C. B. Zeller

As you mentioned, this is ok under the 2-year eligibility rule, because someone who was hired on 1/3/2023 would complete 1 year on 1/3/2024 and then enter the plan on 1/1/2025. This requires that the match and PS both have 100% immediate vesting. For deferrals, the plan could have a single entry date, as long as the application of that entry date with the associated service requirement does not result in any participant entering the plan later than either the first day of the plan year or 6 months following the date they complete a year of service. For example, the plan could impose a 6-month service requirement with entry on the first day of the plan year only. The participant hired on 1/3/2023 would enter on 1/1/2024 (six months earlier than they would with semi-annual entry dates), but a participant hired on 12/29/2023 would enter on 1/1/2025, the same as if the plan had semi-annual entry dates.

It's not that they wouldn't be subject to the LTPT rules, but rather that it would be impossible for someone to have 2 consecutive 12-month periods of 500 hours of service without satisfying 1 year of elapsed time along the way. No one would ever enter as LTPT because they would have already satisfied the plan's normal eligibility requirements.

Reasonable assumptions about things like salary increases are fine, but I don't think you can make assumptions about plan provisions that will be adopted or amended in the future. 1.430(d)-1(d) lays out rules for what plan provisions may be taken into account when determining the funding target and target normal cost. With limited exceptions, only plan provisions actually adopted by the valuation date may be taken into account, unless the sponsor makes a 412(d)(2) election.

Corp B adopted the plan as a sponsoring employer on the date of the sale? Did Corp A revoke its adoption of the plan, or does A continue to sponsor the plan? If A still sponsors the plan, then John is still a 5% owner and continues to be a Key employee. If A no longer sponsors the plan, then, although it's less than crystal-clear under the regulations, I would agree with your analysis and treat John as a former Key employee for plan years after 2022.

A forfeiture allocation is an annual addition. So you can't allocate it to participants whose annual additions limit is zero (because their comp is zero) in the current year. In what year did the forfeitures arise?

That is a question for the insurer. Read the actual contract - it will define what is and isn't a covered loss.

ASG determination is highly fact-dependent and needs to consider things that don't fit nicely into a spreadsheet. I find the flow charts on pages 45-46 of this document to be very helpful in analyzing potential ASG scenarios. https://www.irs.gov/pub/irs-tege/epchd704.pdf

There is no one right answer that is going to apply to all employers. It depends on this particular employer's appetite for risk, their assessment of the likelihood of experiencing a covered loss, and their ability to cover losses without regard to the insurance. Cyber security insurance is strongly recommended, however there is no need that the insurance be obtained from the same vendor that provides their ERISA fidelity bond. The employer might want to see if they already have insurance that would cover cyber-related losses to the plan, or consider shopping around before making a decision.

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.