TH 401k

Whether this plan required two Testing. From 01/01/2025 to 07/31/2025 till the cessation and from effective new plan 08/01/2025 to 12/31/2025. Or else, we can aggregate both the compensation and contribution and test under newly established plan with the effective date of 08/01/2025.

Patrick Tool LLC employer is participating in Business 401(k) Plan (MEP plan) effective 01/01/2023. During mid of 2025, Patrick Tool LLC decided to establish new plan and spin off from Business 401(k) Plan and completed the participants cessation on 31/07/2025 and establish new plan as Patrick Tool 401(k) Plan as effective date of 08/01/2025. The first return, it will be short plan year. For the compliance testing whether we required to do two separate testing for two period like 01/01/2025 to 07/31/2025 and 08/01/2025 to 12/31/2025. Since the employer is same whether we have to aggregate both the period data and required to do compliance testing for full plan year under Patrick Tool 401(k) Plan. Even though the plan effective is mid of the plan year, we have to complete the testing based on full year compensation and contribution or else based on the short plan year.

The plan excludes Union employees for the employer contribution including safe harbor. The plan is opted for safe harbor non elective and HCEs are excluded for the SH Non Elective. The plan has totally 4 HCEs (2 union and 2 non union employees) and 2 NHCEs and both are Union employees. None of the employees received the SHNE contribution. Whether the plan is subjected to ADP for union employees and ADP ACP for non union employees if the additional employer match is allocated. My understanding is the plan is deemed to pass since the exclusion is not discriminate in nature against NHCEs and both of them are not received the contribution. Is there any other opinion on this.

Can you please provide the details. Currently, both are not available with me.

Is that SH formula can be set as more than 6%. I have noticed only in one plan document that the formula is more than 6%. Even though the plan has only Safe Harbor, is the plan is subjected to ACP testing.

Is the regulation allows Safe Harbor Formula to be more than 6%. I have seen Safe Harbor enhanced match formula upto 6% as a common. But I have seen one document and it mentioned 100% up to 9%. It is already breaching the Employer Match limit of 6% and 4% rule. Any where in the regulation it allows more than 6% as Safe Harbor.

While determine the EBAR using permitted disparity how it works in FTW and other software

Employees hire on 05/21/2022 and terminated on 10/25/2022 and has hours of 550 and rehire on 3/17/2024 and 2024 hours is 1023. Plan eligibility condition is 6 month of service with 500 hours consecutive or else, one year of service. Entry Cycle is monthly. Additionally, Rule of parity is not applies. What is the entry date for this employee? Whether we have calculated 6 mos from rehire date and entry date as 10/01/2024 or else need to consider his prior service and determine the shift to plan year and entry date as 01/01/2025. Can you provide explanation if possible. Also, is there any documents which explains this to refer.

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.