Plan has discretionary match and currently the document election is to compute match with each payroll period.  Sponsor is asking to amend the plan to be a Plan Year election to allow for true up.  Now in February 2023, is this something that can be retroactively amended for 2022 plan year? 

Does an auto-escalate notice have to be provided 30 days in advance? Thanks in advance.

Setting up a new 401(k) Plan effective 1/1/2023.  The Plan covers a workforce that is entirely HCE, with one exception.  There is an employee who had 10 years of service but was terminated in April 2022.  She was then rehired in mid-January of 2023.  It also appears that she did not have a Break in Service in 2022 as she did have over 500 Hours.

This person would NOT be HCE for 2023 since her pay doesn't reach the pay threshold given her termination.  (She will be HCE in later years by pay level.) It is hoped that she can be excluded from the Plan in 2023 for testing purposes.  Since we have to include past service for eligibility, the only way we see where exclusion might be possible is using the fact that she was not in the employ of the firm on an Entry Date.  This could be achieved if we use a single Entry Date of January 1 following 6 months of service.

I don't believe this will work since she did not have a Break in Service as she had over 500 Hours in 2022, so she must be allowed entry on her date or reemployment.  Is this wrong, or does anyone see a method where she could be excluded?  Would using a 2 year wait for profit sharing entry limit her to only the Gateway, for example?

Well new one for me. Have a client that was bought. Recently told "Oh hey we were bought as of X" where X is a date in the past.

Part of the selling agreement which they just sent me had resolutions terminating the Plan as of date before acquisition. Not prepared by us. Buyer is taking the position that that is formal plan termination.

Seller decides on his own that since they aren't in the buyers plan he's going to continue deferral and safe harbor match and deposits first 2 January payrolls to the Plan.

What is the fix? Can this be self corrected? or does this require VCP?  

Do the deferrals after term date get paid out as like a 415 excess? they ran through payroll so will presumably be on 2023 W-2.

What happens to the match that was deposited? Forfeit? Allocate as prior year contribution? Return to client as mistake of fact?

I have been trying to work with Empower regarding the first half of the 2022 year when plan assets were still at Mass Mutual from the previous Hartford platform.  The data they provide is only available as a .txt file, and changing the extension to a .dat file does not work.  Relius gives an import error stating that “Fatal error in The Hartford link.  Incorrect file format.  Fixed position file with linefeed only must be used."  They have stated that the extension change should work (it doesn't), and that because the data is from another company (which they bought), they "cannot convert files obtained from another company."  Outside of manually entering all the transactions for the first half of 2022, has anyone found a way to import this data correctly?

I'm looking for some direction, response, something to point me in the right direction.  Currently have a 401(k) that due to a change in ownership has resulted in an Affiliated Service Group situation.  Confirmed ASG.  Therefore, we must test the two different companies owned as one.  Coverage will fail.  The HCE/owner who is my client is willing not to participate so that coverage will pass but we need to find something appropriate outside the plan for savings purposes for him.  I need options.  Thought of non-qualified immediately but it's an LLC and he's a partner so my understanding is that there would be no current tax deduction for him.  Can someone suggest other options for this employee outside of a qualified plan?  Thank you.

I am curious how comfortable practitioners using Grouping with 410(a)(4)?

For example, one owner, one employee.  If employee's MVAR is 12% how comfortable is to give the Owner MVAR of 13.80% (=12 x 1.15)?  What is the interpretation of "significant" from the https://www.law.cornell.edu/cfr/text/26/1.401(a)(4)-3?

Combining SECURE 2019 and SECURE 2022 changes, a sole proprietor may establish, retroactively, a plan (up to her tax-return date with extensions) and may make, retroactively, an elective-deferral election (up to her tax-return date without extensions).

(Let’s leave aside the BenefitsLink discussion about whether that’s practically useful for 2022. Imagine a sole proprietor with calendar tax years, and a plan and § 401(k) arrangement that, when retroactively adopted, are effective January 1, 2023.)

Am I right in thinking the situations in which a proprietor might want a § 401(k) arrangement are:

the proprietor is 50 or older and classifying a portion of a contribution as a § 414(v) catch-up elective deferral enables a contribution up to $73,500 instead of $66,000; or

the proprietor’s deemed compensation is less than $264,000?

Is there another situation in which an elective deferral allows a proprietor to do something she could not do with her nonelective contribution alone?

(Please ignore Pennsylvania income tax.)

I have a plan that tests the adp/acp using prior year testing

I ran the test for 2022, and fail.  However if i test using statutory exclusions I pass. 

The plan was not tested using statutory exclusions in 2021.  So the NHCE average when i did 2021 shows 3.46% but when i run the adp test for 2022 using stat exclusions, it changes the prior year to 3.70%.      I understand why...

Question is, can i switch back and forth using statutory exclusions from year to year if needed?

Thank you!

Shoe company based in the UK and has US employees. The US operations have an EIN and US address based in Portland. The owners reside in the UK and are not US citizens. All US based employees are US citizens and earn W2 compensation. They are wanting to set up a 401(k) plan with ADP and the ADP sales rep is telling them that they can indeed do this. Our hesitation is that there would be no US citizen who would serve as the plan’s trustee.

I'm reading a previous post from 2020 that speaks to this. In reading the treasury reg, specifically 301.7701-7(d)(1)(v) Example 5, it seems that it is permissible to use a directed trustee, as provided by ADP but I am not sure if I am missing something. Our other hesitation is due to receiving conflicting, and gray area guidance from other practitioners.

I’m sorry but I am thoroughly confused at this point. If the plan uses a directed trustee, does that satisfy, both the “control” and “court” tests and can they set up a plan?

Sorry for my ignorance, we just want to do what is right.

CB/DC plans. The CB plan froze in 2022 and no participant earned a CB accrual for 2022. The top-heavy minimum is provided in the DC plan. Due to the CB plan freeze the DC plan TH minimum will be 3% rather than 5%, correct?   Top-heavy has always been provided in the DC plan. The DC document is ftwilliam.

Can a 401k plan continue to function without Roth in a post-SECURE 2.0 world?

Ignore the 'corner cases' where no one defers any catchup (whether because they defer low or there is no ADP failure recharacterized) or no one earns more than $145K (seriously, $145K?  Like we needed another limit to track?).

If someone earning $150K is required to make their catchup as Roth, then the plan has to allow Roth deferrals, right?  I know we don't have all the answers yet, but it seems unlikely that there will be a special carve-out we can use to not amend the typically older plans that never had Roth in them before to allow Roth deferrals.  And that amendment would have to be in place before any regular Roth deferrals are allowed, because the SECURE 2.0 amendment coming to a document near you in 2025 will only cover the catchup amounts.

I - and I'm sure most of us - have a whole segment of plans that just want to keep things nice and easy, and I'm looking for a way to do that here... and not finding it.  I'd rather the plan run smoothly than charge for correcting plan errors, personally.

Existing company is a Corp owned 51% by the Grandfather and 49% by the Grandson.  They sell cleaning products to the Restaurant Industry.  The Grandson would like to start a new Company, as an LLC.  The Grandson would be 100% Owner of the new entity.  

• New LLC owns IP and charges a royalty to Corp (Existing Company)
• Corp produces and sells products covered by the IP
• Grandson is employed by Corp (Existing Company) as an officer and is possibly a director 

Would this be considered an ASG or can the Grandson start a 401k PS for his new Entity without regard to the Corp (Existing Company)?

Just to make sure, have there been any updates from the IRS regarding the RMD life expectancy tables? I'm well aware the RMD age increased to 73, but I'm wondering if we use the same expectancy tables as we did for 2022.

Coming to the experts.  Need to avoid coverage issues for my new AFG.  One 20% owner participates in the plan that my firm administers.  Originally I thought non-qualified outside the as our ERISA counsel suggested.  This is an LLC though taxes as Sub S I believe.  I'm now being told not going to work if they want the current tax deduction.  What are my options for this one employee to avoid the coverage issue for tax deferred savings?  

Damn good question from someone in the office:

Plan has no conditions  but they exclude people from getting an allocation if they have less than 1,000 hours or term before last day (not top-heavy).  But, the plan is now below 70% for coverage.  I realize there are Terms with Breaks because last day/1,000 hours is not the "sole" reason they're not benefitting.  But can I use the Average Benefits Test based on the conclusion that excluding people who have less than 1,000 hours or are termed is a reasonable business classification?

Follow-up: Does the answer change if I bring one of them in to pass a failed rate group test?

I'm sure this has been asked a lot in the past and so thank you for your patience.  And I realize SECURE 2.0 may have changed this possibly. 

Have a client who hasn't deposited for 4 months in 2022. Dentist bought a practice and didn't know they or their new payroll company needed to initiate payment.  The amount for the 4 months is probably less than $5,000.  It's being deposited now and I know to report on the 5500 and file Form 5330.  My question is the earnings calculation.  This will be self-corrected.  Can I use the DOL earnings calculator?  It is easy to use and takes out any ambiguity.  I read different things about whether can be used or not.  I'm pretty sure the DOL earnings will be higher than the plan actual earnings for this period (which could even be a loss.)

Thank you.

In a plan merger, are the balances of prior terminees also transferred into the new 401k plan?  These terminees can take their money out of the original plan at any time. but if they do not and their balance is over $5,000, they have to be rolled into the new plan, is that correct?

Thank you

How are TPAs handling on-demand/early-access pay with regard to plan compensation?  Is it treated like a traditional payday loan where the employer isn't involved and ignored for plan purposes? Or counted as compensation when the employee has constructive receipt?  I want to think it's ignored, but when the program itself is an employer benefit, it feels a little different somehow.