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for Reid & Riege PC (Hartford CT / Hybrid)View the full text of this job opportunity

Are they already in the same controlled group now? If so, you should read posts like: For part-year participants you would use actual, partial year deferred/contributed amounts and their compensation for the partial year. This "prorates" both so you get to comparable percentages.

We still give the notice even using the Brief Exclusion rule. I did not go back and look for authority...not time right now... perhaps it is just a best practice principle. I mean how does a plan sponsor provide an excluded participant an "opportunity" to make up the missed contributions without providing them notice that something happened.

Thank you. The merging plan will merge mid-year, so I would suspect it needs to be separately tested through the merging date. It's in the same controlled group, however. I think it would be tested for coverage and nondiscrimination on its own (as its own plan, not aggregated with the buyer plan) for the first 8 months. The last four months would be combined with the buyer's plan, but how would they factor the first 8 months? Would they be included in the full plan year numbers, with percentages of actual compensation simply inherent in the testing?

Hello - just wanted some clarification on this issue. A current safe harbor plan provides for an enhanced safe harbor match of 4% and use a payroll computation period. Sponsor wants to increase it this year to 5%. What are the mid year requirements - 30 day notice, the increase must be retroactive to 1/1/26, can the plan do a true up match retro to 1/1 and then continue with the payroll match going forward, or does the match computation period have to change to annual for the remainder of the 2026 plan year? I appreciate your thoughts!

for Michigan State University (East Lansing MI / Hybrid)View the full text of this job opportunity

Each plan would need to satisfy 410(a)(26) independently. If you can get over that hurdle, and satisfy all of the other non-discrimination tests on an aggregated basis, it would be permitted. IOW, you will probably need some NHCEs in the plan with the HCEs in order to meet the 40% rule, unless you have at least 50 HCEs. Then again, if your HCE plan satisfies 401(a)(26), you could use a DC plan to satisfy the NDT and you would not need a second DB plan for the other employees. Nothing wrong with having a second DB plan, but a DC plan would likely be preferred.

Hi, Two corps are a controlled group. Therfore, one DB plan can be opened that will cover both entities. Can the following be done instead? For easier record keeping, etc. Open a DB for each entity and cover each entity separately. The owners (Hcs) are not getting above the 415 as they are covered only in one plan and the employees of each entity are all properly included. Thank you.

No one answered yet, so I'll give you my opinion. It sounds like the merging plan will merge after a complete plan year, but even if a partial plan year, the merging plan has to be tested on its own through August. Kind of like how it will have to file a final Form 5500 for that plan year. The remaining plan gets tested for the full plan year including the new participants for the part of the year they are in the plan (after August). Just like there will be a single 2026 Form 5500, but with an increase in the EOY participant counts to reflect the merged participants. Hopefully others on here can confirm.

Thank you as always CuseFan, David Rigby, and Calavera. I had given a "like" your responses when you had responded, however, I forgot to write this. It was a big help. Thank you

If an individual gets § 403(b) distributions while she remains subject to New Jersey’s income tax, there is some recovery for previously taxed amounts. But if an individual becomes a domiciliary or resident of another State and subject to its income tax, the other State may tax § 403(b) distributions, and need not provide any relief regarding amounts previously taxed by sister States. See 4 U.S.C. § 114 https://www.govinfo.gov/content/pkg/USCODE-2024-title4/pdf/USCODE-2024-title4-chap4-sec114.pdf. New Jersey is not alone in setting up a “double-taxation” risk for someone who retires elsewhere. A participant contribution—whether § 401(k), § 403(b), § 457(b), or something else—is not any exclusion from compensation for Pennsylvania’s income tax (and Philadelphia’s wage tax).

Well it really only makes a difference when it is an HCE because one person is a larger share of the total. I literally had a scenario where the only HCE had a signficant missed deferral and I was able to exclude him from the ACP test (it was a 403b plan). That felt weird to me! To your second question, that was the next paragraph (Again this book is really pretty neat) EPCRS does not directly address ADP calculations when an employee was improperly excluded for only part of the year. However, the whole-year correction methods in Appendix A apply to partial year corrections in Appendix B. [EPCRS App. B §2.02] Accordingly: The plan must correct ADP failures before dealing with improper exclusion, and The plan has the option to disregard participants with partial exclusion exclusions altogether from the ADP test. (Note that the same choice must be made for all participants subject to the improper exclusion. [¶6.2.2]) If the plan elects to count participants with partial year exclusions, logically it would count the deferrals the participant actually made and disregard corrective QNECs (which are determined after running the ADP test). Example 9.8.2 Dan should have entered his employer’s calendar year safe harbor 401(k) plan on January 1. However, he was improperly excluded until July 1, at which point he elected to defer 6% of his compensation. Dan’s total compensation for the year was $100,000. His actual deferrals for the balance of the year were $3,000. His ADR for the year was 3% ($3,000 / $100,000). The employer can choose to count Dan or exclude Dan in performing the ADP test. Assume the test passes and the NHCE ADP was 4%. Dan’s missed deferrals are $2,000, Dan’s compensation for half the year ($50,000) multiplied by 4%. The corrective QNEC is 25% of $2,000, or $500, using the two-year safe harbor. [¶9.6.5]

The plan administrator should decide how to administer ADP refunds and communicate the procedures clearly to participants in advance of the compliance testing. This would include whether the plan will apply deemed elections or will issue refunds if the participant does not make an affirmative election. The procedure could include making an election that is valid until affirmatively changed, or making an election each year (or more frequently) in advance of the compliance testing. Either way, there is an additional tracking requirement. The plan needs to know the participant's election or applicable default before the testing is done.

That doesn't sound so weird - but what if the exclusion was only part of the year? Would you use full year amounts or only those where the guy wasn't in an overlooked status? As a parallel to the original scenario, people who aren't eligible for a 401(k) plan at all because of their division or job category wouldn't show up as zeros in the ADP test. This is sort of inadvertently similar.

There has been some back and forth regarding the Deemed Roth Election and how it interacts with a participant’s affirmative election not to make Roth catch‑up contributions. Our understanding is that the Deemed Roth Election is an administrative option that can be applied when a participant has not made an active election, allowing the plan to automatically designate catch‑up contributions as Roth. If a plan fails ADP and a portion of the excess deferrals is recharacterized as catch‑up contributions, how should Roth treatment be determined? Specifically, does the participant’s prior affirmative election not to make Roth catch‑up contributions override the Deemed Roth Election? Or would the participant need to make an election at the time the catch‑up amount is calculated to determine whether it should be treated as Roth (assuming the contribution was originally pre‑tax and exceeds $250)? Ultimately, we are trying to understand whether this introduces an additional tracking requirement—namely, whether a participant has made an affirmative election—before a plan administrator can rely on the Deemed Roth Election.

Bazaarly the answer is no. From the ERISApedia Plan Corrections textbook (highly recommend!) The plan must perform ADP/ACP testing before correcting errors resulting from failure to implement or improper exclusion. If the plan fails either the ADP or the ACP test, it must first correct those tests before correcting Elective Deferral Failures. EPCRS adds: In order to determine whether the plan passed the ADP or ACP test, the plan may rely on a test performed with respect to those eligible employees who were provided with the opportunity to make elective deferrals or after-tax employee contributions and receive an allocation of employer matching contributions, in accordance with the terms of the plan, and may disregard the employees who were improperly excluded. [EPCRS App. A §.05(2)(g)]

If the employee met the eligibility and entry provisions before start her maternity leave, then she is will get an allocation at the end of the year. Some plans have a provision that an employee who would first meet the eligibility and entry requirements after starting maternity leave are excluded from receiving an allocation as of the plan year end allocation date, BUT upon return from maternity leave, the employee must be given an allocation as if she was active on the allocation date. If the employee in the OP started leave under these circumstances, then check the plan provisions applicable to leaves of absence and year-end allocations.

The employee can still contribute to the 403(b) plan, they just don't get the immediate tax benefit. For those of us in the business a long time, there was a time when 401(k) pre tax deferrals were not recognized for state tax purposes. I live in CA and they still don't recognize HSA contributions for income tax purposes.

If the absence is “(i) by reason of the pregnancy of the individual, (ii) by reason of the birth of a child of the individual, (iii) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement,” ERISA §§ 202-203 set up mandated provisions for crediting service and not having a break in service. And the U.S. Family and Medical Leave Act might provide some benefit-continuation rights. These might bear on how a plan’s fiduciary reads and interprets a last-day condition.

for FuturePlan, by Ascensus (Remote)View the full text of this job opportunity

for FuturePlan, by Ascensus (Remote)View the full text of this job opportunity

Thirded!

Agree - not a severance of employment.

Doesn't sound like a severance of employment to me.....

I'm 99% sure I know the answer, but I wanted to be 100% sure. If a participant is on maternity leave at the end of the year, are they still considered employed on the last day of the Plan Year in order to be eligible for a Profit Sharing contribution (the participant had worked over 1,000 hours prior to going out on leave)? Thanks in advance!