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Well, I'd start with figuring out what year's test has failed 🙂

You can always correct using refunds or QNECs up to 12 months after the end of the plan year that failed. Otherwise, if it's eligible for self-correction, you can use the One-to-One method in rev. proc. 2021-30. If it's not eligible for self-correction, then it's into VCP. If you don't want to use the one-to-one method, you could try proposing an alternative method in VCP, but I think you'd better have a darn good reason why you aren't using the method that was specifically provided in the rev proc.

For me, I would want a sponsor to tell me in writing that they want to elect the alternative method. Then I'll prepare the premium filing using the alternative funding target. There is a checkbox to say that you are electing the alternative method, which would need to be checked. The rates for the alternative method are just the 430(h)(2)(C) segment rates without stabilization, which is to say, they are the segment rates used for calculating the maximum deduction limit. Your premium funding target using the alternative method is just your (vested) maximum funding target. Good question about the lookback month, it doesn't come up very often that a plan changes its lookback month. My guess is that if you changed the lookback month for funding purposes, it would also change for alternative premium funding target purposes. Remember that the segment rates for the alternative method are 24-month averages, so they will tend to be higher (=lower premiums) when interest rates are falling, and lower (=higher premiums) when interest rates are rising, as compared to the standard method (spot) rates. With interest rates looking to rise sharply this year, I would be very careful about recommending a sponsor switch to the alternative method now, since it will lock them in to the 24-month average rates for 5 years.

When you say "refund one participant," what I'm hearing is that there are multiple HCEs and you want to just pick one to eat a refund. That is not ok under any method I have ever heard of. The 401(k) regs and EPCRS lay out specific methods for correcting an ADP test failure. Try something else at your own peril. Also don't forget to read the plan document. Does it say anything about how an ADP test failure will be corrected?

This might be simplistic, but I look at the "standard" determination as being under the 417 lump sum segment rates, and the "alternative" as being under the "maximum deduction" 404 segment rates. The PBGC sets the month for you on the standard calculation, while the month under the alternative calculation depends on the funding lookback month you might be using.

If you're worried about it, maybe write the benefit formula as the greater of 0.5% per year, or the benefit provided by the cash balance account. That should make sure that you're benefiting for purposes of 410(b)/401(a)(26), even if you don't actually accrue a benefit in the current year.

I think the insurance law requiring receivership would be a state law similar to federal bankruptcy law - potentially triggering the limit on prohibited payments such as lump sums under 436(d)(2). Plan should confirm that with counsel. Assuming that's correct, if the actuary certifies that the AFTAP for the plan year in which the lump sum would be paid is at least 100% (without taking into account the segment rate stabilization relief under 430(h)(2)(C)(iv), the plan can pay the lump sum. Otherwise it can't. Presumption rules based on prior year's AFTAP don't apply in cases of bankruptcy (see 1.436(d)(4)(v)) - (so can't assume same AFTAP as last year until start of 4th month, 10% lower than last year's AFTAP at start of 4th month) - so you'd have to wait until the actuary really certifies the plan meets the above criteria to pay a lump sum during the plan year.

It's kind of a "waterbed" issue - pushing down the interest rate increases the testing leverage of the DCP (where NHCEs get majority of their contributions) versus the CBP (where HCEs get majority of their contributions), but makes it more difficult to satisfy 401a26 and may require higher NHCE contribution credits - or the converse, where higher ICR helps 401a26 but makes NDT more challenging. That highlights the case for a knowledgeable actuary and/or consultant developing/analyzing the proper design given all the above mentioned variables in conjunction with the (prospective) client's objectives. (The fun part of the job IMHO.)

Yeah, if that last six percent is going to be offered in March for the CODA election, then that's going to be 2023 wages and so that year's W-2 to report any deferrals on.

Post-SECURE Act, the notice is no longer required for a 3% safe harbor non-elective contribution to satisfy the ADP safe harbor, but you do still need the notice if you want to satisfy the ACP safe harbor.

1. Will probably pass on accrued-to-date. 2. I don't see how it can pass with only 33% of the employees receiving a benefit.

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.

See Treas. Reg. 1.411(b)(5)-1(d) and (e). You might find this page helpful as well: https://www.irs.gov/retirement-plans/issue-snapshot-how-to-change-interest-crediting-rates-in-a-cash-balance-plan Any fixed interest crediting rate of not more than 6% annually is fine. The IRS is generally concerned about interest crediting rates being too high, not too low.

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.

huh, so if the plan was cross tested it potentially would pass 410b? Put everyone in their own group,

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.

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.