C. B. Zeller

A plan can allow in-plan Roth conversions of amounts that are not otherwise distributable, but a participant can only do what the plan allows. So if the plan says that in-plan Roth conversions are only allowed for amounts that are otherwise distributable, then that's what would be available to the participant. One thing to note about allowing in-plan Roth conversions of amounts not otherwise distributable, is that you have to preserve the distribution restrictions attached to that source. Which means you might end up separately tracking Roth conversions from deferrals, Roth conversions from safe harbor, Roth conversions from profit sharing, Roth conversions from rollovers, etc. etc. The entire source does not have to be 100% vested, but only the vested portion could be converted. Agreed. As mentioned earlier, if the amount was not otherwise distributable, you will need separate Roth sub-accounts to track the distribution restrictions attached to the original source(s). Only the earnings are taxable, since the basis was taxed at the time of the conversion. In a qualified Roth distribution, the earnings are tax-free. The 10% penalty could be waived even if under age 59½ in certain circumstances, for example a distribution on termination of employment after age 55. However that would not on its own make it a qualified Roth distribution and the earnings would still be taxable. If you roll over a designated Roth account to a Roth IRA, it re-starts the 5 year clock. Here is an article with more info: https://www.napa-net.org/news-info/daily-news/case-week-designated-roth-account-rollovers-and-5-year-rule

Care to share some links?

Those are the current maximum amounts in the regulations, although a plan administrator would presumably be allowed to specify a lower threshold for each. The $200 and $500 amounts are found in Treas. Reg. 1.401(a)(31)-1 Q&A-11 and -9, respectively.

Yes, I agree that the accrued benefit has to be limited to 415. However that does not restrict the hypothetical account balance.

There is no requirement that the hypothetical account balance be limited to the 415 max lump sum. 415 controls what can actually be paid out of the plan, so if the hypothetical account balance exceeds the maximum lump sum on the actual distribution date, then the entire hypothetical account balance could not be paid. But purely from a plan design perspective it doesn't matter.

So the participant was working up until they died? As long as the plan document offers a lump sum option for the death benefit, then the beneficiary can take the lump sum, and use the account balance RMD method to calculate the amount that is not eligible for rollover.

Had the participant commenced RMDs prior to 2023? Or would 2023 be the first RMD year? We're assuming the surviving spouse is the 100% beneficiary - is that confirmed?

Also check your local public library - mine, for example, subscribes to EBSCOhost, through which I have access to the Journal of Pension Benefits, among many, many other publications.

The regulations only provide for permissive disaggregation of otherwise excludable employees using the maximum permissible age and service requirements of age 21 and 1 year of service.

There is no requirement that the top heavy minimum contribution be 100% vested.

If you read 45E (as amended by SECURE 2.0) carefully, the "paid or incurred" language only appears in paragraph (a), with respect to the credit for qualified startup costs. If I'm understanding the question correctly, you are asking specifically about the credit under paragraph (f) for employer contributions. Reading paragraph (f) for similar language, it appears to be missing a word! Removing the parentheticals, it says "the credit allowed for the taxable year under subsection (a) shall be increased by an amount equal to the applicable percentage of employer contributions by the employer to an eligible employer plan." Contributions WHAT by the employer to an eligible plan? Sloppy drafting aside, given what paragraph (e)(2)(B) has to say about a disallowance of a deduction for amounts for which the employer receives a credit under paragraph (f), it seems to me that the intention is that the credit is available for a year in which the employer would otherwise have been able to take a deduction for the contributions, in other words, the prior year as long as the timing of the contribution satisfies 404(a)(6).

If it's a direct rollover, then the taxable amount is clearly known - it would be zero. That said, there are other issues at play here. For one, I don't think your client has a qualified Roth contribution program at all. The statute under 402A(b)(2) is clear that separate accounting is required for the Roth portion of the employee's account. Second, since the distribution is bifurcated into Roth and non-Roth portions, you will need to know how much of the account is attributable to Roth and non-Roth contributions. This is true regardless of how the rollover is being done. If the non-Roth portion is being rolled over into a traditional IRA, then you need to know how much is being sent to that account. If the non-Roth portion is being rolled over into a Roth account, then you need to know the amount since it will be taxable in the year of the distribution (note that the taxable amount shown on the 1099-R would not be zero in this case, even though it is a direct rollover). Note that a Roth account in a qualified plan may only be rolled over to a Roth IRA or to a Roth account in another plan. It can not be rolled over into a traditional IRA. See the IRS rollover chart here: https://www.irs.gov/pub/irs-tege/rollover_chart.pdf

The requirement for the 60-day notice of intent to terminate is found under ERISA sec. 4041(a)(2). This section only applies to plans subject to Title IV, in other words, PBGC-covered DB plans.

A corrective amendment under 1.401(a)(26)-7(c) is subject to the same requirements as a corrective amendment under 1.401(a)(4)-11(g)—in particular, the amendment must satisfy coverage and nondiscrimination testing on its own. If the individual(s) you are looking to bring in to the plan under the amendment is/are HCE, and the employer has any non-excludable non-HCEs, the amendment would not be allowed. The same is true if you are looking to satisfy the meaningful benefit portion of the test by increasing an HCE who is already benefiting at a lower level—you could not increase them on their own without also benefiting some non-HCEs. Note this is only true for a corrective amendment adopted after the end of the year. Assuming a calendar year plan, it is currently too late to fix under -7(c) for 2022, but if you are looking at 2023, then you could expand the group of participating employees in any way you like before the end of the year without the additional restrictions of -11(g). In addition, although there is currently some ambiguity around when this becomes effective, you will (eventually) be able to adopt an amendment retroactively to fix this under 401(b)(3) (as added by SECURE 2.0 sec. 316) without the additional restrictions of -11(g). One last thing—does your plan document include a 401(a)(26) fail-safe? If so, follow its terms before you start looking at corrective amendments.

Careful here - what happens if the employee (presumably these employees are partners or otherwise individuals significantly contributing to the production of the business) chooses not to participate or chooses a smaller contribution? Do they get that amount in cash (or in the case of a partner, earned income) instead? In other words, does making an election to receive a contribution result in a corresponding reduction in their compensation (and if it doesn't, why would anyone choose not to participate or choose a contribution level less than the maximum legal limit)? This sort of arrangement could result in a deemed CODA, and could disqualify the DB plan.

Even if the plan document allows a distribution, the distribution could be restricted by the plan's funded status under sec. 436, and if the participant taking the distribution is an HCE, 1.401(a)(4)-5(b). If the participant is at or near their 415 limit (or will be in the future), be aware of issues that can occur when there are multiple annuity starting dates. The distribution taken now still counts against the eventual 415 limit at retirement.

The rule is that it is based on the year in which the employee retires. The IRS has never given a concrete definition of "retires" for this purpose. If you asked the employee when they retired, would they say they retired in 2022 or in 2023? I have a feeling they would say they retired in 2022. Not that this is necessarily determinative, but it is probably indicative of the common understanding of what it means to retire in a given year. If I can hazard a guess, it sounds like RMDs should have started on 4/1/2023 but weren't, and you're trying to find a way to avoid the failure and associated penalties. I'm certainly sympathetic, but I would caution you (and your client) against taking a position that stretches reasonable interpretation. I'd also remind you (and your client) that the penalty for missed RMDs was reduced significantly by SECURE 2.0 and it may help everyone rest easier at night to simply admit to the failure and pay the penalty. Or better yet, file a Form 5329 and request a waiver of the penalty entirely.

So date of birth is 1947, which means he uses the pre-SECURE Act age of 70½. The required beginning date is April 1 of the year following the year in which the participant attains age 70½ or retires, whichever is later. The participant attained age 70½ in 2017 or 2018, and if I'm understanding the facts correctly, retired in 2022. So the required beginning date was 4/1/2023.

What is their date of birth?

For Cycle 3, the IRS required that the plan document explicitly specify the determination period for calculating matching contributions, including safe harbor match. Take a look at item C.18 in the adoption agreement. If the adoption agreement says the determination period is annual, and the employer calculates and deposits the match each pay period, then a true-up will be required. If the adoption agreement says the determination period is per pay period, then a true up would not be allowed unless the plan were amended, and then the rules for mid-year changes to safe harbor plans would come into play. If memory serves me right, FT had a FAQ sheet about this back when Cycle 3 came out. It is probably still on their website somewhere. Or I'm sure they would be happy to send it to you if you contact them, as Bill suggested.

There are two failures here: the missed deferral opportunity, and the failed ADP test. The QNEC used to correct the MDO is limited to the 402(g) limit. The cite on that is rev. proc. 2021-30 appendix B.02(1)(a)(ii)(B)(1) A QNEC included in the ADP test under the 401(k) regs does not have a similar limitation. However, this is a very unique situation, and as you have explained the numbers give a result that is wildly disproportionate to what most of us would consider to be a reasonable outcome. If this were my client, I might try to apply under VCP to amend the plan for 2020 to a 4% safe harbor non-elective contribution, and then use the 3% QNEC on top of that for the MDO.

For DC plans, 415 limits how much can go into a plan in a given year. There is no limit on how much can come out; the participant gets whatever was contributed plus any earnings. For DB plans, 415 limits how much can come out of the plan at retirement. There are no limits on what can go in*, but generally it wouldn't make sense to put in more than would be allowed to be paid out. The actuary will help you determine a contribution formula that will get you to the desired retirement benefit. *There is a limit on how much can be deducted, but that is not really the question here.

See the rule published at 88 FR 12048 (page 65 of the pdf here: https://www.govinfo.gov/content/pkg/FR-2023-02-24/pdf/2023-02653.pdf) DC plans use the number of participants with a balance as of the first day of the year to determine if they are a small plan or a large plan, unless they check the box for first return/report, in which case they use the number of participants with a balance as of the last day of the year.

A plan is exempt from the automatic enrollment requirements of IRC 414A if it is a church plan as defined in IRC 414(e). IRC 414(e)(1) defines a church plan as "a plan established and maintained (to the extent required in paragraph (2)(B)) for its employees (or their beneficiaries) by a church or by a convention or association of churches which is exempt from tax under section 501." There are some exceptions in 414(e)(2) and other requirements as well so I would recommend going and reading the whole subsection. If your plan meets the definition in 414(e) then it would be exempt from the automatic enrollment requirement. "Who's the Employer" by Derrin Watson has a chapter on church and governmental employers - you may find that to be a helpful resource in analyzing this question, if you have access to it.

https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/efast2-credentials#q17