Although an employer makes matching contributions during the plan year pursuant to the plan document's formula, they only contribute half of the prescribed amount to the HCEs because the plan usually fails the ACP test and it's how the employer attempts to prevent refunds of the HCEs' match.  The ACP test, though, still usually fails, even with such small allocations to the HCEs.  Historically, they have corrected the failed test by making refunds just based on the small HCE matches.  However, the new TPA is suggesting that the correction method must be based on the HCEs receiving enough additional matching allocations to satisfy the plan's formula before calculating the appropriate refunds.  I know it's always a good idea to follow the provisions of the doc, but because this seems somewhat counterintuitive and perhaps may yield different results, I just wanted to double check that what the TPA is saying is the correct way to handle the failed test.  What do you all think?      

Yuck.

The plan is a pooled 401k (yes, they still exist!) and now the owner needs do to Roth catchup deferrals.  I really don't want to commingle the pre-tax and Roth in the same account.

Is there a discrimination issue if only the HCE HPI has a self-directed account?

I have been suggesting that they move to a participant-directed model for years and I was hoping that this would be the thing that clinched the decision... but the owner says that he's retiring in 2-3 years and doesn't want to go through all the changes for a short term, so I'm looking for a different solution.  Part of me hopes there isn't one...

Any other suggestions (other than "you can't always get what you want, even if you are a doctor")?

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One lifer DB plan.

Plan frozen/terminated 12/31/2025 with perfect funding with excess, if any, going to qualified replacement plan (QRP).

Client did not tell me about additional contributions made during 2025, simply forgot. Big amount too.

Now have quite an excess but lumpsum still under 415 limit.

Solutions for retroactive amendments?

• Amend to have a retroactive benefit increase
• Amend from QRP allocation to participant allocation

Any thoughts?

Thanks

I'm looking into whether correction under ECPRS is required in this situation and want to make sure I'm not missing something. 

A Safe Harbor plan makes Traditional Safe Harbor Matching Contributions. The AA says the safe harbor matching contributions are based on salary deferrals for the Payroll Period, instead of the Plan Year. The Basic Plan Document says the safe harbor matching contributions must be deposited into the Plan by the last day of the Plan Year quarter following the Plan Year Quarter for which the salary deferrals were made if the employer uses a period other than the Plan Year, which I believe reflects the regs. 

In operation, the plan has been depositing the safe harbor matching contributions into the plan at the end of the year - not be the end of the following quarter.

I believe this is an operational failure under ECPRS and must be corrected? The correction method being adjusting participants for lost earnings from the date the safe harbor matching contributions should have been contributed to the actual date they were contributed?

But the plan sponsor and recordkeeper see no issue, say the plan has been operating like this for a long time, and they have no concerns - Am I missing something?? TIA.

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Let's say a company has 1 owner and a few NHCE participants. They fund 3% SHPS during the year. Can the owner also choose to fund additional contributions to himself during the year?

For example, let's say he decides to fund an additional 6% (in addition to SHPS of 3%) in Profit Sharing. Is this allowed? They would pass Gateway, but we don't know if the General Test would be passing based on 9% to owner and 3% to NHCEs.

If this is allowed, can he fund more than 3% SHPS plus 6% Profit Sharing to himself during the year, while only funding 3% SHPS to NHCEs? At that point, they would not be passing Gateway and additional contributions would definitely be required for NHCEs to pass testing.

Thanks!

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We have a Plan that was once a dual Plan, but has since Frozen the Cash Balance Plan leaving the Profit Sharing Plan to operate as a stand alone Plan for now.  It's a Safe Harbor Match (safe harbor formula).

The Top Heavy Testing is right on the border, but since it is a Safe Harbor Match I believe they are exempt from the testing and are only required to make the Safe Harbor?  I just wanted to make that was still the case, since there would be no Cash Balance Contributions and the Key Employees are only going to receive 401(k) and Safe Harbor Matching contributions.

Thanks!

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We have a 401k plan participant who passed away recently.  Her spouse died a few years ago and there is no beneficiary named.

In this case then we would deal with her estate.

But how (far) and what verification is needed to determine who is responsible?  I assume we would need to see a copy of her will to see who is the named executor which would settle that.

But (gulp) if there is no will, what would be the procedure?  We can't just have a family member jump in without any verification and work everything out through them?

Thank you

We administer a self-trusteed 401(k) plan that offers self-directed investment accounts to all participants. I believe each can purchase mutual funds through their American Funds account. The plan does not restrict each of these participant to just mutual funds but also allows for private investments.

One of the participants wants to purchase a small Almond Ranch. He would like to personally invest $400,000 and invest $600,000 from his plan account. There would be strict accounting splitting the income and expenses each year for both the individual portion (40%) and the plan portion (60%). If this is followed we do not think there would be a prohibited transaction.

We know somebody needs to run the Almond Growing entity. They could get 3 leased employees from a PEO. Correct me if I am wrong here (I very well could be). I believe that after this potential transaction, they would need to cover these leased employees in their plan if the leased employees are substantially full time. I believe substantially full time is 1,500 hours or more per year. What if they had 3 Leased employees who would be restricted to only 1,200 hours per year? I would think the leased employees would ever become eligible for the plan.

Another Issue might be UBTI. Does anyone think UBTI would apply in this case?

Thanks!

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We have a participant who is asking if this situation falls under a Hardship:

Due to a legal divorce, the participant has to move out of their house and needs a deposit for an apartment (first and last month's rent).  

It's not purchasing a primary residence, so I wasn't sure if this would apply.  Thanks in advance for your input!

We have a Cash Balance Plan that froze it's benefits early in 2025 (before anyone incurred 1,000 hours).  

Generally they have been making the 7.5% Profit Sharing contribution, in conjunction with the Cash Balance Contribution.  My question is, with the Cash Balance frozen are they still obligated to make the Profit Sharing?  Or is that back to a discretionary contribution and they can make any level since there's no Cash Balance contribution being made (there is no requirement).?

Thanks in advance!