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I thought I remember reading that the Mega Backdoor Roth contributions had to be made early in the year (I think it was 30 days after the close of the year).  I just wanted to double-check to see if that is accurate?  We have a client asking about it, so before I confirmed that they could start it for 2025 (and not 2024) I just wanted to be sure.

Thanks in advance!

Is the Earned Income reported on Form 1065 K-1, income for the individual for purposes of the 401(k) plan if the K-1 is issued to a P.C.?

My answer is no, but I am second guessing myself and want another opinion. 

Scenario

Plan Sponsor: LLP , Participating Employers are two P.C.s 

LLP has regular W-2 employees that participate in the plan. Those are not in question. 

The shareholders of the LLP are two Professional Corporations and are clearly listed by the P.C. names on the individual 1065 k-1. Think "Jane Garcia, a Professional Corporation". The LLP as well as the P.C.s appear to be listed as active with the Secretary of State. Line i2 says "What type of entity is this partner?" and it says S Corporation. 

Jane Garcia - receives a Form W-2 from her P.C. She does not receive a W-2 from the LLP. 

Jane is arguing that the earned income on the Form K-1, from the LLP to the P.C. counts as personal earned income to her and also as plan compensation. 

Since the actual shareholder is a corporation, and is listed as one both in name and entity type, my understanding is that the earned income reported on the K-1 is NOT personal tot he individual. 

But I am getting so much push back from "Jane" and her advisors that I am second guessing myself. I am not a CPA, so I suppose its possible that there are special rules that apply to P.C.s that I am unfamiliar with so figured it would not hurt to ask the hive mind. 

Employee made elective contributions in 2018 and 2019.

He should have been paid in 2021, but was not -- it is too old to correct under the correction procedures (Notice 2008-113).

So we definitely have an uncorrectable error.  The employer is not interested in ignoring it and hoping it never gets discovered -- they want to fix it now.  I know we have to report it as a 409A violation and there will be a 20% excise tax.  But do we have to go back and report these as if the contributions were actually paid in 2018 and 2019?  Can we even go back that far?  To make matters worse, the participant also has older contributions (going all the way back to 2001) -- how do we handle those?

Can we just pay out everything now (2025), report it as a 409A payment, and pay the 20%?  Do we have to go back and report the contributions as paid in the year the contributions were made?

Say in 2025 a participant under age 50 defers $23,500, receives a non-SH match of $11,750 (match formula of 50% of all employee deferrals), and receives a PS contribution of $40,000 for a total of $75,250 and a 415 excess allocation of $5,250. 

Under EPCRS Section 6.06, the reduction would come first from unmatched deferrals (none as 50% of all deferrals are matched) and then from matched deferrals and the corresponding match.

In that scenario, is the correction:

1. Refund $3,500 of matched deferrals to the participant, and (2) transfer $1,750 of matching contributions to the plan's unallocated account; or
2. Refund $5,250 of matched deferrals to the participant, and (2) transfer $[edit: 2,625] of matching contributions to the plan's unallocated account?

In other words, does the "corresponding match" also count toward the 415 reduction (as in the first scenario)?

Thanks in advance. 

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Hi, all.

We are in the process of looking at an alternative to Relius for our TPA practice.  I've read through the handful of threads here regarding options but do have some questions which I am hoping someone can help me out with.

We've been Relius users forever...we bought in when it was Pentabs and I cut my TPA teeth in Quantech.  I'm an old dog, not necessarily wanting to learn new tricks, but it is becoming more and more obvious that Relius just may not be "it" for us anymore.  It's simply not what it used to be, and that really makes me sad.  The support is so, so, so bad now...it's just a shame.  I fondly remember the days of a call to Jacksonville and awesome support with Alan Gross, John Reasoner or Marlene Stein...but that's gone.  Ahhh...the good old days!  

Anyhow...as a jumping off point, we are a small TPA firm with about 80 plans but are definitely in a growth mode.  We service only DC plans.  We still have a portion of our plans as trustee-directed balance forward plans, but those are becoming less prevalent.  Most new plans are using an investment platform/recordkeeper like AF, Hancock (Manulife...what come around goes around) and Ascensus Vanguard.  We do not do any daily val recordkeeping, so there is no need for the functionality of the VRU, trading, etc.  I also just don't see us moving to that in the future, either.

We are a CPA firm, so I use our engagement binder for workpapers and doing the trust accounting work for determination of investment income from the trustee directed investment accounts.

Currently, we use Relius Administration, Relius Web Client and Relius Documents.  We don't have any proposal or portal software at this point.

I've been looking at FT William and have sat through a couple of demos there; for Document and Compliance.  There is a lot of really intriguing pieces there but am a bit confused.  I've seen in other posts here saying that FT William doesn't do "recordkeeping" It is basically just compliance testing.  I understand that they don't do daily valuation, but would it handle our trustee-directed, balance forward plans in a way that makes sense?  Basically, can we track participant balances, vesting, and allocate contributions and investment earnings to their "account" in a fashion similar to Relius and report to participants and clients as needed?  I've also heard great stuff about their support.  Granted, that's their sales guys touting how awesome it is, but it can't be worse than Relius is now.

ASC looks so clunky and frankly, like it was last updated in the 90s.  Our IT department really is pushing for a web-based solution.  Managing updates/servers for ASC look like a total drag, and it just appears to be "old technology".  Am I missing something about it?

Datair is also an option, but I am not at all familiar with it.  Thoughts?

Any insight of people who have converted to one of these other options would really be appreciated. I'd love a dialogue on this stuff and I feel like there are lots of us out here facing the same challenges with Relius.  I have a small budget to help grease the skids for anyone who can spend some time talking to me about real world use and experiences of ASC, Datair or FT Williams as we embark on our process.  Not talking big bucks here, but a token of my appreciation for your time.  🙂

I am working with a client with a defined benefit plan for collectively bargained employees. The overwhelming majority of the participants are male. The plan uses the RP-2014 blue collar male table for actuarial equivalence for participants and the RP-2014 blue collar female table for beneficiaries. In 1983, the US Supreme Court decided Arizona Governing Committee v. Norris, which held that the use of sec-based tables violated Title VII of the Civil Rights Act. Has anything developed which has changed this result in the interim? Or can this be justified by using a table for a single gender for all participants, regardless of actual gender? Thanks!

Unfortunately, we're getting closer to the 1/1/26 buzzsaw of required Roth catchups for the Highly Paid Individuals (or High Earners, whatever).

I get that it's allowed to not make these participants complete a new deferral election form if they have elected pre-tax deferrals - the plan sponsor has the authority to cut them off at the base limit and then take any additional deductions as Roth.  And for especially large plans, that might be the most practical method.

But what about smaller plans?  Does it "feel" better to allow the participant to sign off on something, or is just a note telling someone "hey, this is what's going to happen" sufficient?  I'd really rather not make this a 'case by case' thing because it's already enough of a pain to deal with.

Thanks.

Hi there,

I have an auditor asking for part-time hours starting in 2021, however this plan started 1/1/2023.  Am I right in thinking that hours prior to 1/1/2023 shouldn't be applied?

Thank you,

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I just wanted to make sure I wasn't missing a step to file a DFVC filing for a new client:

1) File the Form 5500-SF on EFast, with it checked off that it's a DFVC filing
2) Make the payment using the calculator

That's all there is to it, correct?  There isn't a step I'm missing?  Just wanted to make sure.

Thanks in advance everyone!

We use FT Williams for plan  documents (new to us) and we have a client who uses 60 days of service and not two months.  We cannot find a good way to fit that in the document.  IF we use the "Other" field, FT automatically includes the failsafe eligibiility language.  It also does not give us the opportunity to elect Elapsed Time for eligibility.  It seems as though the only way of electing elapsed time is to use something already hardcoded for months.

And this employer has had the 60 days eligibility for 1,000+ employees for years so, no, they will not change  to 2 months 🤣

Any suggestions appreciated!

Company X sponsors a 401k plan. Company X was purchased earlier in 2025 in a stock sale to parent Company. Parent Company also owns Company Z with a 401k plan. Company X will be merged into Company Z effective 10/1 and both companies will be using the same payroll provide going forward which will be a change for Company X.  (Company X plan will merge into Company Z plan at end of plan year 12/31/25). Is it necessary to formally amend the Company X 401k plan document to freeze the plan and discontinue future contributions, or is the fact that they are moving to the new payroll provider and no longer sending payroll contributions sufficient? Can a Board resolution accomplish this in lieu of an amendment? Any thoughts are welcome!

Spouse and daughter (from previous marriage) both claim they are entitled to distribution of deceased participant's 401k plan account.  Plan administrator reviewed information from both parties and determined that the account be distributed to daughter.  Spouse appealed denial of his claim and submitted additional and new information in support of his appeal.  Attorney for daughter is asking whether she will be provided a copy of documents submitted by spouse in support of his appeal and whether she will have an opportunity to respond.  I cannot find anything in the claims procedure requirements that address this.  My thought is that if the plan administrator determines that the spouse's appeal is well taken and therefore the account should be distributed to him, that is tantamout to a denial of the daughter's claim, requiring the plan administrator to provide her a detailed explanation of the basis for the denial (which would include the information submitted by the spouse in his appeal) and triggering her own appeal right where she can submit her own argument/documents.  Thoughts?

This is my first time working on an age-weighted profit-sharing allocation.

The plan includes 5 participants: 1 HCE and 4 NHCEs. The plan effective date is 01/01/2021. The Normal Retirement Age (NRA) condition is age 65 with 5 years of service from the date of plan participation. The plan year ends on 12/31/2024, and it is not top-heavy for the current year.

After allocating profit sharing, the plan fails the 401(a)(4) nondiscrimination test.

The issue arises with the HCE participant, who is 70 years old and was hired on 07/05/2022. In the age-weighted allocation calculation, we initially used 2 years to NRA for the HCE, resulting in a significantly higher EBAR compared to the NHCEs—causing the plan to fail 401(a)(4).

However, based on Treas. Reg. § 1.401(a)(4)-8(b)(1)(ii), it appears permissible to cap the current age at 65 for participants who have already reached 65 age. While apply 0 years to attain NRA for the HCE (instead of 2), the plan passes the 401(a)(4) test.

My questions are:

Can we apply the age 65 cap for participants who are already past the plan’s NRA, in accordance with the regulation cited?

Can we change the HCE’s date of birth to reflect age 65 and revise the hire date to 2020 to help the plan pass testing purpose only —and is this permissible under any Treasury regulations?

Does the HCE need to satisfy the 5-year participation requirement to be considered as having attained NRA under the plan's definition?

Is there any regulation that allows us the years of participation (similar to how the NRA age can be capped at 65) to help normalize the EBAR calculation and pass nondiscrimination testing?

Any insights or guidance to help us accomplish a compliant allocation would be greatly appreciated.

Thank you in advance for your help.

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Hi all,

I'm having a bit of difficulty thinking through this scenario and could use some help.

Company A (two 50/50 owners) acquires 60% of Company B as of 04/01/24, and B Owner retains 40% ownership. Company B becomes a participating employer in Company A 401(k) Plan as of 04/01/24, and a transfer agreement is executed for Company B 401(k) Plan to be merged into Company A 401(k) Plan as of 01/01/2025. Companies A & B are a brother sister controlled group as of the acquisition. Both Plans pass coverage separately and combined at the time of acquisition (also the EEs of Company B all become employees and participants in Plan A as of 04/01/24).

Company B Plan had a standard SHM and Company A has a SHNE.

Company B consists of 2 employees prior to acquisition, 1 HCE (previously the 100% owner) and 1 NHCE. Company B HCE has >$345k comp from Company B prior to 03/31/24 and earns ~$170k comp from Company A the remainder of the year. Company B NHCE has ~$25k comp from Company B and ~$50k comp from Company A. No compensation is paid from Company B after 03/31/24.

1. I understand that Plan A and Plan B can be tested separately during the transition period for coverage, but are they allowed to be tested separately for other aspects as well (404, 415)? They pass 415 and 404 testing either way, so this isn't a crucial consideration, but I'd like to know how my tests should reflect and for future reference.
2. Does the compensation for 2024 Plan B testing have to include amounts paid by Company A as well, causing a SHM true-up for B NHCE? Both Plans exclude pre-entry compensation, so my thought is that the Plan A SHNE & PS calculations only consider the compensation paid after the B EEs become A Participants on 04/01/24.
3. Both Plans were top-heavy for 2024; Plan A made a discretionary PS allocation - does this cause Plan B to lose its top heavy exemption? If so, B NHCE's Plan B ER contributions are less than 3% of their total (A + B) comp, but B NHCE's total ER contributions (A SHNE + A PS + B SHM) are greater than 3% - does this satisfy the top heavy allocation? The B NHCE SHM/B NHCE Comp is 4%.

Checking a thought/curiosity as never dealt with it before nor have any idea.

Company has an existing 401k/PS plan for many years.

They need to add a second PS plan with better allocation provisions and then merge the new plan into the existing plan.

Upon merging, will the new PS plan's benefits need to be 100% vested, assuming the new plan's vesting service will start with the inception of the plan, assuming that the new PS can even have this provision?

Thank you,