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I'm leaning on the 3 month requirement side. The intention is to make the plan a safe harbor plan, which requires that participants have at least 3 months to defer. Otherwise it's just a 401(k) plan with a 3% or 4% profit sharing contribution.

C.B. Zeller correct. Cannot condition profit sharing on deferrals..... it is matching and subject to testing etc. That said, Matching can be discretionary so I do not understand what the big deal is to the plan sponsor about the difference between Matching and PS. Add a Discretionary Match to the Plan and adopt a Board Resolution that says that it only applies to NHCE deferrals as follows: Deferrals from 1% to 3% are matched 200% on the dollar; Deferrals from 3% to 5% are matched 100% on the dollar; deferrals from 5% to 10% are matched 50% on the dollar. You will still have M testing, of course, but the goal for this idea should be to knock the lights out at the lower levels.

Yes we were successful with an anonymous VCP for a 403(b) plan where the "good faith" 2009 plan document failed to exclude the <20 hour/week employees but sponsor could demonstrate consistent application of the exclusion. Of course we were aided by the argument that the 2009 "good faith" document did not have to be perfect despite the Service's published position that eligibility errors could not be "corrected" when the preapproved 403(b) document was executed.

How do you account for the distribution after it is rolled over? Ignore it because you already reported it once? Only report earnings on the "rollover"? report it again? Not trying to shoot you down, just trying to work out what the practical implications of the workaround would be, assuming you don't want amend any prior reporting (5500, 8955, 1099,945) From a reporting perspective, Im not sure you can apply constructive receipt to every situation, so you may need to amend 1099s at least.

I have shown it in the past as a type of other income on the Sch H. I don't like netting with current distributions but not sure I could point to anything hard to cite. I don't see a reason to amend prior filings. You legit though the money was out of the plan. As a rule I don't see plans carry a liability on the books until the check clears the recordkeeper's system.

How is that incentive good for lower paid worker in present day. Half the 402g limit is $9,750. That's almost 20% of a $50,000 salary. All for what? An extra measly $500 in my retirement account?

I agree. I haven't found anything that eliminates 1.401(k)-3(e) which requires at least 3 months for a newly established plan (except for a brand new employer).

Bringing this back up. During the end of an ASPPA video hangout yesterday, this subject came up. There was quite a bit of disagreement. I felt (after the discussion above) that the 3 month requirement was still in place. Others (including @Larry Starr) were pretty firmly in the camp that the SECURE Act changed the law and that was no longer required. Would love to see some more discussion because I think this is very important.

If Y is a broker-dealer, then I don't think "access to Y's people" has much significance; it is normal for the B-D to have support staff assisting their brokers. If Y is another broker or similarly situated individual or entity, then the two phrases "...and have access to Y, Inc.'s people" and "No...shared employees" are questionable (potentially inconsistent). Edited to clarify

Wait, you think a pooled plan that is properly diversified would have problems in court because it is pooled?? Yep, participant direction takes away all the risk... Im just gonna leave this here...

This is but one scenario of many that are similar. Success through EPCRS depends on the employer establishing employee expectations consistent with exclusion.

Me thinks you are suffering from tunnel vision. I'd love to put you and @LarryStarr in a small room and see who walks out.

khn, aside from the issue of the responsibility of the auditor, this sounds really bad they way you've stated it here. The annuities still exist? Who is going to get the money? Will the payments be tax-qualified?

Bill, much appreciated. Thank you and be safe.

No issues. This is a strategy used by many employers.

There was an ARA write up early this year that said further IRS guidance needed, but assume that the 3 month requirement is still there. The 3 month policy is meant to give all participants an opportunity to make meaningful deferrals, I don't think that changes with SECURE. The have started to address SECURE issues, so we might get something closer to the 3 month deadline.

The SECURE Act changed the timing requirements for retroactive adoption of the safe harbor non-elective provisions. I don't see anything in it that changed the rules for the initial plan year. So, I think the initial plan year must be at least 3 months long, unless it is a newly established employer that qualifies for a shorter initial plan year under 1.401(k)-3(e)(2). Note that the definition of "employer" used includes members of controlled groups and affiliated service groups.

Since there is no insurance, there are no PS-58 costs. If there were insurance, it would be Table I, not PS-58 that governed imputation of taxable income. By self-insuring the employer gets no deduction for funds set aside to provide such a benefit until the death of the participant. Then upon a participant's death the employer gets a deduction and the beneficiary pays income tax on the distribution, which is ordinary income. If group-term life insurance were used, the employer would receive an immediate tax deduction for premiums paid, the employee would not have imputed income on the first $50,000 of benefit and the death benefit would be received tax-free by the beneficiary.