The Blue Chip Blast – February, 2025
Blue Chip’s New Secure Portal
We sent several communications at the end of 2024 that we were upgrading our Secure Portal to provide better security. Please be sure to update bookmarks you have saved for our old portal to the new one. Your username is your email address and when you first log in you will receive an email link to set up your password. This email link will come from admin@yoursecureportal.com . Be sure to use this portal to transmit any data to us containing confidential information such as SSN or compensation.
You will notice that there is a file tree on the left hand side when you log in and documents may be saved in different folders. To avoid the need to search through folders to find where something is saved, you can click on All at the top of the tree to see all documents in the order that they were uploaded.
New portal site: https://bor.bluechipretirementplans.com/
Handling Part Time Employees
Quite frequently plan sponsors tell us that someone is not eligible because they are part time. While it may be true that they are not eligible it is not specifically because they are part time. Regulations do not allow you to require greater than “1 Year of Service” for entry into a 401(k) Plan. This term is defined in the Plan Document as either your first 12 months of employment/any subsequent calendar year during which you work 1000 hours OR after 12 months have elapsed from your date of hire even if you had periods of severance during that 12 month period. Therefore, you cannot across the board exclude part time employees as many will meet this Year of Service requirement. However, even if your document defines a shorter period for eligibility that would apply to all employees, it is possible to include dual eligibility requirements imposing a longer wait for those not scheduled to work 1000 hours/year.
It is important to understand how the Plan Document defines eligibility so that people are given the opportunity to enroll on their proper entry date. When that is not done in a timely manner, the employer may be responsible for making up contributions for a missed deferral opportunity and associated match.
Further with the new Long Term Part Time rules, many part time employees will enter the plan even if they don’t meet the service requirement in the plan. To enter under the LTPT rules you only need to work 500 hours in 2 consecutive years. While an LTPT participant does not have to be given employer contributions they do have to be given the right to make their own contributions, and should they ever become eligible for employer contributions their vesting is based on working 500 hours/year vs 1000 for those first entering under the Plan’s usual service requirements.
Please ask your compliance consultant if you have questions about what your plan allows or if you think it is time for a design change to better meet the goals and demographics of your organization.
Catch up Contributions as Roth
SECURE 2.0 added a provision that requires participants who earned greater than $145,000 in FICA wages (indexed for inflation) in the prior year to have current year catch up contributions made as Roth contributions. This provision was to be effective in 2024 but due to lack of guidance the IRS issued an administrative delay until 2026. Now is the time to talk to your payroll providers to make sure they will have the programming in place to handle this provision.
Currently we do not collect FICA wage data but will be requesting that information; luckily this is box 3 of the W-2 so it is an easy figure to obtain. Partners who only receive self-employment income and some governmental employees have no FICA wages and thus are not subject to this new rule.
If your plan year end is not a calendar year end, you are still looking at FICA wages for the prior calendar year to determine who is subject to this requirement as the catch up limit is always a calendar year limit.
For plans subject to ADP testing, one method currently used to handle refunds is to recharacterize them as catch up contributions if the person is eligible for catch up and has not made contributions up to that limit. This will now be a more involved process if the amount being recharacterized as catch up was not contributed as Roth and likely will require plans to include the Roth In Plan Transfer/Rollover provision that has been effective for many years but not well utilized.
Most plans already include a Roth provision, but if yours does not and you have employees affected by this new rule then a Roth provision will have to be added to your plan in order to continue offering catch up contributions.
Blue Chip will continue to update clients on changes that are required but please work with your payroll company on this provision early as they will be the starting point for monitoring the limit.
Meet the Staff – Highlight of a Blue Chip team member
Victoria Hill – Compliance Consultant
Victoria joined Blue Chip Jan. 1, 2024 and has 10 years of experience in the 401(k) compliance field, backed by two decades of experience in banking, loans, floods, and accounting, which has served well in the multi-varied field of compliance. She is a mother of five children, with three grown and two graduating high school. Her hobbies include writing an epic fantasy series, volunteering for local government, serving as the treasurer of her church, and martial arts, where she currently holds a fourth degree black belt. Prior to the life of banking, she served in the United States Marine Corps and served as an electronics technician and then as an air traffic controller.