Miles Leech

Are you saying the plan uses a permitted disparity formula and is using 100% of the taxable wage base? If so, you could view the formula as either 6% of all compensation, plus an additional 5.7% on any compensation over the SS wage base 6% of compensation between 0 and the SS wage base, and 11.7% on compensation over the integration level Both achieve the same thing, and I've seen different individuals prefer calculating it either way. If you're asking specifically about a formula for excel to calculate it, I'd use =0.06*B2 + 0.057*MAX(0,B2-176100) Assumes 2025 taxable wage base, replace the 176,100 if using a different year. B2 would be the compensation used for allocations, can be changed to meet your needs.

Had a similar shock entering into my firm, which uses FIS Relius for recordkeeping + compliance. As someone on the younger side (especially for this industry) and with a lot of exposure to modern tech, this industry is decades behind. That said, there are some pretty good options emerging. Congruent's CORE recordkeeping platform has blown us away with actually looking & feeling like a modern cloud-based system that is still highly functional. Definitely worth getting a demo & looking into. At RANDUG this year, along with Core, there's a platform called Penelope that seemed fairly intriguing. There's also SS&C, Schwab's RK tech, and I feel like ASC has a RK platform as well, but don't quote me on that. On the documents side of things, ASC's documents are far superior to FTW in my experience. The user interface & process of designing plans is so much smoother, and they have an API system for integration with any proprietary firm software you may use. These are the only two vendors I'm aware of in the Doc space, but frankly ASC is so easy to use I don't have much of a drive to look at alternatives. For compliance, it's once again really just ASC and FTW I'm aware of. I'm not thrilled with either compliance module, and this is the area the industry needs work. Because of this, I'm actually in the process of designing & developing a modernized compliance testing software with a friend of mine. It'll be a good year or two at least before it's ready but it's coming along well.

This is very helpful, thank you!

Our firm pretty much exclusively has done small / micro plans (90% of our plans are <1M in assets and under 30 participants). As we grow, I know large plans are likely something we'll have to deal with eventually. We have one plan that's getting close enough to the threshold for requiring a large plan audit that we know we need to start thinking about that in the next few years. With our plan demographic, we've never once actually had a large plan audit. What kind of things should we expect? Does the auditing firm just ask us for a bunch of reports, and if so, what kind of information is generally requested? In the case that anything out of place is found, how much leeway is there in terms of them talking to us about correcting it vs reporting failures on an audit? I'd hate for a large plan audit to be the way we find out we're operating something wrong & cause problems for a client. Any guidance as we start to move into plans that may require audits?

We requested ownership information for a client that onboarded with us this year. Most of our plans are fairly simple with ownership as we specialize in small plans (I don't think we have a single plan that's large enough for a large plan audit), so it's nearly always just some split between a few employees. This company sent over a cap table, showing columns for common & preferred stock ownership, outstanding and diluted shares, etc for ~60 lines, some of them being employees holding stock, but also a large number of them (40+ or so) being holding firms or other entities that aren't individuals. A few questions. When calculating ownership for 401(k) purposes, is ownership specifically voting stock? Their preferred shares don't have voting rights, so that would impact how ownership % is calculated (CS / total CS vs common & preferred / all stock). How should we handle the potential of control groups? While unlikely, if a combination of those holding firms all held interest in another company that added up to 80%, couldn't we run into a control group issue that we'd have no way to know about? In this case, I believe the 80% ownership for controlled groups is specifically between 5 or fewer individuals/entities. If the 5 largest stakeholders don't add up to more than 80%, would it be safe to assume we're safe in this regard, as no combination of 5 firms could hit 80% anyways? If someone who held stock at this company also was an owner of any of the holding firms, would they then need attributed ownership from that? E.g if John Doe owned 5% of the shares of this company, but also held 50% of ABC Holdings, which held 10% of this company, would John's ownership be 5% (direct) + 50% * 10% = a total of 10% ownership for plan purposes? While the odds of any of this being particularly relevant is fairly low, especially in the small plan world, I'd prefer to have a solid understanding of their plan ownership; any input would be appreciated. Thanks!

A plan came on with us earlier this year, this is our first time doing testing for them. Owner wants a projection of what it'd look like to max out profit sharing with new comp (they've never done profit sharing before). Right now their plan doc has 3 month wait, no hours or age requirement, and monthly entry for all sources, including safe harbor. Owner has two kids, 12 and 14, which get a small paycheck, defer some, and get safe harbor money. This causes some wild numbers in 401(a)(4) testing because of their age; the $330 of safe harbor received by one kid means I'd need to get 5 NHCEs up to ~27 EBAR. Essentially, there's no way to max out the owner without giving wild contributions to everyone else because of those two kids. Our plan is to amend their document for next year to either have an age requirement or exclude HCEs from the safe harbor contribution, along with some allocation conditions and other small provision changes to make this much smoother next year. That said, is there anything at all we can do for this year to make this spread better? I've seen conflicting information about the use of statutory exclusions for 401(a) rate group testing & struggling a bit to wrap my head around if there's any way we can make this work. Any input would be much appreciated!

We're a TPA/recordkeeper who works almost completely in conjunction with 3(38) advisory firms to provide plans. As it stands we don't do anything in regards to investment lineups on the plans, that's chosen exclusively by whatever advisor is the 3(38) on that plan. We're toying with the idea of creating a very stripped-down, basic 401(k) plan to sell as a "plan in a box" of sorts for very small companies unable to afford our standard tier. One of the issues is that such a plan would require an investment lineup, and having an advisor with a bps fee on the plan doesn't seem ideal for this structure. We absolutely don't want to take on 3(21) / 3(38) liability, which is why we've never thought about this before. However, I've heard recently from some sources that 3(21) responsibility is triggered only if it's plan-specific advice given to a sponsor. Supposedly, I've heard that some record keepers are able to essentially say "here's our standardized fund line-up, you as a sponsor can either adopt it or choose your own funds to use" and in doing so, the plan sponsor remains the fiduciary for 3(21)/3(38) purposes. Anyone have any further insight on this?

Just to clarify, you're saying that the plan document describes a New comparability formula (employee individual group allocation), but the sponsor wants to do a pro-rata spread?

Recently I was lucky enough to receive the PenChecks NIPA scholarship to go for either a AKS or APA designation. I don't currently have any official designations so it's a very exciting thing. I know NIPA and ASPPA both do similar things but in different ways. My firm has never really invested in continuing education but I've convinced by boss to invest in it as I really would like to start getting official recognition. That said, memberships to ASPPA and NIPA are expensive and required to keep a certification, and I'd hate to end up in a sunk cost fallacy sticking with NIPA if ASPPA might be more useful. A couple questions: I know NIPA offers a kind of equivalency system for designations from some other institutions (for example, ERPA qualifies you for AKS 1, 2, APA 1-4). Does ASPPA have anything like this where a AKS or APA designation would be able to be converted to an ASPPA designation in the case we chose to switch? What's the cost difference look like between being a NIPA member and obtaining CE credits each year for their qualifications vs at ASPPA? We're a relatively small firm and it'd be at least somewhat of a consideration. Any insights would be very helpful, thank you.

A plan sponsor is looking to adopt a retroactive amendment effective 1/1/25 to change their safe harbor match plan to be a safe harbor nonelective (3%) plan, primarily because of the gateway test benefits for their profit sharing. Are they legally allowed to reclassify the safe harbor match contributions they made from 1/1/25 to now as non-elective, essentially using it as a kind of credit when they true up at the end of the year? That would result in everyone having gotten a 3% contribution for the plan year. On one hand, my instincts say that adopting the amendment as of 1/1/25 would mean the safe harbor match provisions would no longer have been in place, so it wouldn't have to stay as match, but on the other hand it feels like it could be sketchy as it was made under a different contribution source structure. Anyone have insight on this?

I've been working for a TPA/Recordkeeper for a good 6 months now and I'm absolutely loving it. I'm definitely learning a lot as I go from my boss & coworkers, and I'm quite knowledgeable about the plans we work on, but we have a fairly narrow scope. Currently we only ever have done DC 401k & PS plans, most of them safe harbor, all of them quite similar in the grand scheme of things. That said we're running into more and more instances where it would be nice to have a good understanding of other types of plans and various fundamentals outside our usual operations, and I'm also someone who likes to really invest in what I do and become an expert. Are there any good books out there that break down the ins and outs of anything related to the retirement planning industry or DB/DC plans, or otherwise good resources written in human-readable language?

We're still straightening out the details as both the prior TPA and the client are... well, not the most informed on how things work, and aren't getting us all the information. That said, this is the first plan we've ever seen money purchase pension assets in and it's for many people, so we're fairly certain it was merged.

We have a 401(k) plan converting to us from a different TPA/Recordkeeper right now. In their plan, they have some money purchase pension plan assets that were rolled over into the 401k plan at some point. Do these assets need to be included in top heavy testing? What should we make sure we do to classify these correctly?

It's my understanding that profit sharing is limited to 25% of your plan compensation. Is this limit for specifically profit sharing, or all employer contributions? Specifically, does safe harbor count towards that limit? I have a client who has a solo K plan and made about $100,000 and maxed out deferral. Her document is a 4% Safe Harbor NE. Can she contribute 4% as a safe harbor contribution and then 25% as profit sharing, or can she only do 21% profit sharing to hit a limit of 25% comp as employer contributions?

I was looking through the plan documents on ASC and I'm seeing language in a few places that we don't use about offset- mostly relating to employer contributions and safe harbor contributions offsetting them. I also see language for this in a few spots within Relius. How exactly does offsetting a source work and why / when would you use it?