All Activity

I've been tasked with a 401(k) plan whose profit sharing contribution allocations are integrated with the SSTWB - a first for me. I realize that this PS allocation method is a type of safe harbor design, though probably not like the popular SHNEC and SHMAC 401(k) designs. Do you have to do 401a4 testing like when there are new comparability PS contributions in a SH 401(k) plan, or is that not needed because of the integrated design? Any pitfalls to look out for?

Plan has never ever had an employer contribution. Only 401(k). Changing pay definition would only affect test results. Revisiting 2024 (2 plan years ago). Reason for thinking about it - Changing Definition of Comp might benefit the 2025 ADP Test based on Prior Year ADP.

I know have more information in regards to all the paperwork signed/filed etc. I can't say for certainty this is everything. I again want to point out that the Person A is the Plan Administrator. So any time I say Person A or Plan Administrator I could use either qualifier. This conflict of interest, lack of transparency and other fraud found out in regards to assets/income are why the actions of Person A/Plan Administrator are being questioned. MID January 2022, a file was submitted to court and electronically signed by the Judge, titled: QUALIFIED DOMESTIC RELATIONS ORDER. It lists out over a dozen definitions like plan name, participant, alternate payee and other legal information. At the end of the form it says: Approved As To Form Only and is signed by Person A/The Plan Administrator's attorney. However, the date on the signature says DECEMBER 2022. This attorney requested and received recusal from the case in JUNE 2022. A letter dated April 2022, Ascensus addresses person B, stating "regarding the QDRO dated END January 2022, a full two weeks after the judge's signature mentioned in the point above" and included Distribution Request Forms A letter dated the following day in April 2022, again addressed to person B, with the header "QDRO Notice", states "we are in receipt of a DRO assigning you benefits...". The next section says "Upon our review of the provisions of the Order in accordance with the attached QDRO procedure (not attached), we have determined that it meets all requirements to be considered a Qualified Domestic Relations Order ("QDRO"). The signature at the bottom is Person A/Plan Administrator. There is an attachment to this letter. That attachment is titled "Determination as to Qualification as QDRO", then lists court information, then again says "DETERMINATION AS TO QUALIFICATION OF DOMESTIC RELATIONS ORDER", then states the parties involved/case number. This letter then states its purpose "The Plan Administrator hereby states and agrees as follows: The Attached Order is a Qualified Domestic Relations Order. It is then signed MID MAY 2022 by the Plan Administrator/Person A. There are no court records for April or May of 2022. The only item signed by the judge was in January 2022.

You only need to test them all together as one big group. Under 414(b), members of a controlled group are treated as a single employer for testing purposes. So if A, B, and C are all the same employer, and C, D, and E are all the same employer, then logically all of A, B, C, D and E must be the same employer.

Is there anyone out there who has Plan Sponsors that have "deemed Section 125 compensation"? And if so, how do you know about it and where is it reported in the payroll records, assuming it is?

No worries, no one is 100% here and we respectfully correct or disagree with each other when appropriate - that is what's great about this forum, it makes us all better.

First, implicitly this issue appears to be a question arising only under a plan using elapsed time. As someone stated above, under the applicable rules, the employment commencement date is the date on which the employee first performs an hour of service. This is the date that the rules require that service begins. That is, a plan cannot credit less time than what this rule requires. I believe a plan could use a more generous standard to determine the date on which service has to begin. Like someone said above, since it is the first year, it should not be discriminatory. § 1.410(a)-7(a)(2) provides in parts relevant to my thoughts: (2)(i) ...Under this alternative method of crediting service, an employee's service is required to be taken into account for purposes of eligibility to participate and vesting as of the date he or she first performs an hour of service within the meaning of 29 CFR 2530.200b-2 (a) (1) for the employer or employers maintaining the plan. Service is required to be taken into account for the period of time from the date the employee first performs such an hour of service until the date he or she severs from service with the employer or employers maintaining the plan. (3) Overview of certain concepts relating to the elapsed time method--.... (ii) Employment commencement date.... (B) In order to credit accurately an employee's total service with an employer or employers maintaining the plan, a plan also may provide for an "adjusted" employment commencement date (i.e., a recalculation of the employment commencement date to reflect noncreditable periods of severance) or a reemployment commencement date as defined in paragraph (b) (3) of this section. Fundamentally, all three concepts rely upon the performance of an hour of service to provide a starting point for crediting service. One purpose of these three concepts is to enable plans to satisfy the requirements of this section in a variety of ways. (C) The fundamental rule with respect to these concepts is that any plan provision is permissible so long as it satisfies the minimum standards. Thus, for example, although the rules of this section provide that credit must begin on the employment commencement date, a plan is permitted to "adjust" the employment commencement date to reflect periods of time for which service is not required to be credited. Similarly, a plan may wish to credit service under the elapsed time method as discrete periods of service and provide for a reemployment commencement date. Certain plans may wish to provide for both concepts, although it is not a requirement of this section that plans so provide.

Oh, absolutely! This one just has some extra stuff like links to each of the IRS and Social Security authorities for each year, and cautionary notes about the fact that 403(b) plans have more than one catch-up. But the IRS one works, too.

for Ascensus (Remote / IL)View the full text of this job opportunity

Agree with @Peter Gulia. More than a few years ago, that exact pattern happened to me: hired for a January 1 (Tuesday, holiday, office closed) start date, first hours worked on January 2 (Wednesday). But I was paid for the entire month, so the ER (wisely) treated me as employed on January 1.

If the employee’s pay includes pay for January 1-2, the rule cited above might suggest counting a time when the employee otherwise would work but does not work because of a holiday. “An hour of service is each hour for which an employee is paid, or entitled to payment, by the employer on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty[,] or leave of absence.” 29 C.F.R. § 2530.200b-2(a)(2) https://www.ecfr.gov/current/title-29/part-2530/section-2530.200b-2#p-2530.200b-2(a)(2). If a term to be applied is something other than an employment commencement date that refers to a first hour of service, the plan’s administrator might read carefully the plan’s definition. Or if the plan uses a word or phrase but none of the plan documents and none of ERISA title I, the Internal Revenue Code, or other relevant Federal law sets the in-context meaning of the word or phrase, a plan’s administrator might use its discretion to interpret the plan and its discretion to find facts. This is not advice to anyone.

Link updated and happy to have it still. I liked the acknowledgment of Ms Carol’s contributions on the page. Well done Bakers!

Here is a stupid question based on what is being discussed above, just curious as lately I am seeing this more than usual. I am not the police and I go with what the client says (though stupidly question it with the client) Example: December 15th, having an interview with the prospect and saying, I am hiring you effective 1/1/2025 (which is a Saturday) but the first day you can come to the office is 1/3/2025. So, what is DOH for pension purposes? Assume document says for eligibility: Completion of YOS Entry is 1/1 and 7/1 coincident with or next following Hmmmm

Consider also that “[a]n hour of service [might include] each hour for which an employee is paid, or entitled to payment, by the employer on account of a period of time during which no duties are performed . . . due to vacation[] . . . or leave of absence.” 29 C.F.R. § 2530.200b-2(a)(2) https://www.ecfr.gov/current/title-29/part-2530/section-2530.200b-2#p-2530.200b-2(a)(2). While a norm for many employees is that one must work a while to accrue vacation days, an executive or valued knowledge worker might get a different arrangement. I’ve seen employments begin with a paid vacation or mini-sabbatical—often, two months or more.

With such a large return it leads me to believe there is little employee participation. The safe harbor plan design will make sense to the employer once the plan becomes top heavy.

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.