CuseFan

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?

1. Very glad I don't do this type of admin work any more. 2. I think this is certainly a government objective, make tested plans ridiculously complex to administer and "incentivize" sponsors into SH designs. 3. All you need is a Fidelity or Vanguard or the like to tell IRS, DOL and/or Congress that they can't ready their systems in time and this will all get pushed back another year or two. Or, God forbid, maybe they will be the only ones ready in time and we'll all be retired or working for them. 4. Good luck

sorry, forgot the "if"

Yes, very odd. So a new plan document and everything? Mirror provisions? How did they handle participation and deferral elections? Any filings under the second plan? Agree with Bri - and this was done on advice from an advisor then that client should find a new advisor rather than adopt a(nother) new plan.

Or as Danny Glover lamented in Lethal Weapon, "I'm getting too old for this s _ _ _ !"

Isn't this something the accountant should be answering, as the tax professional, rather than asking benefit plan practitioners? Unless maybe there are more knowledgeable accountants on this forum who can chime in?

You need to use the control group's non-excludables in your denominator, so if you have husband HCE as only person covered in plan A, then that plan will fail coverage and need to be aggregated with wife's company plan B.

Also, if it's a defined benefit plan (DBP), where a valuation needs to be done to determine the contribution that will be deposited by that tax return due date, you'll want to get the document done and signed far enough in advance. I recommend anyone considering a DBP retroactive to 2022 to put their tax return on extension for the extra time but make the decision and get the document done in the first or second quarter of 2023.

General rule - if the employer and employee are not paying FICA/Medicare or SECA (self-employed FICA/Medicare) taxes on the income it is not earned income and not considered compensation for retirement plan purposes.

Always! I think the prior service counts but applies to the current vesting schedule.

Agreed, and someone coming in early is almost never is an HCE these days because of the lookback rule, and not too many come into an employer as an owner unless it's a spouse or other family member.

A qualified plan document is a qualified plan document whether for one employee/participant or 10,000. As many have echoed in this forum, a "solo 401(k)" or "solo-k" is just a marketing term for provider's product. If you have an owner-only participant, you'll likely want pre-tax deferrals, Roth deferrals, catch-up deferrals, discretionary profit sharing and employee voluntary after-tax contributions. If you are hoping to do for 2022 you need to hustle because document and salary deferral election will need to be signed by 12/31, and that only works if unincorporated sole proprietor, unless getting big bonus on 12/31 from which to defer.

Yes, that is likely the best path forward, and many payroll providers and recordkeepers have 360 degree integration, although I think some payroll providers stay 180 so their bundled product can maintain an administrative edge. Still, keeping all relevant information current and accurate in payroll records is a challenge for both larger employers with HR departments because of sheer volume and smaller employers without the dedicated resources to handle in real time. Thankfully (hopefully?) we now have a technological savvy generation that can tackle this, but it doesn't matter how great the technology is if the system inputs are incomplete or inaccurate - or as our generation says, garbage in garbage out. Another thought - will these changes accelerate consolidation of the provider market, driving out smaller recordkeepers and TPAs, while the 500 gorillas Fidelity and Vanguard et al get even fatter?

That is important as you don't want plan and IRA issuing 1099R for same taxable distribution. The Plan Administrator should write letter to IRA custodian explaining the error. The IRA custodian may not be able to distribute out to the individual w/o tax reporting, in which case the request should be to return to the plan which can then make the proper RMD distribution. Agree with bito too that this was indeed a plan/administrator/trustee/custodian mistake/problem/issue because the plan is required to split the distribution and properly satisfy its RMD requirements under the terms of the plan. Therefore, whichever entities/functions made this ill-advised lateral should fix it before the IRS recovers and runs back for a game winning TD against the Patriots, I mean the participant.

I agree - all those provisions that sound great for enhancing overall retirement plan coverage just make things more complicated and error-prone for the small and unsophisticated (from an HR perspective) employer that they serve as a detriment. Fewer employers will want to adopt these plans, fewer providers will want or be able to serve these plans, and administrative costs will increase, wiping out the short term tax credit savings. I've been in this business for nearly 40 years, have done both DC and DB in terms of administration, plan documents and compliance, and remember when DBPs were the complex animals no one wanted any more. Now, DBPs and CBPs look pretty simple compared to the modern and continually evolving 401(k) plan environment. Maybe all the heads of the states' with those new mandatory retirement plans met in a NYC pizza parlor and conspired with the Federal government to make 401(k) plans so damn complicated that no small employer would dare set one up and thereby drive all their employees into the mandatory state plans, just saying.

As the Patriots found out on Sunday!