C. B. Zeller

If the cash balance plan passes coverage and nondiscrimination on its own, then it does not need to be combined with the DC plan for testing. Practically the only way I can see that being possible would be if there were no employees that met minimum age and service conditions. Maybe the CB plan uses 2-year eligibility, to keep some more people out. If there are any employees who did meet minimum age and service, the CB plan would fail 401(a)(26). The combined deduction limit only applies if the DB plan is exempt from PBGC coverage (which, if it only covers the owner, it would be exempt), and if the deduction taken for employer contributions on the DC plan exceeds 6% of compensation.

Agreed, this section does not create a new distributable event, it only creates a new exemption from the 10% excise tax.

Roth employer contributions were made effective as of the date of enactment of SECURE 2.0 - so a plan could have allowed them for 2022. I'm sure somebody, somewhere out there took advantage of it in the 2 days between the passage of SECURE 2.0 and the end of the year. That person presumably has an income tax return due in about 2 and a half months from now - moreover, their employer has to get them a W-2 and/or a 1099 within the next few days - and there is no guidance on how those contributions should be reported. I really can't blame the IRS on this, given the timing of the law. But it does make the reporting question kind of urgent.

It's not entirely clear yet - hopefully the IRS will give us some guidance on these questions this year. If I had to interpret the law as written, I would probably say that the normal entry conditions apply; an LTPT has to enter the plan by the earlier of the first day of the next plan year, or the date six months after the date they complete their three (soon to be two) consecutive periods of 500 hours of service. Moreover, it seems that the normal rules for counting periods of eligibility service would apply too, so if you had an employee hired 12/1/2023 who worked 500 hours in their first eligibility computation period of 12/1/2023-11/30/2024, their second eligibility computation period would be 1/1/2024-12/31/2024 (unless the plan stays on anniversary years) and if they worked 500 hours during that period, they would enter the plan on 1/1/2025.

As mentioned, the annually-increased penalties are mandated by law. See the The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, and also this EBSA fact sheet. Therefore, reducing the penalties would require a change in the law, which means an act of Congress. Any bill which proposes to reduce the penalties would have to be scored on its budget impact over 10 years. Reducing the penalties would reduce revenue, so it would have to be offset by some other revenue-raising measure. We got a taste of some of those revenue raisers in SECURE 2.0, including such unpopular additions as Roth catch-ups. What would you be willing to give up in order to reduce these penalties?

Maybe there is more to this, but to me, if the participant does not have the option to receive the amount in cash, then it is not a 401(k) contribution. What would happen if they told the employer tomorrow that they want to stop contributing and they want cash instead? While the IRC distinguishes between pension and nonpension retirement plans (with 401(k) plans being an example of the latter), colloquially the term "pension" is often used to refer to any retirement plan, including a 401(k) plan.

https://www.asppa.org/industry-intel/major-secure-20-error-puts-catch-ups-jeopardy-ara’s-graff

I realized I assumed you were talking about a plan that defines interest crediting rate with reference to the funding segment rates. But you didn't actually say that. So, when you said "they were using these interest rate s," using them for what purpose?

Unless there are some special circumstances, then I agree.

That table won't be updated, since the pre-ARP segment rates are no longer available to be used for plan years starting in 2022. What is the exact definition of interest crediting rate in the plan document? Does Notice 2021-48 section III.B.3 shed any light on your situation?

Then, barring any unusual plan provisions, it should be fine.

Is the plan top heavy?

truphao made an important distinction which I believe is frequently lost on DB plan practitioners. A plan is required to define a normal retirement age, which is important for certain calculations under sec. 411 and other requirements under sec. 401. Reg. 1.401(a)-1 offers some guidelines for selecting a normal retirement age. When doing funding calculations, an actuary has to make an assumption about when a participant will commence benefits. 1.430(d)-1(f)(3) requires that actuarial assumptions, other than those specified in law, must be reasonable and must offer the actuary's best estimate of expected experience under the plan. Nowhere in that section or any other is there a requirement that the actuary assume that a participant will retire on the plan's normal retirement date. Indeed, if it would not be reasonable to assume that the participant will retire on the plan's normal retirement date, then the actuary may not make that assumption.

There needs to be 80% common ownership for a controlled group to exist. If the wife only owns 50% of another business, and the other 50% is owned by an unrelated party, then I don't see how a controlled group exists. If the businesses provide services to each other, or are regularly associated in providing services to third parties, then you could have an affiliated service group, but that is a different question. As to your other question, the term "Employer" for 401(a)(26) purposes is defined in 1.401(a)(26)-8 which references 1.410(b)-9. That section says Hence the term "employer" for 401(a)(26) purposes includes all other employers in the same controlled group or affiliated service group.

Man, I'm seeing a lot of negativity in this thread. Yes, there is a new law, yes it was rushed through at the last minute, yes it's complicated and yes it's going to change the way we do a lot of things. I get it that there is a lot of anxiety and not a lot of guidance yet. We've all been through changes before and we will all be through them again. Retirement savings is still worth it and our clients need us to be on top of this for their sake, especially now.

I don't think this is an option. The way I read 414(v)(7)(B), it says that if you have anyone to whom subparagraph (A) applies (that is, anyone who is eligible for catch-up with prior year earnings over the limit), then paragraph (1) (which is the right to make catch-up contributions at all) does not apply to the plan unless anyone who is eligible to make catch-up contributions can make their catch-up as Roth.

It's based on the date on which the cash or deferred arrangement is established. A PS plan adding 401(k) is establishing a new CODA, so the auto enrollment requirement would apply.

EFAST2 FAQ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf See also https://www.askebsa.dol.gov/FormSelector/

This list from NAPA https://www.napa-net.org/news-info/key-secure-20-act-provisions-and-effective-dates

Taking out the bits about deferrals, I'm reading it as, "an employee may elect ... to have made on the employee's behalf designated Roth contributions in lieu of all or a portion of ... matching contributions or nonelective contributions which may otherwise be made on the employee's behalf" This is correct. That's our Congress for you

Again, the plan document should specify exactly what part of the DC account is used to offset the accrued benefit, but generally it would be the amount attributable to employer non-elective contributions. The amount used for the offset has to be a uniform percentage of pay for all participants if you want to satisfy 401(a)(26) on a pre-offset basis.

No. To qualify for the credit the employer can not have maintained any other qualified plan during the past 3 years. See IRC 45E(c)(2)

This question is vague. What exactly are you asking? The plan document should describe in detail how the normal retirement benefit and accrued benefit are calculated, including any offsets. That said, "offset" can mean (at least) two very different things which I think you may be confusing based on the context here. There is a "floor-offset" which is when the accrued benefit in a DB plan is reduced by the actuarial equivalent of a DC account balance. Then there is an "offset benefit formula" which is one way of integrating the plan's benefit formula with social security. An offset benefit formula would usually be designed to be a safe harbor formula.

You need to look at IRC 402A(b)(1) as amended by S2.0 sec. 604. This is what IRC 402A(b)(1) said pre-S2.0: And as amended: With the amended language it is clear that the Roth employer contributions are made at the employee's election.

The minimum funding standard of sec. 430 applies regardless of the owner's salary. Whether a minimum required contribution exists for a given year for a given plan is a question for the plan's actuary.