PLANSPONSOR - November/December 2024 - 31

The regulator also announced it ASK THE EXPERTS
would issue proposed regulations giving
further guidance on the QSLP benefit,
stating that plan sponsors may rely on
the notice in the meantime.
The guidance says plans may not have
provisions limiting QSLP matching to
only certain qualified education loans and
that " all employees ... eligible to receive
matching contributions on account of elective
deferrals must be eligible to receive
matching contributions on account of
'qualified student loan payments.' "
It also states that plans have to treat
elective deferral matches and QSLP
matches equally-i.e., plans may not
include provisions that except eligible
employees from receiving one type of
match if they are eligible to receive the
other.
Overall, the notice addresses plan
administration issues raised by Section
110 of SECURE 2.0. Clarifications
include that:
* Only an employee's qualified education
loan payments that were made during
a plan year are eligible to be counted for
purposes of that employee's QSLP match
for that plan year.
* A qualified education loan payment
is a QSLP only if the certification requirement
is satisfied with respect to that
payment. A plan may require a separate
certification for each qualified education
loan payment intended to qualify as a QSLP
or, alternatively, permit an annual certification
that applies for all such education loan
payments intended as QSLPs for a year.
* To certify a QSLP, the plan or its
third-party service provider must have:
the amount of the loan payment made;
the date of the loan payment; confirmation
that the payment was made by the
employee, that the loan is a qualified
education loan and was used to pay for
qualified higher education expenses of
the employee, the employee's spouse or
the employee's dependent; and that the
employee incurred the loan.
Further, the notice offers examples
of administrative procedures and optional
actual deferral percentage testing.
-Amy Resnick
SIMPLE IRA Plan Terminations;
Self-Certifications in 457(b)s
QUESTION: The SECURE [Setting Every Community Up for Retirement Enhancement]
2.0 Act of 2022 now allows a mid-year termination of a SIMPLE IRA [savings incentive
match plan for employees individual retirement account] plan and replacement with a safe
harbor 401(k) plan. I understand that the 25% early distribution tax will not apply to distributions
from a terminated SIMPLE IRA within the first two years of participation if the
distributed assets are rolled into a new 401(k) or 403(b) plan, and the rollover contributions
are then subject to the distributable events permitted in the 401(k) or 403(b) plan. Do these
distribution rules apply to all IRA rollovers from the SIMPLE IRA plan or only for participants
who had not yet met the two-year participation requirement?
ANSWER: You are correct that Section 332 of SECURE 2.0 waives the limitation on rollovers
from a SIMPLE IRA within two years of initial participation by providing an exception
to the 25% additional tax if an employer " terminates the qualified salary reduction
arrangement of a SIMPLE IRA plan and establishes a 401(k) plan or 403(b) plan. " Such rolled
over amounts are then subject to the distributable events set out in Section 401(k)(2)(B)
or 403(b)(11), as applicable, for participants within that initial two-year period. However,
as this provision is merely an exception to the tax for new participants, the general distribution
rules for rollover contributions likely continue to apply to rollovers by participants
who are outside that two-year participation window. See IRS Notice 2024-2(G-4).
QUESTION: I understand that self-certification is permitted for hardship distributions
in 403(b) and 401(k) plans, but is it for unforeseeable emergency distributions in a 457(b)
plan as well?
ANSWER: It is! In fact, the same Section of the SECURE [Setting Every Community Up
for Retirement Enhancement] 2.0 Act (Section 312) that addressed self-certification of
hardship distributions expressly states that self-certification of unforeseeable emergencies
is permissible, amending Section 457(d) to add a new subsection (4) as follows:
''(4) PARTICIPANT CERTIFICATION-In determining whether a distribution to
a participant is made when the participant is faced with an unforeseeable emergency,
the administrator of a plan maintained by an eligible employer described in subsection
(e)(1)(A) may rely on a written certification by the participant that the distribution is-(A)
made when the participant is faced with an unforeseeable emergency of a type described
in regulations prescribed by the Secretary as an unforeseeable emergency, and (B) not in
excess of the amount required to satisfy the emergency need, and that the participant has
no alternative means reasonably available to satisfy such emergency need. The Secretary
may provide by regulations for exceptions to the rule of the preceding sentence in cases
where the plan administrator has actual knowledge to the contrary of the participant's
certification, and for procedures for addressing cases of participant misrepresentation.''
Thus, a 457(b) plan may allow for participant self-certification of an unforeseeable
emergency, though it is not required to do so. Note that, if a plan provides for distributions
on account of an unforeseeable emergency, it must contain specific language
defining what constitutes such a distribution. See Reg. Section 1.457-6(c)(2).
Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom
Law Group, and Michael A. Webb, a senior financial adviser at CAPTRUST,
answer readers' questions. This does not constitute legal advice and cannot be used
or substituted for legal or tax advice. Send your questions for the Experts to: Amy
.Resnick@issgovernance.com, with Ask the Experts as the subject.
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PLANSPONSOR - November/December 2024

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