David D

What you stated in your original question is why typically when you have a 401k plan with a cash balance not subject to PBGC, it is better to have a Safe Harbor Non Elective plan than a Safe Harbor Match plan in regards to staying within the deduction limits when trying to pass 401a4 testing.

I think clarification is needed on this. If the owners of the company are sponsoring a 401k plan, it's either an incorporated business for which they are not being paid wages, therefore cannot defer, or it's unincorporated in which their income should pass through to their Schedule C or K-1 as self employment income. Typically the business would pay independent contractors via 1099, but it doesn't seem right that the owners of the business would qualify as independent contractors. It seems to me they are already eligible for the plan they sponsor unless specifically excluded. The only potential qualification issue is if they sponsor a Safe Harbor Non Elective 401k plan and were entitled to Safe Harbor Contributions based on their SE income and did not make that contribution.

You need to check the document. The old Keogh Plans did not offer Salary Deferrals, only ER Money, so it may be a solo K plan that is being called a Keogh because the owner is Self Employed.

5500 EZ's must always be filed in the year the plan is terminated and distributed, so you would be filing both a first return and a final return in one filing

I believe the issue here is the limitation year. You cannot have a limitation year that precedes the date of incorporation, so that first year would be pro rated.

Absolutely. My guess is that somewhere in the doc it would address self employed individuals, but not certain

You also need to check how the plan document defines After Tax Contributions. Many I have seen say that After Tax Contributions are made from Gross Wages paid to the employee during that tax year and withheld from pay, not submitted from other funds the participant may have access to.

I have found it most practical to create the document closer to the time the client is ready to fund. I can't tell you how many plans were created in December when the client had tons of money, only to find out later when it was time to fund in September that circumstances had changed, and they did not have the needed funds.

Keep in mind with FICA taxes, Gross Wages of $23,000 will result in a deferral amount less than that, so that is where there is a little room for a PS allocation.

The extension applies for the deduction and the PBGC premium payment deadlines, but does not apply to the minimum funding deadline.

This would definitely be the employers decision. And it would seem you would need to have the 2023 Form 5500 amended if you want to reflect participants with account balances to be less than 120 at the end of the year.

The Discretionary Match notice requirement was part of the Cycle 3 Pre-Approved language. IRS originally wanted to eliminate the discretionary match altogether as they felt it did not satisfy the definitely determinable requirement under Treasury Regulation §1.401-1(b)(1)(ii). They compromised and allowed it with two parts 1) The Plan Sponsor communicate in writing to the Plan Administrator/Trustee, and 2) The Plan Sponsor/Plan Administrator communicate the match to the participants so that the match is definitely determinable to participants. I believe that language is in all Cycle 3 documents.

A word of caution, only because I have seen this misunderstanding before (more than once) - just because a person takes a hardship that does not mean they stop making loan payments.

I seem to remember that if a participant has 402g excess from 2 unrelated employers, once the April 15 deadline is missed the money cannot be returned. That's the double taxation of being taxed in the year it was made, then taxed again when it it ultimately distributed once a distributable event occurs. I am not aware if that rule was recently changed. I am not clear if the medical K plan and the hospital 403b plan represent unrelated employers from the original post.

@truphao Same here. We often are forced to set up a new PS just to accommodate what the client desires for the current year (which is almost always after the year end). We typically then merge the new plan we created into the existing one in the following year. The client then pays administrative fees for 3 plans for 2 years, but the benefit of the combined plan testing results outweigh the cost, especially when running the disaggregated testing if the existing plan has earlier entry dates than we prefer for the CB plan.