MWeddell

If she is a highly compensated employee, note that the timing of the amendment may be discriminatory.

Also check the plan document. If it's not a prototype document, it's possible that hardship withdrawal events aren't limited to the six deemed hardship events listed in the 401(k) regulations. I've seen many times where the employer thinks only safe harbor events are in the document but the document actually has both the general hardship test and the safe harbor events.

It depends. Suppose a profit sharing contribution has no allocation conditions and you want to amend the compensation definition retroactive to the first day of the plan year. For example, if the plan says that profit sharing contributions shall be 3% of compensation, then it's not a cutback. On the other hand, if the plan says that profit sharing contributions shall be a discretionary amount allocated in proportion to each eligible employee's compensation, then removing exclusions will be a cutback for some participants because it will lower their allocation percentages.

I agree with mjb but note that many DC plans with a last day of the plan year requirement also have exceptions for those who die, become disabled, or "retire" (however it's defined) during the plan year.

John, the problem is that only some employees receive the extra match. All you'd need is one NHCE in a lower match tier and one HCE in a higher match tier and you will have violated Treas. Reg. Section 1.401(k)-3(c)(4) if the match is the safe harbor contribution and Treas. Reg. Section 1.401(m)-3(d)(4) regardless of which contribution type is the safe harbor contribution.

Assuming that the match was fulfilling the safe harbor requirement, you now have a plan design that is neither 401(k) nor 401(m) safe harbor. So ADP, ACP and BRF testing are all required.

I think you want to read your SPD carefully or request a copy of the legal plan document to see how compensation is defined for purposes of computing the amount of one's elective deferrals. We can't tell whether the plan is being operating consistent with the plan document.

If employed for any portion of 12/31, then the last day of the plan year allocation condition is met. If employed on the last business day of the plan year but not employed on the last calendar day because it falls on a weekend, then I would ask the employer to interpret the plan document because neither decision is arbitrary and capricious assuming the plan document has the discretionary Firestone language where someone (typically the employer) has discretion to interpret the plan document.

Original post says that there are no HCEs so there will be no BRF testing. You might want to prepare the document so any HCEs who are nonexcludable get the 100% on 1% match if you want to permanently eliminate the need for BRF testing on the available rate of match.

No, this could easily disqualify your plan. Don't do it. It sounds like you are suggesting that elective deferrals can be made from bonuses but that any deferrals from bonuses be excluded from matching contribution computations. However, all you'd need is one NHCE with a bonus that is higher as a percentage of his/her pay than the HCE receiving the lowest bonus among HCEs and you will have violated Treas. Reg. Section 1.401(k)-3(c)(4) if the match is the safe harbor contribution and Treas. Reg. Section 1.401(m)-3(d)(4) regardless of which contribution type is the safe harbor contribution. You'll then have a plan that purports to meet 401(k) and 401(m) safe harbor requirement but does not, which is a disqualification issue. It's possible that I'm misunderstanding the facts, or that I understand the facts but those who replied previously did not.

Yes, you can use them in the ADP test. Assuming the plan document is drafted optimally, you can use any portion of them in the ADP test. Leaving some of the 3% contribution out of the ADP test (while still passing coverage for the nonelective contributions not shifted into the ADP test) often is a better testing strategy.

The latest eligibility / entry date combination is allowed because it is impossible for an employee to become eligible later than required by Code Section 410(a).

It seems to me that the suspension is a benefit, right or feature. However, it is uniformly available to all plan participants (the fact that one has to first have experienced a financial hardship is ignored for current availability purposes), so there wouldn't be any BRF testing.

I agree with the above, but it seems a bit tangential to the original poster's question. It is possible for no suspension at all to be required after a hardship withdrawal. Yes, a plan document could require a 12-month suspension instead of a 6-month suspension that is now in the safe harbor portion of the hardship regulations. This was quite common for the first couple of years after the regulation lowered the suspension period's length from 12 to 6 months. There is no citation that supports this. The structure of Code Section 401(a) is to list various prohibitions for qualified plans and anything else is permitted. Given the absence of a rule that claims "elective deferrals may be suspended only under specified circumstances,," then a plan may make up its own suspension rules.

I agree with the recordkeeper, not the original poster. The rule is in Treas. Reg. Section 1.401(m)-3(d)(2): "Matching rate must not increase. A plan that provides for matching contributions meets the requirements of this paragraph (d) only if the ratio of matching contributions on behalf of an employee under the plan for a plan year to the employee's elective deferrals and employee contributions, does not increase as the amount of an employee's elective deferrals and employee contributions increases." I have no difficulty in interpreting "matching contributions" in that regulation as applying to all of a plan's matching contributions. If the IRS had intended "matching contributions other than the safe harbor matching contributions," then that's what they what have written. Ask yourself this: if you think that "matching contributions" in 1.401(m)-3(d)(2) means "matching contributions other than the safe harbor matching contributions," are you consistently interpreting the phrase "matching contributions" the same way elsewhere in 1.401(m)-3?

It's a matter of following what the plan document says. You've said that the plan allocates based on full year compensation, not just compensation for the portion of the plan year during which the individual was eligible. However, you'll need to track through the plan's definitions to see whether "compensation" includes pay from any employer in the controlled group or from only participating employers (or in your case, participating divisions).

Let's assume that the plan is intended to meet both the 401(k) and 401(m) safe harbor rules. Yes, 200% match on the first 6% of pay that is deferred is permitted. The owner will be an HCE. The other eligible employee will have to have at least as generous a match rate as is available to the HCE. Whether the part-time employee is eligible, I don't know. I've not reviewed your spreadsheet.

Be aware that there is some very informal and rather spurious IRS guidance opining that prime rate + 2% or higher interest rate is deemed acceptable for loans. I would disclose it to the client.

I agree with Tom above. I initially thought that there might be a problem based on question 43 in the 2011 Enrolled Actuaries "gray book" IRS Q&As, but that question deals with a different set of facts.

In general, a discretionary plan amendment must be executed by the last day of the plan year in which it becomes effective, according to IRS guidance.

If you want to be more specific other than "check with legal counsel," you could point out "1) It clearly is not authorized by the IRS' Self-Correction Program and 2) according to the ERISA Outline Book, the 7th circuit court of appeals in a case involving Verizon "noted that the power to recognize and correct a scrivener’s error in an ERISA plan rests exclusively with the courts, and an administrator cannot simply reform a plan to correct what it unilaterally perceives to be a mistake or error contained in the plan’s written terms." Also, in my recollection, courts generally interpret the scrivener's error doctrine more narrowly than benefits consultants tend to do. Hence, my caution.

If an employer wants to reform its plan document without a VCP filing, claiming that it was a scriviner's error, then I suggest the employer should consult with its legal counsel.

Assuming that communications to the employees consistently describe the integrated allocation formula, the IRS may approve a retroactive amendment to put the integrated allocation formula back in place. However, you'll have to incur the time and expense of a VCP filing. The Self-Correction Program doesn't allow you to make this amendment on your own.

You might also consider whether he would still be an HCE if all of the employer's plans were amended by the end of the 2016 plan year to use the top-paid 20% group election. Sounds unlikely that it'll wortk, but I'll throw it out there.

First you have to determine whether the employer has violated the deadline in the plan assets regulation, DOL Reg. Section 2510.3-102. The employer needs to deposit the money into the qualified plan's trust as soon as the assets reasonably can be segregated from the employer's general assets. Sounds to me like the employer probably has missed that deadline based on your short post, but it's a bit of a judgment call. If the deadline is missed, realize that it will be reported on item 4a of Schedule H of the Form 5500, so you've really got to go by the book to correct it. That means using the DOL's Voluntary Fiduciary Correction Program. You ought to be able to search for that term on the internet and take it from there.