Hi

As not being a DC person and dealing with very few DC plans, I have a really stupid question as I could not find anything on it.

Owner only plan, owner (over 50 years old) makes 50k in w-2 and makes full deferral plus catch up.

They are required to have Roth catch up, correct?

The plan also needs to be amended to provide Roth deferrals/catch up as well by 1/1/2026, correct?

Sorry if this was asked before.

View the full text of this job opportunity

I just want to make sure I am understanding the rule correctly.

Facts:

• Plan doesn't currently allow Roth deferrals
• Owners have SE Income
• 2 owners are 50+ and will defer up to their catch-up limit
• Employees have W-2 wages
• No employees are 50+
• No employees have FICA wages greater than $150,000

They are possibly moving from brokerage accounts to a Platform in 2026, and will likely add Roth deferrals at that time. They would prefer to no allow Roth until they are at a platform because they will have even more accounts to move. 

This Plan is not required to add Roth deferrals NOR remove Catch-up contributions right now because they don't have anyone that the Mandatory Roth Catch-up applies to, correct?

View the full text of this job opportunity

View the full text of this job opportunity

View the full text of this job opportunity

View the full text of this job opportunity

A client established a 401(k) plan as of January 1, 2020, for which it never obtained a fidelity bond. The plan administrator filed Forms 5500-SF 2020-2022 and 5500s for 2023 and 2024, and correctly check the "No" box for the question of whether during the plan year the plan was covered by a fidelity bond.  The client recently obtained current and retroactive fidelity bonds for all years going back to 2020, and the question is, can, or should, the plan administrator file amended 5500s for plan years 2020-2024 to show that the plan was covered by a fidelity bond?

Thanks for your time!

Employer maintains an FSA plan that provides for a grace period.  Calendar year plan.  Regs state that if it has a grace period it cannot also provide for a carryover.  The Regs state that it can be amended prior to end of year to change.  So, under the Regs, a calendar year plan permitting a grace period in 2026 relating to 2025 could be amended to instead use a carryover to 2026 of unused 2025 health FSA amounts (as limited) if amended by December 31, 2025.  I didn't think you could do it this late but the Regs state differently.  However, Notice 2013-71 states "If a plan has provided for a grace period and is being amended to add a carryover provision, the plan must also be amended to eliminate the grace period provision by no later than the end of the plan year from which amounts may be carried over. The ability to eliminate a grace period provision previously adopted for the plan year in which the amendment is adopted may be subject to non-Code legal constraints."  

Can someone expand on what "subject to non-Code legal constraints" means?  I have some thoughts but would like to hear from others.

Because of differing ways of calculating COLAs, it looks like the 2026 SIMPLE IRA catch-up limit for plans with 25 or fewer employees (or bigger plans where the employer has elected the 1% extra employier contribution) is $3,850, while the catch-up limit where a bigger employer has not elected the extra 1% is $4,000. This is exactly the reverse of what Congress was trying to accomplish.

Am I interpreting that correctly? Thank you!

View the full text of this job opportunity

View the full text of this job opportunity

I often find it confusing to determine eligibility for rehired employees. The plan’s eligibility conditions are age 21 and 1 year of service, with a monthly entry cycle. The rule of parity does not apply.

Employee A was hired on 4/14/2022, terminated on 9/08/2022, and completed 590 hours. The employee was then rehired on 10/03/2023. If rehired 07/09/2023 what is the case of determining eligibility.

In this situation, should eligibility be calculated from the original hire date or from the rehire date?

Could someone also explain, with examples, how eligibility is determined for rehired employees who rehired within one year versus after one.

These days, for the most part, new plans must have an auto-enrollment feature.

But can the ER stop the auto enroll after a few years?  Or must it be in there forever?

Does Secure address that?

The calendar year end 403(b) plan in question is required to have the mandatory automatic enrollment provision as of 1/1/2025, as per SECURE. That is not in question. The question is how to correct a failure under EPCRS.

The plan document did not include an automatic enrollment provision, and participants have not been automatically enrolled. There is no match contribution. 

A retroactive corrective amendment to add the provision, effective as of 1/1/2025 seems appropriate. 

And then analysis for a missed opportunity to defer - specifically a failure to implement an automatic contribution feature. 

Does it then follow that the plan can rely on the on the reduced QNEC provided in Rev Proc 2021-30 Appendix A part .05(8)? 

"(8) Special safe harbor correction method for failures related to automatic contribution features in a § 401(k) plan or a § 403(b) Plan. (a) Eligibility to use safe harbor correction method. This safe harbor correction method is available for certain Employee Elective Deferral Failures (as defined in section .05(10) associated with missed elective deferrals for eligible employees who are subject to an automatic contribution feature in a § 401(k) plan or § 403(b) Plan (including employees who made affirmative elections in lieu of automatic contributions but whose elections were not implemented correctly). If the failure to implement an automatic contribution feature for an affected eligible employee or the failure to implement an affirmative election of an eligible employee who is otherwise subject to an automatic contribution feature does not extend beyond the end of the 9½-month period after the end of the plan year of the failure (which is generally the filing deadline of the Form 5500 series return, including automatic extensions), no QNEC for the missed elective deferrals is required, provided that the following conditions are satisfied:

(i) Correct deferrals begin no later than the earlier of the first payment of compensation made on or after the last day of the 9½-month period after the end of the plan year in which the failure first occurred for the affected eligible employee or, if the Plan Sponsor was notified of the failure by the affected eligible employee, the first payment of compensation made on or after the end of the month after the month of notification;
(ii) Notice of the failure that satisfies the content requirements of section .05(8)(c) is given to the affected eligible employee not later than 45 days after the date on which correct deferrals begin; and"

This seems like an aggressive interpretation of the correction options but I am open to being swayed that it others think it is perfectly reasonable and not aggressive at all. 

What say all of you? 

View the full text of this job opportunity

View the full text of this job opportunity

Hi all,

I’ve been learning about CB plans for a sole owner/employee S corp and have several questions I haven’t been able to find out or confirm with research. Hoping you can help.

1) If one overfunds a CB plan (more than the allowed frontload amount) for the first year, can that entire amount be deducted as a business expense that year from the Scorp?
 

The rep from a company that does these plans (as a TPA but not custodian) is telling me the overfunded amount would never be deductible- neither in the year it was deposited nor in the following years (even if the eventual W2 added up allows it). I understand that it all adds up to the lifetime max and therefore anything overfunded will have to be underfunded in the future to make up for it. But it doesn’t make sense to me that the amount overfunded would be lost forever- otherwise why would anyone do it?

2) the 6% rule (when having a DB plan and 401k) doesn’t apply when the DB plan is subject to the PBGC. I understand that a plan in this scenario doesn’t require PBGC coverage but is such coverage optional? As in- can one voluntarily pay PBGC premiums (presuming they don’t cost much- like $30 a year for a plan this size) to avoid the 6% limit? Or does this just not work?

3) the discrimination rules require contributions for all employees to my understanding. What if an employee already reached their lifetime maximum? Does a contribution need to be made for them to not violate these rules? (In this question I’m referring to possibly adding the spouse of the solo owner as the additional employee).

Thank you for the help!

We have a failed 2023 ADP test that was not corrected timely. We are now correcting under ECPRS using the one-to-one correction method. Plan is also Top heavy for 2023.
QNEC allocated under one-to-one correction can be used to off-set top heavy minimum allocation? 

The SECURE 2.0 final regs provide Plans are not required to add Roth provisions to continue Catch-up contributions in 2026; they also provide a "safe harbor" provision that can be added to the SECURE 2.0 Amendment for Plans that do not offer Roth contributions, to avoid tripping over the Universal Availability requirements (similarly situated employees for Catch-Ups) where the Plan Sponsor is Self-Employed (or Partners) and does (or could?) have a Non-Highly Compensated Employee (50+) who is a High Paid Individual ("HPI") for purposes of the 2026 Roth Catch-up rules. To avoid discrimination, the Plan can essentially "prohibit any HCE with any "compensation" in excess of the HPI FICA threshold from contributing Catch-up contributions in the following year. In doing so, you avoid the discrimination issue.

My questions are:

1. Can this "safe harbor" provision state it is only effective for the Plan Years in which there exists a Non-Highly Compensated Employee (50+) who is an HPI? If so, can the HCE owner therefore contribute pre-tax Catch-up?
2. Can or must an S-Corp Plan Sponsor incorporate a similar "safe harbor" due to the nature of S-Corp "control" over W-2 wages (albeit they should be reasonable) and dividends?
3. Can the spouse of the S-Corp owner continue to make pre-tax catch-up when prior year W-2 is less the HPI FICA threshold?  It seems to me they can since income is not "attributed" (therefore no effect on whether or not they are an HPI).

Thank you.