dragondon

Apologies I meant to say S-corp throughout. So basically if he receives any pass through income that needs to instead need to be paid out in W-2 wages in order for it to be considered eligible income. It cannot be eligible income from a dividend/distribution/passthrough even if we change the definition of compensation in the plan doc?

I have a client who is paid 40k in W-2 wages from their sole proprietorship We are going to defer the max amount of 20,500 to his 401k and do 25% profit sharing. This gets us to 30,500 in the 401k account. We were going to do an additional 9500 of after tax to get to 40k in his 401k this year but we wanted to see if there are other options around compensation. He earns additional pass through income from this s-corp. Is there anyway to consider this pass through income as eligible compensation for the plan purposes so that we can defer additional amounts (this could be in after tax) to the 61k limit rather then 40k? How would we have to structure the s-corp and plan to allow for this, or is that even possible?

I see okay so then an employer can match 100% of the deferrals of the employee? or does the 25% rule still apply here in that they can't match more then 25% of their contribution since they can't profit share more then 25% of their compensation?

I am seeing elsewhere that for solo's it is only non electives are you sure that this is accurate?

I have a client with a solo 401k who contributed the max deferrals for 2022 but would like to make after tax contributions to get to the 61k limit. Their compensation this year was 40k so can they contribute more then 100% of their compensation to their 401k in after tax dollars?

I have a client who wants to match 100% of their deferrals is this allowed?

If the rule of parity states: If an Employee does not have any non-forfeitable right to Employer contributions, exclude eligibility service before a period of five (5) consecutive One-Year Breaks in Service/Periods of Severance - No and the one year holdout state: If an Employee has a One-Year Break in Service/Period of Severance, exclude eligibility service before such period until the Employee has completed a Year of Eligibility Service after returning to employment with the Employer - No How far back are we required to look to determine if an employee who joins has any service that should be included because both of these rules do not exclude it? Is there a certain criteria given by the IRS or if it is not determined in the plan document is it like since the company began?

Can you make is so that employees that were terminated in the year will not receive a QNEC or a QMAC for that year?

If the plan has to make a QNEC or a QMAC would they be considered eligible to receive on of those? Or is it possible to have a requirement to be employed at the end of the year to receive a QNEC or QMAC?

If a plan has a start date of 1/1/2022 but elective deferrals are not allowed till 12/21/2022 and eligibility emails were sent out on 11/21/2022 for participants to determine their contribution %'s. If an employee was fired on 12/1/2022 are they considered participants in the plan or because they were fired prior to the first elective deferral being allowed are they not considered participants? If they employee has to make a safe harbor contribution to save the plan would that employee receive that distribution? Also will they be considered in the calculation of ADP and ACP?

What is the purpose of Normal Retirement Age in the plan document? There is a section that specifies in service distributions can begin at 59.5 but then there is another section specifying that normal retirement age is 65. What benefits must start at 65? This does not mean that they have to start taking RMD's at age 65 correct?

I have a plan that has a start date of 1/1/2022 with an effective date for deferrals of 11/1/2022, with an eligibility requirement of 6 months. If someone has been at the company for a year but has an "effective date" into the plan of 11/1/2022 does that mean they will have to work another 6 months before they are eligible to defer or since they have been at the company for a year they are eligible on the effective date? I have the same question for vesting. The company has a vesting schedule of 1 year, with a plan start date of 1/1/2022 and effective date of 11/1/2022. If an employee was hired on 1/1/2020 will they have to wait another 1 year to fully vest after the effective date?

According to the law you must give 30 days notice before a person becomes eligible to make deferrals to the plan. How is this calculated because a participants hours may vary in any given month? For salaried employees I would think we can make an assumption. The plan doc specifies that the eligibility is 175 hours and is using the actual hours method to calculate eligibility.

Is it legal to specify that you have to be employed by the company on the last day of the year to receive profit sharing (new comparability, pro rata ect) even if they have earned eligibility throughout the year to be eligible for the profit sharing? Also is this possible to do with safe harbor non elective contribution or do they have to receive the non elective distribution regardless of their employment on the last day?

Can non elective safe harbor be used to offset the gateway requirement?

If I have a safe harbor plan either with non elective or match and I add in the new comparability profit sharing, do I have to run the ADP/ACP and top heavy tests on the entire plan or just the profit sharing portion? I know that the gateway requirement will need to be met, and that the non elective match can help offset this, but wanted to understand the testing requirements when adding profit sharing to safe harbor plans.

We have a new comparability plan and I wanted to see if we can offset the cost of the gateway requirement with the 3% safe harbor non elective or if we have to give an addition 5% on top of that? Can we also offset it by a safe harbor match or no? Obviously this is all assuming that the 5% is lower then the 1/3 of the highest contribution to HCE's.

How do we determine who is an HCE if the company did not exist in the "look back" year?

If a company may need to make a non elective to pass non discrimination testing at the end of the year does it matter in the plan docs if the non elective contributions are determined at the end of plan year or each pay period? I suppose per pay period would give them the option to do it earlier then end of plan year but wanted to make sure there are not other drawbacks to doing per pay period instead of end of plan year?

Thanks Lou, Should the plan doc specify how this will be handled for every plan?

What are the benefits and drawbacks of using paycheck to paycheck for company match vs statutory compensation? We are taking a rollover plan that is paycheck to paycheck but are not sure if it would be best to keep it this way or change to statutory compensation. We believe statutory compensation would be easier for true up purposes but paycheck to paycheck could be easier for record-keeping.

If the administrator inputted the incorrect % match for a participant how can they correct this error? The plan is matched on a paycheck by paycheck basis so is there a way to correct it in the following paycheck or would that not be allowed? If that does not work would we be able to have a forfeiture of that amount or is the money now the participants due to the error?

With Compliance testing what if someone changes salary mid year? Which Salary is used for compliance testing and for determining NHCE and HCE thresholds? Is the salary used the one at the end of the year to determine they pass the ADP, ACP and top heavy requirements? Also in this same question does a plan have to pass compliance testing at each point during the year, or only at year end?

Can you please explain the difference between a safe harbor plan which makes a nonelective 3% distribution to employees vs a QNEC or QMEC in order to pass ACP and ADP testing? To me it seems that they are basically the same means to an end which is making the plan compliant, so what would be the benefits and disadvantages of using each?

Thanks Lou. The Plan would be Top Heavy and failing ADP testing. Can you explain what you mean by making an election to use the top paid group improve testing results? If this is a new plan what would you suggest for vesting of the top heavy group in order to help with passing the testing? Or will this not effect the testing results? What exceptions are there with the top heavy not passing ADP testing? If we do a 3% non elective distribution will that make us pass both ADP and ACP testing or are there exceptions?