TH 401k

No. There no other contribution for key employees other than $7,500 of Deferral

I often find it confusing to determine eligibility for rehired employees. The plan’s eligibility conditions are age 21 and 1 year of service, with a monthly entry cycle. The rule of parity does not apply. Employee A was hired on 4/14/2022, terminated on 9/08/2022, and completed 590 hours. The employee was then rehired on 10/03/2023. If rehired 07/09/2023 what is the case of determining eligibility. In this situation, should eligibility be calculated from the original hire date or from the rehire date? Could someone also explain, with examples, how eligibility is determined for rehired employees who rehired within one year versus after one.

I reviewed the plan’s historical events and noted that it was previously top-heavy, requiring the Top-Heavy minimum contribution. For the 2024 plan year, the owners contributed $7,500 as deferrals, which were later reclassified as catch-up contributions. Since catch-up contributions are excluded from the calculation of key employee contribution percentages, they do not impact the top-heavy determination. For Safe Harbor (SH) contributions, the plan applies statutory eligibility. So, plan is lost the top heavy minimum exemption for the plan year. Deferrals require 3 months of service with quarterly entry dates. Although the plan permits profit sharing contributions, the client has decided not to provide them for 2024. The plan currently has three owners (each holding 33.33%) and two HCEs by compensation. The client’s intent for the 2024 plan year is to allocate a 3% Safe Harbor Nonelective (SHNE) contribution to this two HCEs to avoid top heavy minimum contribution if we allocate SHNE to other HCEs, however, they are key employees also. Is this allowable as general?

Can the plan be amended for the 2026 plan year to allocate SHNE contributions to two HCEs and zero SHNE contributions to the other HCEs for that same plan year? Is it required to specifically mentions the name of the participant in the amendment? Or any other notes in adoption agreement?

There is no any other additional comments in adoption agreement. I think the snip which I have mentioned is from C3 document.

There is no profit sharing contribution.

The plan provides a Safe Harbor Non-Elective Contribution (SHNE) and excludes Highly Compensated Employees (HCEs) from safe harbor contribution. In this situation, there are five HCEs in the plan, and the client wishes to provide the SHNE to only two of these HCEs while giving no safe harbor contribution to the remaining three. The question is whether this allocation is allowable under IRS regulations, and if permissible, which specific regulations authorize it. Refer the adoption agreement snip.

Thank you all for such clear and helpful insights on this questions.

Thank you @CuseFanand @Lou S. for helpful clarification. However, I have a follow-up question regarding matching contributions with the same allocation condition mentioned above: If a participant died during the year and did not make any deferrals, they obviously wouldn’t receive a matching contribution. In this case, should the participant be treated as a non-excludable employee due to death waiver and consider them has not benefiting, or are they considered excludable for coverage testing purposes under less than 500 hours?

@CuseFanIn this scenario, since the death participant received a contribution, should they be included in coverage testing and treated as a non-excludable employee? Now, am I understanding that correctly?

@ratherbereadingBut I'm unable to upload vesting with plan year date. Is there any documents which has instructions to update vesting in voya

The plan has a Profit Sharing contribution (new comp) with allocation conditions of 1,000 hours and employment on the last day of the plan year, with a waiver of these conditions in the event of death and attainment of Normal Retirement Age (NRA). While generating the Coverage Test, if a participant is reported as death and having less than 500 hours during the current year and received a Profit Sharing contribution, should this individual be treated as a benefiting (i.e., non-excludable) employee for coverage testing purposes? Or else, this employee needs to be excluded in coverage because of less than 500 hours? If there are no allocation conditions in the plan and death participant has less than 500 hours and everyone receives a Profit Sharing contribution, what is the applicable method of excluding in coverage test for less than 500 hours? Could you also point to the relevant Treasury Regulations or other official guidance that explains this treatment in detail?

Has anyone updated vesting information in the Voya recordkeeping system? This is my first time handling a vesting update for a plan on Voya. I’ve just completed the compliance testing and vesting calculations for one of the plans. The plan includes an employer match with a 6-year graded vesting schedule. Since this is a calendar year plan, I’m unsure whether I should update vesting as of the current date or through 12/31/2024, which is the end of the plan year and the period used for the calculation. When I attempted to upload the file using an "as of date" in seperate column by updating 12/31/2024, I received an email from Voya stating that the update failed. Has anyone else encountered this issue? What might be causing the error, and what’s the correct process to ensure the vesting update is accepted by Voya?

Thanks so much for the insights—they have been clarified the concept perfectly.

Just to confirm—participants can be segregated based on whether they’ve met the IRS statutory eligibility requirements (i.e., age 21 and one year of service). Those who haven’t met these requirements are considered otherwise excludable employees. Am I understanding this correctly?