Just a question, after having a discussion with a co-worker.  Can a plan have different eligibility dates for a 401(k) and 3% Safe Harbor Contribution, or should they match?

I know the eligibility date for a Profit Sharing (or any discretionary contribution) can be different.  I just wanted to confirm if the Safe Harbor had to match the 401(k) or not.

Thanks in advance!

I have a prospective client who received a $500K payment in 2024 for signing a  “non-compete agreement”.  This will be reported on a 1099.  Can income for signing a non-complete be used as “earned income” for pension purposes? 

This person has other self-employment income that can be used, but wondering if they could also use the $500k in 2024?

In late 2023 we calculated the 2023 profit sharing contribution allocation for a 401k plan.  Only 4 participants shared in it (1 HCE).  The profit sharing is optional and is allocated on a cross-tested basis, each participant as its own allocation group.

The PS amount for each participant was communicated to each participant.  The NHCE's allocation was more than the minimum needed to pass testing.

Early 2024, one of the NHCEs is leaving the company.

Can the employer change only his allocation to a lower amount (enough to still pass testing)?  Since the employer previously informed the participants of their 2023 PS allocation, is it a problem to go back and change that allocation to a lower amount just for this specific NHCE?

Thank you

Any advice would be appreciated regarding the following question:

Can I switch from 5500-SF to 5500-EZ if a one-participant plan has been filing 5500-SF for several years, but it seems that it should have been filing 5500-EZ instead?  

To clarify - as a single owner LLC I have been filing 5500-SF since 2015 (don’t remember why I started with 5500-SF instead of 5500-EZ, but at the time that seemed the right form), and now in 2024 accidentally I read that I should have been fining 5500-EZ instead since 2021.  Which form should I file in 2024 and should I do anything about the prior filings?  Is it possible to hide all of my 5500-SF filings since 2015 from the public, which I just learned are visible to all?

Thank you.

Hi, 

I'm looking for some clarification on final 5500 for Terminating plans. Is the final 5500 based on the Plan Termination date of final asset exist date.  We received a Plan for Termination in 2022 and the Term date was 8/31/2022 and the asset exist date was 12/26/2023, post the asset exist date there was a residual amount that got posted on 01/02/2024 since the plan had assets in 2023 the final 5500 will be for 2023 right? and the residual amount can be adjusted in 2023?

Thank you. 

I have a 401k plan that is TOP HEAVY and makes a PS contribution (new comparability).  The Service Requirement is 1 year, 1000 hrs, age 19 to enter the 401k plan but for the Profit Sharing has a Age 21 requirement. I have a NHCE (non-highly compensated employee) that is age 20 so they are entitled to the 3% Top Heavy Contribution, but the client wants to give him a 5% contribution since he is giving all other NHCEs 5% for the Profit Sharing. Can I do this? I am just concerned about the age requirement.

Please consider the following:

Calendar year DC plan with a non-elective discretionary employer contribution. The plan document is written with the following allocation condition to receive the non-elective:

"To be eligible to receive such Non-elective Contribution, the Participant must be employed by the Company on the date the Company makes the Non-elective Contribution."

The plan administrator will fund the contribution on March 1, 2024 for the 2023 plan year to only eligible participants actively employed on March 1, 2024.

This is a new one for me, I was under the impression that you could not have an allocation condition beyond the end of the plan year. Am I wrong? Do the regulations allow for this type of allocation condition? Or can the word "makes" be interpreted differently (e.g. "makes" means the plan year to which it is allocated, or does it mean the date money is deposited to the plan)?

Thank you!

I just can not fathom a PT worker wanting to contribute to an employer 401(k)- I can't be the only one!!

No one has said anything about a LTPT employee doing an election form with either $0 or 0% of pay, which would appear to solve the problem.

I would think clients will scream like stuffed pigs if they have to bring in LTPT employees in any event.  At least some of mine have.

If I change eligibility to 1 YOS and drop the hours requirement, I don't think you can do that for only deferrals as well I don't think software can handle it; and keep the customary age 21/1,000 hours within a 12 month period for the SH and profit sharing contributions, if any are to be made.

I would think the other options would either be elapsed time (but this would apply to FT as well) or change eligibility to age 21/500 hours, but that again would apply to all eligible.

Then again, and pardon my ignorance, the 500 hours is for entry or entry and contribution, or both?

Too many changes to digest - starting to question whether this is worth it.

Bob owns his own RIA 100% pushing investments. He also owns a 50% stake in an insurance business.  No control group.

The insurance business has 4 EEs.  If they setup a 3% SH 401(k) plan I don't have to worry about Bob exceeding the 415 limit if he maxes out the RIA business.  Correct  

Of course I need to watch the 402(g) limit.

What is the correction method for an operational failure to exclude rollovers when applying the $5000 involuntary cashout distribution rule in a plan to termed participants?  The plan has operated since 2018 as if rollovers were included. Do we go back to each prior plan year and look at the small accounts that should have been cashed out and cash them out now in 2024 even though the  vested balance could now exceed $5000. Thank you for your thoughts. 

An RMD was requested on 12/29/2023. The fund company didn't process it until 1/2/2024. They said a 2024 1099-R will be generated since the distribution wasn't actually done until 2024.

How is the handled by the participant regarding his taxes? He is expected to reflect a 2023 RMD but will not have a 1099-R to show for it. in 2024, he will end up with 2 1099-R's.

We have a Safe Harbor Non-Elective plan that wants to terminate the plan in January of 2024. The plan's only participants at this point are the owner and his spouse.

What would be the requirements to terminate the plan? The owner would like to terminate the plan as early as possible.

Thank you.

Plan provides for immediate entry for deferrals and Safe harbor non-elective.  Profit Sharing requires 12 months of service.   Plan is not top heavy. 

In 2023 an owner's son got hired and deferred and is getting the safe harbor along with 6 other NHCEs.   They all are getting the 3% safe harbor.  I am testing the plan using cross testing.  This passes non-discrim testing for the >12-month group but fails for the <12-month group.  I'll have to allocate profit sharing to the <12-month group to pass testing.  Or does it need to be allocated as QNEC?  In hindsight, the plan should have excluded HCEs from the safe harbor non-elective.  But that is obviously too late.

Thank you in advance for any comments.

Tom

For those of you who use either Quickbooks Desktop or Online for your finance/invoicing software, how do you handle clients with multiple plans? With desktop, we used "jobs" for each plan under a single client. It is possible with Online, but getting the job onto the invoice is proving very difficult. I was thinking maybe someone has a better way to track this. Thanks.

I am new to the issue of Cross Testing, but started my career in Pensions (Entry Age Normal..anyone?) and am now using this concept for my own SEP Plan.

Can anypne point me to the latest Excel in the public domain, I can use to sort out the EBAR for a situation where there is a 401K and a SEP? Thanks in advance 

Ken.phillips@benefitscape.com

Plan has a 1- month of service eligibility provision.

They are increasing that eligibility provision up to 1- year as of first day of next plan year.

I believe then, anyone hired within one month (ie from 12/2-12/31 of a calendar plan year) before the eligibility change would be required to wait for the full year, since not being participants, plan rules don't yet apply.

If a plan terminates, and the plan had heretofore stipulated a concluding day of the plan year condition for eligibility for an allocation, and the effective date of the plan termination occurs prior to the hitherto calibrated end of the plan year, prima facie the last day of plan year employment eligibility condition resynchronizes to the effective date of plan termination. Please provide guidance on this situation.   

NHCE Participant in a small, successful office where all other employees are HCEs. Eligible for entry into the 401k Plan in July 2022.  Terminated employment in October 2022.  Participant claims they were never offered the opportunity to participate in 401k.  No automatic enrollment, Safe Harbor Non-Elective contribution was made for the participant for the Plan Year.

IRS Guidance says correction is a QNEC for 50% of the missed deferral, calculated on ADP of other NHCEs and applied to their compensation from the period of time in which they were excluded.  How do I calculate that amount if there are no other NHCEs?  Do I use the ADP for the HCEs, since they are the only group?  Or is there a Safe Harbor percentage that I would use?

3 software developers worked 10 years as independent contractors for “Business Software Company” that was 100% owned by “Investment company”.   There were no Employees of Business Software company or “Investment company”.   In 2022 the 3 developers, as a new partnership “Partnership”  purchased 75% ownership of Business Software Company, each partner now owns  25% and the remaining 25% still owned by Investment Company. 

The Software company appears to be unrelated to Investment Company.   

The 3 independent contractors may/may not have had individual 401(k) Plan (we were told one possibly has one).

One of the partners of the new partnership came to us looking to start a new plan.  

Should we be concerned about the successor plan rule?

Thanks in advance!

Curious to know what action (if any) should be taken in this case.

Employee makes an annual DCFSA election of $4992 back in January of this year.  Given the timing of this election, the benefits system calculates that $208 per pay should be taken from the employee's check based on the 24 payroll deductions.  Unfortunately. the deductions don't start from the paycheck immediately and only 22 deductions were made.  Only $4576 was taken from the employee's paycheck.

This error was only discovered after the last paycheck of 2023 was processed, so there is no easy way to catch-up on the missed contributions.

Given that every dollar that was taken from the employee's paycheck was properly deferred to the DCFSA, is there any action needed?  With no additional payroll cycles left, what options would be available to correct 2023?