MWeddell

Ha! ESOPs are so important that an entire month is needed each year to celebrate their existence! https://esopassociation.org/employee-ownership-month#:~:text=October is Employee Ownership Month,local communities%2C and the nation.

On the first issue, I also prefer treating it as an automatic enrollment. I don't know what legal counsel's rationale was for where it hasn't been treated that way. Regarding your second paragraph, the Code tends to tell us what is prohibited for a qualified plan, not what is permitted. Certainly if one treats it as an automatic enrollment, there is text in Treas. Reg. Section 1.401(k)-1 that is broad enough to cover it.

Yes and no. Agree that if the 414(s) arithmetic test fails because a pre-approved 414(s) definition of compensation is not used, then it is not a safe harbor plan. The consequence is potential disqualification for failure to follow the plan document (which states that it is a safe harbor plan), not to perform an ADP test.

I have had many employers continue to deferral elections from one plan to a new one. Make sure the plan document clearly authorizes this. Legal counsel for these employers have been split whether to treat this as auto enrollment (triggering both initial and annual employee notices) or not.

I agree with Lou S. You can have 6 months + 1000 hours of service eligibility but then you also have to let someone in after 1 year with 1000 hours of service.

You might also be remembering the "greater than 50%" rule for aggregating DC plans for 415 limits. For all of the other testing rules, the 80% common ownership (or a brother-sister controlled group) rule applies.

My experience is the opposite, perhaps because I tend to work with larger employers than many of the regulars on these message boards. During the past ten years or so, the rules regarding rollovers and in-plan Roth conversions have increased, not decreased, interest in accepting voluntary employee after-tax contributions.

There's an election that must be made with Hacienda (although maybe Peter's links above already tell you that).

It sounds like you have (or your client has) a 401(k) / 401(m) plan that is not a 401(k) / 401(m) safe harbor plan and does not have employer nonelective contributions made to it. You are performing the ADP / ACP tests with compensation that clearly satisfies 415 compensation. In those circumstances, there is no requirement that the compensation definition used by the plan to compute contributions must comply with Code Section 414(s).

BenefitJack, I answered the questions as best as I could, including providing citations.

I agree unless these are Code Section 403(b)(9) accounts. Pending legislation, if passed into law, would change the investment restrictions.

On the first question quoted above, Chapter 7, Section IV, Part E.2 of The ERISA Outline Book, citing Treas. Reg. Section 1.402A-1, Q&A-1 says that a qualified plan may only accept Roth rollover contributions if it accepts Roth contributions more generally. That's the consensus view, although reading the regulation leaves me less than fully convinced. On the second question quoted above, it is a clear "no." IRS Notice 2010-84, Q&A-19, a portion of the notice that was not modified by Notice 2013-74.

I'll assume that any seasonal employees who already are eligible for the plan will continue to be eligible. So this is a mid-year enhancement. Furthermore, we're enhancing eligibility, which is not part of the required content of the safe harbor notice from Treas. Reg. Section 1.401(k)-3(d)(2)(ii). Sure, you can make this amendment effective mid-year and don't need to circulate a new notice (although one would think the employer would want to promptly communication the plan enhancement). Notice 2016-16 governs the situation.

Yes. If the plan document provides that "catch-up contributions" are not matched and the document defines "catch-up contributions" the same way as the Code and regulations instead of as contributions initially regarded by payroll as catch-up contributions, then the related match will need to be treated as forfeitures to comply with the written plan document.

Note that (although I have never seen it) it is possible that "catch-up contribution" in terms of what isn't matched is defined in the plan document differently from how the IRS defines "catch-up contribution." In general though, I agree with the preceding post that this is an area where operational practice often differs from what is required by the plan document.

I agree with BIll Preston that it doesn't matter. The plan document says (presumably) that the plan meets the 401(k) safe harbor conditions and therefore an ADP test is not required. Presumably the plan year you are concerned with has ended so that it is too late to amend the plan document.

As with most questions, read the plan document carefully. For most plans, the deferral election applies to the entire 7/24 - 8/5 pay period before the compensation is paid on or after the 8/1 entry date. For most plans, one continues to permit elective deferrals to made made from regular forms of compensation after the participant terminates employment until the later of 2½ months after termination or the end of the current plan year.

Belgarath, the 403(b) contributions are excluded from the ABPT when the ABPT is performed in order to get a qualified plan to pass. This might lead to unpredictable results. It's fairly common where the 401(k) plan covers the for-profit employees that its population skews in favor of HCEs, making not just the nondiscriminatory classification test but also the ABPT a challenge.

It sounds like you understand the lay of the land. One thing to ask your client is whether AA is the first for-profit entity in the controlled group. If there are going to be multiple for-profit entities, then be aware that Treas. Reg. Section 1.410(b)-6(g)(3) doesn't work unless all of the for-profit employees are in more plan (which may be an aggregated plan). Also, as you already noted, that rule doesn't work if there are employer nonmatching contributions to the 401(k) plan for the for-profit employees. Also, if you have to do any average benefit percentage testing in order to get a qualified (not 403(b)) plan to pass a test, this excludes contributions to the 403(b) plan, which can lead to funky results, so be wary that an ABPT test could have difficulties passing.

It is optional whether to calculate the safe harbor match based on elective deferrals (which includes any Roth contributions) or based on both elective deferrals and traditional employee after-tax contributions. See Treas. Reg. Section 1.401(k)-3(c)(5)(i).

Let's assume both plans use the same plan year to simplify things a bit. A non-safe harbor plan cannot be merged into a safe harbor plan in the middle of a plan year. The first sentence of Treas. Reg. Section 1.401(k)-3(e) requires that safe harbor provisions be adopted before the plan year begins and that was not true for Company B's plan. The work-around is to amend Company B's plan to freeze contributions, amend Company A's plan so that Company B's employees are eligible for it, and then merge together the plans after the plan year ends.

Yes, they can do that. It is permitted by IRS Notice 2016-16, Section III.C. It will require that a revised safe harbor notice be distributed because it is changing a plan feature listed in Treas. Reg. Section 1.401(k)-3(d)(2)(ii)(B).

Note that the bolded 50% in the above quote is not always true. By my count, the EPCRS contains three correction methods calling for a 0% QNEC, one correction method calling for a 25% QNEC, and then the general rule calling for a 50% QNEC, and other correction methods are possible if they are reasonable and appropriate. In the original poster's situation, I suspect that the 25% QNEC option is the best one available.

I've seen this done many times. Like the original poster, it feels sloppy to fund a contribution sooner than required by the plan document, but the practice probably does not violate what the plan document says.

I agree that it would be an invalid retroactive cutback to add a last day of the plan year condition to the true-up match for the current plan year.