I've got a plan that is currently using the 3% safe harbor NEC, and they want to add a small match as well.  This is a plan that historically gives bad data late, so I'm trying to think of ways to deal with the 3/15 ACP deadline.  I was thinking that if I added it with prior year testing, then all I really need to do is get HCE data by Feb or so and then I can do the ACP test by 3/15 and deal with the rest of the census data as we get it.

I don't do a lot of prior year testing, so I'm not sure if that would work.  If it's added for 2025, what NHCE ACP rate do I use for the 2025 testing?

Thanks.

Has anyone here explored outsourcing 401(k) administration work or considered setting up a back-office team to handle the workload? I’d love to hear about your experiences, challenges, or any best practices you've come across.

For those still exploring options or facing hurdles, I’d be happy to exchange ideas and discuss potential solutions. Please send me private message.

Thank you!

I've got a pre-enactment MEP (established years ago).  New Company G started up in 2024, wants to join the MEP effective 1/1/25.  They have 15 employees.  It seems like we get to use the 3-year grace period here for G and they don't have to start automatic enrollment until sometime in 2027 (or 1/1/28?).  Am I interpreting this correctly?  Or at least reasonably?  Putting aside the wisdom of doing it from the start for the moment...

In 2023 the DOL revised the methodology for counting participants for the small plan audit waiver so that only account balances must be counted. Does anyone know if there has been guidance as to whether that new "small plan" definition would extend to the safe harbor for remitting elective deferrals?

Guy works April to November every year.  Turned 73 this year.  Since he is not employed on 12/31 does he have to take an RMD?  Do service spanning rules apply here?

Hello. We have a nonqualified deferred compensation plan for our HCEs. I’m a bit confused as to how we determine eligibility as I feel that it somewhat conflicts with eligibility for our regular 401(k) plan that HCEs are not eligible for. Our qualified 401(k) plan excludes HCEs based on the IRS’ definition of an HCE (not a 5% owner and did not earn greater than 150k in 2023 (for the 2024 plan year)). Our adoption agreement clearly states that HCEs are excluded from the plan. 

My question- How does this work for new VPs or executives that we hire in 2024? Are they eligible for the regular 401(k) plan since they do not meet the HCE definition yet? Or are they eligible for the nonqualified plan? The eligibility for the nonqual plan is for ‘a select group of management or HCE as defined by the employer.’ Our 401(k) administrator is telling me that these new hire VPs and execs should be eligible for the regular 401(k) and should be given the opportunity to elect since they do not yet meet the definition of an HCE. I do agree with this statement since the only employees excluded from the regular 401(k) plan are HCEs in our plan document. We did not elect the top paid group election for our non discrimination testing either.

So where I’m confused is that our administrator for the nonqualified plan on the other hand is telling me that new hires who come in and are in the top 20% of employees current compensation would be eligible for the nonqual plan. But he also says that eligibility is ultimately determined by the company. I understand that these VPs may be eligible in their first year, but may no longer be the following year if we are basing it off of their income in the previous year or ownership and they are determined to be an HCE.

I don’t want to be out of compliance in regards to our regular 401(k) and want to make sure we are offering the plan to non-excluded team members even if they are VPs and above. So based on the info I provided, would they be eligible for the traditional 401(k) plan (until it is determined they are an HCE) or the non-qual plan? I’m getting two different responses, from both administrators so any input would be appreciated!

During divorce participant was supposed to roll over a portion of retirement into the ex-spouse's designated account.  The participant filled out a QDRO from the third-party administrator for a 457 (b) non-government account.  The participant did not let the ex-spouse or the court know that this was a non-qualified account.  The court processed the QDRO only to later find out that the funds could not be rolled over into the ex-spouse's designated account.  The court then ordered another QDRO to return the money to the participant's account.  The employer then refused to return the funds to the participant because the ex-spouse was not a high-earning employee of the company or any employee of the company.  The third party should not have approved the original QDRO to begin with because the participant was not transparent with the order of the court stating the funds need to be rolled over into a designated account.  Should the court rescind the original order for the funds to be placed back into the participant's account? To complicate things, the participant terminated employment shortly after the funds were placed in a parallel account, not the ex-spouse's designated account, her IRA. 

Question from Schedule MEP

2e Does the plan include any individuals not participating through an employer or who are individual working owners?  Yes or No

Does anyone have information on the working owner questions on Part II of the Schedule MEP? 

I have read the instructions to the schedule, as well as the referenced CFR. 

Assuming a small 'closed' MEP of business entities, where each entity is a participating employer on the legal plan documents. 

Entity A - S-Corp has two owners who are part of the plan, along with a number of employees. 

Entity B - LLC, no S-corp election, one member owner, no other employees, self employment earnings, also participates in the plan

Entity C - sole proprietor, no other employees, self employment earnings, also participates in the plan. 

Entity D - LLC, no S-corp election, one member owner, several other employees that are part of the plan, owner has self employment earnings and also participates in the plan

I would think the answer would be yes for all. The definition of working owner doesn't preclude the business from having other employees, so even Entity A has a "working owner" two in fact. Am I understanding this correctly? 

If there is a MEP and the owners are NOT part of the plan (do not have earned income, no contributions etc) then I would guess the answer to the question on the schedule would be No. 

I appreciate any light someone can shed. Thanks! 

Are there any regulations limiting the amount of compensation used in a fixed match formula? We have a client wanting to do a match of 100% on the first 6% of deferrals, then 50% on the next 2% of deferrals. Thus allowing for a 7% match on 8% of compensation. 

Hi, 

Plan that is terminating the re-allocation of the forfeiture balance occurred after 180 days of the participants initial distribution, is it mandatory the participants should receive a second communication along with the special tax notice since the participants are receiving the additional money post 180 days of their initial distribution? 

Is there any resource of information can be shared in reference to the special tax notice? 

Terminating DB plan has excess assets to be transferred to an QRP (which is the sponsors existing 401k PSP).   In the first year of the transfer,  can the sponsor use part (greater than 1/7) of the excess to fund the previous years accrued profit sharing contribution?       For example, transfer happens in 2025, want to use excess assets to fund 2024 profit sharing contribution in 2025. 

Hi

Sorry if this was discussed before. Not a 401k person.

I want to make sure I understand this correctly.

Client is 75 years old. Because not between ages 60-63, cannot have enhanced catch up, correct?

A National TPA firm, which has a lot of turnover, is handling a Combo Plan for a Law Firm handling criminal law.  The Law Firm thought they were going to implement a Cash Balance Plan in 2021 (yes, 2021) and apparently the message didn't get across, but they signed paperwork to start it.  

TPA firm is talking to them about penalties and have sent them an email on this.  The plan has never been funded.

Can they just pretend that it never happened?  They don't want it opened. What are their options?  

I previously worked for a TPA firm and we set up a Safe Harbor 401(k) Plan for a 20 person construction company in November 2022 to start on 1/1/23.  They never sent out notices about the Plan being started and no contributions ever came in.  We checked with them and they decided they didn't want to do it, so we just allowed them to get out of it as though the Plan never existed.

Can the Law Firm treat this the same way?  Apparently, the TPA has set up a meeting and bringing their ERISA Attorney in.

Hard to find some definite details on this concern and really only have 2 plans that are profit sharing only. 

Plan Sponsor has a Profit Sharing only plan for 20+ years.

Now wants to add a 401k with a Safe Harbor design feature.

1.) Does the start of the 401k safe harbor have to be the 1st of the plan year?  or can it be anypoint in the year to start the 401k?

2.) Is it mandatory when adding a 401k that that it have an automatic enrollment  since it is not a "New Plan" 

Thank you in advance.

Hello all,

Due to an administrative mix-up a client did not file Forms 1095-C for 2023, but their insurer did file 1095-Bs. Client has not received a 5699. Do we just go ahead and file the delinquent 1095-Cs? What to do with the 1095-Bs? Any grace given there?

Thanks!

What amendments, if any, in the current remedial amendment period are needed before terminating a plan?

          I have a client with a 401(k) Plan. A prior plan participant is removing their account balance and is taking the money directly. They will receive 80% of their vested balance with the remaining 20% being transferred to the IRS electronically through the EFTPS program. What is the latest date that the plan can transmit the 20% to the IRS? I would assume that the plan has until the date the plan's annual filings, plus extensions, are filed. I just want to make sure of this.

Of recently enacted early-out distributions limited to an amount (for example, $1,000, $5,000, $10,000, or $22,000), am I right in recalling that an eligible distribution to a victim of domestic abuse is inflation-adjusted (to $10,300) for 2025 but others are not yet adjusted?

And is there any early-out distribution limited by a Code-specified amount but with no inflation adjustment?
 

A 401k plan has a year of service requirement to enter the plan.  However, employees can roll money into the plan before they hit that year of service.

Can an individual who does that, rolls money into the plan before their YOS, take a loan from that rollover?  

I would think they could not since they are "participant" loans and the individual is not a participant yet.    Or is s/he?

Thank you

My apologies I know this information is floating around somewhere, I just haven't been able to easily locate it. 

Does anyone know the fee for a VCP pre-submission conference?

Is the IRS doing them? I know it is only as time and resources permit. 

On the IRS website I couldn't see the information about fees specifically for a pre-submission conference, just the regular VCP submission fees, which I'm familiar with. Or are they $0 since the intention is that there will be a VCP immediately forthcoming with the regular full VCP fee? 

Thank you all!