David D

I had the same reaction when I first came across it, but each line where you can make a choice starts out with: An Eligible Employee.... (which are defined earlier with Union, non resident and all the rest) Been too many years, I don't remember why the inconsistent language We wait on Albany Consultant to hopefully shed some light.

Austin3515 - Definitely depends on how the doc reads. If they are excluded under eligible employees they would be excluded, but the ASC doc that I see most often has this: EFFECTIVE DATE OF MINIMUM AGE AND SERVICE REQUIREMENTS. The minimum age and/or service requirements under AA §4-1 apply to all Employees under the Plan. An Employee will participate with respect to all contribution sources under the Plan as of his/her Entry Date, taking into account all service with the Employer, including service earned prior to the Effective Date. To allow Employees hired on a specified date to enter the Plan without regard to the minimum age and/or service conditions, complete this AA §4-4. Deferral Match ER    An Eligible Employee who is employed by the Employer on the following designated date will enter the Plan on the designated date without regard to minimum age and/or service requirements (as designated below):  (a) the Effective Date of this Plan (as designated on the Employer Signature Page).  (b) the date the Plan is executed by the Employer (as indicated on the Employer Signature Page).  (c) [insert date no earlier than the Effective Date of this Plan] An Eligible Employee who is employed on the designated date will enter the Plan on the designated date without regard to the minimum age and service requirements under AA §4-1. If both minimum age and service conditions are not waived, select (d) or (e) to designate which condition is waived under this AA §4-4.  (d) This AA §4-4 only applies to the minimum service condition.  (e) This AA §4-4 only applies to the minimum age condition. The provisions of this AA §4-4 apply to all Eligible Employees employed on the designated date unless designated otherwise under subsection (f) or (g) below.  (f) The provisions of this AA §4-4 apply to the following group of Employees employed on the designated date:  (g) Describe special rules: [Note: An Employee who is employed as of the designated date described in this AA §4-4 will enter the Plan as of such date unless a different Entry Date is designated under subsection (g). The provisions of this AA §4-4 may not violate the minimum age or service rules under Code §410 or violate the nondiscrimination requirements under Code §401(a)(4).]

Austin 3515, I read it as all employed on a specific date were in, but the employer took it as well, if you don't work 1000 hours, that does not mean you. I agree, the language is super critical.

I believe the QNEC for the missed deferral is zero. Since the plan made everyone eligible on the effective date, that overrides the ability to put those people in the otherwise excludable group for testing. You will not have a coverage problem, but you may have an ADP problem depending how the doc was written. You would also have a top heavy minimum in these calcs in which your QNEC for the ADP failure can go towards that as you are not making a QNEC for missed deferrals.

I have seen documents and participant disclosures written where the employer pays active participant charges, both TPA and recordkeeping and terminated participants pay those charges. Of course, they are usually written that they pay for the year following the year they terminate.

It depends on whether your firm plans on filing a 2025 5500 for those plans or not. I think the industry is split on that as some firms take the position of always filing a 5500 as part of their annual administration cost, and some never file and indicate on the following year return that it was a late adopted plan.

We paid for one last year from an ERISA attorney that provided us a notice we could use and the required HPI participant notice. It's important to note that i believe the Practices and Procedures had to have been in place at the time the deferral was made. https://www.law.cornell.edu/cfr/text/26/1.414(v)-2

HI fmsinc, Which comment? Does this help https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-plan-loan-failures-and-deemed-distributions

If an installment payment is missed and not paid by the end of the calendar quarter following the quarter of the missed payment (the cure period), the entire remaining loan balance plus accrued interest is deemed distributed. Even though the amount is taxed as a distribution, the loan stays active. You must keep paying it back, and those ongoing repayments create "after-tax basis" so you aren't taxed twice on those amounts when actual future distributions occur.

As long as the document says everyone is in their own group, you should not have a problem.

Consider how the 1040 tax return is prepared. The total of all Schedule C income (positive and negative) determines the income subject to Self Employment Tax. That income then goes on the 1040. After the adjustment for SE tax, the balance is available for "comp and contribution) to the 401k plan. In the example you provided $25,000 is the starting point to determine the maximum deductible contribution.

@C. B. Zeller Was just about to make the same comment

I think the bigger issue here is the tax deduction. For a self employed individual, they take the deduction on their individual 1040. The deadline to make the contribution is the due date of the 1040, including extension. If the individual did not file an extension, the due date was April 15.

In smaller companies I have always told my clients to keep the employee resignation letter on file since IRS takes the position that every termination is employer initiated. It helps in the event of an audit in the future.

Might also want to see what the Adoption Agreement says. Many Adoption Agreements have an option that addresses that by the pre approved providers.

What I, and many others have experienced, is that starting about 5 years ago, the IRS seemed to be wanting to disqualify as many ERPA's as they could since they no longer offer that program. Many people were asked to provide actual certificates from 2011, 2012 and 2013 at some point in 2020, for which many only still had the transcript from ASPPA or NIPA which IRS would not accept. Not sure if that is still the same, but it could be.

Agree with @ESOP Guy . Very common we see a child or spouse paid W-2 wages from a small employer while doing zero of what an employee might do, just as we see them pay an individual, that does everything an employee would do, but they classify as a 1099 contractor. As a TPA, we don't make those decisions for the employer.

Sounds like the originally late filed return should have been filed under DFVCP, so amending the return seems the correct thing to do. Whether they waive the penalty or not might be a case by case issue as they instruct you to file a DFVCP if you have NOT received an IRS notice, but do not say you cannot file a DFVCP if you have received a notice.

One more t One more thing, That 30K goes into your testing, but most likely this is an owner only plan.

Box 1 is 30,000, Box Box 2A is 0, Box 5 is 30,000

The difference is for business tax returns, the deferrals are withheld from their employee paychecks. So the employee is making the contribution timely as it is withheld from their pay. It's the employer that pays the penalty for sending in that money late. For the Sole Prop, if the money was not deposited by the extended due date of the tax return, no employer or employee contribution deduction is available for that year. Any deferrals contributed now will count towards the current 402g limit, so there is no benefit in trying to say they are late deferrals as they cannot be deducted for the year they were intended to be made.

Yes, they are included in box 1 of the W-2.

You need to find out whether it's an S Corp that contributions are based on w-2 wages, or a partnership that bases contributions on line 14a of each K-1.

Because the participant is still working, there is a Treasury Reg that permits RMD payments to be made while working and then payout under any available option upon actual retirement. This is different from a participant who has terminated service as they are then electing their benefit option at the time they elect their RMD payment.

Amending is fine. Assuming it's a non PBGC plan, just be careful of the 6% of comp limit in the DC plan as you may have to give more in the DC plan to one or two to pass testing.