austin3515

Bracketed/bolded text text is me. This is the text from the reg you cited. Really (3) is what is most relevant. Again, this reg, and the article you cited are not related to my approach, they're about something completely different. (g) Employees of certain governmental or tax-exempt entities (1) Plans covered. For purposes of testing either a section 401(k) plan, or a section 401(m) plan that is provided under the same general arrangement as a section 401(k) plan, an employer may treat as excludable those employees described in paragraphs (g)(2) and (3) of this section. (2) Employees of governmental entities. Employees of governmental entities who are precluded from being eligible employees under a section 401(k) plan by reason of section 401(k)(4)(B)(ii) may be treated as excludable employees if more than 95 percent of the employees of the employer who are not precluded from being eligible employees by reason of section 401(k)(4)(B)(ii) benefit under the plan for the year. (3) Employees of tax-exempt entities. Employees of an organization described in section 403(b)(1)(A)(i) [i.e., a tax exempt 501(c)(3)] who are eligible to make salary reduction contributions under section 403(b) may be treated as excludable with respect to a section 401(k) plan, or a section 401(m) plan that is provided under the same general arrangement as a section 401(k) plan, if - (i) No employee of an organization described in section 403(b)(1)(A)(i) [again this means a 501(c)(3) tax exempt entity] is eligible to participate in such section 401(k) plan or section 401(m) plan; and [This requirement is not met in my scenario. ALL of the employees except for the HCE’s are eligible to participate in the 401(k).] (ii) At least 95 percent of the employees who are neither employees of an organization described in section 403(b)(1)(A)(i) nor employees of a governmental entity who are precluded from being eligible employees under a section 401(k) plan by reason of section 401(k)(4)(B)(ii) are eligible to participate in such section 401(k) plan or section 401(m) plan.

Its mindblowing that there is not more attention. I can't understand it.

First paragraph of the pdf in my link: SUMMARY: This document contains final forms and instructions revisions for the Form 5500 Annual Return/Report of Employee Benefit Plan and Form 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan effective for plan years beginning on or after January 1, 2023.

Agreed, but from what I heard the AICPA was fighting this hard for obvious reasons.

Yeah me too. A lot of them I know spent years building up and growing their practices. Probably the ones they are not auditing anymore are the least profitable engagements but still, revenue is revenue. If there was a parraellell to the TPA world I would be ripping mad.

Wow, the auditors are gonna be ripped. I agree this is is good for sponsors but the 25% of their employee benefit audit practice just disappeared.

https://public-inspection.federalregister.gov/2023-02653.pdf After considering the public comments, the Agencies decided to adopt the proposed counting method change for defined contribution individual account plans by adding a new line item on both the Form 5500 and Form 5500-SF for defined contribution pension plans to report participants with account balances at the beginning of the plan year (there already is a line item for reporting the number of participants with account balances at the end of the plan year). Instead of using all those eligible to participate, defined contribution plan filers will look at the number of participants/beneficiaries with account balances as of the beginning of the plan year (the first plan year would use an end- of- year measure) when determining if they are eligible for small plan reporting options, e.g., the Form 5500-SF. Conforming changes are also made to the short plan year filings and the “80-120” Participant Rule instructions to reflect this new counting method. See Appendix C for details on changes to forms and instructions related to this audit related participant counting method change.

Belgarath, are you seeing something that covers this scenario perfecty? I still think someone who is not as risk averse as me could point to that and say "yup, I check off all the boxes!". Simply having no HCE's doesn;t mean the plan is not required to satsify the ADP test in my opinion. Again I would never ever do this because it's way too aggressive...

That article is about a wholly owned for profit subsidiary sponsoring a 401k, which is not the same topic. This is a 501c3 who has chosen a 401k plan for it's employees, and uses a 403b just for the HCE's to avoid the ADP test.

Interesting. One could argue I am subject to the ADP test, there just are no HCE's, however, I did begin this thread under the premise that something has to make this not allowable and I think you've given me something to point to!

Definitely needs to pass before and after. If not passing before, you need to shift deferrals for HCEs as well as NHCE's. Perhaps that is what you are referring to.

Thats what I'm doing, HCE's in 403b. But I have to aggregate the match in one ACP test. In order to shift I can shift deferrals from ADP to ACP if I can pass the ADP test before and after the shift. I can shift 100% of the NHCE's deferrals to the ACP test and still pass the ADP test becase no HCE's have 401k. It's really a very interesting question.

HCE's participate in the 403b plan to avoid the ADP test. All employees are eligible for a match and we're failing ACP Testing. Someone in the office asked "can we shift deferrals to the ACP Test". Any Seinfeld fans out there - "You just blew my mind." Because of course the only deferrals in the ADP test for this plan are for NHCEs so I can shift 100% of the deferrals to the ACP test which will basically exempt this plan from ACP testing. Aside from the sheer obnoxiousness of this really cool idea (I might be terrified to do it in practice), what is to stop me?

No calendar year data elections in any plans.

I have a client who sponsors two plans, a calendar year 401(k) plan, and a profit-sharing plan with a November 30 plan year end (the latter is paired with a cash balance plan). Do I determine highly compensated employees for both plans with respect to the look back year that corresponds to their plan year? It just seems odd to have, perhaps, two different groups of highly compensated employees.

Or yo have turnover or growth or both. And also hypotehtically an artificial deadline of March 15th for 75% of your plans... Just some other variables!

yikes, we're doing 401ks and all seems well... Good luck

Client pays for LTD benefits to its employees by paying insurance premiums every month. They are allowed to elect to treat the employer premiums as taxable so that if they were ever disabled their benefit would be tax free (at least I believe that is the arrangement). In any event, the Plan uses W-2 wages and this election increases Box 1 federal wages on W-2. So this election increases their 415 wages, correct? Yes it would be a taxable fringe benefit, but curious if others agree it is part of 415 comp.

According to the Internal Revenue Code I am required to work weekends. This is not a joke it is actually built into the law.

Apparently it was planned maintenance.

Anyone not able to login to Relius ASP this morning (2/11/2023)?

Interesting analogy that it is a standing election to convert every single match to Roth...

Absolutely. It's still an employer contribution. A really interesting question I never thought of is, will the Employer have to pay the employer FICA portion, and Employer unemployment taxes. Has that come up yet?

I knew "you guys" would know!

1099R was issued with a Code 1 for a 2022 distribution but the Participant is claiming they would qualify for the disability exception to the 10% penalty tax. My understanding is that even though the Code 1 was used, which specifically is titled "Early distribution, no known exception.", you could claim eligiblity for the waiver of the penalty tax. i.e., we don't have to issue an amended 1099-R. Is this correct? Can anyone point me to anything explaining how this is done? I assume it is straightforward. This must happen on a fairly regular basis.