jsample

As far as ADP "the recordkeeper", their website has the following: Catch-up Contribution increase, aged 60 - 63: ADP is currently evaluating this provision and will release more comprehensive information as we approach the effective date. For those using the ADP prototype Plan Document, ADP will include this provision in an interim amendment. I agree that the payroll providers more than likely are scrambling right now. We have a local payroll company that services most of the local businesses in the area. They currently have no idea how to accomidate this by 1/1/2025.

I have always believed, I do not have citations, that a stand-alone plan into a MEP continues on as the same plan. A stand-alone plan into a PEP formally terminates and a new plan is established in the PEP. The termination of the standalone plan going into a PEP does not create a distributble event and all balances transfer into the PEP.

If I understand, that will work as long as the employer does not take a deduction for a contribution.(?)

Although there may be some, I have not seen Relius come out with any SECURE 2.0 language for their documents.

I believe that it will provide an additional testing strategy for failed ADP test refunds for the employers who adopt it. If the return is more than the catch -up limit available for the affected employee, see if they are ages 60 - 63 and possibly it will lessen, or eliminate, the return.

I have been working under this scenero: When an employer joins a PEP mid year, the standalone plan is terminated, including needing a final 5500. Although the termination of the standalone plan does not trigger a distributable event. The prior tpa deals with the final short plan year, including testing. The PEP begins their administration with the date the plan joins the PEP, which is also a short plan year. I am still confused on annual profit sharing contribution calculation, employment on the last day of plan year for contribution, annual match and match true-ups. Even though there are two short plan years, it seems like some some of these issues are requested to be done annually. This causes two census requests from the client in the initial year they join the PEP. It causes either annual calculations to be done in excel or setting up the plan twice in the recordkeeping system, once with annual compensation and once with compensation when it joined the PEP. I am not aware of any regulations that deal with these issues.

Dumbest question of the day. If they are excluded per the plan, why do they even need to be considered for LTPT? Can they run coverage testing and not include the entire group if they pass every year? According to IRS proposals, plans with immediate eligibility can still exclude a class of employees, even if some of those employees meet the eligibility requirements for long-term part-time (LTPT) participation. For example, a plan might exclude employees working in a specific business unit or division, as long as the exclusion isn't based on age or service

The distributions can be subject to fees or charges, just not to the employee who is taking the distribution. You can certianly charge the employer.

When I owned my tpa business, out of 450 clients I had aproximately 70 balance forward plans. A handfull of annual and semi-annual, pooled profit sharing plans and quarterly 401k's. Some 401ks had participant direction and some in a pooled account. I also consider brokerage account plans as balance forward. I had around 15 plans where every participant had a brokerage account and I reconciled those plans annually. Most of the plans I had were small plans, under 100 lives. Many of the balance forward clients were banking relationships, assets managed in the trust department, I did the tpa work. I honestly believe there are a lot of balance forward plans getting done at small accounting frims, in excel, incorrectly.

This does not address Peter's questions, but an employer's possible mindset. When I started in this business, my area had a heavy concentration in the tool and die industry. Most tool and die business owners sponsored profit sharing plans with a paired money purchase plan and made healthy annual contributions. The owners started getting annoyed with their 20-year employees, who were generally only in their early 40's, quitting and taking their retirement plan account balance, and starting a competing tool and die business. They knew the customers, they knew the pricing, and they would buy one machine with their distribution and try to take business from the employer where they had just quit. The tool and die owners got together, and they all decided to amend their plans to only allow for all distributions at age 65.

Not referring to any regs here, but my understanding is that a single employer who joins a MEP mid-year, their plan follows them into the MEP. It is the same as if they switched recordkeepers, you need to gather asset data from the prior recordkeeper, but the plan and compliance is run on the 12-month period. I get confused when a single employer plan joins a PEP mid-year, say on 7/1. The single employer's plan files a final 5500 and joins the PEP, which files one 5500. If the new plan is selected for audit in the PEP, the auditor wants the census data from the date they joined the PEP through year end. However, the plan has to be compliance tested for the 12-month period. The prior tpa would file the final 5500, but when the employer wants to calculate their true-up their match or make a profit-sharing contribution, which may have a last day requirement, the PEP tpa will need annual census data for those calculations. If the plan is ADP / ACP tested that has to be completed for the 12-month period, even though there are "half" plan years as a single employer plan and then a PEP adopter. I am not aware of any specific guidance that deals with annual compliance testing when a plan joins a PEP mid-year.

I am having one of those end of the day moments: 401k plan may limit type of compensation from which participants may defer to a reasonable definition of compensation. Definition does not need to pass compensation ratio test. Matching is based on deferal amount, not compensation, so is there an issue if a safe harbor match plan fails the compensarion ratio test?

Semi-related to this thread. The plan document is silent on automatically voiding a spouse as beneficiary after a formal divorce. The plan participant died, without changing the ex-spouse on the beneficiary form. However, I seem to recall hearing in a seminar that, if the beneficiary form lists "spouse" under the relationship, and there is a divorce, this person is no longer the spouse. Hence, the beneficiary form is invalid so now the plan document provision, which outlines the hierarchy in the absence of a beneficiary form, supersedes the beneficiary form on file. Has anyone distributed death benefits based on this rationale?

One of the "ifs", as long as he is a NHCE.

You referenced EOB, I am posting an example taken from ERISApedia. If I am not allowed to post this material on the boards please let me know and I will take down. Example 9.9.3 Bob, age 48, has his own medical practice, which sponsors a 401(k) plan. He is also an adjunct professor at a local university and participates in the university 403(b) plan. In 2019, Bob deferred $12,000 to each plan. Bob’s excess deferrals are $5,000 ($24,000 minus the 2019 §402(g) limit of $19,000). Presumably, at least one plan will allow Bob to request distribution of the excess deferrals before April 15, 2020. But if he does not make the request, there is no EPCRS correction, because there is no Operational Failure. Neither plan has violated Code §401(a)(31). Bob is taxed on $5,000 in 2019, even without a distribution. He does not acquire basis and is taxed again when the plans ultimately distribute the deferrals. 402(g) limit violation that occurs in plans maintained by unrelated employers is not an operational error for the plans and cannot be corrected in EPCRS. In this case, the penalty for distributing after 4/15/2017 is double taxation of the excess by the participant. Plan A cannot refund the excess after 4/15/2017. The money must remain in the plan. This rule should be in the plan document. Don't take our word for it. IRS website states: To the extent that a corrective distribution is not made within the correction period, the excess deferrals may not be distributed until a distribution is otherwise permissible under the terms of the plan, or the distribution is necessary to avoid plan disqualification under IRC Section 401(a)(30). Reg. Section 1.402(g)-1(e)(8)(iii) provides that distributions of excess deferrals after the correction period may be distributed from a 401(k) plan only when permitted under IRC Section 401(k)(2)(B). See, IRS Website. EPCRS Appendix A, Section .04, while it doesn't address pre or post 4/15, suggests OK to refund. Do you agree? No. This is not an operational failure because the employers are not related. The participant may only get a refund if it is a distributable event. If the limit was exceeded in one plan, the correction would be accomplished in EPCRS Appendix A.04.