publicly traded security, so I can see those taking longer especially if individually designed. I usually tell clients that 12-18 months is not unheard of and that anything less than 12 is a blessing. We'll see if the new House is able to strip IRS funding and if so, if it has any impact on employee plans - not one of the positives for a resource-constrained IRS. You (if POA) or employer can call IRS and check the status. The first key is whether it's been assigned as sometimes these sit for months before they get assigned to an agent. Good luck.

I guess we'll need guidance. I understand that "new" plans via spin-offs and a merger can create a A+B = "new" plan C rather than just A merging into B. However, these "new" plans were not "brand new" newly created out of nothing where sponsoring employer(s) had no plans at all. Maybe I'm reading too much into I what I think is the spirit of the law - that brand new plans covering employees not previously covered under a plan by their employer (or predecessors) must be auto-enrollment and all others are grandfathered. Personally, I think the next round of significant pension legislation will mandate auto-enrollment for all 401(k) plans (and maybe 403(b)) new and existing, with a phase period for existing plans.

I don't know about you all but I find these discussions much more interesting and enriching compared to the "what compensation do I use to calculate the safe harbor contribution?" questions that make me feel like we're doing someone else's job of basic training their staff.

It is absolutely the employer/plan sponsor's decision on how to handle this. It is a discretionary decision (and discretionary 2023 amendment if done) to provide the retired participant with a lump sum that is more than what is otherwise statutorily required to be paid from the plan and impacts the funded status of the plan (and financial obligation of the employer), so in no way is this a decision that should be (or can be) made by anyone other than the employer. The employer's advisor(s) can provide advice concerning pros and cons and mechanics but the decision rests with the employer. Going back to the TPA service agreement, if some agreed upon service standard was not met and directly resulted in this situation, then maybe some restitution is warranted - but that is between the employer and TPA.

Thanks Corey, I'm still recovering from a SECURE 2.0 hangover, appreciate you doing the legwork on this one!

I don't see how these plans would be deemed newly established under any scenario.

Agree, it appears the question is essentially do you include the taxable S-corp medical insurance premium add-in, and absent any specific exclusion I think you do.

Disability benefits are ancillary, not part of the accrued benefit and may be amended (and eliminated, if desired) without issue. The only potential issue is if you have an existing disability claim or current disability stream of payments (like under a DBP). If your only concern in determination/definition of disability, no problem.