Message Boards Digest

February 2, 2023

Here are the most recently added topics on the BenefitsLink Message Boards:

ftam created a topic in 401(k) Plans

2023 RMD Expectancy Tables

"Just to make sure, have there been any updates from the IRS regarding the RMD life expectancy tables? I'm well aware the RMD age increased to 73, but I'm wondering if we use the same expectancy tables as we did for 2022."

1 reply so far   |    Click Here to Add a Reply

DDB BN created a topic in 401(k) Plans

Is This an ASG?

"Existing company is a Corp owned 51% by the Grandfather and 49% by the Grandson. They sell cleaning products to the Restaurant Industry. The Grandson would like to start a new Company, as an LLC. The Grandson would be 100% Owner of the new entity.

  • New LLC owns IP and charges a royalty to Corp (Existing Company)
  • Corp produces and sells products covered by the IP
  • Grandson is employed by Corp (Existing Company) as an officer and is possibly a director

Would this be considered an ASG or can the Grandson start a 401k PS for his new Entity without regard to the Corp (Existing Company)?"

1 reply so far   |    Click Here to Add a Reply

AlbanyConsultant created a topic in 401(k) Plans

Can 401(k) Plans That Don't Have Roth Still Function Post-SECURE 2.0?

"Can a 401k plan continue to function without Roth in a post-SECURE 2.0 world? Ignore the 'corner cases' where no one defers any catch-up (whether because they defer low or there is no ADP failure recharacterized) or no one earns more than $145K (seriously, $145K? Like we needed another limit to track?). If someone earning $150K is required to make their catch-up as Roth, then the plan has to allow Roth deferrals, right? I know we don't have all the answers yet, but it seems unlikely that there will be a special carve-out we can use to not amend the typically older plans that never had Roth in them before to allow Roth deferrals. And that amendment would have to be in place before any regular Roth deferrals are allowed, because the SECURE 2.0 amendment coming to a document near you in 2025 will only cover the catch-up amounts."

2 replies so far   |    Click Here to Add a Reply

DBnme created a topic in Defined Benefit Plans, Including Cash Balance

Top Heavy Minimum / Frozen Cash Balance Plan

"CB/DC plans. The CB plan froze in 2022 and no participant earned a CB accrual for 2022. The top-heavy minimum is provided in the DC plan. Due to the CB plan freeze the DC plan TH minimum will be 3% rather than 5%, correct? Top-heavy has always been provided in the DC plan. The DC document is ftwilliam."

1 reply so far   |    Click Here to Add a Reply

Matt RPS created a topic in 401(k) Plans

Foreign Entity Wants to Provide 401(k) Plan to Us Employees. Trustee?

"Shoe company based in the UK and has US employees. The US operations have an EIN and US address based in Portland. The owners reside in the UK and are not US citizens. All US based employees are US citizens and earn W2 compensation. They are wanting to set up a 401(k) plan with ADP and the ADP sales rep is telling them that they can indeed do this. Our hesitation is that there would be no US citizen who would serve as the plan's trustee. I'm reading a previous post from 2020 that speaks to this. In reading the treasury reg, specifically 301.7701-7(d)(1)(v) Example 5, it seems that it is permissible to use a directed trustee, as provided by ADP but I am not sure if I am missing something. Our other hesitation is due to receiving conflicting, and gray area guidance from other practitioners. I'm sorry but I am thoroughly confused at this point. If the plan uses a directed trustee, does that satisfy, both the 'control' and 'court' tests and can they set up a plan?"

1 reply so far   |    Click Here to Add a Reply

Lou81 created a topic in 401(k) Plans


"I have a plan that tests the ADP/ACP using prior year testing. I ran the test for 2022, and fail. However if I test using statutory exclusions I pass. The plan was not tested using statutory exclusions in 2021. So the NHCE average when I did 2021 shows 3.46% but when i run the ADP test for 2022 using stat exclusions, it changes the prior year to 3.70%. I understand why... Question is, can I switch back and forth using statutory exclusions from year to year if needed?"

2 replies so far   |    Click Here to Add a Reply

Peter Gulia created a topic in 401(k) Plans

When Would a Sole Proprietor (With No Employee) Want a ยง 401(k) Arrangement?

"Combining SECURE 2019 and SECURE 2022 changes, a sole proprietor may establish, retroactively, a plan (up to her tax-return date with extensions) and may make, retroactively, an elective-deferral election (up to her tax-return date without extensions). (Let’s leave aside the BenefitsLink discussion about whether that’s practically useful for 2022. Imagine a sole proprietor with calendar tax years, and a plan and § 401(k) arrangement that, when retroactively adopted, are effective January 1, 2023.) Am I right in thinking the situations in which a proprietor might want a § 401(k) arrangement are: the proprietor is 50 or older and classifying a portion of a contribution as a § 414(v) catch-up elective deferral enables a contribution up to $73,500 instead of $66,000; or the proprietor’s deemed compensation is less than $264,000? Is there another situation in which an elective deferral allows a proprietor to do something she could not do with her nonelective contribution alone? (Please ignore Pennsylvania income tax.)"

3 replies so far   |    Click Here to Add a Reply

truphao created a topic in Defined Benefit Plans, Including Cash Balance

410(A)(4) General Test with Grouping

"I am curious how comfortable practitioners using Grouping with 410(a)(4)? For example, one owner, one employee. If employee's MVAR is 12% how comfortable is to give the Owner MVAR of 13.80% (=12 x 1.15)? What is the interpretation of 'significant' from the [401(a)(4) regs]?"

3 replies so far   |    Click Here to Add a Reply

HarleyBabe created a topic in 401(k) Plans

Change in Ownership During an Acquisition Causes AFG Situation: What Can the One HCE/Owner Do Outside the Plan to Avoid Coverage Issue

"Currently have a 401(k) that due to a change in ownership has resulted in an AFG situation. Confirmed AFG. Therefore, we must test the two different companies owned as one. Coverage will fail. The HCE/owner who is my client is willing not to participate so that coverage will pass but we need to find something appropriate outside the plan for savings purposes for him. I need options. Thought of non-qualified immediately but it's an LLC and he's a partner so my understanding is that there would be no current tax deduction for him. Can someone suggest other options for this employee outside of a qualified plan?"

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