Client has a 125 plan and contributions are made to an HSA (generous contributions by company).  Client wishes to set up a separate track for medical benefits for all new employees hired after a certain date.  Legacy employees continue to get the same favorable benefits.  New employees receive an ACA compliant offer (perhaps with a premium only plan separate 125 plan).  Thus, the new employees would not be ineligible to participate in the 125 plan.

Any issues with this?

Thank you.

Hypothetical question:

Combo plan DC/DB, top heavy

Only DB provides top heavy

What is the percentage?

Last I knew, under IRS Notice 2024-2, the amendment deadline for these was 12-31-25 - the IRS didn't give the non-governmental plans the extended deadline available for 401(a), 401(k), and 403(b) plans. Has there been any update of this deadline that I missed? Thanks.

The regulations are written in a way to protect the benefits of NHCE compared to the benefits of an HCE/Key. 

But do the regulations have parameters around the amount of benefits provided between the HCE group, or the NHCE employees?

For a new comp allocation could an employer at its discretion for example provide a larger benefit to a single NHCE, or even no benefits to a certain HCE? While still passing gateway etc. 

I'm curious is there any regulatory language that prohibits an employer from discriminating within HCEs or NHCE? 

I can't believe in all my years of administration I've never run into this before, but here's the situation:

LLC that had owners with W-2 wages in 2023 (and prior) decided in 2024 to put the owners on K-1 income.  This Company traditionally fails the ADP-ACP testing.  Accountant gave us preliminary K-1 information so that we can at least run preliminary 2024 testing and determine refunds prior to 03/15.  We'll then make adjustments when the final K-1 info is available, and the client will have to pay excise tax on any late refunds.

Am I missing anything?  I guess because 99% of my K-1 and Sch C clients are safe harbor I haven't run into this ever before.  I can't believe it's very common, though, is it?

Thoughts?

We have  small Cash Balance plan for owner and two participants; the owner passed away, the spouses needs to take his RMD by 4/1

Would his RMD be calculated on his age, 73 or the spouses, she’s 68.

Would the RMD be calculated on the retirement benefit or thehypothetical account balance?

The RMD amount for the owner was miscalculated and was too low.  What is the correct way to fix, and what are the tax ramifications? Does the fact that it occurred more than five years ago have relevance?

Client has  basic safe harbor match.  They want to provide more match.  I will recommend the discretionary match that doe snot match deferrals over 6% nor exceeds 4%.  they can choose the parameters.

The plan is top heavy.  We don't run into this situation often but I believe the above still satisfies the top-heavy exemption since it all stays within the parameters of the safe harbor rules.

Thank you,

Tom

The plan sponsor had a small name change from 'Inc' to 'LLC' as of 1/1/2024.  The ERISA plan document was not updated to reflect this during 2024, but will be updated at some point during 2025.  Should the 2024 Form 5500 filing for the plan year ending 12/31/24 follow the plan document or the legal company name?

Litigation involving a number of adult children and stepchildren of the owner of a single IRA account, who died in 2023, are now resolving their dispute by a settlement allocating a share of the IRA to each of them.  The IRA owner had been taking RMDs but died without having taken her 2023 RMD, which still has not been distributed.

My understanding is that the 2023 RMD could have been taken by any one of the beneficiaries in the year of the IRA owner's death.  Is there any way the missed 2023 RMD can now be distributed to only one of the beneficiaries so that just one Form 5329 needs to be filed or must the 2023 RMD be allocated among all of the beneficiaries in proportion to their respective shares of the IRA to be received under the settlement and a Form 5329 be filed by each of them for a corresponding share of the 2023 RMD?

How should HSA pre-tax deductions be handled if an employee is on an unpaid Leave Of Absence across two different tax years?  For example the employee starts the LOA in 2024 and comes back in 2025. 

Is there a violation of minimum participation rules here, or is there additional testing required with the following plan design? An ERISA 401k calendar year plan has 1 year of service/1000 hours for eligibility (anniversary year then switch to plan year) and a tiered year of service match formula with tier 1 drafted as follows 1- 7 years 25% match (8-14 years 50% etc), and Year of Service for the match formula defined as 1000 hours in the Plan Year (in practice credited at year end), are there any minimum service/participation concerns under ERISA? Example employee completes eligibility on June 26, 2024, with an entry date of June 28, but is not credited with 1000 hours of service in 2024 until 12/31 and then 1/1/26 receives the first match. Seems a plan design flaw but trying to determine exactly what the issue is? Appreciate your thoughts!

If an HCE participates in plan A and plan B which are in a controlled group and has Compensation of $200,000 in each plan and a 2% employer contribution, how much gets allocated to each plan account? I realize that for 2025 the 401(a)(17) compensation cap is $350,000 so it appears the maximum contribution should be $7000 across the 2 plans? Does one plan allocate $4000 and the other $3000? Thanks!

We have a client who failed ACP test.  The one HCE is entitled to the match but then must receive the correction.  Issue is the match has not yet been funded and the correction is to be made by March 15.  This is his first year int he plan so he has no other match source funds. 

I should know this but I'm thinking the ADP correction is due March 15 but an ACP correction is not dye until the end of the following plan year.  We know about the vesting rule - refund the vested portion only and forfeit the unvested amount.

Thank you

Employer employs four employees, none of who are catch-up eligible.  Employer currently has a SIMPLE with the 3% match approach.  No salary deferrals have been made in 2025.

• It’s our understanding that the increased deferral limit of $17,600 in the SIMPLE is automatically in place for 2025.  Is that right?

   

If they terminate the SIMPLE as of 6/30/2025, then start a new SH 401(k) plan effective 7/1/2025, (distributing all required notices timely and communicating the pro-rata deferral limits in each plan ($8,727.67 / $11,846.58) specific to each participant), for the initial plan year:

• Is Compensation from 1-1-2025 to 6-30-2025 for purposes of calculating the 3% match in the SIMPLE, if any salary deferrals are made?
• Is Compensation from 7-1-2025 to 12-31-2025 for purposes of calculating the Employer contributions (Safe Harbor, Profit Sharing, Discretionary Match) in the 401(k) plan, or could the 401(k) plan be written to use full-year (1-1-2025 to 12-31-2025) compensation for allocation purposes for the first plan year?
• Can the new Safe Harbor plan use the Match approach, or does it have to use the Non-Elective approach?
• Is the SIMPLE match (if any) completely disregarded in the 401(a)(4) test in the 401(k) plan?

They will be well under the 25% deduction limit between Employer contributions made to both plans.

Thanks in advance for your input on this.

In prior year, ADP ACP Non-discrimination test and coverage test is taken in disaggregate method.

I have taken both coverage and ADP ACP test disaggregate method. However, my ADP ACP is passes in disaggregate but coverage is failed in disaggregate. But the coverage is passes in aggregate method.

As per my understanding, it is not permissible to change the method of ADP ACP testing from disaggregate to aggregate because the plan follows prior year Testing Method. 

Is it permissible to take coverage test in aggregate method to make the test pass. Is there any provision in IRC regarding this scenario.

Thanks in advance!!!

President Trump’s order Designating English as the Official Language of The United States revokes President Clinton’s order Improving Access to Services for Persons With Limited English Proficiency. https://www.whitehouse.gov/presidential-actions/2025/03/designating-english-as-the-official-language-of-the-united-states/

Here’s the revoked order: https://www.govinfo.gov/content/pkg/FR-2000-08-16/pdf/00-20938.pdf.

Although the order is directed to Federal government agency heads, might this affect anything an employee-benefit plan’s administrator must do (or not do)?

There are some threads here that come near this, but I can't find anything that really gets to this situation... especially with a safe harbor plan.

Plan excludes commissions from the definition of compensation for all sources - deferral, safe harbor match (deposited per payroll with no true up in the AA), and profit sharing.  For the first several years of the plan, the owner and child have had 50%+ of their total compensation paid as commissions, so 414s would always pass as most NHCEs have commissions of 10%-20% of total comp.

Until now; in 2024, child is not paid at all, and owner restructured so that all his compensation was regular wages.  Sure, I can point to the caveat in my letter each year that this is a terrible idea and only is valid due to the large percentage of commissions that owner & child take, and let us know if that changes... but now that it fails, what actually happens?

There's no PS for 2024, so that's fine.

There's no ADP test, so is there no effect on the deferrals?  Plan sponsor insists that all participants understand that there will be no deferrals on commissions.

For the SHM, I presume that I have to calculate it on an annual basis including all compensation.  But here's the thing: that might end up lowering the deferral percentage and therefore the match (example: deferring $2,500 on $50,000 elig comp yields 5% and you get the maximum match; now if we compare $2,500 to $83,000 total comp, that's 3% and you get a lower SHM).

What's the right way to proceed with this?  Thanks.

There is an agreement subject to 409A that provides that a bonus is earned upon a sale of the company. However, it does not provide when or how that bonus is to be paid, is there anyway to correct under 409A? There is going to be a sale of the company, but the plan provisions don't state when payment is to be made (i.e. lump sum, installments...)

In 2025, the 415 limits are $70,000. Here is the scenario:

The employee has a profit-sharing plan because of an agreement that can not produce refunds.  The employee also has a 401k plan with employee deferrals only. Weekly payroll on the deferrals where the monies go in within 3-5 days after the pay date, is consistent and timely. 

The 2025 year ends and we realize that some 401k participants are over their 415 limits. Let's also assume that over the age of 50 and between 60-63 the catch-up and super catch-up contributions were backed off to the 415 limits.  We now have a scenario where refunds have to occur. 

In the first scenario, a total of $9,000 has to be refunded. This $9,000 came in over 9 weeks ($1,000 per week) and applied to payroll periods in November and December. The $9,000 has to be refunded (This is a given)

Now, the $9 million question:  What about earnings on the $9,000 over 9 weeks, plus lead time to perform the calculations and set up the refunds?  It is nearly impossible to capture 10 investments in different asset classes from the day the monies were invested, plus earnings to the day it was refunded.  

How does a TPA or Plan Administrator/Trustee calculate the earnings on the refunds?  One can use this calculator and refund the monies by March 1st of the following year as the pooled investments are held in individual accounts from a major recordkeeper, etc. 

https://www.askebsa.dol.gov/vfcpcalculator/webcalculator.aspx

Do we use the online VFCP calculator to determine refunds on earnings? I see no guidance if we had market losses, like in 2022 (unless you were all in guaranteed investment contracts).  

I doubt a TPA has sophisticated earnings software, and they probably perform this manually.  Again, only for 415 limits here. The ADP test is a separate issue that one can monitor and know upfront based on the census of this plan. 

Earnings Calculator VFCP.pdf