C. B. Zeller

I'm going to have to disagree. 1.414(v)-1(e)(1)(i) says (emphasis added): This doesn't require that everyone be allowed make the maximum amount of catch-up permitted under the law, it only requires that the same limit be available to everyone. So, I think you could ignore the 60-63 catch-ups and limit everyone to the regular catch-up limit.

I think the counter-argument would be Notice 2016-16, which prohibits a mid-year change to reduce the number or otherwise narrow the group of employees eligible to receive safe harbor contributions. Does revoking the participation of a participating employer violate that prohibition?

A plan can allow distributions of deferrals and safe harbor match upon reaching age 59-1/2 without violating any IRS rules. As to whether this particular participant can withdraw her account... ☝️

Mods, can you move this post into the 401(k) forum? This is not a multiemployer plan question. To the actual question, in a controlled group situation the employers are considered a single employer for most purposes. You would have to read your document to see what it says, but if the contribution is discretionary then there shouldn't be an issue with differing amounts coming from different companies.

To be a safe harbor 401(k) plan, you only have to make safe harbor contributions to NHCEs. However you have to follow the document. If the document says that HCEs will get the safe harbor contribution, then they have to get it. They can't retroactively eliminate it even for HCEs since that would be a prohibited cutback.

The defaults from your preapproved document provide might only increase the limit to $7,000 if the limit was previously $5,000. You could still go straight from $1,000 to $7,000 but the amendment might need the sponsor's signature. Distributions less than the force out limit are not 411(d)(6)-protected, so there is no anti-cutback issue. It does to me too - but it is actually straight out of the preamble to the proposed LTPT regulations. Here is what the IRS said: https://www.federalregister.gov/d/2023-25987/p-37

It's the same as any other employee who is eligible and elects not to defer. They still have to receive all of the various notices going forward, and have the right to change their deferral election according to plan procedures. They still count as an active participant on the 5500. They don't have to receive any safe harbor contributions (if the plan is safe harbor) or a top heavy minimum (if the plan is top heavy). To JRN's point, SECURE 2 changed the top heavy rules such that otherwise excludable employees no longer have to receive the DC top heavy minimum at all, regardless if they are eligible solely because of the LTPT rules or because the plan has more lenient age/service criteria than the maximum. And you can always disaggregate the otherwise excludable employees for coverage and nondiscrimination testing purposes; typically that group would contain no HCEs (since anyone with less than a year of service is unlikely to have prior year compensation above the limit) so it would satisfy testing automatically.

Attribution of ownership for purposes of determining who is an HCE, key employee, or required to take an RMD without regard to whether they have separated from employment, is determined under IRC 318. 318(a)(2)(B)(i) reads: Qualified plan trusts are specifically exempt from this attribution. The participant in your example is not considered a 5% owner for the purposes mentioned above.

It's not an unreasonable strategy to say that you are going to deal with the LTPT rule by modifying the plan's normal eligibility requirements such that no employee ever enters the plan as a LTPTE. One way of accomplishing this might be to redefine a year of service as a 12-month period during which an employee is credited with 500 hours of service, as opposed to 1000. Other ways are certainly possible as well. Defining a year of service as a year of elapsed time should do the trick as well in most cases. However, it could be possible for an employee to be credited with 500 hours of service during two consecutive 12-month periods and not complete 1 year of elapsed time in certain re-hire situations, if they have a period of severance greater than 12 months. I'm hopeful that this will be addressed when the regulations are finalized.

No can do. It's a prohibited transaction. Commissioner v. Keystone https://supreme.justia.com/cases/federal/us/508/152/ DOL interpretive bulletin 94-3 https://www.law.cornell.edu/cfr/text/29/2509.94-3

Spouses are usually attributed each other's ownership for controlled group purposes, unless they meet the requirements to be exempt. The requirements to be exempt from attribution are described in IRC 1563(e)(5) - does it apply in your case? If they want to be in a controlled group, it should be pretty easy to make that happen. Personally I am of the opinion that collaborating on a retirement benefit program rises to the level of being involved in the management of each other's business, so just the fact they are both talking to you about adopting a plan together probably makes them lose the exemption. But if you wanted to be more formal about it, you could have one of them hire the other (and pay them a salary), or put each other on their company's board of directors.

Yes, this was the IRS's holding in rev. rul. 2004-13.

Sorry, I meant NOT a top heavy plan. I've edited the original post.

But are they related under the meaning of 414(b), (c), or (m)? Being in different professional fields is indicative, but not determinative.

When you're referring to plans that use the OEE provision, do you mean plans that have different eligibility for deferrals and safe harbor? In general, the option to disaggregate otherwise excludable employees is a testing election that is made operationally - it is not a plan design specification. A plan that has the same eligibility for deferrals and safe harbor, and makes no other contributions, is considered to not be a top heavy plan. A plan that has different eligibility for deferrals and safe harbor, or that makes other non-safe harbor contributions, loses this exemption. The proposed regs say that basically, you ignore the LTPTEs entirely when you make this determination. So if everyone who is eligible for deferrals also gets safe harbor, except for the LTPTEs who are eligible for deferrals but get no safe harbor, then you still have a non-top-heavy plan. If there are some employees who met the plan's normal eligibility requirements (i.e. something less than 3 (or 2, starting in 2025) consecutive years of 500 hours of service) and those people are eligible to defer but not to receive safe harbor, then you lose your top heavy exemption. It IS confusing. I had written a couple more paragraphs about this but deleted it, worried that I might make your confusion worse. I'm hopeful that IRS will improve the situation in the final LTPT regs.

SECURE 2.0 allows the plan administrator to rely upon the participant's self-certification that the hardship is one of the types specified in the regulations. Why are you requesting evidence?

As far as I know, it's the same as it's ever been...file Form 5329.

There are many different types of payments that are reported on "a 1099." You can read about some of them here: https://www.irs.gov/businesses/small-businesses-self-employed/a-guide-to-information-returns Distributions from retirement plans and IRAs are reported on 1099-R. Payments to independent contractors could be reported on 1099-MISC or 1099-NEC.

Is this a 401(k) or profit sharing plan that is exempt from QJSA? The rule to be exempt from QJSA is that the spouse must be the sole beneficiary of the entire account balance. If the participant wants to designate someone else as the beneficiary, the spouse must consent.

IRC 45E(c) defines who is an "eligible employer" for purposes of the credit: Paragraph (2) excludes employers which are a member of a controlled group if there was another plan in that controlled group covering "substantially the same employees." Presumably, if the plan being adopted for the newly-acquired company covered a separate group of employees, then the credit could still be allowed. I'll admit that my initial reaction was the same as Bill's - that you couldn't get the credit multiple times just by adopting multiple plans. However a closer reading of the statute seems that it might not be impossible after all. I wouldn't want to be the one making the call on this though. Pass this code section off to the accountant and let them interpret it. Or maybe they have a tax attorney consulting on all these acquisitions? They could hopefully offer an opinion. If they are doing multiple acquisitions, remember that they have to stay under 100 employees across the entire controlled group in order to be eligible for the credit at all.

Good try, but nope. You can only borrow from the ADP test if the 401(k) plan is actually subject to the ADP test. 1.401(m)-2(a)(6)(ii)

The deadline to make voluntary after-tax contributions is 30 days after the end of the limitation year. 1.415(c)-1(b)(6)(i)(C) Assuming limitation year = plan year = calendar year, your client missed it by a couple of days.

There is a special catch-up available in 403(b) plans that is designed to allow participants to make up for some years in which they didn't maximize their contributions. I don't deal with 403(b) plans enough to feel comfortable explaining it here, but you can research it if you're interested. There is nothing along those lines for 401(k) plans however.

Unfortunately, they're going to have an uphill battle. If they go back to their former employer, the employer is going to say that the plan is terminated, and the benefits were transferred to the insurance company, so it's not their problem. The insurance company is going to say that the benefit isn't payable until age 65, and whatever information was provided previously is wrong, or not binding on them since it was provided by someone else, and again not their problem. Hopefully you have a copy of the Summary Plan Description. It will describe the early retirement benefit. That might be enough to convince the insurance company to take it seriously, but then again it might not. The insurance company should have an appeal process for denied claims, which you will probably have to use. And yes, you are correct that PBGC protection ended when the benefit was transferred to the insurance company. Good luck.

Are you sure about this? Please go and read the document carefully. I have a feeling it actually says that it excludes non-resident aliens with no US-source income. If they are working in the US then they are not excludable under this definition regardless of their immigration or residency status.