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26 C.F.R. § 1.411(a)-8 https://www.ecfr.gov/current/title-26/section-1.411(a)-8 26 C.F.R. § 1.411(a)-8T https://www.ecfr.gov/current/title-26/section-1.411(a)-8T

I actually liked Lotus back in the day 🤣.

Isn't the top-heavy minimum covered by the safe harbor contribution?

I believe you can amended a plan to say anyone who worked at least one hours on or after 1/1/2025 will be on this vesting schedule (describe the new 5 year schedule). I know I have seen those types of amendments back when you were made to shorten you schedule back in the mid 2007s. Your criteria is non-discriminatory and treats anyone who have the same set of facts the same. Anyone who termed before 2025 isn't have their vesting schedule changed so you don't have to offer then anything.

If the kids are not deferring the maximum - perhaps their tax advisor could educate them on IRAs. If they are eligible to make IRA contributions, might be better than messing up the 401(k) testing with deferrals. They could still be eligible for the plan, and help testing, but a way for them to still get tax savings, but not skew testing.

CuseFan has the best suggestion. Restructuring is sometimes also known as component testing. both testing groups would have to meet minimum gateway. Generally the youngest HCE + older NHCE are put in a group and tested on a contribution allocation basis, the older HCE and the younger NHCE are tested on future basis. For next year - I would not suggest adding in allocation conditions - if you do , it handcuffs who can receive an discretionary employer contribution. Your plan document might waive allocation conditions for purposes of meeting gateway, but what if a younger NHCE left partway way through the year, and it would be advantageous to testing to give that person a larger contribution? you would not be able to if the plan has a last day employment condition. That person would be limited to the Safe harbor, and perhaps gateway. I do suggest that safe harbor nonelective go to NHCE ONLY in plans that are cross-tested. If it works out to give the HCE 3% and not skew testing, that can always be accomplished with a discretionary contribution. Alternatively - for some future year - if the plan is small, owner comp is high, and general participation is low - sometimes it works out better for the plan to use safe harbor match. The owners defer the maximum, if their comp is high they can receive a large match, and then make up the difference in discretionary employer. Depending on the specifics, it might get the owners to the maximum overall limit with less minimum to the NHCE to pass testing. May not work as well if the plan is top heavy. But something to consider sometimes.

I thought this seemed pretty simple but now I am getting confused .. 401k plan currently has 6-year vesting schedule. They would like to amend the schedule to a 5-year schedule, which will be more advantageous at every year. They are doing this because they feel like their current schedule is not competitive in their industry. However, they do not want to give the new vesting schedule to anyone who is terminated but still has money in the plan. Can the amendment state that only participants who work an hour of service on or after the effective date of the amendment will be subject to the better vesting schedule? And they want the new schedule to apply to all of the money in the accounts of anyone who is still employed on the date of the amendment (ie., they don't want to only apply the vesting schedule to new contributions made after that date). I guess where I am getting confused is, Is there a requirement that anyone with at least 3 years service (including terminated participants) must be allowed to elect the better schedule? Thanks!!

I don't trust these new-fangled computing devices.

The Top Heavy Minimum is not determined by Nonelective Contributions alone. As Bill Presson notes, even employee deferrals from an HCE will trigger a Top Heavy Minimum.

At least get into the '80s and get on Lotus 123 man!

I do all my stuff on green sheets still.

Have you looked at Sepirak.com. Its a software designed for the self directed industry but has the components to recordkeep 401(k) plans.

Plus, i didn't the match could increase in later years. (In the same spirit as 'Cuse's question, I guess)

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Yes a key employee did make salary deferrals as well as safe-harbor match

Did any key employees do salary deferrals? That will trigger top heavy minimums.

You can use the PBGC program for missing participants in DC plans. Plan does not have to be "covered by the PBGC." Link for more info: https://www.pbgc.gov/sites/default/files/form-mp200-instructions.pdf

Would a top-heavy Safe-Harbor plan have to make a top-heavy minimum contribution if they only made profit-sharing contributions to non-key participants? My thoughts are no because the highest profit-sharing contribution received by a Key employee would be 0%.

Brian, thanks for the practical information. I do believe they don't want a trust situation as well. And part of the problem is their using the terminology more generically, not in the more legal sense that's leading to some confusion. Hope to get a more details on the situation shortly, but this helps clear up my thinking.

Now that Brenda Wren resolved an inquiry, just an aside: Even when ERISA’s title I required a plan’s administrator to file a summary plan description and a summary of material modifications with the Labor department, many administrators did not. Congress ended those filing requirements, effective August 5, 1997. Yet: “If a plan participant or beneficiary wishes a more recent copy of the SPD or SMM, the [U.S. Labor department] will request a copy from the plan administrator.” That would return a request to the plan’s administrator, and it might no longer have (or might never have had) a requested summary plan description.

Got it. Well if they do not have a formal trust in place, they may have inadvertently created a trust requirement through the segregated accounting. However, if the separate account is in the employer's name (not the plan's name) there are still ways to avoid the trust requirement. I'm assuming here they do not want to have a trust with all the associated compliance requirements and potential liabilities. The DOL looks to "ordinary notions of property rights” via all the facts and circumstances to determine “whether a plan acquires a beneficial interest in definable assets depends, largely, on whether the plan sponsor expresses an intent to grant such a beneficial interest or has acted or made representations sufficient to lead participants and beneficiaries of the plan to reasonably believe that such funds separately secure the promised benefits or are otherwise plan assets.” Here's a quick shorthand: https://www.newfront.com/blog/j-and-j-case-practical-considerations-the-erisa-trust-rules-for-health-plans-part-2 Common Arrangements That Generally Meet the 92-01 Relief to Avoid the ERISA Trust Requirement No Trust Required: Premiums/benefits paid from the employer’s general assets checking account. Facts and Circumstances: Premiums/benefits paid from a separate account in the employer’s name where the employer expresses no intent and makes no representations to lead employees to believe the funds in the account are plan assets. In either case, the employer could provide the third-party administrator (TPA) with check-writing authority over the account to ameliorate administrative burdens. Arrangements That Often Do Not Qualify for the 92-01 Relief (Subject to the ERISA Trust Requirement) Trust Required: A separate checking account held in the name of the health plan (even if maintained with a zero-balance approach to immediately pay premiums/benefits upon receipt). Facts and Circumstances: Zero-balance account maintained in the name of the TPA whereby the TPA periodically has the employer transfer funds in the exact amount of aggregate adjudicated claims to the fund the account and release approved benefit distributions to participants and beneficiaries. With respect to the TPA account zero-balance approach, the DOL has cautioned that “drawing benefit checks on a TPA account, as opposed to an employer account, may suggest to participants that there is an independent source of funds securing payment of their benefits under the plan,” which could create ERISA plan assets that must be held in trust. The J&J Connection: Avoiding the inadvertent loss of the DOL’s trust enforcement policy could end up as a key liability consideration derived from the J&J case. The J&J plan’s trust-funded status may prove to be one of the primary reasons the plan was targeted as the test case in this area, as well as a potential factor in the court’s analysis of the class plaintiff’s breach of fiduciary duty allegations.

I think that the SPD might be available from the DoL EBSA Public Disclosure Room, at - https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/how-to-obtain-employee-benefit-documents.pdf and see attached. This problem comes up frequently when the parties were divorced 20 or so years ago and realized that no QDRO was ever submitted, and where the in-hours Plan Administrator doesn't have a copy, let alone the TPA. David how-to-obtain-employee-benefit-documents (1).pdf

Brian, thanks for the thorough response as always. The terms "trust" and "surplus" were the terms used by the client - which did surprise me - and got me going into more of the VEBA/ Trust direction, and they made no mention of a Sec 125 plan (but as you say, that likely exists). The client appears to "set aside" funds in a non-interest bearing account which is why they say they have a "surplus" at year end. I don't know if the account is in the name of the ER or the Plan yet, but I'd assume that could make a difference based on your notes above, as well as if they choose to "invest" those funds in some manner to create additional earnings. I see your point on the FSA issues and agree.

With a “self-funded” (really, unfunded) health plan, a period’s expenses can be less than or more than the employer budgeted. When there is an amount that looks like a “surplus”, it’s tempting to think an employer might use it to provide employees an increased benefit. But remember, when expenses for already promised benefits are more than budgeted, the employer is obligated to meet those expenses.

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