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Retirement Plans Newsletter

February 2, 2024

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[Guidance Overview]

IRS 'Grab Bag' Guidance on SECURE 2.0 Provisions

"A financial incentive may only be provided to an employee who does not have an election to defer in place when the financial incentive is announced.... If a qualified plan does not permit terminally ill individual distributions, the employee is permitted to treat an otherwise permissible distribution as a terminally ill individual distribution on the employee's federal income tax return ... [A] matching contribution may be designated as a Roth contribution only if the employee is fully vested in matching contributions at the time the contribution is allocated to the employee's account."  MORE >>

Willis Towers Watson

[Guidance Overview]

The Maximum Contribution May Be Lower Than You Thought: ADP and ACP Test Basics for 401(k) and 403(b) Plans

"It is a common misconception that employees who are not contributing should not be included in the census data provided to the third-party administrator performing the testing. Unfortunately, not including the zeroes renders the results of the test incorrect."  MORE >>

Belfint Lyons Shuman

[Guidance Overview]

Long-Term Part-Time Employee Eligibility Rules Now in Effect

"While safe harbor 401(k) plans are explicitly called out as requiring amendments to reflect the exclusion of LTPEs from eligibility for those contributions, as well as their exclusion from testing, non-safe harbor plans also appear to be subject to this requirement. The preamble to the proposed regulations requires a plan to contain 'enabling' language to permit the exclusion.... [A] non-safe harbor plan, out of an abundance of caution, should be amended in the same manner as a safe harbor plan regarding LTPE eligibility for employer contributions and exclusion from testing."  MORE >>

Troutman Pepper

Small Business Retirement Survey: Policy Knowledge and Reasons for Offering or Not Offering a Retirement Plan

"Among the small business owners not offering a plan, almost three-quarters (72 percent) said they were not aware of tax credits up to $5,000 being available to cover the costs of starting a retirement plan.... Of the small businesses not offering a plan, the reasons they were most likely to consider ... [were] the costs of administering a plan and the profitability of the business."  MORE >>

Employee Benefit Research Institute [EBRI]

401Kids Savings Act Would Create Savings Accounts for Eligible Minors

"[T]he 401Kids Savings Act ... would automatically create tax-advantaged accounts for qualifying children and newborns, designed to save for higher education, starting a business, buying a primary residence or in retirement.... Contributions to these accounts would be capped at $2,500 per year, indexed to inflation. State governments would be able to make contributions to these accounts without limit."  MORE >>


Introduction to Service Purchases for Public Pension Plans (PDF)

37 pages. " Generally, a service purchase involves a plan participant making one or more payments to the plan in exchange for additional service under the terms of the plan. This practice note is intended to provide discussion of practice in the area of service purchases; to give actuaries background information that may aid in their discussion with plan sponsors considering implementing, changing, or closing such a program; and to summarize a few examples of existing service purchase programs operating as of the publication of this practice note."  MORE >>

Public Plans Committee, American Academy of Actuaries

FAS87 ASC715 Discount Rates and Moody's Rates, January 31, 2024

An unofficial monthly report of the Moody's Daily Long-term Corporate Bond Yield Averages and Moody's Daily Treasury Yield Averages (used as benchmarks by some corporate pension plans).  MORE >>

BenefitsLink Message Boards

Should Older Workers Contribute to IRAs?

"Older workers with earned income -- including those who've already started taking required minimum distributions (RMDs) at age 73 -- can make contributions to tax-deferred traditional IRAs.... [C]ontributing could make sense if you want to: [1] Lower your taxable income ... [2] Benefit from a lower tax bracket in retirement ... [3] Perform a backdoor Roth conversion "  MORE >>

Charles Schwab

Benefits in General

Student Loan Benefits for Employees

"Given the impact of student loan debt on a large portion of the workforce, employers may find that tax-advantaged student loan programs are significant recruiting and retention tools. [This article covers] two potential benefits that an employer may adopt: [1] student loan assistance through Educational Assistance Programs (or EAPs), and [2] the new qualified student loan matching provision in certain retirement plans."  MORE >>

Kilpatrick Townsend

Executive Compensation and Nonqualified Plans

California's New Non-Compete Laws: Effect on Benefit Plans

"For employee benefit plans governed by ERISA, there is case law precedent for the proposition that ERISA preempts California law prohibiting enforcement of non-competes in an ERISA covered plan.... [F]or so called 'top hat' plans, non-compete provisions are not rare and in the past have at least arguably been enforceable.... [B]ecause the new law is based on the same statute as before, there is at least an argument that the same analysis will apply."  MORE >>

Boutwell Fay LLP

New Fire for Enforcing Forfeiture-for-Competition Provisions

"[The Delaware Supreme Court] court upheld the enforceability of a forfeiture-for-competition provision, instructing that courts in Delaware should not second guess the reasonableness of a contractual forfeiture-for-competition provision, and the contractual provision should be legally enforceable as a matter of law. This case has serious implications given that many legal entities are formed under Delaware law and employers should therefore consider applying forfeiture-for-competition provisions in their contracts (executive, partnership etc.) as a valid and binding way to protect against harmful competitive conduct from departing employees." [Cantor Fitzgerald, L.P., v. Ainslie, No. 162, 2023 (Del. Jan. 29, 2024)]  MORE >>

The Wagner Law Group

Employee Benefits Jobs

View job as Installation Specialist for Benefit Plans Plus, LLC

Installation Specialist

Benefit Plans Plus, LLC

Remote / Saint Louis MO

View job as Installation Specialist for Benefit Plans Plus, LLC

Selected New Discussions

Employer Contributions for Simple Converted to 401(k) Per SECURE 2.0

"Scenario A SIMPLE IRA program is terminated as of 6/30/2024, new 401(k) plan effective 7/1/2024, calendar year plan. Assume all the requirements for a replacement plan under SECURE2.0 are met. The sponsor could do an employer contribution to the new plan, subject to the pro-rated 415 limits, correct? None of those contributions are combined for any limits with any employer contributions to the SIMPLE that I can tell. Is that correct?

"Scenario B Same fact pattern, but the new plan is effective 1/1/2024 for employer discretionary contributions, with the deferral and safe harbor pieces effective 7/1/2024. In this scenario I think the 415 limit wouldn't be prorated for the new plan, and any employer contributions to the SIMPLE would also be ignored.

"Additional question: Since 415 limits are per participant, and also include deferrals, would the employee contributions to the SIMPLE IRA in scenario B have to be considered when checking the 415 for the new plan? I think the answer is NO, even though it would mean in theory a participant could end up with total contribution to the 401(k) plan that is the full 415 amount AND an employer contribution, and they have their employee contribution to the SIMPLE for the first part of the year. So their total contributions in a single calendar year are higher than they would have been able to do if there had been only the SIMPLE or only the 401(k) plan for the year. What say all you lovely people?"

BenefitsLink Message Boards

Webcasts and Conferences
(Retirement Plans / Executive Compensation)

Pressing Defined Benefit Plan Issues for 2024



DOL Fiduciary Hearings and Comment Letters: Part 2

February 2, 2024 WEBINAR

Faegre Drinker

Preventing Tax-Return Mistakes with Stock Comp and Stock Sales

February 14, 2024 WEBINAR

Empowering Plan Sponsors to Create Successful Retirement Plans

February 22, 2024 WEBINAR


Last Issue's Most Popular Items

IRS Issues Updated Rules on Minimum Present Value of Benefits


Retirement Planners React to Proposed Repeal of Income Tax on Social Security


DOL Issues Proposed Automatic Portability Regs: What Defined Contribution Plans Need to Know

Thomson Reuters / EBIA

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BenefitsLink® Retirement Plans Newsletter, ISSN no. 1536-9587.

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