TH 401k

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.

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?

@Lou S.There seems to be a formatting issue with the comma in the Excel file. My main question is: Is it permissible to maximize owner contributions under the Integration allocation formula using the 5.7% Social Security integration level? After reviewing some comments, I’m a bit confused. If we allocate the maximum allowable contribution to the owners, does the plan need to undergo 401(a)(4) nondiscrimination testing? Also, please refer to the attached file, which currently does not include Profit Sharing allocations. Based on the provided values, could you walk me through how to properly allocate Profit Sharing contributions to maximize all three HCEs while remaining compliant? @drakecohen If possible, could you help me determine the optimal allocation values for this scenario? That would really help me apply the correct approach in similar upcoming plans. It is refund the elective. If it limit on employer contributions, what is the appropriate method or approach we should follow to address it?

@BriHere’s my understanding and a few questions based on the scenario: For example, suppose the plan has 20 employees—5 HCEs and 15 NHCEs. Out of these, 4 HCEs and 12 NHCEs are eligible for both Deferral and Safe Harbor Match, so this group is deemed to pass ADP and ACP testing. The remaining 1 HCE and 3 NHCEs are eligible for Deferral only, but not yet eligible for Safe Harbor Match. Since the HCE falls into the otherwise excludable group (i.e., not eligible for Safe Harbor Match), this subgroup would be subject to ADP and ACP testing. Am I interpreting this correctly? Typically, my approach is to examine whether any HCEs fall into the otherwise excludable group—for example, those who haven’t yet completed age 21, one year of service, or semi-annual entry. If they do, I consider the plan subject to ADP and ACP testing for that group. Based on the example above, if my interpretation is correct based on your response above, should I perform separate ADP/ACP testing in ASC software by updating location one —one for the main group (3 HCEs and 12 NHCEs) that is deemed to pass, and location 2 another for the otherwise excludable group (1 HCE and 3 NHCEs)? Also, is this kind of classification and separate testing approach permissible under Treasury Regulations? I’m not entirely sure and would appreciate clarification from other like @C. B. Zeller @Lou S..

@C. B. Zeller@Bri@Lou S.The plan uses age 21 with no service requirement and monthly entry for Deferral eligibility, and age 21 with 6 months of service and quarterly entry for Safe Harbor Match eligibility. Plan is not top heavy. In this setup, I’d like to clarify the following: Are employees who meet both Deferral and Safe Harbor Match eligibility requirements automatically deemed to pass ADP and ACP testing? Are employees who are eligible for Deferral only, but not yet eligible for Safe Harbor Match, subject to ADP and ACP testing? Or, in this scenario, should we perform separate testing for employees who meet statutory eligibility versus those considered otherwise excludable? If any HCEs fall into the otherwise excludable group, does the plan become subject to ADP and ACP testing for that group? Looking for clarification on how eligibility impacts testing requirements under this structure. The documents I’ve refered to so far don’t specifically address this type of scenario in detail.

@Lou S. The plan is integrated with Social Security, using the standard 5.7% integration formula. The client has requested to maximize contributions for the owners. After applying the 5.7% to eligible compensation (including excess compensation), I calculated the remaining Profit Sharing contributions needed to reach the annual addition limit for each owner. The additional percentages came out to 1.72%, 6.20%, and 6.24%, respectively—all three being owners. Now, I’m unsure how to proceed with allocations for the other two owners and the NHCEs. Should I: 1. Allocate 1.72% (the lowest remaining percentage) to the other two owners and NHCEs based on base compensation, or 2. Maximize each owner up to the 415 limit, and then use the highest HCE percentage (6.24%) as the allocation rate for all NHCEs? In the attached image, I’ve applied the second approach—allocating 6.24% to all NHCEs. I’m not certain if this method is correct and would appreciate clarification. If I’m understanding correctly, I haven’t been able to find a specific provision or Treasury Regulation that explicitly permits this method of allocation. Could you please point out the relevant section if it does exist? And if my current allocation approach is incorrect, I’d appreciate your help in correcting it so I can better understand how to apply integration allocations properly in this kind of scenario.

I have a similar question to the one raised earlier by @Gilmore. While reviewing the conversation, I’ve get some helpful insights. However, could you @C. B. Zeller and @Lou S. please point me to the specific Treasury Regulation section or provide a reliable reference that explains this scenario in detail? I’d like to review the official guidance to better understand the rules and ensure proper compliance. Could you please specify the exact Treasury Regulation section or provide a reference that explains this scenario in detail? I’d like to review the official guidance to better understand the rules and ensure compliance.