C. B. Zeller

Gilmore - my concern with a 12/31/2024 amendment would be the effective availability of Roth contributions, within the meaning of the 401(a)(4) regs. HCEs would have their catch-ups automatically reclassified as Roth in order to comply with the new rule. However most non-HCEs would not have any opportunity to make a Roth election if the amendment were adopted very late in the year. Putting the Roth option in the plan before the beginning of the year also allows the disclosures for the 2024 plan year to accurately reflect the options that will be available, instead of requiring later amendments. This also goes to Peter's question about the complexity of this amendment from a document provider's perspective. Besides merely checking a box, safe harbor notices and 401(k) election forms (maybe other notices as well) will need to be updated to reflect whichever options are chosen.

If you're referring to the requirement that most new 401(k) plans be EACAs starting in 2025, as added by SECURE 2.0 sec. 101, there is no exception for large plans. As I read it, for any plan year in 2025 or later, if any 401(k) or 403(b) plan does not contain EACA provisions, it fails to be a qualified CODA, unless it meets one of the exceptions in 414A(c). The only exceptions are for SIMPLEs, plans established before 12/29/2022, governmental and church plans, plans sponsored by businesses less than 3 years old, and plans sponsored by businesses which normally employ no more than 10 employees.

This seems like a lot more trouble than just having the plan issue the refund directly to the participant with the appropriate 1099-R.

Only if the plan covers anyone born in 1974 or earlier with sec. 3121(a) wages of more than $145,000 in 2023.

I believe the answer is yes. Distribution of excess deferrals under 401(a)(30) and 1.402(g)-1 is one of the listed acts in rev. proc. 2018-58.

Luke is asking the right questions here - specifically, I think, whether the closing agreement addressed minimum funding. If it said that the plan is not subject to the minimum funding standard, then that's all you need to tell the IRS to bug off. If it wasn't addressed, then I think you still have an argument, but you might have to convince them. IRC 6059(a) requires an actuarial report (i.e. schedule SB) for each plan to which section 412 applies. IRC 412(e)(1) says that section 412 applies to a plan which was qualified under section 401(a). If the closing agreement provided that the plan was not considered to be qualified under 401(a) for the year in question, then I think you can point to this to say that it was not subject to 412 and consequently not required to file a schedule SB. Hopefully you answered the question on the 5500 about whether the plan is subject to 412 (line 11 on the 5500-SF, or part II on the schedule R) as "no." If you indicated on the 5500 that the plan was subject to 412, that would explain why the IRS thinks you owe them a schedule SB. You might consider filing an amended 5500 in that case.

SECURE 2.0 just increased the dollar limit that appears in the code. How a plan sponsor chooses to amend the plan is up to them, or maybe up to their preapproved document vendor. I haven't seen any amendments yet, but I can imagine a vendor providing an amendment that says the involuntary distribution limit is increased to $7,000 effective 1/1/2024 only if the plan's involuntary distribution limit was $5,000 as of 12/31/2023. In that case, your plan sponsor could either amend to $5,000 as of 12/31/2023 to take advantage of the vendor's amendment, or just operationally amend on their own to $7,000 as of 1/1/2024. Either way would get them to the same place as of 1/1/2024. Since the actual amendment isn't due until 2025, I think they would have plenty of time to figure out the paperwork.

$12,500. It's a letter ruling request under the jurisdiction of Employee Plans - see rev. proc. 2023-04 sec. 24.01 and the fee schedule in appendix A of the same procedure.

You ARE allowed to tell employees that they have the option to reduce their salary by a certain amount and have it made as a plan contribution instead. This is called a "cash or deferred election" (CODA) and the rules governing it are found in section 401(k), including 402(g) limits, ADP testing, etc. etc. And 401(k) contributions are actually considered to be employer contributions; see 1.401(k)-1(a)(4)(ii) of the regs. What your sponsor would be doing would be considered a "deemed CODA." Essentially they would disqualify the plan unless they subjected the amounts to ADP testing and all the other rules that apply to 401(k) arrangements.

Your question is about adjusting 415 for multiple annuity starting dates, which is a complex topic. The IRS found it complex enough that they have never finalized their proposed regulations on the subject, replacing them with simply the word "Reserved" in the final regulations. It's not something that can be easily answered in a forum post. If you're looking for ideas on how to proceed, you can find some experts' thoughts here: https://www.google.com/search?q=415+masd+site%3Aasppa.org

What does the plan document say?

414(v)(4)(A) provides a special rule for a plan to satisfy the requirements of 401(a)(4) with respect to the availability of catch-up contributions. It states: This paragraph says "all eligible participants" - not just all eligible NHCEs - so I don't think you can eliminate the availability of catch-ups for just a portion of the employees, even just HCEs, without violating 401(a)(4).

It seems likely that the situation Paul points out was not intended by Congress. Nevertheless, the text of the law as it stands today is reasonably understood to say that individuals with earned income, and therefore no sec. 3121(a) wages (because they pay into Social Security and Medicare through self-employment taxes instead) would not be subject to the Roth catch-up rule.

This is literally the definition of a 401(k) arrangement. Can you elaborate on what you are concerned about? Maybe provide some specific examples with numbers? When you said "They also allocate the 3% to all participants" does this mean a safe harbor non-elective contribution? If so there is no ADP test, so there is nothing stopping HCEs from contributing up to the annual limit.

The sections Peter refers to were added by SECURE 2.0 section 301, titled "Recovery of Retirement Plan Overpayments." The gist of this section is that plans do not generally have to seek recoupment of inadvertent overpayments. One of the exceptions however is that this does not entitle a plan to violate IRC 415. If the participant died in 2022, then presumably they had no compensation for 2023 and consequently their annual additions limit for 2023 would be zero. Thus any amounts allocated to their account for 2023 would violate 415 for 2023, and would not be eligible for the treatment afforded under 414(aa).

If it wasn't withheld from payroll then it isn't a deferral. It should be returned to the owner, adjusted for earnings. The earnings would be taxable.

Are we certain it was a genuine Roth contribution, and not a voluntary after-tax contribution? Roth contributions are 401(k) contributions, so they have to be made by the employer with money withheld from the employee's paycheck. VAT, on the other hand, is money contributed by the employee and generally doesn't need to come directly out of the employee's paycheck. If this was truly a Roth contribution, then what happened to the money that was withheld from the employee's paycheck? Is it still sitting in the employer's bank account?

I usually let the auditor make the call on this one, and do it however they prefer. Some of them have strong feelings about it one way or the other.

That's right.

Yes, exactly. Section 310 of SECURE 2.0 added a new paragraph to IRC 416 which says that employees who have not met the minimum age and service requirements of IRC 410(a) are not considered when determining if a DC plan satisfies the top heavy minimum.

I don't think that would be allowed. Sec. 603 notwithstanding, part of the definition of a Roth contribution is that it has to be made at the employee's election. If you force certain contributions to be Roth then they're not valid Roth contributions. Likewise, catch-up contributions have a requirement that if any employee is allowed to make a catch-up, then every employee has to be able to make a catch-up. So you couldn't take away somebody's ability to make a catch-up merely because they didn't make a Roth election.

Yes, but not exactly. Since there is a portion of the plan that is not safe harbor (the portion of the plan covering employees with less than 1 year of service), the entire plan loses its top heavy exemption. So all employees are now eligible for the top heavy minimum. The top heavy minimum can be satisfied by the matching contributions, but if you have an employee for example who defers only 2% of their pay and receives a 2% match, the employer would need to make up the additional 1% to get them to the 3% top heavy minimum. All non-key employees who receive no match - whether because they have less than 1 year of service and are not eligible, or because they are eligible but simply do not contribute - would need to receive the entire 3% top heavy minimum as an additional employer contribution, if they are employed on the last day of the year. It's worth noting that SECURE 2.0 changed the rules a little. Starting in 2024, employees who have not met age 21 and 1 year of service do not have to receive the top heavy minimum. This doesn't entirely fix your situation though, as your plan would still lose its top heavy exemption and still need to provide a top heavy minimum to those employees who have completed a year of service.

I imagine that the recordkeeper would want the Plan Administrator's acknowledgement that they do not have any actual knowledge to the contrary of the information provided on the participant's self-certification.

Neither farming nor cold storage are one of the specified fields in the regulations, and it sounds to me like capital is a material income-producing factor for both businesses. So I would say that neither one could be a service organization, so you don't have an ASG.

What fields are the two companies in? Is capital a material income-producing factor for either business?