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There was a thread on this recently. My opinion is that the 30 days is a safe harbor but it doesn't mean you can't do it with a shorter time frame - facts and circumstances would dictate that if a plan is just set up on 9/30 you can't give 30 days notice.

Calendar year plan? Mary is a Key employee and HCE for the 2021 year as she owned more than 5% at any time in the 2021 calendar year. For determining the TH ratio for 2022 Mary is a considered a key employee as of the determination date.

David, FWIW, here is a fairly recent scenario I am familiar with. Sponsor of a frozen PBGC-covered plan was headed toward likely bankruptcy. The Plan permitted lump sums in many situations, and although it was significantly underfunded on a PBGC termination basis, its AFTAP was high enough that lump sums were not restricted by the funding rules. The PBGC was well aware of this case and had been closely tracking the employer's finances through its various monitoring activities. Bankruptcy lawyers with ERISA expertise were assisting the employer. Right up until the official date of PBGC takeover, the plan continued to pay the lump sum value of the participant's full accrued benefit where there was a valid lump sum election, even if that accrued benefit exceeded the amount that the PBGC would guarantee if paid as a life annuity. Peter asks an interesting question but it's beyond my expertise.

I agree as well. The notice (if required) should be delivered to participants within a reasonable period before the beginning of each plan year. at least 30 days but no more than 90 days is deemed to be reasonable, but other periods can be reasonable as well. Personally, i find it unreasonable to deliver a plan notice for a plan that does not even exist yet. So if I sign a plan on 10/1, 10/1 is the earliest day the notice could be delivered (and I would argue that is completely reasonable). I agree with Cusefan that the plan is supposed to be ready to accept deferrals for 3 months, so 10/1 may be pushing it unless you have a backup plan for deferrals.

Agree as well - for brand new plans I thought the notice could be any time before effective date. Also, remember that the notice for 3% SH design is no longer required, it is optional. But I think the plan needs to be ready to start deferrals effective 10/1 as well. I don't think you could make it effective 10/1 but then not start taking deferrals until November because the admin wasn't set up - at least that's my understanding/opinion.

Possibly. But your plan document can't have any overriding failsafe language, where if you end up less than 70% then the terminee automatically gets swept in for a contribution. And it's not that everyone's in their own group, but just you would use the amounts the "normal allocation formula" (integrated) would give everyone, and do the cross-testing from those.

Because he's not excludable under the coverage and nondiscrimination regulations, I suppose. But seriously, though - Does your plan allow 410(b) to be passed via the average benefits test instead of the ratio percentage test? I'm getting the vibe that you've got 2/3 NHCEs against 1 HCE. Although that's less than 70%, you could potentially be okay perhaps with a cross-tested rate group.

I'm of the mind that the code says she's a key employee for 2021 and is key-employees are excluded from TH minimum benefits she is not entitled to TH minimum for 2021. Though I have seen the other position taken, I'm just not sure it's supported by the actual 416 code.

Exactly, we have plans with fixed rates anywhere from 0% (yes 0% and have D-letters on that) to 6%. The best ICR choice depends on a lot of different variables and there are advantages and disadvantages to relatively higher or lower rates. Is it owner(s) only or are there employees covered, age(s) and risk tolerance of the owner(s), will it facilitate passing nondiscrimination testing, will it facilitate meaningful benefits for minimum participation, what are the investment advisor's recommendations? Some of these variables may be of little to no concern while others very important. Depending on the circumstances, we usually recommend 3% to 5%. However, lower while rates can support higher contributions/deductions, be careful of over funding relative to the maximum lump sum.

I'm going to err on the side of desperate moron, because not only is he lying(or not understanding?) about the two fields; his misrepresentation undermines his own selling ability!! Instead or recognizing that 8 is an explicit expense, and 10 is an implicit expense that reduces the earnings paid out by the investment (ie opportunity cost); he's limiting his own cost savings analysis to just one of the amounts. Actually, if a fiduciary did make a decision based on such a flawed examination could you have a breach of duty? Come on, time to spill the beans on this joker; who knows what other damage he could be causing if not checked!!

I have no opinion on the administration of the plan. From an IRS perspective, though, I recommend reading Revenue Ruling 96-47 (i.e., potentially a “significant detriment” as applied to only terminated participants), and from a DOL perspective, I recommend reading the NAPA article referenced below. That article cites DOL guidance and concluded that “a plan may charge administrative expenses to terminated participants, while not charging active participants, provided the method is not a breach of fiduciary responsibility, and the expenses are proper, reasonable and done in a nondiscriminatory manner.” https://www.napa-net.org/news-info/daily-news/can-plan-charge-fees-terminated-participants-not-active-ones#:~:text=The%20DOL%20and%20IRS%20have,done%20in%20a%20nondiscriminatory%20manner

If they are active and not yet the older of age 62 or the Plan's Normal Retirement Age I don't think there is a way to force them out. As ESOP guy suggests you might be able to have an in-service window crafted to encourage people to voluntarily take a distribution.

This plan would probably have me finding a new place of employment...... Seems like a big complication, but maybe not as bad as I think. Just because I am curious, does the Profit Sharing piece have any allocation conditions? What type of Profit sharing allocation? Cross-tested, ProRata, Integrated?

HCE determination (and lots of other things) is made under section 318 and is different than attribution for controlled groups (section 1563). Under 318, a parent is deemed to own a child's stock no matter the age of the child or the percentage ownership in the business. I love this summary from Lincoln. https://www.lfg.com/wcs-static/pdf/Attribution of Ownership in Retirement Plans - PDF.pdf

You might consider what “sometimes”means. If there is a revolving door with enough people going out and back in within short intervals, immediate distribution might be problematic, or at least the optics raise questions. Rather than live a life subject to the whims of circumstances and intent, a change in plan design or reemployment policy may be warranted. Industry standards and practices would be relevant.