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Many § 403(b) plans lack a service provider that’s obligated to inform the charity about a perception or suspicion that the plan’s elective-deferral arrangement does not meet § 414A.

you're providing the 3% Safe Harbor and the people with less than a year of service no longer get the THM (assuming you are going to make the "obvious" election here and adopt that new policy under S2.0). It is true that if you used the profit sharing piece anyone who has comp as a participant would need a small THM but I'd still opt for that scenario. Not sure if that helps.

The citation is likely in your plan document itself.

Why do I get the feeling this is happening for hundreds and hundreds of plans...

I just happened to be looking at this issue and my initial thoughts are: I doubt a plan provision can be made operative or inoperative, such as whether Catch up Contributions are allowed, based on the annual census data. That being said, I think you could accomplish the same, without violating the universal availability rule, by actually amending the plan each applicable year to add or eliminate the Catch-up Contribution feature (yes a PIA). I would think the same would apply in the S-Corp situation. Without looking into it too much, I think I agree with #3 as well. Spouse still an HCE, just not an HCI.

Because of differing ways of calculating COLAs, it looks like the 2026 SIMPLE IRA catch-up limit for plans with 25 or fewer employees (or bigger plans where the employer has elected the 1% extra employier contribution) is $3,850, while the catch-up limit where a bigger employer has not elected the extra 1% is $4,000. This is exactly the reverse of what Congress was trying to accomplish. Am I interpreting that correctly? Thank you!

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Internal Revenue Code § 414A(a)(1) provides: “[A]n arrangement shall not be treated as a qualified cash or deferred arrangement described in section 401(k) unless such arrangement meets the automatic enrollment requirements[.]” A plan might be amended to remove automatic-contribution provisions if the plan is amended to omit an elective-deferral arrangement. But how many plan sponsors want a plan only for an employer’s nonelective contributions?

thank you @Peter Gulia thoughtful insight as usual. I will mull it over, but I think can be on board with the argument that it is within the remedial amendment period.

I often find it confusing to determine eligibility for rehired employees. The plan’s eligibility conditions are age 21 and 1 year of service, with a monthly entry cycle. The rule of parity does not apply. Employee A was hired on 4/14/2022, terminated on 9/08/2022, and completed 590 hours. The employee was then rehired on 10/03/2023. If rehired 07/09/2023 what is the case of determining eligibility. In this situation, should eligibility be calculated from the original hire date or from the rehire date? Could someone also explain, with examples, how eligibility is determined for rehired employees who rehired within one year versus after one.

These days, for the most part, new plans must have an auto-enrollment feature. But can the ER stop the auto enroll after a few years? Or must it be in there forever? Does Secure address that?

Does anyone have a citation for the deadline to make an involuntary cash out of an account less than 7,000, other than that it has to happen after the participant was terminated? Not seeing any deadline requirements, wondering if a plan sponsor can theoretically let an account atrophy until it is eligible for cash out.

I reviewed the plan’s historical events and noted that it was previously top-heavy, requiring the Top-Heavy minimum contribution. For the 2024 plan year, the owners contributed $7,500 as deferrals, which were later reclassified as catch-up contributions. Since catch-up contributions are excluded from the calculation of key employee contribution percentages, they do not impact the top-heavy determination. For Safe Harbor (SH) contributions, the plan applies statutory eligibility. So, plan is lost the top heavy minimum exemption for the plan year. Deferrals require 3 months of service with quarterly entry dates. Although the plan permits profit sharing contributions, the client has decided not to provide them for 2024. The plan currently has three owners (each holding 33.33%) and two HCEs by compensation. The client’s intent for the 2024 plan year is to allocate a 3% Safe Harbor Nonelective (SHNE) contribution to this two HCEs to avoid top heavy minimum contribution if we allocate SHNE to other HCEs, however, they are key employees also. Is this allowable as general?

If the plan was not established before December 29, 2022 (or the plan’s elective-deferral arrangement began on or after December 29, 2022), the plan is neither a governmental plan nor a church plan, and neither the new-employer nor the small-employer exception applies: Are you sure there is, for tax-treatment purposes, a plan-document failure? If the plan provides an automatic-contribution arrangement because the employer presumes it will amend, retroactively, the written plan to meet Internal Revenue Code § 414A’s tax-treatment condition, shouldn’t such an amendment be within Congress’s (SECURE 2022) and the IRS’s remedial-amendment period? IRS, Miscellaneous Changes Under the SECURE 2.0 Act of 2022, Notice 2024-2, 2024-2 I.R.B. 316, 332-333 (Jan. 8, 2024), at Q&A-J1., https://www.irs.gov/pub/irs-irbs/irb24-02.pdf.

I think I have my own answer. The "start-up credit" in paragraph (a) of 45E is increased by the 45E(f). But it is still the credit under 45E(a). 45E(a) is for "qualified start up costs." And qualified start-up costs are defined to include only costs related to a Plan that has at least one NHCE. The key is that the 45E(f) credit is a 45E(a) credit and the Employer Contributions are therefor "qualified start-up costs" and subject to that definition. Not a straight line, but definitely would be foolish to claim the exemption; the line is not straigtht, but it only has a slight arc. Someone could probably argue this away but imagine arguing this applies to an owner-only plan when there is a pretty strong position to the contrary.

The calendar year end 403(b) plan in question is required to have the mandatory automatic enrollment provision as of 1/1/2025, as per SECURE. That is not in question. The question is how to correct a failure under EPCRS. The plan document did not include an automatic enrollment provision, and participants have not been automatically enrolled. There is no match contribution. A retroactive corrective amendment to add the provision, effective as of 1/1/2025 seems appropriate. And then analysis for a missed opportunity to defer - specifically a failure to implement an automatic contribution feature. Does it then follow that the plan can rely on the on the reduced QNEC provided in Rev Proc 2021-30 Appendix A part .05(8)? "(8) Special safe harbor correction method for failures related to automatic contribution features in a § 401(k) plan or a § 403(b) Plan. (a) Eligibility to use safe harbor correction method. This safe harbor correction method is available for certain Employee Elective Deferral Failures (as defined in section .05(10) associated with missed elective deferrals for eligible employees who are subject to an automatic contribution feature in a § 401(k) plan or § 403(b) Plan (including employees who made affirmative elections in lieu of automatic contributions but whose elections were not implemented correctly). If the failure to implement an automatic contribution feature for an affected eligible employee or the failure to implement an affirmative election of an eligible employee who is otherwise subject to an automatic contribution feature does not extend beyond the end of the 9½-month period after the end of the plan year of the failure (which is generally the filing deadline of the Form 5500 series return, including automatic extensions), no QNEC for the missed elective deferrals is required, provided that the following conditions are satisfied: (i) Correct deferrals begin no later than the earlier of the first payment of compensation made on or after the last day of the 9½-month period after the end of the plan year in which the failure first occurred for the affected eligible employee or, if the Plan Sponsor was notified of the failure by the affected eligible employee, the first payment of compensation made on or after the end of the month after the month of notification; (ii) Notice of the failure that satisfies the content requirements of section .05(8)(c) is given to the affected eligible employee not later than 45 days after the date on which correct deferrals begin; and" This seems like an aggressive interpretation of the correction options but I am open to being swayed that it others think it is perfectly reasonable and not aggressive at all. What say all of you?

The excise tax on the excess contribution can be waived. The sponsor should file Form 5330 indicating the amount of excess and then putting the same amount on the exempt line. The filing documents the amount with the IRS.

First, I did not think you could tie your ICR to an equity index like the S&P500 but had to tie it to a specific S&P500 index fund. Second, as John stated, it is cumulative. The account balance goes up or down annually per the ICR and can and will be negative until such time as it gets paid out. Assuming future pay credits of $10,000, a 12/31/2024 first year balance of $10,000 has negative interest of $2,000 after the 20% loss and gets $10,000 pay credit at 12/31/2025 for balance of $18,000. 10% gain in 2026 yields interest credit of $1,800 and $10,000 pay credit makes balance $29,800 at 12/31/2026, and so on. However, if this person left and was getting paid out, they would get $30,000 ($10,000 x 3 years) - unless the plan has defined ICR floor as may be permitted by the regulations, as John noted.

1) For example, if the actuarial valuation report says maximum deductible contribution is $200,000, and the S-corp wants to contribute $300,000, can it be deducted? No. Might it be deducted in a future year? That's a question for the company's accountant. There are (or were last I knew) excise taxes for making nondeductible contributions to a qualified plan. The income passes through to the owner regardless, so why do it? Maybe such earnings can be retained by the S-corp and contributed and deducted later - again, involve an accountant. Also, owner's W2 may serve to determine/increase their 415 limit but does not directly limit (or provide "room") for the corporate deduction. 2) A plan either IS or IS NOT covered by PBGC based on the facts, there is no opting into or out of coverage. 3) Nondiscrimination requirements come into play when there are employees that are NHCEs. It looks like you are confusing the minimum participation requirement, where if you have two non-excludable employees (e.g., owner and spouse) you must cover both in defined benefit plan. An employee who does not benefit under a plan for a current year because they have reached their respective 415 limit is still considered covered and benefiting for minimum participation purposes is my understanding.

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For anyone who might help cheersmate reason through those questions, here’s the final rule: https://www.govinfo.gov/content/pkg/FR-2025-09-16/pdf/2025-17865.pdf. The rule paragraphs cheersmate mentions [26 C.F.R. § 1.414(v)–2(b)(2)-(3)] are on page 44549 [page 23 of 27 in the pdf].

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Hi all, I’ve been learning about CB plans for a sole owner/employee S corp and have several questions I haven’t been able to find out or confirm with research. Hoping you can help. 1) If one overfunds a CB plan (more than the allowed frontload amount) for the first year, can that entire amount be deducted as a business expense that year from the Scorp? The rep from a company that does these plans (as a TPA but not custodian) is telling me the overfunded amount would never be deductible- neither in the year it was deposited nor in the following years (even if the eventual W2 added up allows it). I understand that it all adds up to the lifetime max and therefore anything overfunded will have to be underfunded in the future to make up for it. But it doesn’t make sense to me that the amount overfunded would be lost forever- otherwise why would anyone do it? 2) the 6% rule (when having a DB plan and 401k) doesn’t apply when the DB plan is subject to the PBGC. I understand that a plan in this scenario doesn’t require PBGC coverage but is such coverage optional? As in- can one voluntarily pay PBGC premiums (presuming they don’t cost much- like $30 a year for a plan this size) to avoid the 6% limit? Or does this just not work? 3) the discrimination rules require contributions for all employees to my understanding. What if an employee already reached their lifetime maximum? Does a contribution need to be made for them to not violate these rules? (In this question I’m referring to possibly adding the spouse of the solo owner as the additional employee). Thank you for the help!

Good point.