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Yes, some advisors and plan sponsors have read articles about making voluntary after-tax employee contributions to qualified plans. As pointed out above, these articles leave out some important points. After-tax contributions must be tested for nondiscrimination (the ACP test), even if the plan is a safe harbor 401(k) plan. That means: if zero NHCEs contribute true “after-tax employee contributions”, then the HCEs can only put in $0.00 of after-tax contributions – thus the HCEs all get a full refund back of their after-tax contributions, and if refunded too late, it is subject to a penalty. In my opinion, after-tax employee contributions should be found mainly in: An owner-only plan where the owner’s compensation is low, but the owner is sitting on a pile of cash. The after-tax contribution is needed to reach the 415 limit because the overall deduction limit is 25% of pay. A non-profit entity with no HCEs (or any plan with no HCEs for that matter). Any entity with only HCEs High skill organizations where the “NHCEs” are actually quite highly paid and those NHCEs have average deferrals that are already significantly higher than the deferrals of the HCEs without an after-tax option. Also note that after-tax employee contributions are also part of the general test for nondiscrimination under Internal Revenue Code Section 401(a)(4) – treated like a match or deferral for purposes of the average benefits test. The articles out there almost always leave out the testing problems associated with after tax contributions. They imply that this is a new concept or an obscure loophole, but it’s nothing new as mention above. After-tax has been around for longer than 401(k) plans have been around. I would not recommend including the after-tax provisions in a plan that has the typical NHCE group, but if the Employer really wants it, I recommend the HCEs not use the after-tax feature in its first year. After that first year-end, run the test to show just how much after-tax the HCEs would have been able to keep in the plan. And bill them for your extra time. You might find that some investment providers are pushing an after-tax “emergency fund” idea. The rank and file contribute after-tax and they can withdraw it at any time (yes, after-tax can be withdrawn any time). The downside of this concept is the withdrawal fee. If the distribution fee is perhaps $65 and the NHCE has an after tax balance of $650, well that’s a 10% cost to get the money back. Banks fees are much less than that. In-Plan Roth In contrast to after-tax contributions, In-Plan Roth Rollovers and In-Plan Roth Transfers (Roth conversions) are not subject to the ACP testing described above because they aren’t contributions. If the plan has both In-Plan Roth Rollovers and In-Plan Roth Transfers, the participant can convert all or any portion of their vested pre-tax balance into Roth, including balances from employer contributions, even if they are not eligible for a distribution. The IRS actually has a nice explanation of the details. https://www.irs.gov/Retirement-Plans/Designated-Roth-Accounts-In-Plan-Rollovers-to-Designated-Roth-Accounts Here is a case study with after-tax: S. Corp Owner/employee: Age 51 Eligible W-2 compensation: $60,000 Plan type: 401(k) only – owner only plan – no other employees Assume the owner’s reasonable compensation is only $60,000 (W-2 compensation). Perhaps additional income is also provided from S Corp dividends, but that can't count for plan compensation purposes. The deduction limit is 25% of $60,000, or $15,000. However, the 415 contribution limit for 2017 is $60,000 (the lesser of 100% of pay or $54,000, plus catch-up deferrals). Even with elective deferrals included, the maximum pre-tax contribution available is only $39,000 ($24,000 + $15,000), leaving $21,000 of the contribution limit unused (see figures below). By adding an after-tax contribution option, this business owner now has the ability to put more money away for retirement in the 401(k) plan by utilizing the entire 415 limit including catch-up deferrals. You'll have to scroll, probably, to see the figures below to the right, but its $24,000 deferral, $15,000 profit sharing, and $21,000 after-tax. Elective Deferral (includes $6,000 catch-up): $24,000 Employer Profit Sharing (limited to 25% of pay): $15,000 After-tax Contrib. (can convert to Roth): $21,000 Total Contributions: $60,000 I hope this helps.

February 5

There was absolutely a clear answer at Annual but some in the audience did not want to accept the answer. The answer is that if you have immediate eligibility and later change that eligibility to something else, those who have not met the new eligibility are now not eligible to participate. There are no cutback issues here (which is what Brian was saying in his session and Sal confirmed during the general session the next day). But wait there is more... If you want the people who are in the plan to stay in, simply make your amendment prospective and you won't have any issues. As for discrimination issues, you should be fine changing the eligibility within the statutory limits.

2/5. Operate the plan on a cash basis.

And just to be clear, the reduced fee "should" apply. We just received approval on one which covered a key employee so we couldn't use the standard correction checkboxes. But we just copied and pasted the language of the standard correction checkboxes as an invitation to have the IRS approve the submission in the same manner. They did. And while we warned the client that the reduced fee might not apply, we submitted only the reduced fee and the IRS accepted it. That, and $4.95 will get you a tall coffee somewhere.

What John said.

The QDRO procedures should cover the circumstances expressly and give you the answer. I would advise that the QDRO procedures of a plan that only has a death benefit for a spouse (a QPSA) should provide that for a "separate interest" QDRO (for those who presume to use that term, correctly or not), the pre-distribution death of the alternate payee extinguishes the interest and the participant's former interest (what was assigned to the AP) is not restored. If the QDRO procedures are incompetent and fail to address, I would advise the same result by interpretation and by application of the statutory language (more on that below). If the plan provides for a death benefit that is not restricted to a spouse of the participant, then the answer is not so clear, and neither is the law. It is even more important for the QDRO procedures to cover the circumstances and for the fiduciary not to approve a sorely ambiguous QDRO (as the post describes -that "separate interest" language is trouble). One can argue that the accepted (shame on the fiduciary) language means that the AP's interest included the related death benefit, so the AP's beneficiary (and who is that?) gets the related death benefit. Personally, I see in the statute lots of language about the need for express award of death benefits in order for an effective assignment of death benefits, as though there is a presumption against the implicit award of death benefits under any circumstance.

I think in most cases it is up to you, at least in the case of Roth vs traditional deferral (of course maybe your document is hard coded otherwise) (The following is for ADP corrections, though I would think similar logic applies for excess deferrals) the FT William master document has (4) Refunds. If the Plan permits Roth Elective Deferrals, the Plan Administrator shall determine the ordering rule for refunds of Elective Deferrals made as a result of any testing failure; provided that such ordering rule is nondiscriminatory. Such ordering rule may provide that the Participant may elect to have refunds made either from his Pre-tax Elective Deferrals or Roth Elective Deferrals or any combination thereof. oh heck as long as it copied I will include: CCH INCORPORATED, DBA FTWILLIAM.COM 40 Copyright © 2002-2015 As for the calculation of gains attributable “ …the sum of allocable gain or loss for the plan year…”1.401(k)-(2)(b)(2)(iv)(A) Or the alternative method speaks of “…beginning of year …” as well 1.401(k)-(2)(b)(2)(iv)(C) There is no mention of “Calculate gain from date of deferrals last deposited”. “Any reasonable method may be used for calculating gains 1.401(k)-(2)(b)(2)(iv)(B) but since both A and C speak of plan year, or beginning of plan year I don’t see that as saying Last deferrals in first deferrals out.