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SECURE 2.0 - Roth Catch-Up for HPEs: Lookback comp for onboarding PEO


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I assume further guidance is required, but The Secure Act text states that the lookback 145k compensation for determining the HPEs  is from the employer sponsoring the plan.  

So if a worksite onboards with a PEO and the PEO sponsors a MEP, and the worksite adopts the MEP, then could we make a case that the lookback compensation is based on the compensation under the PEO only?

Otherwise, the operational processes of onboarding a PEO, collecting  prior-year  FICA wages, and possibly year-to-date compensation plus deferrals (if HPE) will be a bigger administrative lift given that employers join PEOs continuously throughout the year.

Consideration:  Worksite now receives W2 from PEO EIN.



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Before the administrator of the PEO’s pooled-employer plan or other multiple-employer plan adopts an interpretation that one counts the wages Internal Revenue Code § 414(v)(7) refers to without counting wages paid by the participant’s former employer that now is the PEO’s service recipient, the administrator might want a written legal opinion of expert employee-benefits counsel.

For that advice, a mixed question of law and fact might be affected by the particular plan’s governing documents, including provisions other than those for which SECURE 2022 permits a years-later remedial amendment.

Also, the PEO and the PEO plan’s administrator each might want its lawyer’s advice about whether a failure affects the tax treatment of the whole plan, or only a portion of the plan attributable to the service recipient that brought the problem.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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