Is it OK for a Plan to have a different hours requirements for different classes to get an annual Pay Credit in the Cash Balance Plan?  For example, can I design a Plan to require 1,000 hours for Pay Credit for Direct Owners, 500 hours for non-HCEs and 800 hours for Non-Direct Owners?  I think  this would be OK if the requirements are more liberal for non-HCEs.   If I am correct, what would be the best way to accommodate with a Prototype/VS software?

Participant hasn't terminated and remains on the books but only does minimal consulting some years.  He hasn't earned over $1000 for over 5 years, so clearly hasn't worked at least 1000 hours in that long. But he does defer 401(k), even when he only works one day in the year.

Would this participant continue to be considered active and therefor share in top heavy minimum for the years he does receive some income?  (Plan has just become top heavy).

I have a small Profit Sharing Plan that wants to terminate ASAP. I wanted to confirm we could accomplish this with a 15 day notice to participants so I checked the IRS website and found the below information under "Plan Terminations - Required Notices". Did we loose the 15-day notice and/or 30-day notice of Termination for small plans? 

Retirement Topics - Notices | Internal Revenue Service (irs.gov) 

401k Safe Harbor Profit Sharing Plan with 1 Year of Service (12 mos 1000 hrs) wait, dual entry.

Owner's wife started assisting owner Jan 2020 with business. When Covid hit in March 2020 her services increased significantly and remain so to current (1000+ in each year). Spouse was not paid in 2020 or 2021 but was paid W2 wages in December 2022 and permitted to contribute 401k as an eligible Participant in the Plan. It is not clear to me if there were financial reasons the business did not pay the spouse in 2020 and 2021, and not sure if that necessarily matters.

Question:

Though her prior services went unpaid, is the Plan permitted to count her prior years' hours of service for eligibility purposes? I have read through many articles that debate the fine nuances of this and a reference from an ASPPA conference Q&A from more than 10 years ago. I am hoping someone may know of something more recent. (if so, she would have been eligible 7/1/2021 with $0 415 compensation, no contribution due)

The Plan defines Hour of Service as:  "Hour of Service" means (a) each hour for which an Employee is directly or indirectly compensated or entitled to compensation by the Employer for the performance of duties during the applicable computation period (these hours will be credited to the Employee for the computation period in which the duties are performed); (b) each hour for which an Employee is directly or indirectly compensated or entitled to Compensation by the Employer (irrespective of whether the employment relationship has terminated) for reasons other than performance of duties (such as vacation, holidays, sickness, incapacity (including disability), jury duty, lay-off, military duty or leave of absence) during the applicable computation period (these hours will be calculated and credited pursuant to Department of Labor regulation §2530.200b-2 which is incorporated herein by reference); (c) each hour for which back pay is awarded or agreed to by the Employer without regard to mitigation of damages (these hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made). The same Hours of Service shall not be credited both under (a) or (b), as the case may be, and under (c).

To note, the State exempts the spouse from minimum wage requirements.

Thank you.

A wellness program imposes a surcharge on tobacco users who do not complete a tobacco cessation course. If a person completes the requirements to have the surcharge removed mid-year, could the surcharge that has already been paid during the current plan year be refunded? 

I'm thinking that would be an impermissible, retroactive election change. Prospectively, the surcharge could be removed and the participant's election automatically decreased assuming it's an insignificant change in cost. 

Any thoughts on the refund of the surcharge previously charged during the year?  Thanks in advance. 

I need to be sure that my thinking is correct on this situation:

Plan fails 2021 ACP test.  A refund of match is made to the HCE in February 2022.  Participant account lost money for the 2021 plan year.  Refund to HCE is made timely and net of losses.  Well known national 401k vendor prepares 2022 1099-R form, boxes 1 and 2a are the same amount and equal the gross amount of the refund and not the net amount that the participant received after losses.  

Is that the correct way to do the 1099-R form?  For example, I always understood that had there been earnings on the account, the participant would have received a 1099-R form for the gross distribution (including gains) as long as it was timely distributed.

Therefore if there are losses on a timely distributed refund, the 1099-R form should reflect the actual distribution amount after the losses are applied.

Am I incorrect or missing something - or was this 1099-R improperly prepared?

TIA for any comments. 

Background
Participating Employer-A of a 403(b)(9) non-electing [multiple-employer] church plan sent both EmployEE and employER contributions to the Plan for an individual who is not enrolled in our Plan under that employer. The funds came to the plan with remittance instructions while the employer and employee were working to get the employee enrolled under Employer-A. The Plan does not have an auto-enrollment provision but does require enrollment paperwork be processed before it accepts any contributions - for whatever reason, the employer sent the funds anyway. The employee has since decided not to enroll in the Plan under that employer. He is, however, enrolled in the same Plan under a different employer, Employer-B. Meaning, he works for two different participating employers.  

Question
If he is not enrolled in the Plan under Employer-A, are they even considered retirement plan contributions? What are the Plan's options from here? Employer-A wants us to send all the funds back to them. My understanding is we must keep A's employER contributions in the Plan which will be used to offset future employER contributions for its enrolled employees. We are unsure if the money sent to us as "pretax deferral contributions" should be distributed to the employee (per usual) or if some other type of arrangement could be made.

I know allowing after-tax contributions for intent of mega backdoor Roth conversions only tend to work for very large companies. Is there a minimum number of employees where this strategy generally starts to make more sense? 1,000 employees? 

We have a company that is around 800 employees that is considering adding an after-tax contribution source. They currently pass ACP testing easily using the top paid group election. The most recent ACP test had around 90 HCEs and 80 other employees who reached the 2022 income limit of $305k but are NHCEs because of the top paid group. 

If after-tax were to be added, I suppose it would depend on how many employees in each category actually used the source. If it were only a handful of the HCEs in the top 20% they'd be screwed. Are there any other considerations with respect to the demographics that should be considered? 

What kind of time frame are we looking at here?

If someone has been working 18 hours a week for half the year, but then summer kicks in and they work 25 hours a week for a few months, are they in the plan?

Also, how do you measure?  Is it an average?  Over how long?

What if someone works 35 hours a week every other week?

It averages 17.5 hours a week.  But each week they actually do work, it's 35.

When an employee obtains a second 401k loan, is this a separate repayment schedule or can the initial loan get paid off and "refinanced" into the new loan?

I am the owner of a small business (2 employees, including myself) and am the administrator of our Safe Harbor 401k plan.

Hardship withdrawals and In Service Distributions are not allowed under this plan but loans are.

My employee obtained a 401k loan about 3 years ago and his remaining loan principal balance owed is about $4000.

His current 401k plan value is about $32k (100% vested) so he should be able to obtain loans totaling up to $16k against his plan.

He again needs money and needs to tap into his 401k again (I already explained this is unwise).

If he needs $10k now, and this is possible (I believe it is), what is my better option?

-a) Continue his current payroll deduction (3 more years, $4000 + 5% interest) and create a 2nd loan/payroll deduction (5 years, $10000 +9.25% interest)

-b) Create a new loan/payroll deduction combining both loans (5 years, $14000 + 9.25% interest) and distribute $10000 to him, effectively paying off the 1st loan.

-c) Something I haven't thought of

Looking back, I wish I had known that being the administrator of our plan could get complicated.  More work than I expected but I've sure learned a lot!

Thanks in advance for any input or insight!!!

Any thoughts are appreciated:

A participant in a 401k is a US citizen.  Her spouse is not a US citizen and does not live in the US.  She wants to name her 2 children as beneficiaries for her 401k account.  Would spousal consent be required to do so in this case?

Thank you

My memory is failing me here.

I recall that 401(k) and safe harbor plan eligibility are best kept with the same eligibility requirements.

I can't remember the drawback to having them different.

A DB plan utilizes a pre-approved document and intends to terminate before the end of the year. Given we are now into the Cycle 3 restatement period for pre-approved DB plans, does the plan need to restate onto the Cycle 3 document or can they continue to rely on the prior restatement assuming they amend for any mandatory changes since the last restatement? 

Starting with the applicable plan language:

Rehired Eligible Employee who had not satisfied eligibility. If any Eligible Employee who had not satisfied the Plan's eligibility requirements is rehired after severance from employment, then such Eligible Employee shall become a Participant in the Plan in accordance with the eligibility requirements set forth in the Adoption Agreement and the Plan. However, in applying any shift in an eligibility computation period, the Eligible Employee is not treated as a new hire unless prior service is disregarded in accordance with Section 3.5(d) or (e) below.

Ok. The underlined language does NOT apply (that is, 3.5 (d() or (e) don't apply) in the following scenario, so we can ignore the underlined clause.

This is concerned with entry date. Plan uses age 21, 6 consecutive months with at least 500 hours for eligibility, entry date quarterly. If eligibility requirements not met in the initial specified time period (6 consecutive months with at least 500 hours) then the employee is subject to the 1 Year of Service requirement.

After the initial 12 month eligibility computation period, the computation shifts to Plan year, which is calendar.

Original date of hire, 6/6/2017 - Date of termination 8/20/2017. Had 200 hours of service. 

Rehire date of 8/2/2021 - had 833 hours in 2021, over 2,000 hours in 2022.

So, since the employee had not met eligibility prior to termination, then what is the entry date? Is it 4/1/2022? 1/1/2023? Other? It appears that since the employee is not treated as a new hire for the eligibility computation period shift, then the eligibility computation period shift has already occurred, and is now Plan Year 2021, then 2022, etc. 

Thoughts? 

We have more and more clients from NY and MA for instance who want PFML reported in the Form 5500 for health and welfare. It is deemed as self-insured. We need to list the benefit code on page two. Would you suggest using 4Q and note list PFML? We assume to list PFML in the SAR as well. Any thoughts/feedback? 

The secure act 2.0 allows plans to fund matching and nonelective contributions as Roth.

1. I believe the participant must be 100% vested to do this correct?

2. What about safe harbor matching and nonelective contributions. Can they be funded as Roth?

Thanks!

A plan had numerous prohibited transactions over a number of years, with very large excise taxes due. The PTs were only recently discovered. We are now filing 5330s. I believe there is reasonable cause and would like to request the IRS to waive interest and penalties on the late filing of 5330s. I am unsure how and when to request the waiver. Does anyone have experience with that? If so, please let me know.  Feel free to reply by private email: jkirtner@hershnerhunter.com. Thanks for any help.

If we have a company that is currently a LLC taxed as a S corp but they are changing their structure to be a LLC taxed as a C corp is there anything specific that we need to keep an eye out for in their plan? I assume we need to make an amendment to update the tax structure and the EIN for the plan sponsor. Outside of that is there anything in the plan design that needs to be updated if a tax structure is changed? They don't want to change anything else in their plan such as vesting, eligibility, ect. 

Hello,

I need to switch investments in plan specs to allow the use of an allocated link on a balance forward plan. After making the changes (added Voya as investment and generated accounts for everyone), I am unable to run a profit sharing transaction, and I am not sure where the disconnect might be. Also, how should the brokerage account assets be transferred over to the new record keeper platform accounts within relius to reflect the actuality of the account balances at their new record keeper platform? Any guidance is greatly appreciated

Is a enhanced safe harbor match (6%) still exempt from top heavy and ADP and ACP testing?