Leaderboard

I think you have an aggregated DB/DC "plan" and the people in that "plan" must get 7.5% gateway if they are benefiting in that "plan". If someone gets no CB because you exclude and no PS because they terminated, then no gateway because they do not benefit. Yes, your 6% DC max is based on compensation of those in the DCP.

If there is no ESOP, then very likely there are no dividends available to pass through to participants. All of the references to 404(k) deal with ESOP shares. I asked about KSOPs because some are designed to allow participants to have the pass through of dividends from the ESOP portion's dividends redirected into the 401(k) part of the plan. They even take this one step further by allowing the dividend pass through to offset deferrals taken from payroll, but the dividends themselves are not deferrals. My understanding is dividends on employer securities in non-ESOP accounts are not available for pass through to participants. I double checked some ESOP, KSOP and 401(k) documents as well as the regulations and do not see anywhere that dividends on non-ESOP accounts are available for pass through. Hopefully some of our BenefitsLink ESOP colleagues or perhaps whoever drafted the plan you are working with can let us know any explicit rules on this topic.

You have one gateway for your one aggregated plan. You can't test the gateway on a restructured or component plan basis. I'm disregarding disaggregation of otherwise excludable employees here, since I don't think that's what you're asking about. This person would need the 7.5% gateway (if that's the gateway minimum).

Interesting issue that I have never seen arise, but it looks like it's covered in Treasury Regulation 1.402A-1, Q&A 11 below. Reinvesting the dividends in employer stock that continues to be held in the participant's Roth account would allow a qualified distribution of that account balance later. Q-11. Can an amount described in A-4 of § 1.402(c)-2 [note: subsection (e) of this cite is 404(k) dividends] with respect to a designated Roth account be a qualified distribution? A-11. No. An amount described in A-4 of § 1.402(c)-2 with respect to a designated Roth account cannot be a qualified distribution. Such an amount is taxable under the rules of §§ 1.72-16(b), 1.72(p)-1, A-11 through A-13, 1.402(g)-1(e)(8), 1.401(k)-2(b)(2)(vi), 1.401(m)-2(b)(2)(vi), or 1.404(k)-1T. Thus, for example, loans that are treated as deemed distributions pursuant to section 72(p), or dividends paid on employer securities as described in section 404(k) are not qualified distributions even if the deemed distributions occur or the dividends are paid after the employee attains age 59 1/2 and the 5-taxable-year period of participation defined in A-4 of this section has been satisfied. However, if a dividend is reinvested in accordance with section 404(k)(2)(A)(iii)(II), the amount of such a dividend is not precluded from being a qualified distribution if later distributed. Further, an amount is not precluded from being a qualified distribution merely because it is described in section 402(c)(4) as an amount not eligible for rollover. Thus, a hardship distribution is not precluded from being a qualified distribution.

Some sources of relevant Federal tax law are: I.R.C. § 72(e)(5)(D) (“Any dividend described in section 404(k) which is received by a participant or beneficiary shall, for purposes of this subparagraph, be treated as paid under a separate contract to which clause [72(e)(5)(D)](ii)(I) [referring to a § 401(a) trust] applies.”); I.R.C. § 72(t)(2)(A)(vi) (“dividends paid with respect to stock of a corporation which are described in section 404(k)” excepted from the additional income tax on a too-early distribution). https://irc.bloombergtax.com/public/uscode/doc/irc/section_72 I.R.C. § 404(k) (employer’s deduction for a dividend paid out, rather than into the plan’s trust). https://irc.bloombergtax.com/public/uscode/doc/irc/section_404 I.R.C. § 3405(e)(1)(B)(iv) (section 404(k)(2) distribution not a designated distribution). https://irc.bloombergtax.com/public/uscode/doc/irc/section_3405 26 C.F.R. § 1.402(c)-2/Q&A-4(e) (“Dividends paid on employer securities as described in section 404(k)” not an eligible rollover distribution). https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.402(c)-2 26 C.F.R. § 1.404(k)-1T/Q&A-3 (treating a dividend paid out, rather than into the plan’s trust, as a separate contract for I.R.C. § 72 income ordering). https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.404(k)-1T

Nate S has provided great guidance with regard to who truly is an "officer." But in an ESOP company, the shares in a participant's ESOP account are NOT direct ownership. In a 100% ESOP owned company, there could not be any "owners" other than the ESOP. So you can essentially disregard the ownership test in determining Key Employees... you would simply base it on the officer and compensation thresholds. Hope that helps.

The more I think about it, the email seems like a courtesy. I wonder how many of those emails that are sent relate to the sponsr at Bundled Provider, Inc. who just submitted without realizing the pdf needed to be attached. I'll bet it;s a fair amount. And then there are those that were legitimately late, but now that the audit is finished, the amended was never done. That's also common. We have definitely followed up with the auditors and gotten the response "oh we finished that 6 weeks ago!"