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Although not recently, we used to see mistakes where Plan A contribution was mistakenly deposited into Plan B. The solution was simple: just transfer it to the correct location/trust. If you need an adjustment for earnings, make a reasonable estimate and do it. But do it immediately, and document it completely.

As of right now, it looks like the article is running under the title "America’s Booming Solo Workers Embrace $72,000 Tax Shelter" Besides Form 5500, possible pain points include: Capturing any non-owner employees who are required to be covered (including long-term part-time employees) Analysis of related employers which could result in a controlled group or affiliated service group With respect to an unincorporated business, calculation of net earned income, both for purposes of limiting contributions to 100% of compensation and deduction of employer contributions to 25% of compensation Applying limitations on distributions Applying mandatory tax withholding on distributions Reporting distributions on Form 1099-R Applying a plan's loan provisions

I do not think you can formally state two groups, those employed 2/15/PY+1 and those not, because a person's grouping is not determinable by PYE. Draw a parallel to changing an HCE top-paid group election after PYE, where the result changes a person's status under the plan, which is impermissible. Using individual allocation groups in the document but in practice determining two allocation groups by your desired methodology is the best way to accomplish what they want IMHO and I think that of most others. If said 2/15 fell on a weekend or holiday and/or for whatever reason the plan sponsor wanted to accelerate or delay that date, individual groups compared to hardcoding, even if such was permissible, makes administration accommodating. Just because the document allows for flexibility doesn't mean it needs to be used. Finally, you mention a parent and a lot of subsidiaries all with their own plans with separate RKs and independent testing. Is no one concerned about testing in consideration of the control group?

Yeah, the times I have seen this error we didn't put this much thought into it. We got the money moved to the correct plan. If we thought it was material there was some earnings transferred. I have to admit I don't recall any of these plans ever getting an IRS or DOL audit also. But at times the KISS Principle works.

Any way to amend the trust so that a single trust holds both plans assets rather than moving dollars? I would have legal counsel opine because I don’t know that it can be done after the fact. But we do know it can exist.

Agree with your suggested solution but also strongly suggest some formal legal guidance which could also ascertain risk. I would not "cheap out" given the size of the assets. Other key thoughts: who made the mistake, when did it occur, when was it discovered, and how soon thereafter was it corrected? Was this one big errant transfer or a series of errant transfers? Were they caused by honest clerical errors or was someone asleep at the wheel not paying attention. Was this the plan sponsor's doing or a third party? Documenting all that and fixing ASAP at a minimum is what I would suggest - put the plans where they'd be had the mistake(s) not occurred. Maybe a VFCP filing would be appropriate. My only formal advice here - get qualified legal guidance.

Check the BPD - it should say that for a self-employed individual their compensation is their net earned income from self-employment, so whatever AA option gets checked I don't think it matters much.

As a former TPA I will tell you these are generally not great clients. I dont mean in the sense that they are jerks or that they don't pay their bills. I mean they are so "unusual" from an operational perspective that only a partner can assist and answer their questions. There is no detailed work ti be done, so not much that a staff person can do. So if you bring on one of those clients, it's basically 100% partner time which starts to raise the quesiton of "can you charge enough money." I used to tell clients, "it's not worth it for you to pay me what I need to get paid to do this work for you, but I cant do it for any less. If you want me to be available to you when you call, I need a decent fee." I would review the plans all the time throughout the year for, amendments needed, invoicing, collections, you name it. Just having a plan on the books takes time even if I'm not doing any work. I used to charge $1,250 a year and I still think it wasn't enough sometimes.

As stated already, I think the majority of "solo 401ks" are created without a TPA, but via a financial advisor or CPA. Only after issues arise, all those already mentioned, does a TPA/Attorney get involved. Recently, I had one referred by a CPA where his client thought he had a SEP not a 401k plan, for over 15 years. Another was set up without anyone asking the ownership/controlled group question. I think these plans are more likely to have alternative investments which can bring more unknown complications. They seem simple to market and run, until they are not.

In addition to the issues mentioned by @C. B. Zeller, (the control group / affiliated service group / related employer group issue is so common!) some what I see: Disregard for deposit timing, both for deferrals, and Over contributions thinking it can count towards a future year even though the deposit occurs this year. - think throwing in an extra $100,000 because they have the cash available and want it to grow As well as disregard for limits, such as depositing up to what they think is the maximum, even though the W-2 compensation they have paid themselves(or a covered spouse) is substantially lower. Investments in unusual assets with no additional compliance such as an independent appraisal for valuation Assets/accounts titled to the business rather than the plan name when they were intended to be for the plan Starting more than one plan every time they get a new account or advisor. Or thinking they have more than one plan when really a new doc with a new account might be a restatement of the older document, but they don't realize it Compensation not being eligible - thinking that profit and loss is enough, and not having earned income, but still making contributions Failure to make any contributions - for 5, 10+ years(sometimes nothing beyond the first year) at that point the plan isn't really a plan and should be terminated and closed

Peter, just because the document says everyone is in their own group, it’s incredibly rare to actually have to test more than a handful of groups. For example, everyone that is employed on the February date would likely be in the same group for testing. The plan definition just provides flexibility on how they are grouped.

Hiya Peter! Thanks for all you do for this community, I appreciate the way you step up to make sure correct information gets out there and questions get answered. There are lots of other folks on this board that have also shared their deep experience, and perhaps they can weigh in here: In all the years I've been using the General Test for Non-discrimination (Cross testing), I've developed a "wait and see" attitude. I have been surprised many times when the math doesn't work. One really knows nothing until the tests are performed. I would advise a Plan Sponsor against jumping to conclusions about the likelihood of passing the tests. I have also been surprised when a Plan passes testing when at first glance I thought that it never would.

Also agree with @justanotheradmin and @Bill Presson. Assuming no coverage and nondiscrimination concerns, I would use the everyone in their own group document provision and then utilize that 2/15 methodology for allocation determinations. What you lose in that is the ability to statutorily exclude from testing those who terminate during the plan year with 500 or fewer hours. I do not think you could write the 2/15 of the following year into the document as your allocation entitlement would not be determinable by the plan year end. I think someone in this forum asked this same question (maybe with different date) within the last year or two, if memory serves.

Agree with justanotheradmin with one caveat: if the plan is top heavy, anyone employed on 12/31 will likely have to get a contribution whether they are employed in February or not.

Is this allowed? and if yes, does it have to be written into the plan document? offhand I don't know the answer to your first question. I suspect there is something about definitely determinable as of the last day of the plan year, but I am unsure, but I suspect it is allowed, based on my answer to the second question. Does it need to be written into the plan document at all? If the plan uses a "everyone in their own group" method of allocating the employer contribution, and testing passes, why would an allocation condition need to be written into the plan document at all? An employer could decide "everyone who wears blue shoes in November" gets an employer contribution this year, and the plan's TPA, recordkeeper, etc might never know that is the reason why some people got a contribution that year and not others, even if the TPA was the one who performed the testing. When the allocation groups are not a safe harbor classification - full testing has to pass anyways. So use whatever criteria or allocation restrictions the client wants and as long as it passes I would think its okay.

If the MPPP component is currently active then an advance 204h notice is required prior to such component being frozen/terminated. Only affected participants (active in the MPPP component) need get notice. If the MPPP component is not active as it was frozen previously, for which a 204h would have been required at that time, terminating the plan with that component does not trigger another 204h requirement. We see this all the time in DB world - issue 204h notice when plan is frozen, not again at termination (but is referenced in the Notice of Intent to Terminated - "NOIT").

If a participant specifies a 100%-of-pay elective deferral, many employers and plan administrators interpret a plan to restrain such a deferral to what’s available after required withholding. Here’s a simplified illustration, assuming no tax beyond Federal taxes, and assuming nothing else taken from the worker’s pay: Pay before any withholding $10,000 Withholding for OASDI tax $620 Withholding for HI tax $145 Net pay after withholding for wage taxes $9,235 Federal income tax withholding (22% x $765) $168.30 Pay available for elective deferral $9,066.70 Elective deferral $9,066.70 Net pay $0.00 I’m not aware of a particular statutory authority. Some might follow a principle that what otherwise would be a contract promise or obligation that would require a person to disobey applicable public law is legally unenforceable. This is not advice to anyone.

Exactly! Whenever I see the phrases "husband and wife" and "cash balance" and "overfunded", I wonder if the last one is true. Has there been a real 415 test? A consulting actuary would ask lots of questions, which might include: Why is a husband/wife plan structured as cash balance rather than traditional DB? Do the participant(s) have health status that impairs insurability? What is the magnitude of any "overfunding"? What are the ages of the participants? How soon do the participants plan to retire/cease working? Are there others (e.g., children) that might join the business? Do the participants plan to choose a lump sum distribution (at some later date) or choose a J&S payment form? Does the business also have a DC plan? A really good consulting actuary will explain to the plan sponsor how these questions are inter-related.

Putting insurance in a pension plan is usually a great idea if you are the agent making the sale. Your client should talk to their accountant and/or financial advisor (not the one selling him/her the insurance) and determine if it makes sense from a long term financial perspective. It might be a great idea, but more likely a its a horrible idea.

2% Shareholder premiums are generally already included in the box 1 figure. This is one reason why it is good to cross check comp on payroll reports against the actual W-2. Payroll reports through out the year do not usually include the 2% shareholder premium, it is tacked onto the final income reporting at year end and reflected on the W-2. An aggregated payroll report for the year may not include it, which it often is needed information to correctly determine Plan Compensation. The amount in box 14 is for informational purposes, not tax reporting purposes. So if the plan definition of compensation is gross W2 with no exclusions, usually you would take Box1 + pre-tax amounts in box 12. If there are pre-tax amounts NOT reported anywhere on the W-2, such as §125 or employee HSA contributions, those get added as well, because absent the employee's election to put money into those buckets they would have appeared on the W-2. Box 3 - I pretty much only use it for HPI determinations unless your plan doc has some interesting definition of compensation. Box 5 - this almost always means nothing for plan purposes unless the plan doc has an interesting definition of compensation

Editing my initial answer since I misread the question . You are asking if you can amend the plan by 12/31/2025 for a 2026 change from SHM to SHNE? Technically, you can make the change at any point before the plan year starts. A question that could be asked is whether participants will have a reasonable time to make changes to their elections after you amend, and if they are negatively impacted by the change if they do not have reasonable time to change their elections. I think you are fine since you are providing the SHNEC in place of the SHM and participants will not miss out on any of the employer contributions even if they do not have enough time to change their elections for the first payroll. It would be different if you went from 3% SHNEC to 4% match and a participant did not have time to change their election to receive the full 4% match.

I have heard of consequences from not filing a Final 5500. The two partners rolled their plan accounts to IRAs and thought that was that. Five or so years later, the IRS said your money purchase plan is still on-going. Where is your latest restatement and 5500 filing? I don't know what it cost to untangle the mess.

You will report credits earned in each year 2023, 2024 and 2025. It helps to see what the form looked like (https://www.irs.gov/pub/irs-pdf/f8554.pdf) to see what information is required, but renewals are easier using pay.gov. The place to start is here: https://www.irs.gov/tax-professionals/enrolled-agents/maintain-your-enrolled-agent-status Here is a fairly detailed description of the renewal process: https://accountably.com/irs-forms/f8554ep/ (my including this here is not an endorsement of their service). I agree the calendar-year dates for earning credits tied to off-calendar-year dates for the renewal application period and a different off-calendar-year dates for the expiration of the renewal makes it seem more complicated than it needs to be, but in our business most things that are tied to off-calendar-year dates seem more complicated than they need to be.

I will say, while most advisors will just use the plan documents provided by a custodian (Altruist/Charles Schwab) without even reading them, there is a growing group, especially in XYPN, that will typically bring in providers like mysolo401k. But I mostly see advisors using the custodian's plan docs, and the advisor takes on a pseudo admin role without having the knowledge to step into those shoes.

Could not agree more. However, I believe we are going to see more issues as AI becomes more prevalent with the "do-it-yourselfers". We've referred a handful of cases over the past several months to ERISA Attorney's for correction of a host of issues when the "do-it-yourselfer", or their other "professional advisor", realizes there is an issue.

Not that more is needed, I often come across plan documents not being up to date, no Cycle 3, sometimes no Cycle 2. I often find these are set-up without a TPA, generally with an investment advisor and accountant.

Okay, the idea here is that she wants to get to her DC annual additions maximum, which will likely exceed the sum of the deferral max and then the 6% DC allocation. So she does the rest as employee after-tax. as having no employees means the ACP test is passed. As for the backdoor part of the Roth, that's just a Roth conversion of some/any of the total, including the employee after-tax, so that she's basically gotten the full DC max and it's all/some become part of a Roth account within the plan.

Said another way, its incredibly rare to test more than a handful of rates. Everyone in their own group, maximize owner, and 5% to all others is very common (as long as it works for testing of course).

Ok lets be dumb and set aside the oddities but they have been covered enough I won't beat the dead horse too much. I would check if this is an Affiliated Service Group. I have to admit I know enough about these to know to look as you see them infrequently. I mean what are they doing for this company as "owners" if not managing it? It might not be a service organization for example. My guess even if they think they can thread the needle on the Affiliated Service Group rules and so forth in an audit the way they are being paid becomes the issue. This seems to be set up to exclude the rank and file from benefits they want for themselves. I just try to avoid the stink of pigs in this job and this has the stink of pigs trying to get benefits for themselves they aren't willing to give the rank and file.

CuseFan - excellent memory!

Also remember that limit only applies if the cash balance plan is NOT subject to the PBGC.

Additionally, practitioners should note that the 80/120 rule is administrative and regulatory in nature. It is NOT a statute; thus, not appropriate to assume its application extends to anything else.

CuseFan is correct in pointing out that the 80/120 is used for determining whether the plan must file a 5500 versus a 5500-SF. BPF916, the 1-100 participants for the start-up credit really is not black and white. The count is based on the employer: having 100 or fewer employees (not participants) who had compensation of at least $5,000 (regardless of plan eligibility) in the preceding year (subject to an available election to have the first credit year be the year preceding the year containing the effective date of the plan) There also is a 2 Year Grace Period where the employer is considered eligible for the credit for the 2 years following the last year the employer was eligible. Check out all of the eligibility criteria because there are certain conditions that will disqualify an employer from taking the credit such as the employer was involved with a merger, or there are related companies with existing plans, or if the employer had a plan in the 3 years prior to the new plan. None of this has to do with the 80/120 rule.

The 80/120 rule only applies with respect to which 5500 form a plan may file, nothing else that I know of.

Going fully remote with no experience in the field likely will be next to impossible. Consider a strategy that demonstrates a strong work ethic and commitment to learning the business along with establishing some personal contacts with people in the business. Pursuing starting to build professional credentials by enrolling in courses available from industry groups/associations like ASPPA. A QKA (Qualified 401K Administrator) would be a great start, as would a RPF Certificate (Retirement Plan Fundamentals). There are many different types of firms that work with retirement plans - third party administrators, recordkeepers, financial advisors, accountants, banks/brokerage houses... - so explore opportunities with any of these firms that are close enough for starting out with a hybrid approach. Look for professional associations that hold periodic, in-person events. They provide opportunities to connect face-to-face with industry professionals. There also are some mentoring opportunities such as the Thrive Mentoring Program. You can find additional here: https://www.usaretirement.org/get-involved/special-initiatives/thrive-mentoring-program/ It will be a challenge, but the professionals in the retirement plan industry welcome anyone who is committed to working in the field. Best of luck to your daughter!

Could that sentence be interpreted as "marked as terminated"? There's no way, operationally, to 'remove' anyone quickly.

Removing the participating employer on the transaction date is fairly easily done. I can’t imagine “removing” the participants as of the transaction date. It’s either a distribution or a spinoff and that will all likely take way more time.

True, but if the employer is locked in for gateway purposes, especially adding a CBP to the testing, discontinuing any SHNE isn't likely in the cards.

You mean like https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500 ?

The ASPPA courses: Retirement Plan Fundamentals and Introduction to Retirement Plans are excellent. ERISApedia is also excellent, there are a lot of recorded webcasts on many different topics.

Many of these one-participant plans have < $250k of assets and don't need to file 5500-EZ while operating. Still, a Final 5500-EZ is required when the plan closes, and this is often missed. I've never heard of consequences from not filing a Final 5500-EZ but maybe a future IRS/DOL will datamine that filing miss to generate revenue.

What you stated in your original question is why typically when you have a 401k plan with a cash balance not subject to PBGC, it is better to have a Safe Harbor Non Elective plan than a Safe Harbor Match plan in regards to staying within the deduction limits when trying to pass 401a4 testing.

I think clarification is needed on this. If the owners of the company are sponsoring a 401k plan, it's either an incorporated business for which they are not being paid wages, therefore cannot defer, or it's unincorporated in which their income should pass through to their Schedule C or K-1 as self employment income. Typically the business would pay independent contractors via 1099, but it doesn't seem right that the owners of the business would qualify as independent contractors. It seems to me they are already eligible for the plan they sponsor unless specifically excluded. The only potential qualification issue is if they sponsor a Safe Harbor Non Elective 401k plan and were entitled to Safe Harbor Contributions based on their SE income and did not make that contribution.

Peter, you are not overlooking anything. Plans are designed to gather information beforehand about participants and money coming into the plan. This is not built into the Saver's Match design. There is a significant mismatch between how retirement plans are administered and how tax "refunds" (read money paid from the Treasury to an individual) are administered. The simplest way to characterize a recordkeeper taking on administering Saver's Match account is trying to pound a square peg into a round hole. The SPARK comment letter's great detail about the mechanics of moving the money around is just one example of the issues a recordkeeper will face.

First, the Saver's Match has to survive 2026. The topic will start to gather attention based on the mandate for Treasury to report about it to Congress by July. The target recipients of the Saver's Match low- and moderate-income employees, replacing the pre-existing Savers’ Credit for low- and moderate-income employees who make contributions to retirement plans. There are elements rile up anti-DEI advocates such as the multilingual communications, and some analysis published in PlanSponsor magazine that concluded "Plan sponsors and participants both benefit from retirement plans implementing the Saver’s Match because adding it could reduce gender and race disparities in 401(k) balances, finds research from the Collaborative for Equitable Retirement Savings." IRS Notice 2024-65 says: "Section 104 of the SECURE 2.0 Act requires the Treasury Department to take steps to increase public awareness of Saver’s Match contributions, and to provide a report to Congress no later than July 1, 2026, summarizing the anticipated promotional efforts. The report must include a description of plans for: (1) the development and distribution of digital and print materials, including the distribution of such materials to states for participants in state facilitated retirement savings programs; (2) the translation of such materials into the 10 most commonly spoken languages in the United States after English ..." Assuming is does survive, a few recordkeepers at best will offer to receive and separately account for the match, and administer the more restrictive withdrawal provisions. No recordkeeper has access to the information needed to calculate the match or determine if the match calculation is accurate. Since retirement plans are not required to accept Saver's Match contributions and since IRAs can accept the Saver's Match, it is very likely that most plan recordkeepers will not accept it and refer clients to direct employees to IRAs. It is possible that some state-run plans built around IRAs would be more interested in pursuing this.

Box 1, taxable wages, includes the 2% S-corp shareholder employee health insurance premium of $16,293.32 since it is taxable to the employee, but does not include the pre-tax deferral amount of $20,150 since it is not taxable. On the other hand, Box 3 and 5 do not include the 2% S-corp shareholder employee health insurance premium of $16,293.32 since it is not subject to FICA tax, but includes the pre-tax deferral amount of $20,150 since it is subject to FICA tax. Statutory comp would include both of these items, so if you make the applicable adjustment to each box, you get to the same number (rounding to the integer) - Box 1: $96,143 + $20,150 = $116,293 and Box 3/5: $99,999.90 + $16,293.32 = $116,293. Note Peter's point about checking the document, though. It might exclude the 2% S-corp shareholder employee health insurance premium (e.g., exclusion of taxable fringe benefits) for plan/allocation comp purposes, in which case you would use $99,999.90 for computing your employer allocations.

This amount should just be earnings that goes into the participant's account. These lost earnings are technically interest paid on a loan the employer is considered to have taken from the participant's account during the period of time the loan payment was being held by the employer before being sent to the trust. The participant did not pay this interest, the employer did. It is considered like the employer took a separate loan from the participant's account and must pay interest on that separate loan. It is the earnings that were lost (should have been earned in the participant's account( because the payment of the loan repayment was not sent to the trust on time Accordingly, the payment of these lost earnings should not affect the amortization schedule of the original loan. Again, due to it being an untimely deposit of the loan payment, it is not an amount owed by the participant on the participant's loan but an amount owed to the participant by the employer due to its prohibited transaction loan. Make sense?

Correct, family aggregation went away with SBJPA '96. (but for real, no attribution there)

Thanks everyone. I really like austin3515's suggestion to go with the 4% SHNE. We are possibly adding a Cash Balance Plan and the gateway will be at least 7.5%.

Is there published IRS guidance that says that? I'm not aware of one but if it exists I'd like to see it. It can't be applied for minimum funding because it past the deadline, but I see no reason why the tax payer can't apply it on their tax return if it is timely made for tax deduction purposes and designated as such by the Sponsor.