austin3515

From ERISApedia. I assume it is cool to post this, lots of people post the EOB. Anyway, great textbook, I rely on it heavily! In short it is not as clear as I had thought. Mandatory automatic enrollment (MAE) does not apply to a plan year if, as of the beginning of the plan year, "the employer maintaining such plan (and any predecessor employer) has been in existence for less than 3 years." [Code §414A(d)(4)(A); Prop. Treas. Reg. §1.414A-1(d)(4)(i)] The proposed regulations do not define predecessor employer. The Section 415 regulations [Treas. Reg. §1.415(f)-1(c)(2)], which look to whether the new employer substantially continues the business of the old employer, might be a good starting point for making a good faith interpretation of the statute. Under those regulations, a predecessor employer is defined in one of two ways, depending on whether the company being evaluated continued the plan of the earlier company. In particular, the regulation provides that, if the current employer continued the prior plan: [A] former employer is a predecessor employer with respect to a participant in a plan maintained by an employer if the employer maintains a plan under which the participant had accrued a benefit while performing services for the former employer (for example, the employer assumed sponsorship of the former employer's plan, or the employer's plan received a transfer of benefits from the former employer's plan), but only if that benefit is provided under the plan maintained by the employer. On the other hand, if the current employer did not continue the prior plan (i.e., the benefits in the current employer’s plan were all accrued while the employees worked for the current employer): With respect to an employer of a participant, a former entity that antedates the employer is a predecessor employer with respect to the participant if, under the facts and circumstances, the employer constitutes a continuation of all or a portion of the trade or business of the former entity. Example 14.4.27 Fresh Foods swings open its doors on October 1, 2025, ready to serve the community, and promptly establishes a calendar year 401(k) plan. As a brand-new business, Fresh Foods gets to enjoy the "new kid on the block" exemption from MAE. This reprieve lasts until the plan year starting January 1, 2029. For now, the team can focus on stocking shelves and slicing compliance red tape. Example 14.4.28 Now imagine a twist: Fresh Foods, while newly incorporated, buys out Ed’s Good Groceries, which has been serving the same location since 2015. Fresh Foods also keeps many of Ed’s long-time employees. This changes the game. Since Fresh Foods continued Ed’s operations, Ed’s is likely a predecessor employer, and Fresh Foods can’t claim the new business exemption. The MAE rules kick in right away, applying from the moment the 401(k) plan is established.

I just don't see any basis for any sort of predecessor issues. My understanding has always been the only way that could happen is if the buyer maintains the plan of the seller, or some sort of spin-off. Are you saying that a straight asset sale, where the new buyer just so happens to hire some or all of the existing employees might somehow be considered not a new employer?

I think it very much matters if it was an asset purchase or a stock purchase. If your client bought the stock of the business through the LLC (i.e., the LLC owns 100% of the stock of the business that had been ongoing) then the employer is NOT new. If on the other hand it was an asset purchase, I believe there is no question that this is a new legal entity with a bunch of new employees and the 3 year exception would apply. The laws are all very clear on an asset sale not having any successor connections to the prior entity. Note that an asset sale might be for all of a business, or one sliver of a business. There is no requirement that they need to hire the same employees either.

Peter is being very non-alarmist (even though he is of course correct!). I would like to be much more alarming. Fix this immediately, it is super-duper bad. The Plan Administrator made a mistake; that's the plan administrator's fault and they need to pay the expense. At best you can take the position that this is a prohibited loan from the plan to the plan administrator, corrected with interest (etc). Get an attorney involved. This is very very problematic. probably eligible for self-correction under the new DOL Program, but absolutely needs to be corrected.

I was rushing meant to clarify that this is 100% the better solution. There was an IRS FAQ way back when this fact pattern was posed to the IRS and they said that an 11g was acceptable. It wasn't precisely the same but it was pretty much the same. The point was you dont have to be failing a test with no other means of passing to be able to do an 11g amendment, and the question was about making people eligible who were not previously eligible. I found it, it was the ASPPA Annual Conference Q&A from 2010. I know it is from behind the paywall where I got it, so not sure I can share it.

I have done what you suggest in scenarios where the existing plan is a comp to comp or integrated allocation, and I ran the fact pattern by a highly respected compliance service. There is absolutely no rule against setting up a new profit sharing plan just because you have another existing one. That was the answer I received.

As a former TPA I will tell you these are generally not great clients. I dont mean in the sense that they are jerks or that they don't pay their bills. I mean they are so "unusual" from an operational perspective that only a partner can assist and answer their questions. There is no detailed work ti be done, so not much that a staff person can do. So if you bring on one of those clients, it's basically 100% partner time which starts to raise the quesiton of "can you charge enough money." I used to tell clients, "it's not worth it for you to pay me what I need to get paid to do this work for you, but I cant do it for any less. If you want me to be available to you when you call, I need a decent fee." I would review the plans all the time throughout the year for, amendments needed, invoicing, collections, you name it. Just having a plan on the books takes time even if I'm not doing any work. I used to charge $1,250 a year and I still think it wasn't enough sometimes.

OK this is coming up again for me and I cannot find any guidance on point whatsoever. 457f plan has an SRF that expires in 2035. Client wants to know what happens if non-profit ceases operations in 2030 and they want to terminate the plan. Does the participant vest and get paid out or forfeit? The Basic Plan Document does NOT say the participant becomes vested on termination, nor does any provision in the AA. Would I need to add a special vesting event that says something like "In the event the plan is terminated in connection with the Organizations intentions to completely cease operations"?

probably you're talking about Dr. Evil...

Also True, LOL.

If anyone is interested this worked out really well. Price is 189 now. Tons of ERPA courses on demand. Definitely not at the level of Ilene/Alison/Derrin, but super convenient. I watch the course, take a 5 question quiz and my ERPA cpe is ready for download. Watching from a browser was glitchy and apparently there have been a lot of tech issues reported by people. When I switched to the iphone app I had no tech issues at all (I have a Roku so I can screenshare on the TV!). Anyway, it was always a scramble and super expensive to get CPE. I'd pay $250 for one 50 minute course (if my free ones were not enough). Anyway big fan. I really did no due diligence on them besides asking ChatGPT. Aside from the tech issues I mentioned they had a pretty good reputation. I just wanted to mention so as not to overstate what I did by way of research.

I think the issue with not doing the safe harbor notice is that if you don't have the "maybe not" language you can't discontinue it mid-year unless you are operating at an economic loss. According to the ERISApedia text book it's a little gray, but I still send them out for this reason.

And the relevant fact and circumstance in my 4% SHNEC example is that everyone gets the same or more from their employer.

So I think the analysis here is, there is lots of guidance in 2016-16 on mid-year changes to Safe Harbor plans but NOTHING at all regarding amendments made before the beginning of the year, regardless of whether the SH Notice has been distributed or not (I spent some time looking this morning out of curiosity). Switching from match to SH Nonelective is not a "protected benefit" issue. The employer can change its approach before the plan year starts. From an optics perspective with employees (And who knows, maybe one day the IRS) it just looks really bad, since you just told them you were going to give them 4% (assuming they contribute enough of course). But of course this is not an HR / Employee relations forum!

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.