TH 401k

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.

I'm trying to figure out how to maximize owner contributions using the integration method, but I'm not sure how to handle the NHCE allocations. Can anyone have any idea about it? This 401(k) plan has 4 HCEs — 3 are owners and 1 is an HCE due to compensation. There are 12 NHCEs. The plan uses integration at 5.7%, and the 3 owners are getting different additional Profit Sharing percentages to reach their annual addition limits.Excluding the 5.7% integration, the owners are receiving 6.92%, 9.88%, and 12.93% in extra Profit Sharing. Now, I’m unsure how much Profit Sharing to give the NHCEs and one HCE beyond the 5.7%. Can I just give all NHCEs 5.7% + the lowest HCE extra (6.92%) = 12.62% and still be compliant? Or is that not allowed? Also, if anyone has official guidance or Treasury regulations that explain this kind of setup, I’d ready to read more and understand it better

@CuseFan@John Feldt ERPA CPC QPA@Lou S.The adoption agreement does not specify each groups. However, the employer has followed a discretionary classification approach for each year differently. In this case, the client initially provided a Profit Sharing contribution of 5.6% to all HCEs, 2% to 4 NHCEs, and 0% to the remaining 6 NHCEs. Upon clarification, the client confirmed that the 4 NHCEs receiving contributions were considered “target-achieved” employees for the year. Based on this classification, I ran the 401(a)(4) nondiscrimination testing in ASC using both the allocation rate method and the allocation rate method with permitted disparity. The plan failed under both approaches. However, when tested under the accrual rate method, the plan passed the Average Benefit Percentage Test (ABPT) and Rate Group Test, but failed the Gateway Minimum Contribution requirement. Additionally, the plan failed coverage testing. To satisfy the coverage test, three additional employees needed to be treated as benefiting under the plan. After discussing this with the client, they agreed to allocate 2% contributions to those three employees to make the plan pass coverage. Initially, I assumed that the Gateway Minimum Contribution requirement would not apply since the plan has only Profit Sharing contributions and SH match and no other nonelective contributions. Later, I came to understand that when 401(a)(4) testing is performed using the accrual rate method, the plan is automatically subject to the Gateway Minimum Contribution requirement. Given this, should I now request the client to provide the minimum Gateway contribution to all NHCEs in order for the plan to pass the Gateway test? Also, when a plan is tested under the 401(a)(4) accrual rate method, is it automatically subject to the Gateway Minimum Contribution requirement by default?

@C. B. Zeller@Artie MThank you for the detailed explanation. Could you please point me to the official guidance or provide a reference link that confirms earnings must be calculated from the date of failure through the date of correction? I’d like to use this as documentation to support the correction approach with the client for earning calculation.

@John Feldt ERPA CPC QPA The plan doesn’t have a uniform Profit Sharing allocation and no allocation condition (last day or hours conditions). Contributions are split into three groups (This is a separate scenario aimed at making the plan pass the coverage test) Group 1: HCEs receiving 5.6% Group 2: 7 NHCEs receiving 1.87%(Example - employees achieved target) Group 3: 3 NHCEs receiving 0% ( not achieved) I’m planning to run nondiscrimination testing using the allocation method with permitted disparity. If the plan passes both the Average Benefit Percentage Test and the Rate Group Test, do I still need to meet the Gateway Minimum Contribution requirement, since the contributions are not the same for all all employees or NHCEs? Just looking for clarity on whether Gateway applies in this case. If the plan is tested using the benefit accrual rate method and includes only Profit Sharing contributions, is it automatically subject to the Gateway Minimum Contribution requirement? If so, in the scenario described 1st scenario above —where 4 NHCEs receive 1.87% and 6 NHCEs receive 0% — would it be necessary to provide the 1.87% contribution to all 10 NHCEs in order to satisfy the Gateway requirement? Alternatively, is the plan not subject to the Gateway Minimum Contribution requirement because it includes only Profit Sharing contributions and no other type of nonelective contribution?

@C. B. Zeller Is it necessary to calculate earnings through the date the excess contribution is corrected for 402g, plan limit and excess employer contribution and is there any taxation like 402g.

@Lou S. Thank you for your time. I’ll review the documents and verify whether my scenario is applicable, along with the relevant correction programs

@Lou S.What is your opinion on this plan to meet the coverage and cross-testing requirements? Do you think there's a better way to achieve compliance?

@CuseFan Is it necessary to benefit a total of 7 NHCEs instead of 4 to satisfy the coverage test requirements by allocating 1.87%? Alternatively, are there any other applicable methods for meeting the test in this scenario?