Gilmore

Thank you Lou. Would the answer be different if we did not allocate the additional $4,000 as a 415 catchup for the plan year ending 10/31/21? In that case would the $4,000 deferred from 11/1/2021 to 12/31/2021 be treated as catchup for the plan year that ends 10/31/2022? Thanks.

Off calendar plan year ends 10/31/21. In calendar year 2020, the participant deferred $26,000 from 1/1/20 to 10/31/20. So all of the catchup in 2020 was used for the plan year ending 10/31/2020. No deferrals were made from 11/1/20 to 12/31/20. From 1/1/21 to 10/31/21 the participant will defer $22,000. $2500 of the deferrals will be catchup for the plan year ending 10/31/21. I'm thinking when I allocate profit sharing to this participant I can allocate $42,500. $2500 is treated as 402g catchup, and $4,000 is treated as 415 catchup. The total allocated for the plan year would be $64,500. Further, if the participant defers an additional $4,000 from 11/1/21 to 12/31/21 (for a total calendar year deferral of $26,000), those deferrals would be catchup for the plan year ending 10/31/22. Note, this is a safe harbor 401(k) so ADP refund catchups are not a factor. Am I thinking through the catchup process correctly? Thanks very much.

I wouldn't try using that argument when your completing the 5500 participant counts.

The company has a lot on its plate at the moment, and while 1/1/2022 seems pretty far off, they do not want to tackle merging the plans for 1/1/2022. Even without the funds coming over right away there is still the process of enrolling Company B participants, setting up payroll, etc. I was just trying to think through some issues if they merge the plans 2nd or 3rd quarter next year.

Company A purchases Company B in stock sale. The transaction occurs in 2021. Company A sponsors a calendar year end safe harbor 401(k). The safe harbor is an enhanced, 100% of the first 4% match. The plan requires age 21 and One Year of service for eligibility. Company B sponsors a calendar year end safe harbor that also uses an enhanced 100% of the first 4% match. Company B's plan requires age 21 and 3 months of service. At some point Company B's plan will be merged into Company A's plan. I understand that it would be best to merge the plans at the start of a new plan year. It is not possible at this point to merge for 1/1/2022. If Company A does not want to wait until 1/1/2023 to merge the plans and they do so mid 2022, what pitfalls need to be overcome? Company A has been considering making their eligibility requirements more liberal anyway, so moving to a 3 month wait would not be an issue. And both plans use the same match formula. If Company A amends eligibility to 3 months effective 1/1/2022, that effectively ends the coverage transition for 2022, correct? But if the intention is to merge the plans in 2022 the coverage transition would end in 2022 anyway. That being said, would it be better to wait until the plans merge in 2022 for Company A to amend eligibility, or would amending at the start of 1/1/2022 be the preferred way to go? Are there any "mid-year" amendment concerns since we are talking about safe harbor plans? I've already advised the client that any decisions should be reviewed by their legal advisors, especially any decision that might affect the length of the coverage transition period, so this is more for my own education. Thanks very much.

Thank you very much.

Sorry, should have been clearer RBG. I'm looking for an audit of our firm.

Looking for a referral for companies that perform cybersecurity audits. We are a small TPA (5 employees). Thanks very much.

Jakyasar, I think I found the answer in the EOB, if you use that resource. Part D of the "Controlled Group" definition in Chapter 1 has a "Caution" that service with a foreign controlled group member is counted as service for certain plan purposes that are listed, but include Eligibility, Coverage, Nondiscrimination, and Vesting. I'm assuming it generally is not an issue as long as the plan is excluding nonresident aliens until there is a cross-hire.

A Canadian company has a US subsidiary. The US company sponsors a 401(k) plan with a One Year of Service eligibility wait, and excludes non-resident aliens. An employee in the Canadian company is moved to the US company. While working for the Canadian company the employee had earned more than 1 year of service as measured under the US plan. Does the Canadian service count under the US plan? I'm thinking it would just as it would with any other controlled group member? Thanks very much.

I am in total agreement that the full restatement is the best way to go, especially if the termination is not submitted to the IRS, but it may not be the only option. I think the full restatement was especially important when interim amendment language was captured in the new version of the document. This time around there are at least three interim amendments that are not part of the pre-approved language, at least with our document vendor.

I believe as long as the assets are distributed before the restatement deadline (July 31, 2022) the restatement is not required as long as the appropriate interim amendments are in place, as you alluded to.

FT William says they will be updating their system to allow for the required information to appear on their statements, if that is of any help. Hopefully that can be accomplished before the first statements are required, which even for a September year end would not be until summer of next year, right?

With the new cycle 3 docs, at least per FT William, if you elected in the Adoption Agreement under "Determination Period for Safe Harbor Matching Contributions" any option other than "End of Plan Year" (so more frequently than annually), and you want to make a true-up, you need to amend the document to choose "End of Plan Year" no later than 3 months before the plan year ends. I'm sure other documents have different provisions, but FT explained that was per the IRS and their new match requirements.

Our document provider (FT William) gave similar instructions. Their Q&A on the topic says that the amendment must be effective at least 3 months prior to the end of the plan year (with an updated safe harbor notice).

I have read some of the previous discussions on how to treat an employee of a US company with a US 401(k) plan that is a resident of Puerto Rico. I think I understand that if the employee is a bona-fide resident of Puerto Rico, and all service for the US company is performed in Puerto Rico, then the compensation earned is considered to be non-US source income? If that is the case, and the plan document does not have dual provisions for US and Puerto Rico, is the employee treated as excludable for coverage, or are they non-excludable, non-benefitting? Thank you very much.

CalSavers - final-regulations 2020 May.pdfCalSavers - final-regulations 2020 May.pdf For what it's worth, Section 10001(d) of the statute says, "Exempt Employers may, but need not, inform the Administrator of their exemption from the Program...", for employers with plans that don't register. Although registering is not difficult.

Good point CB. I've also thought it was good to have a last day rule so that no participant actually had earned a right to an allocation in case you needed to amend the plan.

Is it acceptable to provide that the initial default rate in a QACA will increase on the anniversary of the participants initial automatic enrollment? For example, participant is auto enrolled at 3% on July 1, 2021. The deferral rate would increase to 4% on July 1, 2022, 5% on July 1, 2023, etc? Thank you very much.

Her husband is an HCE of the unrelated company, or the company she works for?

Ok, yes that makes more sense CB. Thank you Lou and CB for your time and expertise.

So for the ADP test the deferrals used would be only the deferrals made during the 3 month wait to receive safe harbor? If so, would you also use only the compensation earned during the period the participant was not eligible for safe harbor? So assuming the 90 day wait, a participant is hired January 1 and is eligible to defer immediately, but not eligible for safe harbor until April 1. The ADP test for that participant would be the deferrals made and compensation earned from January 1 through March 31? And for the plan year you would need to capture the deferrals and compensation for all similarly situated participants to include in the ADP test?

I was listening to a discussion the other day regarding dual eligibility in safe harbor plans. One individual mentioned that they had clients who allowed immediate entry for deferrals but had a 3 month wait for the safe harbor match. I know you can use disaggregation to require a participant to earn the statutory entry requirements before they are eligible for safe harbor, the caveat being that ADP testing is required for that group, which could include HCEs, and the plan would not be deemed to be non-top heavy, but I'd never heard that you could have dual eligibility as was described. Has anyone had any experience with that type of design? I had always thought that once you were eligible for deferrals you were eligible for safe harbor (at least the NHCEs), notwithstanding the disaggregation option. Thanks.

ESOP, your 2015 question does not fit Jakyasar's original fact pattern, which indicated that the employees became participants on January 1, but your question was interesting, thank you for sharing that. So Mike and Austin's opinion was that the employee is counted as a participant on the date they actually met the requirement to be a participant and not the retroactive entry date. Makes sense. What did you decide?

Under the circumstances you describe, we would also use the 10 that satisfied the entry requirements on 1/1/2020 as the beginning count.