Hello…I’m trying to create a model to project future balances for our participants but am running into a couple of roadblocks.
In past years, we have had 1 ESOP loan. I reengineered the allocation calculation from our TPA and it seems that once we have an ESOP only allocation of contributions (after accounting for 415 limits and backing out 401k contributions), the loan is allocated to each participant to reduce the actual contribution amount paid.
Fast forward to 2024 and we will now have 2 loans due to a re-leverage. When I use the same methodology to allocate the loans to participants, two of our participants have a negative contribution amount. I’m not getting any clear answers from our TPA on how to handle this.
Similar to how 415 excess amounts are re-allocated to participants, would these negatives be re-allocated until no one is negative?
Furthermore, to make up for the fact that the bulk of our contributions are going toward loan payments, we will be doing an S-Corp Distribution in 2024. S-Corp Distributions earned on allocated stock are allocated in proportion to participants based on beginning share balances less distributions and S-Corp Distributions earned on shares held in suspense are allocated based on Eligible Compensation.
What I’m unclear about is the timing. Should contributions be allocated first, then S-Corp distributions, or vice versa? I was going to model it out using both approaches, but the negatives caused by the loan impacted that original plan.
Thank you for your assistance.
Jeff
