Doc Ument

The protected benefit rules apply to key employees and HCEs. Documents must be operated in accordance with their terms, including the matching allocation formula. For any plan year, once participants have become entitled to a fixed contribution, or have become entitled to a portion of a discretionary contribution under the matching allocation formula, then that amount, or that portion, cannot be subsequently reduced (for that plan year). The fact that the overall annual match is discretionary in amount (which means only that it is not fixed in amount) does not mean the allocation formula itself is discretionary any formula must be followed, e.g., pro-rata on deferrals). In contrast, the matching allocation formula is nearly always, by its terms, uniform as to all participants who have made deferrals (and if not uniform, the formula must state in what way it is not uniform). The rules thus described are the same as those for profit sharing contributions, where you have a discretionary nonelective contribution (i.e., the amount of profit sharing contribution is discretionary, but not its allocation, meaning that you must follow the plan's nonelective contribution formula). While there is now such a thing as having a profit sharing allocation formula that states that "each participant is in their own allocation group," I have not seen or heard of any such provision for the matching component of the plan (and even if it were possible, the plan would need to so state prior to any participant becoming entitled to an allocation of the matching contribution for the plan year). The exclusive nondiscrimination testing method for matching contributions is the ACP test (there is no such thing as "the general test). (An ACP safe harbor arrangement stated in the plan is an ACP test method.) In addition, each unique rate of matching contributions must be nondiscriminatory under Regulation 1.401(a)(4)-4, which is why employers need to be careful when they do have a non-uniform allocation formula. You are correct, I doubt that any document contains a provision allowing an employer to cut-back matching contributions for HCES in anticipation of a failed ACP test, and I doubt the IRS would knowingly approve such a provision in a preapproved (or any other) plan because it could potentially violate the anti-cutback rule. The fact that such language would not be discriminatory is irrelevant. I believe there is another older thread on this forum reaching the same conclusion, possibly with a citation to authority.

The original question was: Can he take all his Roth money out? The answer is maybe he can, and maybe he can't. As Luke and I pointed out, we agree with Kac1214 (and you) that a plan may provide for different distribution options for pretax vs. Roth. What Luke and I are pointing out is that any such provisions are ALSO subject to the in-service distribution qualification rules and the hardship qualification rules, all of which apply equally to pretax and Roth deferrals. So the participant who wants all his Roth money is entitled to all of it (if still employed) only if the participant meets the criteria for (1)an in-service distribution of "deferrals" or (2) a hardship distribution of "deferrals" and if the plan has an option to allow distribution of Roth funds (but not pretax funds) in accordance with the plan's general in-service distribution rules (or the plan's general hardship distribution rules). Every qualified plan is going to have restrictions, e.g., in-service distributions cannot be made prior to age 59 1/2 or hardship, and hardship is limited, for example, to the maximum amount that meets the financial need. So the administrator needs to determine what amount can be paid under ALL the provisions of the AA and BPD bearing on the subject, some of which make a distinction between Roth and pretax, and some of which don't. So, any general restriction on the distribution of "elective deferrals" applies to Roth deferrals, even if the box is checked that Roth deferrals "may" be distributed pursuant to an option on the AA so stating. That AA option does not exist in a vacuum. If this person is under age 59 1/2, still working, and does not have a financial hardship as defined in the plan, I view it as extremely likely that I could find language in the BPD prohibiting the distribution of Roth funds AT THIS TIME. Maybe later, like when he is age 59 1/2, or when he has a plan-defined hardship, or the plan terminates (without any other DC plan within the controlled group to which all deferrals must go in the event of a plan termination). See Regulation 1.401(k)-1(d) with respect to age 59 1/2 and plan termination, and somewhere else in that regulation with regard to hardships. It's not his money, not yet, it is still trust assets in a tax-qualified trust associated with a tax-qualified 401(k) plan.

I think this would be one of those (many) areas where the employer needs to interpret the plan document one way or the other, and then memorialize that decision in writing (e.g., an administrative procedure), and apply the policy-procedure on a uniform and consistent basis thereafter. I don't think you can get into too much trouble regardless of the preferred interpretation, i.e., I cannot think of a legal rule that compels a result one way or the other. This appears to be a matter of drafting and interpretation. The argument for ignoring the "permitted change" date specification is that a suspension period ends at the end of the six-month period, not when the next "choice" date comes around. Further, using your words, the participant is deemed to have made a zero election (it was not an actual election), and that presumably didn't occur on a "permitted change" date but on the date of suspension, so if you are deeming the change to zero on a date other than the "permitted change" date, you the participant can un-deem that zero election at the end of the suspension period (such as by asking that deferrals commence again) without waiting for the next "permitted change" date. In other words, only participants who have not requested hardships and have not therefore had their deferrals involuntarily suspended must wait until the next change date. Starting In 2020, you will not need to struggle with this, since there will be no more suspensions.

I agree with Luke.

Recall that the 1.401(k)-3 provides requires that all "eligible employees" who are not HCEs must be in the ADP SH arrangement, and that 1.401(k)-6 defines an eligible employee (for that purpose) as anyone eligible to defer. (Whoever would be in your ADP test needs to be in the ADP SH, a big deal for a nonelective ADP SH contribution.) Your only escape, if the document permits it, is the disaggregation of a group that can be permissively disaggregated under 410(b) (e.g., otherwise excludable employees, collective bargained employees, QSLOB, etc.). So it doesn't matter that you can satisfy 410(b) coverage if you can't satisfy 401(k) because you are setting up a class exclusion like "all janitors" or all "legal associates." You could, however, for example, exclude legal associates who are HCEs (subject to any limitations imposed by a particular preapproved plan, such as (perhaps) including or excluding all HCEs). Notice 2016-16 rests on the foundation of the 401(k) regulations (and so states in a couple places). Nothing in that Notice supersedes any regulatory provision. That Notice merely clarifies what may and may not be amended midyear. The Notice might permit a midyear amendment at this time, but the Notice doesn't confer the ability to amend in any way that would violate the 401(k) regulations, i.e., you might be unable to retain such a document design beyond the point that any of those employees must be treated as "eligible employees" for purposes of the 401(k) regulations. It may be that the only way to permanently exclude a particular group from the ADP SH might be to exclude that group from eligibility to defer, and <that> would be subject to 410(b) coverage testing for the K component of the plan.

I am looking at such a document, and the "Dollar Limitation" paragraph in the definition of "Compensation" refers to the steps to take for when there is a "determination period of less than 12 months." I infer that a determination period is the 12-month period defined in the plan's definition of "Compensation Computation Period, " a term which is referred to earlier in that same "Dollar Limitation" paragraph. The switch from "Compensation Computation Period" to "determination period" within the same paragraph appears to be idiomatic but harmless. Questions about a particular plan's provisions are best addressed to the document provider/drafter.

I have seen preapproved documents that state that there is no pro-rating of the 415 limit for the initial limitation year, i.e., that the employer can use the 12-month period ending on the last day of the first plan year (assuming that the first plan year and first limitation year are intended to end on the same date), in which case you have reliance on such language. I <believe> that is because the 415 regulations require a short limitation year only for (1) an amendment that creates a short limitation year or (2) a mid-year plan termination. In contrast, the 401(a)(17) limit has nothing to do with the 415 limit, and must be pro-rated based on any short plan year.

It has been my experience that appointments of trustees generally occur pursuant to plan language, not by modifying plan language. For example, the initial (or continuing) trustee(s) might be mentioned in the preamble, and their signature line(s) presented at the end of the document, but otherwise the plan simply uses the term "trustee" throughout (whoever that is at each point in time). In that case, I fail to see the need for an amendment unless the plan by its terms requires an amendment. If the employer has the power to appoint trustees without an amendment, the employer has the power to appoint contingent or successor trustees without an amendment. You generally aren't limited to the types of trustees by the terms of the plan - e.g., could be directed trustees, discretionary trustees, replacement trustees, co-trustees, or successor trustees. In addition, you can put an expiration date on the grant of contingent trusteeship, or, you can condition such designation as being valid under some conditions, or becoming invalid upon other conditions, e.g., the successor trustee is no longer the surviving spouse. The employer is in the driver's seat. The exception might be where there is a definition of Trustee that names names. Ideally, the definition of trustee does not name names, but simply states the trustee is whoever is designated by the Employer as trustee pursuant to the plan's provisions for appointing, discharging, or otherwise replacing trustees. I wish more plans also stated the need for the trustee to accept in writing. ("Yo, Tom, did you know you were the trustee of our plan?" "- -You're kidding me, yes?") As pointed out above, watch for a change in who is serving as the successor employer in the event of, for example, a sole proprietor's death. Typically the spouse would inherit the business, and appoint self as trustee (if not done in advance). If you want to be sure the original employer's counter-intent prevails, then THAT might require special plan language and a careful review by an attorney (and I agree that such modification of language would generally fall into the category of an amendment that does not destroy reliance). Many plans, incidentally, echo those "permissible amendments" language from the Procedure straight into the text of the plan itself. That makes it delightful when it comes time to explain to the government agent or private auditor why you still have reliance after an amendment or modification, since you have reliance on the preapproved plan language that confers continued reliance for that particular type of amendment or modification.

I point out since preapproved documents must contain the ACP testing provisions, it's a really good idea to see if the document supports the exception for the first 4%. I am not saying you cannot do so if the plan is silent - only that some will say so - perhaps an auditor. Also, you cannot have an ACP safe habor unless one is declared in the document for the PY, and thus if you blow the ACP SH, you have technically failed to follow the terms of the document (as would also be true for a failing ADP SH. So a cautious practitioner will self-correct whenever a ADP/ACP SH fails.

SMMs. Some advisors may reasonably conclude that an interim SMM (i.e., a "pretend" SMM if you prefer) may (or should) be distributed in advance of the amendment to describe the intended interim operation of the plan pending the eventual adoption of an amendment, and then a revised SMM can be distributed (if need be) after the actual amendment is adopted (if the amendment modified the content of the interim SMM). That is why employers are currently struggling with how to draft safe harbor notices that reflect how the plan will be operated in 2019 (if such notices have, until now, referred to the suspension of deferrals upon a hardship distribution). DEADLINE FOR AMENDMENT. I agree that the reference to the Required Amendment List is not applicable to all plans. The proposed regulation is merely presenting an example: "For example, with respect to an individually designed plan that is not a governmental plan, the deadline for amending the plan to reflect a change in qualification requirements is the end of the second calendar year that begins after the issuance of the Required Amendments List described in section 9 of Rev. Proc. 2016-37 that includes the change." That deadline is consistent with Revenue Procedure 2016-37's general procedures for NON-preapproved plans, i.e., "individually designed plans" that are not governmental plans. I disagree that preapproved plans can wait until the end of the six-year cycle, as that would render Section 15.04(1) of the new Procedure meaningless. Preapproved Plans. Section 15.04(1) of IRS Revenue Procedure 2016-37 provides the deadline for required interim amendments for preapproved plans as being the time described by Regulation 1.401(b)-1(b)(3) (i.e., generally the time of the tax filing deadline following the plan year of implementation). (As an aside, my cites to Procedure 2016-37 include the leading zero after the period, e.g., Section 15.04, as does the text of that Revenue Procedure. I observe, however, that the IRS (oddly) fails to use the leading zero at the start of each numbered subsection, i.e., ".4" rather than ".04" as would was typically used in the past. I am, however, looking at an advance copy, so maybe that was changed in the final copy. Whatever.) Revenue Procedure 2016-37 follows the general template established by Revenue Procedure 2007-44. Why else would the new Procedure still contain the same language of the prior Procedure that "[the extension of the remedial amendment period applies to a good-faith amendment] if the amendment was adopted timely and in good faith with the intent of maintaining the qualified status of the plan. It goes on to say "The Service will make the final determination in all cases as to whether a new plan or an amendment was adopted with the good faith intention of being qualified or maintaining qualified status." If we had until the end of the six-year cycle to adopt every amendment, why bother adopting an amendment at all. Just restate. There would be no "good faith interim" amendments as described by Sections 15.03(1). Sections 15.03(1) and 15.03(2) set forth the general rules that have been with us since IRS Revenue Procedure 2007-44, i.e., that perfecting amendments (usually restatements) are required by the end of the six-year remedial amendment period, at which time any restatement will reflect (or otherwise incorporate) the employer's intent expressed in all the interim good-faith amendments that were timely adopted during six-year remedial amendment period. The language of IRS Revenue Procedure 2007-44 did not excuse the absence of timely adopted required interim amendments in 2007, and the same language appears in the new Procedure, so I infer that the new Procedure does not excuse the absence of timely adopting required good faith amendments throughout the six-year cycle. If the content of such amendments represent a good faith attempt to comply with a change in law, but fail on some technicality, then such amendment itself be retroactively amended for such technicalities discovered by the end of that cycle (during the restatement window). Such technicalities are usually resolved by the document provider when negotiating preapproved language for the then-current cycle (which will be Cycle 4 for these changes, not Cycle 3 - the Cycle 3 documents will reflect only the changes published in the 2017 Cumulative List). As in the past, employers that do not adopt a timely interim amendment must be able assert a good reason for not doing so, otherwise it would be unnecessary for Section 15.03(2) of the current procedure to say (as the IRS stated in Revenue Procedure 2007-44) that "...if an employer makes such a determination [that no amendment was required] and the IRS finds that an amendment is required, the plan would still be eligible for the six-year remedial amendment cycle to correct the disqualifying provisions described in section 15.02. The IRS will make the final determination in all cases as to whether the determination that no interim amendment was required was reasonable and in good faith." Query: Can employers and advisors reasonably and in good faith determine that no timely adopted interim amendment is required under Section 15.03(2) for a change the statutory and regulatory changes to the hardship distribution rules? If not, then the amendment is either "required" (go to Section 15.04(1) for the deadline) or the amendment is "discretionary" (go to Section 15.04(2) for the deadline). If we choose to characterize this amendment as a discretionary amendment under 15.04(2) rather than a required amendment under Section 15.04(1), then we can say with certainty that the earliest possible deadline is the end of the plan year of implementation (12/31/2019 at the earliest). Thus, no one can go wrong by waiting to adopt the amendment until the second half of 2019 for an amendment, and employers with preapproved plans should therefore target the second half of the 2019 plan year for evaluating such an amendment's content. Some providers have a "draft" version available for inspection and feedback. The IRS can also choose to extend the deadline for a particular set of changes in the law, but has not done so, to date, for this set of changes. TAXPAYER RELIANCE. I also observe that the proposed regulations do not appear to me to contain, as they often do, a statement of "taxpayer reliance." That means Treasury reserves the right to back-track on its guidance. When a proposed regulation comes with reliance, Treasury explicitly promises, within the proposed regulation, that no retroactive subsequent amendment will be required because of a change in the guidance, i.e., taxpayers "may rely" on the proposed regulation, and that "any more restrictive provision in the final regulation will not be retroactively effective." Since I can find no such statement to that effect in this regulation, I think that should give everyone pause. I offer below a potential reason why the IRS (i.e., Treasury) might choose not to commit itself to what it stated in the proposed regulation, though perhaps it is not a good example because the potential change I have in mind would be a liberalization of the regulation. The IRS is perhaps waiting to observe any push-back on one of the provisions of the proposed amendment, as follows. Controversy. Recall that the proposed regulation states that employers will NOT have the option of continuing to suspend deferrals after 2019, which is a BIG issue for some employers and advisors that want to continue having that requirement in the plan as a permanent provision. Maybe that's why Treasury didn't offer reliance on the proposed regulations - it is still thinking about issues like that. And just the thought of Treasury still thinking about these issues is sufficient reason for document providers to hesitate providing "the amendment." Suppose, for example, document providers follow the proposed amendment and say that no suspension of deferrals may be imposed for hardship distributions made on or after 1/1/20, and then Treasury changes its mind, and lots of employers want to keep the suspension provision, and thus will need to amend the earlier-adopted amendment (and SMM) that document providers rushed to market. I would prefer to wait and make sure that's the final rule about the permanent impermissibility of suspensions before giving employers an ultimatum, in the form of a signed amendment, that the suspension provisions cannot be continued for hardship distributions after 2019, only to turn around and issue a subsequent amendment (and SMM) saying that they are permitted after 2019 (under my imaginary scenario that Treasury reconsiders this issue and changes its mind). PESKY NEWSLETTERS. Just because a zillion law firms are trying to rustle up document business via a newsletter doesn't mean it's a good idea. Some firms even issued newsletters (can you imagine?) suggesting all the great things an employer can do after one employer in this country received a very narrow and technical Private Letter Ruling dealing with an unusual plan design whereby nonelective distribution that was disguised as a self-enrolled matching contribution was available, but only if the participant was a member of a certain group, and otherwise the participant received only the ordinary but "real" matching contribution. So because the "no contingent benefit" rule was determined by the IRS as not having been violated for that employer, now every employer in the country wants to try to do the same thing with a PPA preapproved plan. Nowhere in that Ruling was there a determination as to whether such a design could be used by a preapproved plan (the senior IRS document policy staff determine what's permitted and what isn't), nor for that matter, did the Ruling even opine on the qualified status of the plan at issue (since a PLR is not a determination letter). Providers were flooded with calls as to how to set up such a miracle plan. What percentage of those newsletters went into detail regarding all the testing, document, and potential administrative issues associated with such a complex design? How many newsletters suggested alternative and more conventional ways to assist with student debt relief? Any newsletter that omitted the gory details and potential alternatives was not useful. How many "hardship" newsletters detail all the administrative and unresolved compliance issues associated with the cessation of the suspension of deferrals upon a safe harbor hardship distribution? Or is their focus on the need for an "immediate" amendment? If the latter, what is their rationale for an immediate amendment in the absence of final guidance that offers "reliance"? WHAT WE HAVE HERE. Let's give Treasury some credit. Treasury wanted to, and did, issue sufficient information for employers to determine how plans should begin transitioning in operation, which is why many provisions of the proposed regulations apply to distributions beginning in 2020. More importantly, the regulations provided guidance on how to handle the cessation of the suspension of deferrals, e.g., employers will not need to stop suspending (i.e., the potential need to resume) deferrals at the stroke of midnight on New Year's Eve (this coming January 1st) simply because that is the effective date of the new law (depending on a plan's exact language (or an administrative procedure's exact language) as to what occurs at the end of a suspension period). That had been an open question prior to the proposed regulation. Now we can all enjoy our New Year's Eve and not look for all the plans that automatically restart deferrals at the end of a suspension period (which, until this guidance was issue, could reasonably be presumed to be January 1, 2019), i.e., plans that had suspension periods that had started in the second half of 2018 but that also automatically reinstate deferrals when the suspension period ends - or, in this case, might have potentially been required to end the suspension on 1/1/19 because of a change in the statute having an effective date of the first day of the 2019 plan year). Last, but not least, we now know that plans will be able to continue offering hardship distributions for casualty losses as defined prior to this most recent change to the personal tax deduction section of the Code for casualty losses (for those plans that referred to that Section of the Code). WHAT'S THE RUSH? Preapproved plan document providers should not be in a hurry to get an amendment out for the sake of getting an amendment out. Employers should not be in a hurry to get a comprehensive amendment adopted for the sake of getting an amendment adopted. The only rush is trying to determine what employers want to do in response to what we know are the most likely options, and that is not an easy task. Suppose one document provider has one set of default provisions (thinking most employers want those provisions), and another document provider has another set of default provisions (with the same thought). That will be fun. Document providers have been known to talk to each other, so maybe there will be some informal consensus on what defaults to use. When it is clear how the plan will be operated, e.g., whether employers will or will not acquiesce to the default provisions of document providers' "blanket" (prototype sponsor) amendments, then there should be a movement toward updating the language of the plan via an amendment. Or, if the employer is ready to do so now - then draft an amendment. Just don't expect providers to rush to market on this set of regulatory changes. The expansion of source accounts available for hardship distributions is relatively straightforward. If that were the only design issue involved, I suspect amendments would already start to be offered by providers and adopted by employers. But the suspension of deferrals (or the timing of the cessation thereof), and the need to amend the technical definition of a casualty loss, and other changes mentioned in this column, represent a can of worms for those who need to adjust all the moving parts under the hood, both for the document and for the administrator. The devil, as always, is in the details, including but not limited to (in this context) what the payroll service providers can do sooner rather than later. There's no point in adopting an amendment regarding deferrals until you are sure the payroll service provider can and will comply with the employer's (or provider's) amendment(s).

Basically, you need to give the EACA notice before the start of the plan year... which means you can't distribute the notice midyear (except to new entrants), which means you can't start an EACA midyear for everyone, but you can for the participants who would not have gotten the notice until midyear anyway, i.e., the new entrants, as noted by Belgrath. So, you most likely want to either adopt a make-believe EACA for everyone in 2018 (i.e., administratively identical in all specifications as a EACA other than the refund feature, so that you can simply turn on the refund feature at that time), or (2) start the limited new-entrant EACA, and then expand it to a full EACA for 2019. I suppose a third alternative is to have an ordinary ACA for 2018, meaning not even trying to fit it within the framework of a EACA, but then you may have an awkward time amending it to fit within EACA specifications as of 1/1/19, which is why I say you may be better off saying you should pretend you have a EACA from the get-go. (There are some things you can do with a ACA you can't do with a EACA, and if you start with a product's ACA specifications, you may be inadvertently choosing an option not available for that product's EACA, and you don't want to discover that for the first time when it comes time to make the transition.) This general problem is conceivable the result of a poorly worded statute and the Treasury perhaps believes it lacks the authority to provide for starting EACAs midyear. (I merely speculate.) Of course, as alluded to above, your preapproved document might not be able to handle any of these suggestions gracefully, but that is another issue. You are generally permitted to modify preapproved documents to add effective dates, and this is a situation where you might need to provide a different effective date for the refund feature than for the automatic deferral provisions (even if the plan architecture doesn't give you a preapproved option for a special effective date for the refund feature). It gets to be even more fun if you want to have escalation of automatic deferrals starting with your 2018 implementation date, since some documents will say that escalation depends upon the passage of time since the date that automatic deferrals began "under this Arrangement" (which begs that question: if an ACA becomes a EACA in 2019, is the EACA a continuation of the same Arrangement for purposes of continuing the escalation feature, or is it a new, replacement Arrangement that means that escalation starts over at the initial default percentage?). Again, you may want to see what the document says (exactly) in this context before you decide the best way to go forward, i.e., maybe wait to start escalation until 2019. Or not. Granted, in your situation, it doesn't matter much, but for a mature ACA with escalation that wants to convert to a EACA (or QACA) (or vice versa) without disrupting escalation that has already been underway for years, the specification and interpretation of the plan's escalation provisions can sometimes be problematic.

I agree with CuseFan. You might also want to mention to the participants the 50% tax penalty (imposed on the participant, not the employer) for refusing to take an RMD (Code §4974; Treas. Reg. §54.4974-2). (If the participants are not opening that employer's mail, then have some other firm send the warning.) That is why administrators should continue to report the RMDs as such to the IRS, so that the IRS computers can compare the employer's tax reports with the participant's tax filings. I suspect the participants will start accepting the checks once the IRS starts "asking" the participants for the 50% tax deficiency (with accrued interest), though hopefully they will do so once they are informed by someone else of that tax consequence. The employer should take reasonable steps to avoid being in the position of looking like it did not try to inform the participants of the tax consequences of failing to cash the checks.

A plan cannot be written to allow for only Roth deferrals. 1.401(k)-1: "The term designated Roth contribution means an elective contribution under a qualified cash or deferred arrangement that, to the extent permitted under the plan, is designated irrevocably by the employee at the time of the cash or deferred election as a designated Roth contribution that is being made in lieu of all or a portion of the pre-tax elective contributions the employee is otherwise eligible to make under the plan;..." IRS website FAQ: "Can a plan offer only designated Roth contributions? No, in order to provide for designated Roth contributions, a plan must also offer traditional, pre-tax elective contributions." https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts#13 I would be surprised if any resource like EOB fails to mention this requirement.

The Relius option is just that - an option. To paraphrase Larry - FIS gives you enough rope to hang yourself (by selecting that option). And any preapproved plan that does not have that option but that does have a blank "other" line could <presumably> be filled in with something to the effect that all acquired companies are "in" (I say "presumably" because you must observe any stated parameters for the "other" option). Don't forget, however, that such language can lead employers and less experienced advisors astray - because such options (depending on how well they are drafted) can convey an unintended implication that there are no predecessor employers except those designated by such an option. In fact, there may be some predecessor employers declared as such under the plan's boilerplate provisions, as required by law. Those employers must be treated as predecessor employers even if no option is elected - but some employers, when they see that no option is selected, conclude that no company is a predecessor employer. Such an option should ideally say "In addition to any acquired employer that must be treated as a predecessor employer under the terms of the document, the following additional employers shall also be treated as predecessor employers....[every acquired company, trade, or business, whether acquired by stock or asset, etc.]"

Treasury Regulation 1.402(c)-2, Q&A 7 states that the first money out of a qualified plan during the calendar year in which the participant attains age 70 1/2 is not eligible for rollover (until the RMD for that calendar year is reached) (even though the participant is able to wait until the next 4/1 if no money is taken until then).

As stated by the previous responders, there is no "maintenance" determination letter program currently in place for non-preapproved plans, and thus no need for periodic restatements. You may be interested in the Section called "Recommendations Regarding Re-Opening the Determination Letter Program" in the committee report at: https://www.irs.gov/pub/irs-pdf/p4344.pdf Sorry for adding this so late - practitioners need to examine the annual IRS List of Required Amendments for non-preapproved plans to see if amendments are required. The Procedure details when such amendments need to be adopted. I don't recall the timing - I think three's a lag in getting things on the list (I believe the IRS waits until sufficient guidance was issued, so a new law is not necessarily put on the list as soon as a new law is enacted), and I think there is then a window after the item is added to the list for making the amendment (which I think is two years). (Don't take my word for it on my parenthetical recollections.) You also need to determine whether the document needs any of the amendments on the IRS List (it is a case-by-case determination, i.e., not every amendment will apply to every plan). Restatements are now viewed by many practitioners (such as Luke) as being not recommended (at least for plans with a determination letters). Other practitioners might reasonably conclude that any challenge (upon IRS audit) to a particular provision in a restatement can (hopefully) be defended (from the need for retroactive correction) by demonstrating that such language was in the document when the document was last approved. I am not voting one way or the other. I would say that the "separate amendment only" approach appears to me to be the majority view (based on conversations I have heard). Another way of looking at this is that every amendment (whether required or discretionary) must be perfect (unless you are using an IRS model amendment), and there is no way to obtain a guarantee short of obtaining a "private" letter that the plan is properly drafted, in which case, you might have recourse against the party providing that opinion if that turns out to not be the case.

Some document providers provide an option for either the deferral election form or the hardship distribution form (or both) to say that deferral election ceases to be valid when a hardship distribution is made, and the authority for which (if not stated as such in the document) often rests upon the document's grant of broad discretionary authority to the employer (or Administrator) to adopt administrative procedures relating to deferrals (which could also encompass things like, for example, participant-initiated auto escalation).

Wow. That IRS web page is incredibly not helpful, and clarifies why the participant is so passionate. I don't know why the IRS even waded into that territory when their chief concern is with the taxation rules of IRC 72. I suspect that the author of that essay might have had ERISA in mind, and having said that, I point out that the other thing the participant might yet stumble across in their zealous research is ERISA's requirement that loans be available to "all" participants on a reasonably equivalent basis. I speculate that just about any limitation placed on the availability of loans could be construed by a participant (or a novice IRS FAQ webpage author) as being a violation of that requirement.

If you are doing the amendment after the end of the year, you need to comply with 1.401(a)(4)-11(g), which means (among other things) that you can't pick only participants who are nonvested (see the regulation). (...But that doesn't apply to THIS situation since you are going to give QNECs or QMACs.) If by ineligible you mean an excluded classification, then some plans' 410(b) fail-safe language does not extend to the correction of excluded classes (or non-adopting employers) causing the 410(b) failure. The fail-safe provision, if there is one, might not apply to the matching component. The IRS is on record as saying you better not go after those with the shortest service and other groups that yield the lowest-dollar solution (the so-called "Gold Standard" named after an infamous internal IRS memorandum sent from Carol Gold), and that bit of information is just a "FWIW" (I.e., it's subjective and informal guidance, and though it's worth mentioning it, most employers are not looking to "abuse" their discretion). (I know some practitioners take the Gold Standard with a grain of salt.) So, assuming that the plan doesn't preclude what you want to do, and assuming that the employer is picking a reasonable cross-section of employees (thus avoiding the Gold Standard if you care about it), then you need to think about reliance. If you have a preapproved plan but there is no preapproved option for what you want to do (such as a blank line for writing in what you want to do), you probably will lose reliance on an amendment that departs from preapproved language. For example, if your only preapproved option is to make a corrective contribution for all NHCEs, and you want to keep reliance, then that's what I would recommend that you do. Even so, you might be able to reasonably interpret such an option of "all NHCEs" as not having any effect on employees who are in an excluded classification, i.e., they would most likely not be within the meaning of "all NHCEs". You may need to examine the wording closely. Some documents define an "Eligible Employee" as anyone who is not excluded via a class exclusion or because the employer hasn't adopted the plan, etc., so you most likely don't need to extend coverage to those "non-eligible" employees unless you absolutely need to do so in order to pass the 410(b) test, and in that case, your amendment needs to specify exactly who is in and who is not, i.e., who is in an excluded class and who is no longer in an excluded class.

If the document says no waivers, then you can't have waivers. If it allows waivers , you need to follow its terms. In any event, be careful. For example, 10 are in this group, but 4 are required for the plan to pass coverage. How do you determine which 4 to bring in against their will? How do you draft their waiver to cover that contingency? I agree that a class exclusion is the way to go - and that can be subsequently amended as needed (e.g., 1.401(a)(4)-11(g)).

I will address only Greg's first question, and further limit it to MEPs. In my mind, there are two kinds of MEPS. There is the PEO-style MEP, and I have no input on such plans at this time because the facts can become hard to discern from a distance. If, though, you have a simple fact pattern of a very few companies sharing a common plan document, there might be no "conversion" required. You need not declare a plan to be a MEP in order for it to be a MEP. All you need is a document that has MEP provisions and that grants the authority for non-related employers to adopt the plan. Such a plan simply turns from a single-employer plan into a MEP when there is a triggering event, such as when an unrelated employer adopts the plan, or when two related companies that have already adopted the plan cease to be related employers but continue to share the document. You have a potential problem, though, only when the document does not cover the possibility of its becoming a MEP. In that case, the "conversion" could be a simple and timely amendment (ideally before the plan becomes a MEP) to address MEP administration. On the other hand, a document that does not allow for MEPs might nonetheless provide a grace period for adopting a plan that contains MEP provisions, such as I've seen in some standardized prototype plans that allow for a prompt adoption of a non-standardized AA for use with the same basic plan document (i.e., the standardized AA precludes non-related companies from adopting the plan, but the BPD contains MEP provisions and contains that grace period, so all that is required in that case is for the employers to quickly switch to a non-standardized AA associated with that BPD. So, as always, the first step in a "conversion" is to determine what the document already says or doesn't say. Of course, the employer is free to use any document from any provider, I am just saying that there is often a simpler solution. My primary point being that there might be no overt "conversion" required for a plan currently being administered as a single-employer plan that must change its administration to conform to the plan's MEP provisions. A plan might be a MEP even if there is no MEP option on the AA. And even if there is a MEP question on the AA, that might be for record keeping convenience, and not because it is necessary to make that election in order for the BPD's MEP provisions to be triggered. Such questions are best addressed to the document provider. Other plan documents, of course, shout "MEP" from the get-go, and serve primarily as a vehicle for a PEO-style MEP, in which case, changing from a single-employer plan to another provider's MEP would truly be a conversion, though much of the conversion would be digging in the weeds. The actual differences between a document designed only as a single-employer document and a document for a PEO are typically not that voluminous. (The differences that having nothing to do with MEP status might be voluminous, as in the case of any "takeover" document.)

See Treasury Regulation 1.402(c)-2, Q&A #7 (supporting all of the responses above).

The Corbel's document's provision excerpted above is clearly in the "ADP safe harbor" section of the AA (Question 27), not in the discretionary matching section of the AA at Question 28. The language excerpted by Tom Poje states that the discretionary HCE match is an "ADP test safe harbor contribution." Thus, I believe the discretionary HCE match being described at Corbel Question 27 is an ADP SH contribution that must be fully and immediately vested (unless the safe harbor is a QACA) and subject to the distribution restrictions on ADP SH contributions. Regulation 1.401(k)-3 seems to acknowledge that ADP SH contributions may be made for HCEs, i.e., the regulations seem to contemplate this type of design, but that would seem to mean that such contributions, even if discretionary for HCEs, must be vested as required by the ADP SH requirements (100% for non-QACAs) and subject to the restrictions on ADP SH distributions. I will assume the plan is not a QACA. I conclude that a discretionary vested match cannot be treated as a traditional ADP SH contribution, and (whether or not a QACA), that such a match may not be described at Question 27 on the Corbel AA, since Question 27 is characterizing the HCE discretionary match as constituting an ADP SH match. In addition, Corbel AA Question 27 states that Q27 is connected to Section 12.8 and 12.9 of the BPD, which are the ADP SH sections that refer to the general matching contribution section contained at Section 12.1. In contrast, Question 28 would be the place where I think a drafter must provide for any HCE-only match that has deferred vesting, as well as any match with allocation conditions. That Question refers the drafter to Section 12.1 of the BPD. This type of design, i.e., a discretionary ADP SH contribution for HCEs, arose because many employers wanted to back-out of the ADP SH contributions for HCEs after the start of the plan year (on the theory that HCEs are not required to receive ADP SH contributions). That theory, though sound, overlooks that removing a promised contribution of any type will most likely violate the anti-cutback rule (which applies to both HCEs and NHCEs). By connecting the "discretion" of an HCE ADP SH contribution with the exclusion of HCEs, you can avoid the anti-cutback issue by choosing to provide the ADP SH to HCEs midyear (or after the end of the PY) by operationally removing the exclusion, rather than trying to operationally remove the inclusion of HCEs midyear. For the Corbel EGTRRA document, among others, you were forced to either include or exclude HCEs, with no discretion to do anything different. It is unlikely that any preapproved plan will provide for ACP safe harbor status unless specifically elected on the AA. That is to say, unless ACP SH status is selected on the AA, the plan is subject to the ACP test, even if in all other respects the plan would satisfy the requirement for an ACP SH. That being so, any matching contribution that is conditioned upon being employed on the last day of the plan year cannot be an ACP safe harbor contribution because one of the conditions of having an ACP SH is that the plan (at least most, if not all, preapproved plans) must ensure that it is impossible for any HCE to receive a higher rate of match than any NHCE who defers the same percentage of compensation Suppose that Jack and Jill each defer 4% but Jack, the HCE, still is employed on the last day of the PY, but Jill is not. Jack would receive a higher rate of match than Jill. Thus, no plan that wants to attach allocation conditions on the match should elect ACP safe harbor status on the AA. That means the ACP test is required, absent any other special rule to the contrary. I have one. Most employers with an ADP SH match do not need to do an ACP test because most plans do not have an ADP SH matching formula that exceeds the amount that may be operationally excluded from the ACP test, per the second full sentence of Regulation 1.401(m)-2((a)(5)(iv), which is usually reflected in plan documents (including the Corbel document). For a non-QACA ADP match that is being ACP tested, ADP SH matching contributions of up to 4% of compensation may be excluded. That being so, I don't think you need to conduct the ACP test if you are willing to treat the HCEs match as an ADP SH match, and that is because no participant can receive an ADP SH match of more than 4% (provided there are no other matching contributions and no after-tax employee contributions). For the Corbel plan, the text is as follows: (e) Application of ACP test. The Plan is required to satisfy the ACP test of Code §401(m)(2), using the current year testing method, if the Plan permits after‑tax voluntary Employee contributions or if matching contributions that do not satisfy the "ACP test safe harbor" may be made to the Plan. In such event, only "ADP test safe harbor contributions" or "ACP test safe harbor contributions" that exceed the amount needed to satisfy the "ADP test safe harbor" or "ACP test safe harbor" (if the Employer has elected to use the "ACP test safe harbor") may be treated as Qualified Nonelective Contributions or Qualified Matching Contributions in applying the ACP test. In addition, in applying the ACP test, elective contributions may not be treated as "matching contributions" under Code §401(m)(3). Furthermore, in applying the ACP test, the Employer may operationally elect to disregard with respect to all "eligible Participants" (1) all "matching contributions" if the Plan satisfies the "ACP test safe harbor" and (2) "matching contributions" that do not exceed four percent (4%) (3 1/2% if a QACA) of each Participant's "Compensation" if the Plan satisfies only the "ADP test safe harbor" using "matching contributions" (the "basic matching contribution" or the "enhanced matching contribution") and the "ACP test safe harbor" is not satisfied. I would prefer that the last nine words of that paragraph were either deleted or put into parentheses. Even so, I believe the intent of that document's drafter was to say that clause #1 applies for ACP SH plans and clause #2 applies for all other plans. The cited regulation supports that interpretation. In your latest example, you have NHCEs with an ACP of 1.6% (I think Mike Preston is suggesting that the HCE limit would therefore be 3.2%, i.e., 200% of 1.6%, not 3.6%). If, though, you disagree that the first 4% in ADP SH contributions can be excluded from the ACP test, or you do not have a plan document that reflects the regulation (and feel uncomfortable implementing the regulation for that reason), then perhaps the employer can find enough non-deferring HCE(s) to make this design work. Otherwise, you may need to deal with correcting a failed ACP test. Or you need to give up the deferred vesting. If (for whatever reason) you decide you do not want to (or cannot) treat the HCE contribution as an ADP SH contribution, perhaps because the employer insists that full vesting is not acceptable, then it is conceivable there is a "benefit, rights, and features" issue in here somewhere. (I am not an expert in BRF testing.) I don't know whether the fact that the 4% match has different vesting provisions and distribution restrictions raises a BRF issue. But the plan might allow HCEs to withdraw the 4% discretionary non-ADP-SH match in-service prior to age 59 1/2, whereas NHCEs cannot withdraw their 4% ADP SH match in-service until age 59 1/2 (since their 4% match is an ADP SH contribution). Suppose that Jack and Jill both have a 4% deferral and a 4% match, but Jack, the HCE gets to withdraw (while in service) the 4% under the terms of my hypothetical document at age 50 (since his match is not an ADP SH match since it is not fully vested), whereas Jill, as an NHCE, must wait until age 59 1/2 for an in-service distribution, since her match is an ADP SH match. In addition, you must determine if Question 28 on the Corbel AA has preapproved options that will support providing for an HCE-only ordinary match (I didn't examine the AA in that regard). Please note that I may be unable to timely respond to any inquiries about my post, and for that, I apologize in advance. I certainly will not see any inquiries before late Wednesday, if then. I was sorely tempted not to respond to this thread, since I am quite distracted by other endeavors for the foreseeable future, and don't wish to be seen as having posted a response and then fail to timely respond to any issues raised by my post. However, being familiar with this proposed design as well as the Corbel document provision under discussion, I thought I should jump in. (I also initially thought my response was going to be short. That didn't work out as planned.)

I infer the firefighters are being paid, in which case I have nothing to say. If these are volunteer workers, then I have seen (many years ago) plans set up for volunteer firefighters, which (plans) did not fall under any of the usual federal tax provisions for tax-exempt plans, but are a creature of municipal law (i.e., the municipality is setting money aside for them, and I suppose such benefits are taxed as ordinary income when distributed). Generally such a plan is written by an attorney (and sometimes an actuary for a DB-style plan) working with the municipality. Typically the municipality has a specific law authorizing the plan and its formula, and an official who interprets/enforces that law).