All Activity

CuseFan is correct here, that's my mistake. I directly referenced the definition of wages under §3401 (which normally does include severance payments), forgetting §415 carves out exclusions & modifications. Been a long day, rookie mistake on my part; editing my original response now. Thanks for catching that!

The plan document should define the eligibility computation period and likely says first performed an hour of service. The 1/1 vs 1/3 start for a salaried individual is an interesting case. If they were paid for 1/1 then they were credited with hours of service for such date. One could argue that it is a reasonable interpretation to equate crediting with performing, but a strict interpretation of performed would be defensible. In such a case the PA should interpret and subsequently follow the precedent. In the case above, big gap from 7/1 to mid-August.

I think you are missing the point here - the question/issue is severance pay not post-severance compensation. The person is no longer employed and severance pay (per IRS) is never plan compensation.

Interesting. A very common, analogous fact pattern is when a new salaried employee is scheduled to start work on New Year's Day (or any other non-workday), and that employee does not show up for work until January 3rd. The employee does not perform an hour of service until January 3rd but is compensated as if they started on January 1st. Some plans will say this employee's date of hire is January 1st and the employee's initial eligibility computation period starts on January 1st. Other plans will say this employee's first eligibility computation period starts on January 3rd. In the OP, the time period is significantly later but the other facts are essentially the same. It is worth noting that doctors are not described as shareholders or owners, so these doctors will be considered as NHCEs regardless of how much compensation they earn in their first calendar year of employment, so there is not discriminatory. It will be interesting hear from our BL colleagues how relevant the time period is in this situation to determining if there is only one possible determination of the date of hire, or if the plan administrator can choose the designate either July 1st or first day worked is the date of hire for purposes of determining the start or the doctors' first eligibility period.

I've started to work with a complex ownership situation and am looking for guidance. A control group exists and within that group, there is one employer with mutliple entities and 3 different plans, so a smaller control group within the larger control group. I believe that this smaller group has to be tested on its own and then within the larger group. Is this accurate? Thanks for any guidance or reference sites.

for TPA Experts (Remote / Norwich NY)View the full text of this job opportunity

for M2B Retirement Consulting LLC (Remote / PA)View the full text of this job opportunity

for M2B Retirement Consulting LLC (Remote / PA)View the full text of this job opportunity

It is hard to guess what is their motivation. The owner's logic may be similar to someone who has excessive tax withholding during the year because they like getting a big refund when they file their taxes. This owner at least gets a little bit of earnings included in the refund while the IRS doesn't provide earnings on a refund of excess withholding. Maybe, the owner treats the family to a Disney vacation every year after the refund check arrives and the owner doesn't want to break the tradition.

You are correct, terminated employees do not need a top heavy contribution, provided their termination date is before the end of the plan year for the year in question. Under §415, which to my knowledge is required to be used for top heavy minimums, severance pay is not included in compensation.

Right, but technically the participant isn't employed on the last day of the Plan Year so they shouldn't get the Top Heavy contribution. I'm problably overthinking this though

Dave, It works fine and I’ll update my icon/link. I did really like the button she had at the top to choose how many years or what years to show. But this will still be a time saver. I really appreciate y’all taking it on and Ms @Carol V. Calhoun for being gracious enough to allow it.

The two answer above by Pam & Bri are both good places to look. Unfortunately, Relius is a very complex beast & I feel your pain on the highly unhelpful error messages; it's one of the biggest reasons my firm is moving away from Relius this year. In regards to Bri's answer, if you go to plan specs > source summary and click the magic hat button (thanks for the clear labeling FIS), you can generate accounts. By selecting all sources & all investments, you can make sure your plan has an account for every investment-source pair. If your plan has certain more complex provisions relating to source-specific investments, just be careful using this tool. Per Pam's answer, make sure this is done for any relevant plan years. Hope this helps!

"Trailing" post-severance compensation that meets the 2 1/2 month rule is included. Other forms of post-severance compensation (unused leave cashouts, certain nonqualified deferred compensation, salary continuation for disabled participants or military members, etc.) are all governed by the plan document, so you'll have to refer to your specific plan. Our plan documents made through ASC default to include post-severance compensation, with the ability to exclude the various types above. Not legal advice, YMMV

We have a client who has an employee who is only receiving severance payments and no other salary. I just wanted to confirm that all of that compensation is ignored, and therefore they wouldn't get any type of contribution (Profit Sharing, obviously not since they are under 1,000 hours, but a Top Heavy contribution was my only thinking). Thanks in advance.

I doubt it. Not a CPA, but I can think of very little advantage to what you describe. If it happens YoY, they're really just kicking taxes down in a cascading way, not gaining much of an advantage. In fact, they're likely losing out. I don't know how much a safe harbor contribution would cost them, or how much of it would go to HCEs / owners, but the tax savings of a) the safe harbor allocation itself and b) the fact that HCEs could defer another $15,000 (or more) combined annually means they're likely losing a pretty significant tax advantage by not doing safe harbor. I do plan design & work with sponsors fairly often, and honestly there's just always some that will refuse to design a plan in the way that makes sense. Some don't want to be safe harbor because they see employer contributions as "giving money away" and they don't want to do that, even when you break down the numbers of how it actually saves them money overall. Some also just simply don't like being told what to do or what their plan should be. I've had prospects come to us who would benefit significantly by being a SH Non-elective instead of their current safe harbor match; they do new comparability profit sharing every year and have to make a full 5% gateway contribution on top of their safe harbor. Non-elective would save a huge chunk of money for a company that wants to max out its owners, but they came looking to offer match and are set on sticking with it.

That's a more recent version, but yup!

Treas. Reg. §1.410(a)-7(a)(3)(ii): Employment commencement date reads While 1.410(a)-7 is, in general, about the elapsed time method in particular, this section states "in order to credit service accurately under any service crediting method". Unless there's precedent out there otherwise, I would assume using the date they actually started working would be defensible under the above definitions, as they never worked an hour of service prior to that. YMMV, Not legal advice, etc etc.

Just a thought... show a larger portion of the In-Service distribution being made from his match account rather than his deferral account. This would leave a sufficient balance to make the corrections. It would seem that the only issue is if his deferrals were all Roth.

for NPPG (Remote / Shrewsbury NJ)View the full text of this job opportunity

@Bill Presson Bill, how does this new page work for you on your iPhone? https://benefitslink.com/limits.html

@Bri This one? https://benefitsattorney.com/charts/appfa/

Ta-da, now on BenefitsLink (with Carol's consent): Inflation-Adjusted Limits on Retirement Plans, Including Maximum Benefits and Contributions (1996-Present)

A large group of doctors has several doctors in their census with DOH 7/1/2024 which makes them eligible 7/1/2025 in accordance with the plan document. This was on the census file uploaded to the record keeping platform who determines eligibility. They are eligible then for SH, PS and DB. Now the plan sponsor says they didn't actually start working until mid-August and therefore should enter 1/1/2026. These doctors make the max in 6 months and so the employer contribution is large - they maximize the K plan with SH/PS. My approach - plan sponsor we rely on you. Tell us their DOH. I don't know if the IRS has a position on this. I advised them to keep the DOE as 7/1/2025 as that may be the expectation of these recent hires. Thoughts? Thank you

for PCS Retirement (Remote / PA)View the full text of this job opportunity