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This goes back to one of the basic ideas to me. Why is the payroll company telling the plan and sponsor what can and can't be done vs the plan document and the sponsor telling the payroll company what needs to be done? The sponsor and the plan are the customer for crying out loud! The plan document not the payroll company determine what can and can't be done in the plan. The sponsor is most likely paying the bills. Yes, I understand the payroll company has its ways but if the 401(k) deferral was legit the payroll company needs to find a way to make the W-2 match reality instead of people trying to get reality to match what the payroll company wants to see happen.

Hmmm, Safe Harbor Plans, new regulations and differing opinions on what the regulations really mean. I'm having a deja vu moment.

I am a little nervous with the term "broad discretion" when referring to setting eligibility. The plan administrator/employer needs to set the eligibility requirements in such a way that it does not discriminate against a certain person/persons. If they are thinking about writing something other than "pre-65 and 10 years (or some other number of years) I would get a little nervous and ask for legal opinion.

We don't get one if investments are on a platform and the recordkeeper will handle 1099s and WH.

But is it allowed? I'm sure its a major pain, but if it isn't prohibited I don't see why the payroll company shouldn't correct it. You may have to pay for it if you didn't fill out the correct check boxes but it would solve any plan issues. And if they refuse, get a new payroll company. On second thought, I would probably get a new payroll company either way.

Just guessing - it falls outside the pigeonholes, and it would require someone who actually knows something to do some extra work. I know in a prior life at a large corporation, reversing certain transactions could take two or three days, as each "step" had to go through overnight batch processing, then be checked the next day to make sure the system had properly updated, then do step two, wait overnight, etc... The service folks hated those.

For $500, I'd call this a lesson learned. People should be making deposits based on a payroll report, not some assumption. (And they should be using a payroll company that says "hey you need to set this up right or it won't happen" instead of just processing and cutting off; that's pretty pathetic...but you asked to not comment on payroll companies.) A mismatch will almost certainly, I think, result in IRS correspondence, and if an accountant is involved, the fees will immediately exceed the potential tax savings, and frankly, I don't think he has much of a case anyway. I suppose if he wants to hold his company liable for failing to withhold as he requested he could go that route and then EPCRS, but frankly that's more than a little nutty IMO. You could definitely shift it to the ER account, especially if that amount or % wouldn't have to go to others. Even if you wind up giving something to others as a result, I personally would not be worried about the timing issue for the amount of money we're talking about. I must say that none of this makes sense; initially you said he tried to maximize catchup and now you're saying $500 is involved so I am actually not sure about any of this.

This is precisely the thought process I had when I opined that the FIS language seems to permit the change without an amendment. When I queried FIS, of course they opined differently. I suspect (and I can't blame them, really) that unless the IRS makes some additional public statements/guidance, FIS will pursue the extremely safe and conservative interpretation. You certainly can't get in trouble using that approach. They have a gazillion plans using their documents, so I can understand them wanting to cover their tails. And, one could also reasonably adopt their interpretation, even if it isn't a CYA situation. Funny - I can't remember another issue generating this much discussion in such a short time.

Austin: We are a major modifier of the Relius document, but I don't think we modified this section. Here's the analysis: It’s 4.3(e) of the BPD, which provides in pertinent part: Notwithstanding above, effective for Plan Years beginning after the Plan Year in which this Plan document is adopted, Forfeitures may not be used to reduce any Employer contributions which are required pursuant to the Code to be fully Vested when contributed to the Plan (such as QMACs, QNECs and "ADP test safe harbor contributions" other than QACA "ADP test safe harbor contributions.") The first part of that, by way of limitation, prohibits the use of forfeitures as an offset to contributions which must be fully vested at the time of contribution (which until the IRS proposed changes included QNECs & QMACs – which are the types of contributions used to satisfy safe harbor requirements. Since the proposed regulation (and given that it explicitly allows retroactive reliance) QMACs and QNECs are no longer required to be fully vested, when made, so the limitation in that plan provisions (can’t use forfeitures to offset contribution required to be fully vested when contributed) is still an effective limitation – it just no longer applies to QMACs and QNECEs (hence, no amendment necessary). The parenthetical that provides “such as QMACs, QNECs…” is explanatory, and not a limitation, so this change makes that language superfluous and of no effect.

The 2015 ADP is the ADP of NHCEs in 2015 so yes he is included in the NHCE ADP for 2015. The 2016 ADP of the HCEs is all HCEs in 2016 so he is a part of that group too. The 2016 ADP of HCEs is compared against the 2015 ADP of NHCEs. This isn't all that uncommon when an employee crosses the pay threshold to become an HCE, marries an owner, or becomes an owner.

Have you given an equivalent, pro-rata contribution to the employees? If not, then as I understand it would be viewed as discriminatory by funding an owner before the employees.

New feature -- It's now possible to delete all notifications (the ones that appear in the pop-up window when clicking on the bell icon at the top of the page). Look for a "Clear Notifications" link at the bottom of that pop-up window. It seems to work well for me. (This is an "add-on" I located and installed.) Thanks for the suggestion, GMK !

Is the plan set up through the payroll company, or are they just doing the payroll?

I'm having so much fun with calculations that I had to do some reading on this as well. EOB pretty much agrees with Tom's notes it looks like (Ch. 3B - Part 2 - Section IV - Part A - Item 5). The highlights from the section: There is not a specified due date for top heavy contributions In order for the contribution to be deductible for a particular tax year of the employer, IRC §404(a)(6) requires that the contribution be made no later than the due date (including extensions) for filing the federal income tax return for such tax year. Under the IRC §415 regulations, an employer contribution is generally treated as an annual addition for a particular limitation year if it is actually made no later than 30 days following the due date (including extensions) of the federal income tax return for the employer’s taxable year in which the limitation year ends. See Treas. Reg. §1.415-6(b)(7). Use deduction deadline or IRC §415 deadline as informal deadline. If the two deadlines discussed above are used as an informal deadline, then top heavy contributions made after such dates should include an adjustment for lost earnings. A reasonable approach is to use the IRC §415 deadline if the employer has not made the contribution for any non-key employees and to use the deduction deadline if the employer has missed one or more, but not all, non-key employees in making the top heavy contribution. This approach also would be consistent with a reasonable approach for making employees “whole” through the self-correction mechanisms under the EPCRS program. In the latter case, the earlier deadline is used because other non-key employees had the benefit of the contribution by such deadline for earnings purposes.