C. B. Zeller

IRC 414(b) says: So you determine the deduction limit as if all members of the controlled group were a single company, and then allocate the deduction using some reasonable method. Note that the "regulations prescribed by the Secretary" referred to in the statute do not exist. It is probably reasonable for each entity to take a deduction equal to the amount of the contribution allocated to its employees in the DC plan. In the DB plan, the contribution might be allocated in proportion to the benefits accrued in the current year by the employees of each entity. There are likely other reasonable ways to allocate the contribution as well. I'll also point out that the deduction limit is usually higher than 25% in a DB+DC combo situation. Since it appears the DB plan has more than 25 active participants, it should be covered by PBGC. Therefore, the deduction limit is probably 25% on the DC plan, plus the amount determined under 404(o) on the DB plan. If the DB plan is not covered by PBGC, then the combined deduction limit is usually 31% of compensation, or if the contribution on the DC plan is not more than 6% of compensation, then it would be the 404(o) amount plus the DC contribution.

With alternative tools that others might prefer: HP 12c: 3.222023 [ENTER] 181 [g][DATE] Result is 9.192023, interpreted as September 19, 2023 Excel: =DATE(2023, 3, 2022) + 181 Result is 9/19/2023 That said, if you are working with a system that works in days instead of months, a half year would be more correctly 365 (or 366) divided by 2, which would be 182.5 (or 183). So I would go with Belgarath's suggestion of 183 days instead of 181 if you are doing it this way.

I'm with you. I think the author is mistaken.

We will need guidance from the IRS to say for sure, but my take on this is that adding Roth for purposes of complying with S2 sec. 603 isn't a remedial amendment issue, and so wouldn't qualify for the extended deadline. All the law says is that employees whose FICA wages in the prior year were more than a certain dollar amount may not make a catch-up contribution in the current year unless that contribution is Roth. A plan could just as well comply with this requirement by not allowing those employees to make catch-up contributions at all. Of course, due to the universal availability requirement that applies to catch-ups, the employer would have a qualification issue unless they eliminated catch-ups for all participants. But still, adding Roth is not a requirement to comply with the law.

Keep in mind that this will cause the plan to lose its top heavy exemption, if that's a concern for this client.

While the fee quoted by your consultants may seem steep in relation to the actual excise tax due, consider it relative to the cost of responding to an IRS inquiry if the form is not completed correctly. The fee may be worth your peace of mind.

You could exclude all hourly-paid employees, but you can not have a service-based condition with more than 1,000 hours.

Maybe this is a silly question - this is outside my area of expertise. From reading the instructions to 1099-C, it appears that it should only be filed if the creditor is a certain financial entity. If the employer is not one of these entities, do they still file 1099-C?

ERISA § 101(i)(7)(A) defines blackout period: The ability of participants to direct or diversify assets is not being affected, since those rights don't exist with respect to the sub-accounts being transferred. If the ability of participants or beneficiaries to obtain loans or distributions may be suspended, limited, or restricted for more than 3 consecutive business days, then you have a blackout period under this definition. How long is this transfer expected to take? And how long does that compare with your normal timeline for processing distributions and loans from the pooled account? For example, if the transfer is expected to take 4 business days, and the plan only promises to participants that loans and distributions will be processed within 10 business days of receipt, might it be possible that the transfer will not actually affect any participant's ability to receive a loan or distribution on a timely basis? But a better question is, why wouldn't you want to provide the notice? It's better to play it safe, given the applicable penalties. Plus, I imagine the sponsor would want the participants to know where their money is going.

The term "individual account plan" as defined in ERISA § 3(34) means any defined contribution plan.

Hopefully you've advised the client about the annual additions limit...

Rev. Proc. 2021-30 appendix B 2.02(1)(B) You reduce the QNEC such that the QNEC plus any deferrals actually made do not exceed the 402(g) limit. In essence, the employee would be giving up some "free money" by maxing out.

If they're not expected to return to work, aren't they terminated? Wouldn't they be eligible for a distribution then?

Loan payments can be suspended while a participant is on an unpaid leave of absence for a period of up to one year, so assuming that they expect the participant to return to work within one year, I would say that it probably is allowable, unless the plan's loan program doesn't allow for such a suspension. The loan would need to be amortized starting when the participant returns to work, including interest through the end of the leave of absence, to be fully repaid no later than 5 years after the loan origination date.

2023

That may be. The snapshot linked above contains a reference to IRC 414(c)(2) which discusses aggregation of church plans. It's not something I have any expertise in.

Also keep in mind that the deduction limit is only a limit on the amount that can be deducted; if any of the match is funded from forfeitures, that still counts as an allocation for the ACP test and the 415 limit, but it doesn't count towards the deduction limit.

For reference, here is the IRS snapshot on this issue: https://www.irs.gov/retirement-plans/issue-snapshot-403b-plan-application-of-irc-section-415c-when-a-403b-plan-is-aggregated-with-a-section-401a-defined-contribution-plan I don't see any special exemptions for the type of 403(b) sponsor (educational, medical, governmental or otherwise) or for the nature of the other business carried on by the participant. If a 403(b) participant owns or is deemed to own another business, and that business sponsors a 401(a) qualified plan, the 403(b) plan and the 401(a) plan are aggregated for purposes of 415.

If this would result in the daughter getting a smaller allocation, then no. 411(d)(6) prohibits amendments which would result in the cutback of an accrued benefit, even if it only affects HCEs. Unless the plan has a last-day requirement, or a service requirement which hasn't yet been satisfied, then you couldn't even make that amendment effective in the current year. It would have to take effect as of the next plan year. I would recommend that the plan be amended to put each participant in their own group going forward. This will give the plan sponsor the ability to give different allocations to each employee at their discretion each year. Regarding the testing issue, could restructuring the plan into component plans help?

Since there isn't anything in the code or regs that makes special reference to loans for hardship reasons, you can do basically whatever you want. I would just make sure that the plan's loan procedures say something like "a loan will be permitted only in the event that the participant certifies the existence of a hardship" just to be perfectly clear.

First off, it's 50% of the vested account balance - that's an important distinction. Second, as Bri points out, it's not correct in the event there are other loans. Even if the plan only allows a single loan at a time, the $50,000 limit is still reduced by the highest outstanding loan balance in the past year. If you wanted your language to apply, the plan would need to say that a participant may only have one outstanding loan at a time, and also that they may not take another loan until at least 1 year after the final repayment of the previous loan has been made.

In that case I agree with Belgarath. The law only says you can not discriminate in favor of HCEs; you can discriminate in favor of NHCEs all you like.

Does the match actually exclude HCEs though, or is it based solely on comp? Because you could have an employee who is a 5% owner (including a deemed 5% owner by attribution) who is HCE even if their comp is less than $75k. And if the $75k is determined in the current year, you could have an employee who is HCE because they made over the HCE limit in the prior year, but under $75k in the current year.

I have to disagree. Plans are not required to offer catch-up contributions in the first place, and if they do, there is no requirement that they allow the maximum amount of catch-up contributions. The only requirement under 1.414(v)-1(e)(1)(i) is that all catch-up eligible participants must be allowed to make the same dollar amount of catch-up contributions. This will have to be modified for SECURE 2.0 (since some participants will have a higher dollar limit than others) but the reg does not currently specify anywhere that the dollar amount has to be the maximum amount under the current annual limits - presumably the plan could impose a lower limit if it so chooses.

The small employer startup credit of IRC § 45E has a requirement that the plan cover at least one participant who is not a highly compensated employee. However I believe the original question was about the auto-enrollment credit of IRC § 45T, which does not contain the same requirement. The requirements under 45T are that the plan be a qualified employer plan as defined in 4972(d), that the plan include an EACA as defined in 414(w)(3), and that the employer is an eligible employer as defined in 408(p)(2)(C)(i). Scanning each of those sections, I do not see anything that would restrict the ability of an employer to claim the credit merely because their plan does not cover any NHCEs.