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Background: 403(b)(9) non-electing church plan Multiple employer plan The plan (not the 700 individual participating employers) sets the definition of compensation when it comes to calculating contributions based on a percentage. This one employer used the wrong definition of comp and consequently shorted deferral contributions for the employee since 2021 (yikes) I am unsure what correction method is appropriate and didn't find anything specific in Rev. Proc. 2021-30. I also read a page on the IRS website that states the plan can amend the definition of compensation, but that does not seem reasonable with a multiple employer plan where there is one definition for all employers to follow. How does the employer fix this? Can the employer provide an employer contribution for 50% of missed deferral portion? Is there something clear cut I am missing? TIA for your responses.

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I was reading through the IRS Cost-Of-living changes and thought the exact same thing!

If a company is in the business of offering early childhood education (infant to pre-K), kindergarten, before and after school programs, and summer programs do you think that constitutes a service organization? I've reviewed the Who's the Employer's ASG chapter and conducted supplementary research, but I can't find anything on-point. I know educational services do not count as consulting, so that avenue is closed. I lean towards concluding that the school is a service organization because the material income producing part of their business is the teachers' services, rather than capital. But I could be persuaded the other way too.

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And Groom Law Group's article today cites BenefitsLink.

Yeah I think it's weird they highlight that distinction since you can only contribute for under 18 folks anyway. How many under 18 employees wanted to contribute to their own Trump account? Pretty much a non-issue. The BIG deal I think from this is that it seems to suggest employees will be able to make pre-tax salary reduction contribution elections (presumably up to $2,500, reduced by any employer contribution) for Trump accounts of a dependent. There's no way to make deductible contributions outside of payroll. So all of a sudden the name of the game in Trump accounts is going to be to get your employer to throw them into the cafeteria plan, and then always make sure to utilize the pre-tax option through payroll before ever considering a regular nondeductible contribution. Given that most employers are working with a FSA TPA that offers a variety of cafeteria plan benefits in a unified login (health FSA, dependent care FSA, commuter, HSA), it seems that adding Trump accounts with employee pre-tax contributions would be an easy flip to switch to offer a pretty meaningful benefit to employees at almost no cost.

@Connor https://www.federalregister.gov/documents/2025/09/16/2025-17865/catch-up-contributions

For the ASG question - IF they are one - there is a whole other issue of not having a SIMPLE at the same time as a 401(k) plan, by the same employer. And an ASG is treated as a single employer for those purposes, so generally cannot have both in the same year. Determining the status of the SIMPLE would be very important. The deferral limits for short initial year 401(k) plans generally aren't pro-rated as they are personal limits, not plan limits, but the plan document should address if there is any pro-ration of limits (deferral or otherwise) for an initial short plan year where there is no prior SIMPLE or predecessor plan. If there is a basic plan document for the 401(k) plan, you should read it carefully.

We use FT Williams. We tried to help a client file a 5330 to pay the excise tax for an over contribution. FT Williams tells us the filing rejected because the form was late and money was due. They however don't give us any insight how to get the payment and filing done in the correct order. If anyone has done this successfully we could use some insights on how to do this. This was so much easier with the old paper forms.

Let's face it. A client complaining about giving the SHNEC to terminated employees more often than not is motivated by two things. The first is greed. The client likes the idea that they can maximize elective deferrals and think nondiscrimination tests are unfair to HCEs (and they abhor refunds). The second is the perception that terminated employees were not committed/loyal to the company and should not be "rewarded" with a 3% contribution (even though the SHNEC is very much akin to the employer funding payroll taxes). Sometimes the message has to be if the client wants the privilege of avoiding nondiscrimination testing (i.e., being able to maximize deferrals), the cost of that privilege is the 3% SHNEC. That being said, when a significant number employees do not defer, changing the plan design to a Safe Harbor Match often reduces the overall employer cost which seems to somewhat placate the client (until the employees catch on and start deferring more). Kudos to @Tom for trying to be responsive to his client and taking a wild shot.

Sadly, telling a potential plan sponsor about how the safe harbor works during a sales meeting has no bearing on what they remember over a year later when you provide the contribution amounts.

Thanks. I read yesterday’s prepublication release of a not-yet-published IRS Notice describing interpretations and implementations the Treasury might intend to propose. Among many points, I saw that Q&A about cafeteria plans. The response treats an employer’s § 128 contribution (even if made by the employee’s wage reduction) as something “not includible in the gross income of the employee by reason of an express provision of this chapter.” That’s the § 125(f)(1) definition of a qualified benefit. Yet, the IRS’s description of an interpretation the Treasury might intend to propose hints at a distinction between (1) a Trump account under which the § 128-contributing employer’s employee is the account’s beneficiary and (2) a Trump account under which the employee’s “dependent” is the account’s beneficiary. Whether situation 2 always or ever is an absence of deferred compensation § 125(d)(2)(A) precludes seems doubtful. But those questions might not matter if a Treasury or IRS interpretation favors taxpayers. In the early 1980s’ development of cafeteria plans, an important part of the reasoning was seeking to reduce perceptions that some employees get more compensation than similarly situated other employees because of differences in which benefits a worker needs, wants, or even can use. This is not advice to anyone.

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@Peter Gulia a surprising development here, I stand corrected: https://www.irs.gov/pub/irs-drop/n-25-68.pdf Q. I-3: May a Trump account contribution program be offered via salary reduction under a section 125 cafeteria plan? A. I-3: Yes, in most, but not all, circumstances. A Trump account contribution program may be offered via salary reduction under a section 125 cafeteria plan if the contribution is made to the Trump account of the employee’s dependent but not if the contribution is made to the Trump account of the employee. Although a Trump account contribution program would be a qualified benefit under section 125(f)(1), a contribution under the Trump account contribution program to a Trump account of the employee would provide deferred compensation under section 125(d)(2)(A), because the employee would have a vested right to compensation that may be payable to that individual in a later year. The Treasury Department and the IRS intend to address rules related to the coordination of Trump account contribution programs and section 125 cafeteria plans in proposed regulations.

Thank you for your responses. I suppose I should've been a little more specific - the letters are going to the plan sponsors, not the participants, and their only call to action to us was the generic 'please call with any questions'. Most of the plans have participants numbering in the dozens, so no large plans, but some do have both W-2 participants and those who receive SE income - some even have participants who get both types of income. Though we are the bookkeepers, clients have occasionally asked for our take on the new rules and their options. We explained that, like many regulations, there are many ins and outs, and we only know the most general basics. We also remind them to talk to those who specialize in such matters. Artie M I think what you're saying is the missing part for us, as the articles and newsletters we've read (and there were quite a few) didn't delve as deep into the issue. Are the regs that you are citing found in the final SECURE 2.0 regs that recently came out? I'm with you Austin3515 about just adding Roth, as long as the payroll services don't make us regret it.

You’re reading it correctly. Under the updated rules, a plan can file the 5500-SF if it has fewer than 100 participants with account balances on the first day of the plan year. The only other things I’d check are whether the plan falls into a category that still requires the full 5500... For example, being part of a pooled employer arrangement or holding employer securities.

Based on your description, I am not seeing the discrimination issue: "participants whose FICA wages were $150k or less in the prior year can continue to make catch-up contributions on a pre-tax basis, but those whose wages exceed this limit are not permitted to make any catch-ups." So, here, the over $150K participants do not get catch-ups (because they have to be Roth). So they took away something from the more highly compensated.... Under the Code, there cannot be discrimination against NHCEs... no rule says you can't discriminate against HCEs. The discrimination issue comes up if a Plan has participants who do not earn FICA wages and they are HCEs for nondiscrimination testing but not highly paid individuals for Roth catch-up purposes. In that situation HCEs who are not HPIs might be able get catch-ups but some NHCE who are HPIs could not get catchups. That is a very specific set of circumstances. This set of circumstances is addressed in the regs that provide a safe harbor if those HCEs who are not HPIs are not eligible for catch-ups either. If you don't use the safe harbor the Plan would need to do BRF testing (and may or may not fail it). Those same regs say you can design a plan permitting catch-ups but does not permit Roths. The communications piece you read may be meant for the general population and not for a plan with this specific set of facts. Maybe I am misunderstanding the query....

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I'm curious to know what your role is with these clients? From a compliance perspective this is all quite complicated. If you work for a TPA I hope someone at your firm has a solid grasp of this stuff. If you work for a financial advisors office, you're definitely asking the right questions but you're going to want to get someone involved who has the right expertise. They might be available at the recordkeeper if you ask for it. They will not be proactive because the scale is too large as others have noted. But most of them will go over things if you call them. But I can make this a little easier for you. Add Roth. It's a good benefit, and plans without Roth are becoming closer to Unicorns every day. Note that you have plenty of time to add Roth in order to avoid the limitations since most people are not doing any catch-ups until at least June (most likely not until Q4 2026). I think most TPA's and recordkeepers were pretty aggressive about getting Roth added over the last year or two, if they didn't already have it. I know some clients didn't add Roth to keep it simple, I get that. And that was probably a more defensible position before these mandatory Roth rules. But low income people in particular (who pay little or no taxes) are better off doing Roth. There was a great article today by Carol Calhoun who mentioned that anyone eligible for the tip income and overtime income deductions is making a mistake contributing pre-tax because they are converting tax free income to taxable income (I'm paraphrasing). https://benefitsattorney.com/bad-tips-for-401ks/

I'd love the thinking of folks who are more well-versed in SIMPLEs. Didn't get any traction on the other board, so I thought I'd try the 401(k) board since it does involve one. Company A maintains a SIMPLE IRA in 2024 & 2025; several employees of Company A create their own Company B in 2025. Company A maintained a SIMPLE IRA (I'm not sure if the SIMPLE IRA is still active); Company B established a 06/01/25 effective date SH 401(k) Plan (short initial Plan Year). Company A & B have different EINS with no ownership crossover. I understand that when an employer establishes a mid-year 401(k) Plan that the deferral limit is adjusted based on the # of days/365 of each arrangement. Because these are two unrelated employers, my thinking is that this does not apply to this scenario, so all EEs can contribute the total $23.5k between the two arrangements if they would like (a maximum of $16.5k being attributable to the SIMPLE IRA). Do you agree that the deferral limit for the Company B 401(k) Plan does not need to be pro-rated based on the number of days it was in existence vs. the SIMPLE IRA? Since catch-up contributions are separate to each Plan, can a 50+ participant who contributed $10k to the SIMPLE IRA under Company A defer an additional $24.5k to the Company B 401(k) Plan? ($6.5k SIMPLE deferrals, $3.5k SIMPLE catch-up, $17k 401(k) deferrals, $7.5k 401(k) catch-up) If the Company B employees are still employees of Company A and participating in the Company A SIMPLE IRA, does that matter? Or is it just a consideration in that both the non-catch up deferrals to each arrangement count towards their overall 402(g) limit? As I write this out, I imagine that a relevant consideration is whether Company B and Company A constitute an ASG. If they do, would their contributions be subject to the adjusted deferral limits based on the days/365 of each arrangement?

For some time now (both before and after the shutdown), I have had technical difficulties getting an EIN issued online. Roughly nine times out of ten I will get the message "Apply for an Employer Identification Number (EIN) online is currently unavailable We apologize for any inconvenience this may cause. Please refresh your browser or try again later." The most frustrating part is that you have to complete the entire application process before getting this message. The few times a number was issued, it just seemed random. I have tried deleting cookies, using different browsers, and applying at different times of the day. Are any of you having similar difficulties? Do you have other suggestions or insights that could help? My thanks in advance for any ideas.

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