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The gateway may not be tested using component plans. See 1.401(a)(4)-9(c)(3)(ii)

Exactly, this is either an owner-only play or may work in a very large plan that otherwise easily passes ACP testing, but is essentially a nonstarter in small plans that cover NHCEs.

Am I understanding this correctly? Yes. Is there any way to bypass the testing for mega roth backdoor after tax contributions? Have zero eligible nonhighly compensated employees, no testing needed. In other words, employing only highly compensated employees who meet the age/service/entry requirements = no testing needed.

This has come up before in this forum. My understanding is that if a consolidated return is filed for the control group then the contribution dollars can come from either entity in whatever proportions. If each business filed its own tax return then deduction is based on contributions for each one's respective employees and compensation. Here, you have two disregarded entities that just pass through income to the owner so you certainly have a "consolidated" return - one tax return for the owner, correct? I'm not an accountant and this is not advice, client should confirm with qualified tax accountant.

What is the new comp formula? If it's everyone in their own group, then it's up to the ER who will get a PS and how much (subject to the testing limits, of course). If it's the grouping method, you need to allocate the appropriate amount to everyone in each group. Don't use Chat/gpt. It can point you in the right direction, but the answers are still suspect. We had someone here use it to determine eligibility of a rehire and it got it all wrong.

Yes. both sub-plans still need to satisfy the overall gateway.

Arggh. Going from memory only, (so don't trust me) the problem is less about the plan year (if you subscribe to the theory that the plan year can begin prior to company being formed - we've done it, and upon audit IRS never questioned it) than it is the short taxable year. With a short taxable year, the 404(a)(3) limit is based on compensation for that short period, and the compensation limit is prorated to calculate the deduction limit. Hopefully someone with a sharper memory can point out corrections to the above...

If the kids are not deferring the maximum - perhaps their tax advisor could educate them on IRAs. If they are eligible to make IRA contributions, might be better than messing up the 401(k) testing with deferrals. They could still be eligible for the plan, and help testing, but a way for them to still get tax savings, but not skew testing.

fmsinc - Hugh? OP said NRD was 62 w/ NRD 3/1/25. Since he didn't receive his benefit as of 3/1/25, it must be actuarially adjusted to reflect the delayed payment. (This assumes he was not working in suspendable service after 3/1/25 and timely received a Suspension of Benefits Notice.) If he was terminated as of 3/1/25, or if he was active but didn't receive an SOBN, an actuarial increase is required. First you need to adjust the accrued benefit to reflect the delayed payments, then apply the lump sum factor at the age of distribution. This has nothing to do with a DC plan, no idea what you are referring to with those comments.

Sounds like you should do the AE adjustment from March to December on the benefit, and then calculate the lump sum as of December based on the adjusted benefit.