CuseFan

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.

Might some other public or otherwise attainable recent records with the decedent's signature be accessed - such as a driver's license? You mention no claim from an estate, but is there an estate and, if there is, could the executor be requested to find and release a copy of decedent's signature? The claiming beneficiary could be asked to provide such supporting documentation, but unless such is provided through a certified third party you're essentially in the same situation.

I thought this was at the employee's election, if offered as on option by the employer. The employer forcing its contributions as Roth just doesn't seem palatable to me. I haven't plugged in the replacement language to the existing code language (I hate the way they do that), but maybe subsections (b)(1) and/or (2) have that effect (i.e., employee's election).

That is a spot on observation Peter. It is a sensitive situation for sure, but not really anything new. Certainly price points could change and reflect the amount of work that goes into processing a distribution to the extent it is impacted by the amount being paid, but people don't know how to value those new pieces yet. We see that in the DB/CB world for the over/under $5,000 (so to be $7,000) lump sums.

It may be the RIGHT thing to do but I still think it must be via an amendment otherwise it may not be viewed by IRS as the LEGAL thing to do.

Is there anything different or special on administration of these other distributions (abuse, emergency, etc.)? Is there adjudication or are these self-certification? If it's only a matter of whether the 10% premature distribution tax applies, I don't see a huge reason for charging a higher fee. Personally, I think the majority of service providers will be increasing their fees in general because of this, not to mention general inflation, although this is all my opinion from the outside as I do not directly work on the inside nuts and bolts of these plans.

The QJSA notice is provided 30-180 in advance of the ASD, although you can provide closer to the ASD if the person ultimately waives the 30 day notice to get payment ASAP. If a claim for benefits was made, then the plan's claims procedures should be consulted for timing. Also, the TPA's service agreement should hopefully have some standards for this. This is not "administrative delay" in the context of the ASD and how the IRS interpret. I agree to can increase an NHCE retiree benefit without much issue but would do so via plan amendment.

The annuity starting date must be a date after the QJSA notice is provided (which required the benefit calculation) unless the plan allows retroactive annuity starting dates, which some do but I always exclude lump sums in such instance that I've seen. I think you are stuck with the 2022 rates for 2023 lump sum unless the retiring employee in question was NHCE and the employer wants to amend the plan to increase this person's benefit.

Begarath is correct, the Act excludes service prior to 2023 in its 2-year rule.

Yeah, we're definitely in a state of SECURE summary overload with everyone rushing to get their piece out, so missing relevant details or nuances is not surprising.

True, wasn't thinking about that, and I don't think a Jekyll and Hyde defense works here.

Under SECURE 2.0 self-certification rules, effective now, I think the plan is off the hook. I don't know what the ramifications are to the participant for misrepresenting a hardship - they already incur taxable income and potential 10% premature distribution tax. Maybe any exception to that 10% tax that could apply is voided.

Any reasonable classification is fine from the plan perspective but I can see your general labor law discrimination concerns. I would find out the specific name of the program and use that as the exclusion. Even if it only includes one nationality I don't think you have an issue. If these employees become permanent and "graduate" from that program, then they join the eligible class and would likely participate immediately based on their prior service which could not be discounted.

I found this confusing at first and then after re-reading and thinking about so more came to same conclusion as CBZ.

Pun(s) intended?