ACK

"Note that these payroll companies have already rolled things out to their clients. " Actually, my clients are telling me that they have NOT heard from their payroll companies on how this is supposed to work in payroll. I had a client recently reach out to Paycor about how they are going to manage the Roth catch-up requirement and Paycor's response on August 19th was that they are awaiting additional direction from the IRS, including potential impacts to retirement provider files and potential W2 reporting requirements. They told my client they would notify the client once their system was ready to support the new requirement. (?) I've had several clients ask me about how their payroll companies are going to handle the Roth mandate, because the payroll companies have given them no guidance at this point..

Thank you, in this case the wife does not want to roll to an IRA. She would like to keep the money in the plan with the current recordkeeper. Can the recordkeeper switch the account into her name and then she can delay the RMDs until such time as she turns 73/75? I don't know if keeping the money in the plan gives a different result than if she rolls it to an IRA?

Participant died in April 2025. He was 74 but had not started RMDs because he was still working up until his death. So he had not reached his RBD. His wife is sole beneficiary. She is in her 60s. Account is invested with a large recordkeeper. Does the wife have to start taking withdrawals, or can she wait until she turns 73 (or 75)? Should the account be transferred into her name at the recordkeeper and does that make a difference regarding the timing of when the distributions start? Thank you!!

Never mind, I found an email to use to contact the IRS about ERPA questions. EPP@IRS.gov

It seems like even though the IRS says you no longer need a PTIN if you are only preparing 5300 or 5500, in fact if you are an ERPA, you should maintain your PTIN and make sure all your CE gets reported to the IRS through the PTIN system. I have also not received a new ERPA card so now I'm starting to wonder about my status. The last card I received showed an expiration date of 2019. Who do I contact about getting an updated card? thanks!

I agree with the previous posters. However, I think that if the plan is allowing Roth deferrals, those should not be commingled in the same brokerage account as the pre-tax deferrals and employer contributions. This is going to cause issues in the future when distributions are processed and the brokerage house has to produce 1099-Rs. There is a very good likelihood that the tax reporting will be incorrect. At least if all the Roth money is kept in a separate account, there might be a better chance of the tax reporting on the Roth being correct.

If a plan already allows in-plan Roth rollovers from all sources, what would be the benefit (or downside) of adding the new Secure Act option to allow Employer contributions as Roth? It seems like the outcome in either case is exactly the same. Am I missing something? thanks!

Very sad and unusual situation. Perhaps the son should consider taking the money and using it to establish a college fund or investment account for the grandson.

Thank you!

I feel like I should know the answer to this but it is not coming to me. If a plan has semi-annual entry dates, Jan 1 and July 1, and a participant does not enroll on January 1, can they still sign up for the plan later in January because the plan allows contribution changes at any time? Do we take the position that the individual is changing from 0% to 5% (or whatever) and that is allowed any time? Or do "contribution changes" refer to something other than changing from 0%?

I would be leery of assuming the correction is 50% of the missed deferral. That applies in cases where the employee knows about the plan and should have been watching to make sure his deferrals started when they were supposed to. So the employee bears some responsibility in the error. But in this case, I suspect the employees may not have even known there was a plan.

Thank you! In this case, the deferrals for Oct 2020 were deposited in Nov 2020. The lost interest was paid in June 2021 and amounted to $34, so the 2020 5330 has a 15% penalty of $5. For the 2021 5330, Is there another $5 penalty (so $10 due for 2021)? $5 for 2020 and $10 for 2021?

Client had late deferrals in october 2020 that were quickly corrected in November 2020. I am preparing a Form 5330. The lost earnings were not posted to the plan until June 2021. I am preparing the 5330 for 2020. Do I also have to prepare a 5330 for 2021? I'm unclear on what triggers multiple filings. In my case only the earnings were deposited in the following year so I'm not sure if that requires an other 5330 for 2021.. thanks!

In this example, wouldn't it be permissible to give the employees their "gift" (sounds like a bonus) and then the employees could decide if they want to contribute any portion of it to the 401k plan (assuming the plan allows for separate election on bonuses). This way the employee has the option to decide if he wants cash or plan contribution, so you get to the result the employer is wanting. The only issue would be in the case where the employee is already at his 402(g) limit and can't contribute any more to the plan. the plan is safe harbor so 401k testing is not an issue.

I agree with jsample. This sounds more like the participant just wanted to move her money to a brokerage account and self-direct it. I would look at this from that angle..not as a distribution.. if there is a way to make that work.

Yes you may auto escalate mid-year as long as you comply with the notice requirements for participants.

Peter, yes I have seen Adoption Agreements that have an option for the employer to choose the 1-year marriage rule and I have seen at least 1 attorney drafted document that contained the 1-year marriage rule as the default, with no option to remove it. But in my experience it is very unusual to see a plan with the 1-year marriage rule in force. I think generally in the scenario described above, the beneficiary is going to be the spouse. Hence the reason that TPAs are always telling employers to make sure they tell their participants to complete new beneficiary forms any time there is a death, divorce, remarriage, etc. I think there might be some scenario where it would be split 50/50 between the spouse and the son, as suggested by another poster above, but I am not sure on the rules for when that comes into play.

I am not sure about this above statement. I am looking at a merger/acquisition checklist from ASC and whether or not service has to be counted for eligibility depends on a number of factors, including what type of acquisition occurred (asset purchase vs. stock purchase) and whether the company that was acquired already had a plan. In a stock purchase, generally service with the acquired company must be counted for purposes of the buyer's plan. In an asset purchase, if the acquired company has a plan and the buyer is taking over sponsorship of the plan or the assets of the acquired company's plan are merging into the buyers plan, then service with the prior employer must be credited. If the acquired company does not have a plan or has a plan that is being terminated, service with the acquired company is not required to be counted so a plan amendment would be necessary to authorize crediting of service from the prior company.

I have heard of people disclaiming their plan account in order to avoid this situation. That might be something worth looking into. The document might determine who will receive the account if it is disclaimed by the participant, I'm not sure on that.

OK, thanks. I see what you are saying. :)

Can someone explain the logistics of funding the outstanding loan amount when the person has already received a 1099-R showing the loan as taxable in a prior year? How does that work? For example, per the above: participant terminated 12/31/18 rolled over account and had loan offset in March 2019, so will receive 2 1099-R forms for 2019, which will show the rollover and the loan offset (which he will report as taxable income on his 2019 taxes.) But he has until 4/15/2020 to repay the loan. Suppose he chooses to repay it in early 2020. He has already had the loan taxed...? I don't see how this tax law change really benefits someone from a tax perspective but perhaps I am missing something?

He can roll the $160,000 he received back into the plan and re-establish that portion of his account. If he can come up with another $40,000 to roll in, then he can replace the entire $200,000 and effectively get back his $40,000 in tax withholding at the end of the year when he files his taxes. However, if he does not replace the $40,000 that was sent to the IRS, he will have to report that amount as a taxable distribution. Since all of the $40,000 was sent to the IRS as withholding, he will get some of it back when he files his taxes.

The successor plan rules are found in the 401(k) regulations and are only an issue if the terminating plan had a 401k feature. In this case, the terminating plan was a profit sharing plan only, so no successor plan rule applies. The PS plan can be terminated and then a 401k plan started immediately. Also, just for reference, the 12-months starts "ticking" after all assets have been distributed. Distribution from a 401k plan may not be made if the employer establishes another plan within 12 months after all assets are distributed.

Here is a quick article from Kiplinger that you might refer to her that addresses her questions: https://www.kiplinger.com/article/retirement/T062-C001-S003-charitable-donations-from-retirement-accounts.html

So, just curious because I get asked about this occasionally. In this scenario (no non-HCEs contributed), the HCEs are limited to 1.25%, correct?