austin3515

Definitely aggressive to make this change after the notice goes out since participants were eligible for a 4% match and now they will only get 3%. I'll be there will be a lively discussion as to whether or not this can be done. If you want to be lock tight, you could do a 4% SH Nonelective. If you did that, you have no harm no foul every which way you turn and I would have no problem with this change. If you are doing this to max out an owner you would likely be doing a Gateway minimum that is greater than 4% anyway. I don't know if the following will be possible or not, but I would suggest a short plan year from say 1/1/2026 to 3/31/2026. Then have your 3% SHNEC start 4/1/2026 and remain on a 3/31 plan year for a while. If you are trying to max out a calendar year tax payer in 2026, then this probably doesn't work.

Maybe top-paid group would help?

I will also add that allowing after-tax and Roth could be making it easy for employees to do something stupid, like contribute after-tax contributions without first maxing out their Roth 401(k). That's probably the most obvious issue with adding after-tax contributions in general.

Yes absolutely. You can do anything for just NHCE's pretty much, such as profit sharing of varying rates.

I have had it where it was an NHCE who wanted to do it. It was a married couple, and the NHCE was married to someone who made a gazillion dollars so they were looking to contribute the full 415 limit. And the plan sponsor was willing to accommodate (small employer).

https://www.plansponsor.com/blines-ask-experts-410b-coverage-testing-firms-401k-403b/ I had a few minutes before I am heading out for dinner :). This should help!

I had this scenario and had them set up a safe harbor match plan for this reason. There is a special rule about coverage testing for the match for 403bs and 401ks,. Someone else might be able to tell you the site, but there is something so make sure you find it!

I;ve already done all of the above, LOL . But it did occur to me that someone would put something out there.

Well the issue here is that my clients are too small to pay the exorbitant fees for that kind of a service. I think those services (which are awesome and well worth the fees charged) are really only available to the larger plans (say $50MM or more). As an example I have a plan with 15 people who wanted to add it!

I'm hearing different things from TPA's regarding whether or not they are making a Student Loan Matching Certification Form available to participants. Has anyone seen TPA's putting anything together? I'm also surprised I haven't seen anything from document providers?

LOL, all of those designations mean nothing compared to my true claim to fame - International Man of Mystery! Though if you do seek an ERISA attorney, I know a good one! Here is a little more color. Assume a day care center is called Day Care I, LLC. Day Care I, LLC is owned by Susan 100%. Susan owns 51% of Day Care II, LLC and Day Care III LLC and the manager of those facilities own 49%, respectively (two different people). They have one website, DayCare.com. All three locations are listed and co-branded. Taking the position that this is an Affiliated Service Group would be very conservative and reasonable based on my position that a playscape is not a material income producing factor for a Day Care center. Having one 401k for all three and running one ADP test, I just don't see how that could be challenged. If you want to take the other position, I strongly endorse one Peter Gulia to do an analysis of the facts and circumstances to see if it can be defended. For example, maybe Susan wants a SH Match 401(k) for her employees in Day Care I and knows it would never pass coverage taking into account Day Care II and Day Care III (the other owners do not want to spend the money). That could be a reason to investigate that position. But as a TPA, I would not endorse administering that way without a "Peter Guiia" letter in the file approving it. Note: I did not look up the ASG rules here, but I'm pretty sure because they are not professional service entities, the entity type stuff is not an issue. My example is based solely on the affiliation and common ownership. I'll note the original question made no reference to whether there was an affiliation, but I assume the question would not have been asked otherwise.

Absolultely. When you compare a day care with a machine shop or Walmart, there are stark differences. It would be quite dangerous to argue a day care is not a service business. They might have a huge playscape that they paid a lot for, but is that playscape a material income producing factor? I don't think so... Plus to me it seems like the danger lies in assuming NOT a service business. To err on the side of caution means concluding it IS a service business. I personally would not assume it was not a service business wihtout a letter from an attorney.

I'm curious to know what your role is with these clients? From a compliance perspective this is all quite complicated. If you work for a TPA I hope someone at your firm has a solid grasp of this stuff. If you work for a financial advisors office, you're definitely asking the right questions but you're going to want to get someone involved who has the right expertise. They might be available at the recordkeeper if you ask for it. They will not be proactive because the scale is too large as others have noted. But most of them will go over things if you call them. But I can make this a little easier for you. Add Roth. It's a good benefit, and plans without Roth are becoming closer to Unicorns every day. Note that you have plenty of time to add Roth in order to avoid the limitations since most people are not doing any catch-ups until at least June (most likely not until Q4 2026). I think most TPA's and recordkeepers were pretty aggressive about getting Roth added over the last year or two, if they didn't already have it. I know some clients didn't add Roth to keep it simple, I get that. And that was probably a more defensible position before these mandatory Roth rules. But low income people in particular (who pay little or no taxes) are better off doing Roth. There was a great article today by Carol Calhoun who mentioned that anyone eligible for the tip income and overtime income deductions is making a mistake contributing pre-tax because they are converting tax free income to taxable income (I'm paraphrasing). https://benefitsattorney.com/bad-tips-for-401ks/

I just want to clarify that almost no TPA or compliance provider every aggressively pursues cumbersome and complex provisions. However, beggers cannot be choosers. I really really want that new business, so I don't get choose their plan design for them 👍. It's always the biggest clients, who by the way have had those provisions for decades at times, that are at issue. Now Congress did us all a favor with SECURE Act (if you want to take a glass half full view of the world). Now when we go to clients and tell them your "plan document sucks" there is some real meat on the bone, since the LTPT stuff in my view is technically, figuratively and literally impossible to comply with.

Husband A treated as owning 100% of Company A and 50% of Company B (taking into account his wife's ownership). Husband B and Wife B are NOT common owners so are not taken into account for the brother-sister analysis. You're not even a controlled group for 415 purposes because those rules don't even apply to brother-sister groups (and even if they did the threshold is MORE than 50%, which is interesting but not relevant). You only asked about Controlled Groups but I think sometimes people lump together controlled groups and affiliated service groups even though they are different questions. My point being you would need to watch out for Affiliated Service Group rules. In addition of course the other concerns Belgarath mentions 😄