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I’m wondering whether a § 401(a)-qualified retirement plan may provide an allocation condition that, instead of looking to the last day of each plan year, instead uses a somewhat later date, a little after a year closes.

For example, to share in a nonelective contribution declared for 2027 and allocated in relation to participants’ 2027 compensation, the participant would need to be employed on February 15, 2028.

The idea is the client’s, not mine.

Assumptions:

The employer’s accounting and tax year is the calendar year. The plan’s plan year and limitation year are the calendar year.

The plan uses no safe-harbor regime to meet any coverage, nondiscrimination, or top-heavy condition. The plan never has had difficulty meeting these conditions.

Of those participants who might not share in a nonelective contribution (if one is declared for a year) because the allocation-condition is the next February 15 rather than the last day of the year, that effect cuts against highly-compensated participants. (For the business and workforces involved, the executives are mobile and the nonexecutive workers are rooted.) And for further reasons, the employer is not the least bit worried about nondiscrimination.

The plan sponsor could change from using IRS-preapproved documents to an individually-designed plan.

Questions:

What qualified-plan rules, beyond nondiscrimination, are involved?

What am I missing?

Are there reasons beyond tax law why an employer should not do this?

Thank you for helping me think about this.

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TPA for a small PBGC covered plan, with various HCE and NHCE

A portion of the plan's money has been transferred to what appears to be a pooled off-shore account with a wealth management firm. No annual statements are produced, just a letter that says something like your starting interest as of 12/31/2024 is $X, P/L during the year was $Y, and end value of your interest in the pooled investment is $Z. 
The letter explains that statements are not available due to the pooled nature of the investment with lots of other investors. 

Off-hand I do not see anything prohibiting a pooled investment interest that would impact either an ERISA bond (non-qualified assets), or filing of a Form 5500-SF (must be eligible plan assets). Is there one? 
Other potential restrictions that should be asked about? There really isn't enough information to go on, so right now the goal is to make a list of questions for the sponsor and the wealth management company to address. 

So far: I intend to ask which is the categories of "qualifying plan assets" the investment is, in case the bond is not sufficient to avoid audit. 

What other questions /issues should be addressed? I feel like there are things we should ask about that I just don't even have an inkling about. 

Not a producing TPA, do not get involved in investment discussions, other than what is necessary for compliance, testing, reporting etc. 

Thank you all in advance for your insight. 

I brought up the DFVC Penalty Calculator for a plan with a late filing in 2024.  But when the list of late filings in EFAST appeared, it showed two years, not just the 2024 filing.

The other year, 12/31/2022, was filed on 10/16/2023 through EFAST.  Since 10/15/2023 fell on a Sunday, the filing date of 10/16/2023 is timely. An extension was filed before 7/31/2023, and the extension box is clearly checked on the form.

Am I missing something, or does it appear that the 2022 filing should not be considered late?  Should they pay the penalty on 2022 as well, even though it's not late?

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We've known that our client NR is in a controlled group with RR (has their own plan but not our client) for several years, and we actually get the RR data every other year or so to prove that it passes 410b for all the various BRF, which it does.

We've convinced the owners to let us take over the RR plan, and as part of the discussion they mentioned the RR plan includes union employees (they were included in the data we received, but not identified as such).  NR's plan excludes union employees, and there are union employees that are excluded.

They want to keep the two plans separate (getting close to the audit threshold, don't want a conversion, etc.).  Is this union thing going to be a problem for coverage?  I'd like to think that since we can exclude all union employees, it's OK to include some class of them.

Thanks.

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Plan is a safe harbor 401(k) using the safe harbor match to satisfy the safe harbor provisions. Plan includes a prevailing wage contribution that offsets employer contributions.  My understanding is that the prevailing wage contribution negates the top-heavy exemption available to safe harbor plans. However, if in every instance the prevailing wage contribution is used to offset the safe harbor match does that conclusion change.  Do they still get the top-heavy exemption?   

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We have a plan with 2 participants (correction: employees) 100% Owner and another employee who is an HCE (but not a Key Employee).

The plan excludes the HCE by name and only the Owner contributes to the plan.

The Plan is Top Heavy.

The plan passes coverage testing, since there are no NHCEs.

Does the plan have to fund the Top Heavy Minimum 3% to the HCE who is excluded from the Plan?

Thanks!

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I have a client that is a 50% partner in Company A. Company A is a 50% partner in Company B.

The client does not have direct ownership of Company B. The income of Company B, flows through to Company A, then to my client.

Assuming the income reported to the client from Company A, is subject to SE tax, can he participant in the plan of Company B. This is assuming Company A & B are not part of a controlled group under pension law.

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We have a potential client where they have a company 401(k) Plan, but the two owners technically aren't on payroll.  Instead they are paid via 1099.

Can they setup their own individual 401(k) instead of participating in the company plan?  Is there any testing issues if they opted to go that route?

Thanks in advance!