G8Rs

The interim amendment is required in order for a plan sponsor (employer) to have continued reliance on an IRS pre-approved plan. The amendment is subject to a good-faith standard. It is not approved by the IRS. There's no reliance on using LRM language, and for many provisions there is no LRM language because that is only available when the IRS is ready to review plans for the next restatement cycle. The amendment must include mandatory changes in the law as well as optional changes in the law that the employer has used in operation. It doesn't matter if these conflict or override language in the pre-approved plan. Any imperfections caused by the good-faith amendment can be retroactively corrected with future restatements that include IRS approved language. The good-faith standard also applies to changes that are "integrally" related to a change in the laws. What is integral is subjective. Suppose a plan, as of the end of 2025, did not did not permit Roth contributions. But in order to allow catch-ups, the employer will add Roth deferrals. The interim amendment will include the Roth catch-up requirement. But, should the plan have already been amended to allow Roth deferrals based on the existing pre-approved plan? One could argue that adding Roth deferrals for all participants is integrally related to a change in the law. And for a calendar year plan this may not matter because a discretionary amendment must be adopted by the last day of the year - which is the same deadline applicable to a discretionary plan amendment. And here's an unlikely example but it may help with your question. A plan permits Roth deferrals and catch-ups. The employer doesn't want to deal with the new Roth catch-ups requirement. So, catch-ups are eliminated. But, catch-ups are so common that the pre-approved plan used by the employer always provides for catch-ups (i.e., there is no election for the employer to make to not include catch-up contributions). Can the interim amendment modify the pre-approved language to eliminate the catch-up provision? I'd say yes - it's integrally related to a change in the law and therefore the interim amendment can modify the IRS pre-approved language. There is no reliance, but as long as it meets a good-faith standard then the remedial amendment period can be used to fix any defects. If the next pre-approved plan that covers the Roth catch-up requirement does not include a 'no catch-up' option for the employer, then the employer would need to find a different document or modify the plan (and submit a 5307 if reliance is desired).

I agree that it's not a distributable event. I don't think you can have an employer initiated transfer to a SEP (which are IRAs). I think you must create a new qualified plan for the plan-to-plan transfer and then terminate that plan. Which may make it easier to answer your question. The new plan would perform testing and make any corrections.

One question - how can there be any deferrals to be treated as a catch-up? My understanding is you can only make deferrals from compensation that is considered 415 comp. Wouldn’t that be $0?

There is no answer. One concern is whether the auto enrollment feature is too much employer involvement. You could argue there isn't employer involvement because it's required by law. It would have been nice if the law (unlike prior bills) didn't leave any discretion in designing the auto enrollment feature. But there is some discretion in setting the default % and escalation. Is that too much involvement? A bigger concern is that the plan must have a QDIA. If the plan isn't subject to ERISA, then there is no fiduciary standard in selecting the investment. The DOL is aware of the issue. No telling if we'll get guidance. Unless they provide some sort of QDIA safe harbor (possible but unlikely), I suspect they will say the plan is subject to ERISA. They prefer that participants be protected by ERISA.

It's still going into a Roth IRA for the individual so a rollover into a 401(k) isn't allowed.

That is correct - but the IRS announced that the W-2 wasn't going to change for 2025. They will probably add it in 2026.

If using a prototype formatted document, look at the basic plan document. Maybe in the deferral section rather than the definition of comp. Some plans allow the exclusion of non-cash compensation for deferral purposes.

That is correct. But see the following from the preamble to the Prop. Regs. There could be a discrimination issue if you have some NHCEs precluded from making a catch-up because they are subject to the Roth requirement. "Because the Roth catch-up wage threshold is slightly lower than the wage threshold used in the definition of highly compensated employee (HCE) under section 414(q)(1)(B), some nonHCEs may be subject to the Roth catchup requirement. Thus, if a plan that does not include a qualified Roth contribution program prohibits catch-up eligible participants who are subject to the Roth catch-up requirement from making catch-up contributions, while permitting other catch-up eligible participants to make catch-up contributions, then the outcome of the nondiscrimination test with respect to the availability of catch-up contributions performed under § 1.401(a)(4)–4 may be affected. Accordingly, proposed § 1.414(v)– 2(b)(2) would permit such a plan to also preclude one or more catch-up eligible participants who are HCEs and who are not subject to the Roth catch-up requirement (for example, because they did not receive FICA wages for the preceding year) from making catch-up contributions if doing so facilitates satisfaction of § 1.401(a)(4)–4 with respect to the availability of catch-up contributions." https://www.govinfo.gov/content/pkg/FR-2025-01-13/pdf/2025-00350.pdf

I should have stated it differently. I think distributions must be made in accordance with the terms of the plan document. It would be unusual for a plan to have language permitting the delay of a distribution prior to the receipt of a DRO. State law would be applicable to protect the other spouse once a plan distribution is made.

Another factor to support fmsinc's position - once a divorce is filed, there would likely be a Family Law Order prohibiting the parties from dissipating assets without the other spouse's consent or court approval. It's not the plan's responsibility, and arguably right, to delay a distribution to inquire whether the funds are being withdrawn for a nefarious purpose in violation of a possible court order. The plan doesn't want to know all the details and only follows the rules applicable when a DRO is actually received.

Going back to the original question, the daughter could be a designated beneficiary if she is the beneficiary due to a default in the plan document. If the default is the estate then she is not a designated beneficiary, even if she is the sole heir. If the default is to the kids and then she is a designated beneficiary. And so would any of her siblings. The regulations only require that the beneficiary be identifiable by the plan - and be an individual or determinable through a look-through trust. There is no look-through rule for an estate.

I wouldn’t allow them to roll it back in. As you pointed out, it will just be cashed out again when the plan is amended.

Here's another approach. If the plan allows distributions upon termination of employment, then don't you have a failure to obtain consent rather than an overpayment? Rev. Proc. 2021-30 only addresses consent failures in a J&S plan. But if you're comfortable in crafting self-correction where nothing is prescribed, this would seem to help. Try to get consent to the distribution, and if they don't, then oh well. .07 Failure to obtain participant or spousal consent for a distribution subject to the participant and spousal consent rules under §§ 401(a)(11), 411(a)(11), and 417. (1) The permitted correction method is to give each affected participant a choice between providing informed consent for the distribution actually made or receiving a qualified joint and survivor annuity. In the event that participant or spousal consent is required Page 94 of 140 but cannot be obtained, the participant must receive a qualified joint and survivor annuity based on the monthly amount that would have been provided under the plan at his or her retirement date. This annuity may be actuarially reduced to take into account distributions already received by the participant. However, the portion of the qualified joint and survivor annuity payable to the spouse upon the death of the participant may not be actuarially reduced to take into account prior distributions to the participant. Thus, for example, if, in accordance with the automatic qualified joint and survivor annuity option under a plan, a married participant who retired would have received a qualified joint and survivor annuity of $600 per month payable for life with $300 per month payable to the spouse for the spouse’s life beginning upon the participant’s death, but instead received a single-sum distribution equal to the actuarial present value of the participant’s accrued benefit under the plan, then the $600 monthly annuity payable during the participant’s lifetime may be actuarially reduced to take the singlesum distribution into account. However, the spouse must be entitled to receive an annuity of $300 per month payable for life beginning at the participant’s death.

Generally, that will be the case. Under IRC 413(c), all service with all adopting employers in a MEP must be recognized. So, you must apply the eligibility provisions of Company B's plan. If the plan requires a YOS to enter and the person had a YOS while working for Company A, then the person enters on date of hire with Company B (assuming no class exclusion applies). The same approach would be used when applying the LTPT employee rules (assuming it's a 401(k) plan).

That relief only applies to governmental 457(b) plans. There haven't been any extensions for non-governmental 457(b) plans.