Metro Newsletter #112

Metro News # 112

July 4, 2023


Greetings from Metro Benefits, Inc! We hope that you are enjoying a fabulous/fun summer. This issue will start with an update on recent (important) legislation, called SECURE 2.0. We’ll then move on to recent Metro hires, and touch on other interesting and fun topics. We hope that you enjoy …


SECURE 2.0 Reflections:

Our last issue was a “Bulletin” on this legislation, and you can find it here:

The purpose of this item is to briefly reconsider some important items that may soon need your attention.

  1. Roth required for some 401k catch-ups, starting next year:

Starting 1/1/24, anyone earning over $ 145 K in the prior year, who desires a catch-up will be required to do so as a “Roth”, after-tax contribution. Many 401k Plans have already been amended to allow for Roth, but some have not. The burden will be on these unamended plans, as some work and decisions will be required.

The main decision is whether you wish to take advantage of catch-up (for the high earners) next year. If so, as explained above, the plan will be required to be amended to allow for Roth contributions by 12/31/23. Note that the Roth provision affects many aspects of the Plan document, so this amendment is not a quickie one-pager. We would likely need to restate the entire plan document, although we can do so efficiently. We need to know your intentions in this regard. If you have questions, this would be a good time to discuss them with your Analyst or Managing Consultant.

The other important issue for these plans (who have not previously allowed for Roth but may wish to do so) is payroll capability, i.e., your payroll system must be modified to allow for Roth. This would be a good time to start asking about this.


  1. “Long-Term Part-Time Employees” (“LTPT ees”)

As described in the Bulletin, Congress wanted to allow people the opportunity to participate in 401k Plans, even if they did not work 1,000 hours in a year. Normally, these part-timers may never have been eligible to join the Plan. Before we go any farther, be aware that these newly eligible employees need not receive any Employer contributions; the only issue is that they must now be allowed to defer their own pay into the Plan. The tricky part is when this becomes effective.

Note that the original SECURE (1.0, although they didn’t call it that at the time) Act required that employees who had worked 500 hours in 3 prior years would be eligible to join 1/1/24. This rule remains unchanged. The modification is that the 3-year requirement is reduced to 2 years, but this doesn’t apply until 1/1/25.

So, the result is as follows:

As of 1/1/24 – if you worked 500 hours in 3 consecutive prior years you can now join the Plan to defer your own pay. Again, you need not get any match or other Employer contribution. Further, you will not be counted for the 401k discrimination tests.

As of 1/1/25 – the “3-year” rule” reduces to 2 years.

As you can see, Congress liked the original concept so much that they wanted to make it quicker in this new law.


  1. Employee Election on Employer Contributions as Roth

Some people strongly advocate Roth, as they reason that paying taxes now leads to big advantages later. SECURE 2.0 allows for employees to have an option to treat all (vested) Employer 401k contributions as Roth, effective “immediately”. The problem is that the mechanics aren’t yet ready to offer this option.

We are waiting for IRS guidance to implement this feature. Among other things, we’ll need to know who would report the (Roth) taxable income, how that would be done, and how frequently the withheld taxes must be remitted. It’s also unclear whether this additional taxable “income” will need to be counted for Plan purposes. We’ll stay on top of this for you.


  1. Treating College Loan repayments as if they were salary deferrals

We’ve been having some clients ask about this optional provision, effective 1/1/24. It allows college loan repayments to be treated as if they were 401k salary deferrals, and be eligible for an Employer match. Let us know if you’d like us to amend the Plan document in this way.


  1. Hardship Distribution self-certification

One of the hassles of the hardship provision had been the need for the Employer to act as the “referee”, to certify that the employee really did have an approved hardship and no other funds to pay for it. This role (naturally) made some clients uncomfortable. No more! Starting now, an employee can “self-certify”. Much simpler but do bear in mind that if the Employer knows that the employee is lying, then they can’t rely upon that certification. Is it obvious that most or all Plans would want to adopt this provision? (let me know).


Ireland license plate – “actuarial”!

Having just spent some time in Ireland, I learned that their license plate system is interesting. Really observant/loyal readers will recall a similar topic from a 1989 edition of Metro News, regarding license plates in England. At that time, the first letter of the license plate told you what year the car was made if you knew the secret code.

The Ireland system uses the year of the car as the first two digits (i.e., a plate starting with “22” means it was made last year). Apparently, that system wasn’t precise enough, as a car made in January of 2022 has a different value than one made in December of that year; it’s almost a whole year older. They felt that they needed to improve the precision of this disclosure, since they wanted to ensure that their citizens got fair value if they sold or traded their car.

The solution was to add on more digit after the year (Ex: 22-1). A “1” signifies manufacture in the first half, while a “2” indicates second-half production. Is this odd? Rough justice? How finely do we tune this up? (Month? Day?) I suppose that the limitation is the number of digits, that if you go monthly, you’ll need an extra digit for months after September.

This is reminiscent of a discussion in a 2008 book by Malcom Gladwell (“Outliers”), about why some people out-perform others. Chapter 1 discusses the huge physical advantage in youth sports for those born just after the cut-off date, i.e., perhaps a year older than the other kids. I suppose that any cut-off date (kids or cars) can lead to this type of inequity.


(Oldie) – Reminder on 2023 audits for IRS 5500 Tax Returns:

As it comes time to file the 5500 tax forms for your plans (most are due 7/31/23, or can easily be extended to 10/15/23), one issue for some Plans is the required audit if there are over 100 people in the Plan. The rules for counting the “100” have changed in a big way!

Until now, you were considered a “plan participant” if you were eligible for the Plan, even if you decided not to join. So lots of people with a $ 0 account balance were considered against this threshold of 100.

The IRS recently issued guidance (via the 5500 instructions) to ignore people with no account balances, to the dismay of the accounting profession. This will start to apply for the 2023 Plan Year (which will be done next year).


Do extensions make you Nervous?

Some clients ask us to never file an extension for their 5500 tax forms. They believe that this could lead to an increased risk of IRS audit. Is there any basis for this concern? Perhaps there was, decades ago? Let me know what you think…..


Metro Hiring Updates:

We finally crossed the line and started to hire full-time remote employees, who do not live in Pittsburgh. There just aren’t enough local people to do this work, and with remote trends and technology we found it imperative to make this move. So far so good.

Please join us in welcoming Dingwen Sun, an Actuarial Analyst who resides in California, and also Michelle Appel, a 401k Analyst who lives in Kansas. We expect that you will enjoy working with these new Analysts!



That’s all for now. Thanks for reading this far. Let me know what you think about these or any other retirement Plan issues.


David M. Lipkin, MSPA

[email protected]