OrderOfOps

Thanks JAA :^) For some reason, I was under the impression that the catch-up limit was Plan-specific (aka a person could have infinite catch-up limits being in infinite Plans). It makes a lot more sense that it is an individual limit - thanks for pointing me to actually read the regs.

Thank JAA. Agreed on the ASG item - hopefully the Plan Sponsor is answering correctly. I understand that generally the 402(g) limit is a personal limit, but indications are that this is a weird mix of the Plan having a separate deferral limit imposed in this scenario. Since this is a SECURE 2.0 item, the document doesn't reflect any information about this scenario because it wasn't a possible scenario prior to SECURE 2.0. From IRS Notice 2024-02 "Section 332(a) of the SECURE 2.0 Act amended section 408(p) of the Code by adding paragraph (11). Section 408(p)(11)(A) permits an employer to elect (in such form and manner as the Secretary may prescribe), at any time during a year, to terminate the qualified salary reduction arrangement under a SIMPLE IRA plan if the employer establishes and maintains a safe harbor section 401(k) plan to replace the terminated arrangement. Section 408(p)(11)(B) provides a combined limit on the total of the salary reduction contributions under the terminated arrangement and elective contributions under the safe harbor section 401(k) plan for the transition year described in section 408(p)(11)(C) (that is, the period beginning after the termination date and ending on the last day of the calendar year during which the termination occurs). Under this limit, the total of those contributions must not exceed the time-weighted average of the limits that apply, on a full year basis, to a SIMPLE IRA plan (after the application of the catch-up provisions of section 414(v)) and a section 401(k) plan. " Secure 2.0 Text: The terminated arrangement and safe harbor plan shall both be treated as violating the requirements of paragraph (2)(A)(ii) or section 401(a)(30) (whichever is applicable) if the aggregate elective contributions of the employee under the terminated arrangement during its last plan year and under the safe harbor plan during its transition year exceed the sum of— ‘‘(i) the applicable dollar amount for such arrangement (determined on a full- year basis) under this subsection (after the application of section 414(v)) with respect to the employee for such last plan year multiplied by a fraction equal to the number of days in such plan year divided by 365, and ‘‘(ii) the applicable dollar amount (as so determined) under section 402(g)(1) for such safe harbor plan on such elective contributions during the transition year multiplied by a fraction equal to the number of days in such transition year divided by 365.

I'd love the thinking of folks who are more well-versed in SIMPLEs. Didn't get any traction on the other board, so I thought I'd try the 401(k) board since it does involve one. Company A maintains a SIMPLE IRA in 2024 & 2025; several employees of Company A create their own Company B in 2025. Company A maintained a SIMPLE IRA (I'm not sure if the SIMPLE IRA is still active); Company B established a 06/01/25 effective date SH 401(k) Plan (short initial Plan Year). Company A & B have different EINS with no ownership crossover. I understand that when an employer establishes a mid-year 401(k) Plan that the deferral limit is adjusted based on the # of days/365 of each arrangement. Because these are two unrelated employers, my thinking is that this does not apply to this scenario, so all EEs can contribute the total $23.5k between the two arrangements if they would like (a maximum of $16.5k being attributable to the SIMPLE IRA). Do you agree that the deferral limit for the Company B 401(k) Plan does not need to be pro-rated based on the number of days it was in existence vs. the SIMPLE IRA? Since catch-up contributions are separate to each Plan, can a 50+ participant who contributed $10k to the SIMPLE IRA under Company A defer an additional $24.5k to the Company B 401(k) Plan? ($6.5k SIMPLE deferrals, $3.5k SIMPLE catch-up, $17k 401(k) deferrals, $7.5k 401(k) catch-up) If the Company B employees are still employees of Company A and participating in the Company A SIMPLE IRA, does that matter? Or is it just a consideration in that both the non-catch up deferrals to each arrangement count towards their overall 402(g) limit? As I write this out, I imagine that a relevant consideration is whether Company B and Company A constitute an ASG. If they do, would their contributions be subject to the adjusted deferral limits based on the days/365 of each arrangement?

I'd love the thinking of folks who are more well-versed in SIMPLEs. Company A maintains a SIMPLE IRA in 2024 & 2025; several employees of Company A create their own Company B in 2025. Company A maintained a SIMPLE IRA (I'm not sure if the SIMPLE IRA is still active); Company B established a 06/01/25 effective date SH 401(k) Plan (short Plan Year). Company A & B have different EINS with no ownership crossover. I understand that when an employer establishes a mid-year 401(k) Plan that the deferral limit is adjusted based on the # of days/365 of each arrangement. Because these are two unrelated employers, my thinking is that this does not apply to this scenario, so all EEs can contribute the total $23.5k between the two arrangements if they would like (a maximum of $16.5k being attributable to the SIMPLE IRA). Do you agree that the deferral limit for the Company B 401(k) Plan does not need to be pro-rated based on the number of days it was in existence vs. the SIMPLE IRA? Since catch-up contributions are separate to each Plan, can a 50+ participant who contributed $10k to the SIMPLE IRA under Company A defer an additional $24.5k to the Company B 401(k) Plan? ($6.5k SIMPLE deferrals, $3.5k SIMPLE catch-up, $17k 401(k) deferrals, $7.5k 401(k) catch-up) If the Company B employees are still employees of Company A and participating in the Company A SIMPLE IRA, does that matter? Or is it just a consideration in that both the non-catch up deferrals to each arrangement count towards their overall 402(g) limit? As I write this out, I imagine that a relevant consideration is whether Company B and Company A constitute an ASG. If they do, would their contributions be subject to the adjusted deferral limits based on the days/365 of each arrangement?

Gotcha, that makes sense, thank you John!

When would you use code 2D on line 9a? I have a 401(k) Profit Sharing Plan where the employer also maintains a cash balance plan. Because the CBP was not PBGC covered in the first year, the 31% rule is applied; accordingly, the 401(a) feature of the 401(k) PSP is capped at 6%. My thought is this sounds exactly like "Plan benefits are subject to offset for retirement benefits provided in another plan or arrangement of the employer", but I've not swam these waters frequently and I'm not able to find any guidance on this code in particular.

Thank you for noting this C.B.; thankfully, no 415 issues exist for these individuals with the contributions for both Plans aggregated.

This is why you need folks to talk you down off the ledge. Thank you Cuse for your common sense.

Hi all, I'm having a bit of difficulty thinking through this scenario and could use some help. Company A (two 50/50 owners) acquires 60% of Company B as of 04/01/24, and B Owner retains 40% ownership. Company B becomes a participating employer in Company A 401(k) Plan as of 04/01/24, and a transfer agreement is executed for Company B 401(k) Plan to be merged into Company A 401(k) Plan as of 01/01/2025. Companies A & B are a brother sister controlled group as of the acquisition. Both Plans pass coverage separately and combined at the time of acquisition (also the EEs of Company B all become employees and participants in Plan A as of 04/01/24). Company B Plan had a standard SHM and Company A has a SHNE. Company B consists of 2 employees prior to acquisition, 1 HCE (previously the 100% owner) and 1 NHCE. Company B HCE has >$345k comp from Company B prior to 03/31/24 and earns ~$170k comp from Company A the remainder of the year. Company B NHCE has ~$25k comp from Company B and ~$50k comp from Company A. No compensation is paid from Company B after 03/31/24. I understand that Plan A and Plan B can be tested separately during the transition period for coverage, but are they allowed to be tested separately for other aspects as well (404, 415)? They pass 415 and 404 testing either way, so this isn't a crucial consideration, but I'd like to know how my tests should reflect and for future reference. Does the compensation for 2024 Plan B testing have to include amounts paid by Company A as well, causing a SHM true-up for B NHCE? Both Plans exclude pre-entry compensation, so my thought is that the Plan A SHNE & PS calculations only consider the compensation paid after the B EEs become A Participants on 04/01/24. Both Plans were top-heavy for 2024; Plan A made a discretionary PS allocation - does this cause Plan B to lose its top heavy exemption? If so, B NHCE's Plan B ER contributions are less than 3% of their total (A + B) comp, but B NHCE's total ER contributions (A SHNE + A PS + B SHM) are greater than 3% - does this satisfy the top heavy allocation? The B NHCE SHM/B NHCE Comp is 4%.

Hi all, I'd love to hear your opinions on this, because I've had a bear of time trying to find an explicit citation that addresses my thoughts one way or the other. I have a 401(k) Plan with the following eligibility conditions: deferrals & SHNE, Age 21 & 6 months, immediate entry upon eligibility, profit sharing, Age 21 & 1 Year of Service, entry 1/1 & 7/1. The Plan document reads "For allocation purposes of the 5% Gateway Contribution described under (A) of subsection (iii) above, 415 Compensation shall be determined for the Plan Year (rather than the Limitation Year) but shall exclude 415 Compensation paid while an Employee is not a Participant in the Plan." (It's a Relius document.) I have 3 individuals who were participants in the deferral and SHNE components of the Plan for the entire year, but entered the PS component on 7/1, so they have partial year excludable comp for a particular Plan component, but they've received 401(a) contributions the entire year. Is their 5% gateway test compensation based on their post-PS entry compensation or their full year comp? An additional question boils down to is compensation paid prior to participation in a certain component of the Plan a 414(s) safe harbor exclusion or is it only compensation paid prior to overall Plan participation? Does it matter if two different components which are both 401(a) contributions have different pre-participation compensation amounts? Even more simple question, can someone point me to where pre-participation comp as a 414(s) safe harbor exclusion originates? I've found lots of articles saying so, but I seem to be reading past the primary source language listing this.

Thanks Peter, I think this in conjunction with MoJo's response addresses my question very satisfactorily. You were both very helpful.

I'm not sure if the Plan was considered to be in a blackout. Because of all participants being in individual brokerage accounts (functionally), they were still able to fully direct their investments. The transition was just reassigning the TPA/RK access from one firm to another and then getting all relevant data into the new RK platform. I do not see that there was a blackout notice furnished, but I'm being brought onto this and was not part of the entire process so I could be wrong in that regard. I'm not personally familiar with corrections for a fiduciary breach in general or for this instance in particular (I'm working as the research arm for this), and I don't where this would fall among the 19 VFCP correctable categories of transactions. How would you go about correcting this fiduciary breach, if you considered it one? To reiterate, the ER wants to deposit calced late deposits as lost earnings (so not subject to ER contribution limits or considered in the EE's annual additions limit), so we're trying to determine if that is permissible.

The circumstances are that this is 401(k) Plan in transition from one TPA/RK to another. At the previous TPA/RK each individual had a separate account, while at the new TPA/RK there is a core account in which investments are pooled, daily valued with individual balances tracked by RK - the individual accounts (which function the same as a brokerage portal at the custodian). Functionally, each individual had a brokerage portal with the custodian that are then all associated with the Plan's master Trust Account - now that is one investment option available for them, or they can invest in mutual funds in the main account. During the transition period, an EE entered the Plan; the prior RK would not establish an individual account for this EE, as the Plan was deconverting, and the receiving RK was unable to create an account for them as the master Trust Account & associated individual accounts were not yet registered to the new RK. There was a 'master' Trust Account in the Plan that the deposits flow into and are then transferred to each individuals account accordingly; these are actually separate accounts. Because the ER was not able to get an individual account opened for this individual, their deposits were sent to the master Trust Account and sat there in cash, uninvested. AFAIK this was not an interest bearing account. Once the transition was completed, the individual completed enrollment including setting an investment allocation and the funds were then invested according to their allocation in the core account. My understanding is that since the deferrals were segregated from the ER's general accounts and deposited in the Trust Account albeit uninvested, they were not considered late deposits. The issue posed by that is potential liability due to a fiduciary breach. The question at hand is if the ER can allocate lost earnings for this participant for the period they were unable to direct their investments. The ER would like to do so, calculated according to the VFCP calculator. Would depositing lost earnings mitigate their potential liability, if permissible?