Tom

Thank you Bruce. Yes it this were an IRA, the IRS Trustee would handle not us. This is a medical group plan where the deceased participant has a directed-brokerage account at a bank who simply manages the account portfolio. The bank will take no role in the RMD which I understand. We will tell the 3 adult children they will get a life-expectancy RMD in January based on their father's life unless they elect otherwise (and they won't.) After that, the IRA custodian can take care of RMDs. Tom

A participant who was already receiving RMDs died in 2024. He has 3 children as equal beneficiaries (no spouse). We are getting ready to roll their 1/3 interests (about $1.8 million each) to their IRAs. As they are Non-Eligible Designated Beneficiaries, I am reading that they are subject to the 10-year rule AND still must take an annual RMD distribution based their (or the decedent's) life expectancy. They will want to take the minimum RMD and so I assume they would choose their life expectancy, each one being different based on their DOB. Does this sound right? We would then direct the balance to be rolled to their IRAs. Not that it matters to us as they are out of the plan at that point but would the 10-year rule continue with the IRA, meaning 9-years are remaining under the 10-year rule? I will research further but thank you for comments. Tom

Thank you both - definitely some good ideas to consider such as making sure our service agreement simply says we confirm the distribution request is allowable under the terms of the plan but that we are not responsible for confirming the identity of the distributee. We are a non-fiduciary per our service agreement and operationally. Record keepers have controls of their own of course. Still anyone connected with the plan can be vulnerable. And yes I will check our liability carrier. For DB plans, we receive funds and quickly push out in accordance with distribution elections. We obtain drivers license and get the Trustee to approve of course. Still that is an area of vulnerability. I know many use services like PenChecks. In talking with a TPA about that it seems a complicated process. Can anyone recommend a DB product that would include distribution processing that an independent actuary and financial advisor can work with? Thank you

Record keeping platform sends approval notification to the TPA for review an approval. Does anyone attempt to confirm that it is truly the participant who is initiating the distribution request? If so, what do you do? A TPA review/confirmation certainly opens the TPA to some liability. I'd like to get some specific control ideas from the group. We've never had a fraud incident in 30 years but just a few days ago, someone tried. Thank you!

I assume the contribution limit for 2025 is $81,250 for those who are age 60, 61, 62 or 63 as of 12/31/2025? Example: employer contribution of $46,500, deferral of $23,500, regular catch up of $7500 and super catch up of $3750. Is that correct? Tom

Ok I see someone clarified this in an earlier post from me. No super catch-up if turn 64 by end of 2025.

I've not seen definitely how the age limitation works. It is clear that someone who is age 59 on 1/1/2025 and turns 60 in 2025 are are eligible for the additional catch-up. What about the person who is 63 as of 1/1/2025 and turns 64 before the end of 2025? Things I read seem to say they must be 60-63 by the end of the year and might not be eligible for the catch-up if they turn 64 by end of year. So early in 2025, at age 63 they should not defer the extra catch-up since they will turn 64 before end of year. Payroll systems will handle this correctly in any event. Thank you, Tom

So anyone who is 61, 61, 62 or 63 as of 12/31/2025 can do the super catchup for a total deferral of $34,750. Is it that simple? Anyone know why SECURE limited it to that odd age group? Thank you

Perfect - that confirms what I was expecting. Thank you

Thank you - makes sense!

This will be a very easy question for this group. Dentist along with 2 eligible employees will receive 3% non-elective safe harbor for 2024. Dentist will also fund 10% PS. One employee terminated in 2024 with <501 hours. Coverage test rules seem to say if term <501 hours they are excluded from the coverage testing. Ok, but I'd bet our admin soft ware will say discrim testing fails since Dentist and 1 employee are getting 13% total and terminated employee with <501 hours is only getting 3%. I'm just doing a fast calculation to advise the client. I'm thinking this would fail 401(a)(4) perhaps? BTW the PS is provided on allocation basis not accrual cross-tested basis so no gateway minimum. Thank you, Tom

Right or wrong in a couple small cases I excluded Sat/Sun in coming up with the 3-day large plan or 7-day small plan deadlines. Right or wrong 🤔?

This is a very rare occurrence for us but I need clarification. Participant terminates employment after attainment of the later of age 62/NRA and has balance say of $3,000. Participant does not respond to distribution communication provided to them. The plan provides for the standard provisions of mandatory IRA rollover <$7,000 but cash-out if <$1,000. The plan also appears to say that a terminated participant who has attained 62/NRA is not to be rolled to an IRA but instead provided a lump sum distribution. That doesn't seem helpful to a person of retirement age. Is my understanding correct. Thank you!

Thank you for your comments. I did a little more research on this since this was new to us - all our plans use plan year 1000 hour for Year of service for vesting. My reading confirmed when using elapsed time, a participant gets a year of vesting service at each anniversary date regardless of hours. This is what the record keeper was doing. Thanks all

The plan requires the following Vesting Years of Service 1-yr 0%; 1 yr - 50% and 2 yrs 100% on PS and Match. Years are based on Anniversary Year and there is no hour requirement for vesting. Plan as immediate eligibility as background. Example: DOH 3/1/2023; DOT 9/30/2024. The plan record keeper has their distribution set at 50% vesting because according to them the participant did not complete the second full 12-month anniversary year. The participant did complete 1000+ hours in the first anniversary year and in the second short year. I realize a Year of Service for vesting cannot require more than 1000 hours but can it require a full 12-month Year of Service? As I write this I'm thinking this person perhaps should have been 100% vested. The record keeper directly mentioned they did not make it to their second anniversary date for full vesting. I realize this plan is much more liberal over vesting than allowable. One alarm in the plan document system (FIS) I cannot get rid of the mention of 1000 hour for a Year of Vesting Service even though that is not checked. As a side note FIS users when I choose elapsed time for vesting, I cannot select Anniversary Year instead of Plan Year for vesting service determination. Comments are greatly appreciated. Tom

We have a client that gives about 100 employees varying gift cards throughout the year. They do not want the gift card included in compensation for employer contribution purposes. Total gift cards provided might be $10,000 on NHCE wages of $15,000,000. This will certainly pass the generally accepted 3% spread for compensation testing. But I see one IRS requirement that says the definition "does not by design favor highly compensated employees." This clearly does because the HCEs do not get gift cards so they have no comp reduction (but which is irrelevant since they earn well over $345,000.) It would probably be ok to exclude but then we'd have to get reduced compensation from the client. My question is- we can reduce plan comp by the gift cards for contribution allocation purposes but can we use the same reduced compensation definition for testing purposes (this is K/DB combination.) I wouldn't want a small inadvertent error to cause a testing problem, minimum gateway or top-heavy minimum violation. Comments? Thank you, Tom

A client provided a census file and we ran the ADP test and processed 3 corrective distributions By March 15. The plan auditor discovered in August, there was incorrect compensation on the census file. The 3 with the refunds ended up with higher wages. Of course then it meant the the issued refunds were too high. Approximate example: correct refund should have been $5500 but $7500issued. Two of the 3 are over 59 1/2 and so their excess can be considered in-service under the terms of the plan. But then there is the younger HCE. Do you believe this must be corrected? We could have the participant return funds and have the record keeper change the 1099-R that will come out in January if that's even possible. I'd rather avoid that. Thoughts - thank you. Tom

I realize record keeping platforms generally indicate 10% will be withheld unless the participant elects something different (implied higher.) But can a participant elect zero withholding on an RMD? Example below. Thank you.

We have 2 clients in this situation both changed payroll companies in 2024. With the small client 10 participants, I can probably get actual earnings for the multi-month period and reduce by 50% (since funds would have been deposited evenly pro-rata over the period. Then there is the large client 150 to 200. Getting actual earnings for the late period is not possible. I know some will say you cannot use the DOL calculator unless you file with the IRS. I see no other practical option. I don't why this has to fall on the TPA to fix when it is the payroll company responsibility and plan sponsor to monitor. I told the small plan sponsor - what do your corporate accounting records who - there should be a 401(k) liability - withholding less payments to the plan. Accounting probably not kept current. (I know whining doesn't help.) Thank you, Tom

We have a client ABC with a SH 401(k) plan. I just received word they are acquiring company XYZ that sponsors a SIMPLE IRA. It's an assets purchase which will take place 9/30/2024. I don't know if ABC wants to recognize service worked with XYZ in meeting eligibility. I think that is likely. So, the 402(g) deferral limit would apply as combined for any SIMPLE deferrals and deferrals under the 401(k) plan for 2024. ABC only funds a 3% non-elective SH. I'm guessing XYZ funds the SIMPLE match. If we sweep into the ABC plan XYZ employees who meet ABC eligibility, would the 401(k) funding be as simple as providing the 3% SH for ABC 12-months and former XYZ employees for 3-months? I believe there is some flexibility in testing in the case of acquisitions. Thank you!!

A plan was required to be audited in the past but no audit required now since the # of account holders dropped just below 100 as of 1/1/2023 and 1/1/2024. Looking ahead to 2025 - what if the account holders go to 105 as of 1/1/2025? I'm reading that the plan can file as per the prior year if between 80 and 120 account holders. So in this case the plan could file 5500-SF for and no audit for the 2025 plan year? Filing the 5500 wrong certainly has bad consequence which is why I'm asking. Thank you.

Participant has passed and spouse passed some years ago. We believe 3 adult children are beneficiaries. Question - I imagine the beneficiaries will need to waive the annuity as the default distribution option just as the participant would if he had lived and elected to roll to an IRA? Thank you

We file one 5500 for a 403(b) plan. It is long frozen. I asked for their IRS Opinion letter. They provided me one with an approval date of 8/7/2017. This does not seem current. Does anyone know? I requested this from the plan sponsor. But I believe I need to tell them to contact TIAA to make sure this is the most recent. Thank you, Tom

We file one 403(b) 5500. It is a TIAA 403(b) plan document. I assume the plan sponsor should have a copy of the Opinion Letter for 5500 purposes? Thanks

We have a situation whereby the client is attempting to get information to us about a potential first time 5500 filing. We could file an extension to be on the safe side. Is there a problem with then not filing the 5500 if it ends up there is no filing requirement? I know we could file one anyway but this could go on for years when it wouldn't have to. Thanks