MATRIX

I guess what I am wanting to know is, if a participant reaches his 402g limit on March 1, 2026 and the plan year for 2026 does not start until May 1, 2026, are any catch-ups made after March 1 but before May 1, 2026 subject to the Roth mandate? The reason I ask is because it is occuring before the first day of the plan year. But I think the law goes into effect 1/1/26 either way? ASsume high earner earned over $145,000 in calendar year 2025. THanks!

For an off calendar year plan with a 4/1-3/31 plan year, how will the Roth mandate work? For example the 2025 plan year ends 3/31/26, are all catch-ups made starting in January for HPI's treated as Roth?

Thank you both very much! This is helpful.

Hello - is anyone familiar with a 3(16) service agreement and what is typical language for indemnification? We are reviewing a contract for a potential 3(16) for our client. For example, I have seen one agreement refer to the indemnification of fiduciaries in the basic plan document and another one that limits liability to the fees collected from the Employer in the prior 36 months preceding the date of the error, which would equate to a total of $18,000.Thank you for any insight.

Hello All - wanted your thoughts on this issue. Effective 1/1/25 new 401k plan becomes subject to the EACA mandate rules - the plan applied auto enrollment at 3%. A provision in the EACA proposed regulations (pasted below) states that if a participant makes an affirmative election (opts out to 0% or elects 1 or 2%) and remains eligible, then he cannot be re-enrolled unless his affirmative election has been in effect for a period of at least one plan year. This is my understanding. The plan has decided to become a QACA on 1/1/26 and they want to use the initial period (years 1-2) for increases rather than annually each 1/1. So my question is - can the QACA re-enroll these participants with affirmative elections in effect for less than one plan year on 1/1/26 at 3% with the first increase to occur on 1/1/28 the end of the QACA initial period? Can the QACA expiration of election rule override the EACA mandate rules? Thank you! Section 1.414A-1 (iv) (C) Redetermination for employee who remained eligible and made an affirmative election. If, for an entire plan year, no default elective contributions were made solely because the employee made an affirmative election to have contributions made on the employee’s behalf under a cash or deferred election or salary reduction agreement in a different amount (including an election not to have contributions made), then the plan is permitted to provide that the initial period is redetermined so that it begins on any date specified under the plan that is later than the date specified in paragraph (c)(3)(ii)(A)(3) of this section. ERISApedia Example - Example 14.4.10 Assume the same facts as the prior example, except Dave was rehired in 2029. Because he was not ineligible for an entire plan year, the special rule does not apply. When he returns, his default deferrals are at 6% unless he files an affirmative election. A different rule applies if a participant has been under an affirmative deferral election (including an election to defer 0%). The plan can sweep the participant into automatic deferrals starting at the initial period, effectively cancelling their affirmative election. Explaining this rule, the preamble observes: For example, a plan is permitted to be amended to provide that, as of a specific date, the default election will apply to all employees who previously made an affirmative election that has been in effect for a period of at least one plan year to have contributions made on behalf of the employees under the plan at a rate that is below the uniform percentage that applies during an initial period (so that the uniform percentage that applies during the initial period will apply unless the employee makes a new affirmative election). An employer might adopt such an amendment to facilitate an increase in the rate of contributions made on behalf of its employees.

Company X sponsors a 401k plan. Company X was purchased earlier in 2025 in a stock sale to parent Company. Parent Company also owns Company Z with a 401k plan. Company X will be merged into Company Z effective 10/1 and both companies will be using the same payroll provide going forward which will be a change for Company X. (Company X plan will merge into Company Z plan at end of plan year 12/31/25). Is it necessary to formally amend the Company X 401k plan document to freeze the plan and discontinue future contributions, or is the fact that they are moving to the new payroll provider and no longer sending payroll contributions sufficient? Can a Board resolution accomplish this in lieu of an amendment? Any thoughts are welcome!

A sponsor wants to leave a PEP and continue their plan either by spinning off to a new standalone PEP or a new standalone non PEP as a continuation of the 401k plan Concern is we may not be able to do this by 1/1/26. This is a non safe harbor non PEO plan. Are the main concerns whether the PEP and RK will allow this to occur mid-year? If the new 401k plan is drafted as a continuation plan I do not see that a short plan year is created. Please confirm, etc. Thanks!

Thank you!

I just re-read the Notice. THis plan joined the PEO after SECURE 2.0 effective date. So I do not think it is GF. Any one else have thoughts?

Ok I see what you are saying - the PEO was GF so they are ok.

That is what I had been reviewing. So being that it spun out of a pre-enactment PEO plan by the employer plan was post enactment, what happens in the new spin off? I do not think it is a GF plan - grandfathered plan. Am I reading it incorrectly?

I have a question as to whether this spin off 401k plan is grandfathered or not for purposes of the mandatory automatic enrollment. Plan adopted a PEO on 2/1/2023. Plan spins out into its own single employer plan on 1/1/24. Is the plan required to adopt the mandatory AE provision under Section 101 of SECURE 2.0? Thank you!

Yes, but to avoid the escalator, you may elect an initial percent of 10.

Thank you both! I remember trying to get QACA's to set the minimum at 6%. So now it would have to be 10%.

I have a question on implementing a new start up QACA - does the plan have to follow the SECURE 2.0 EACA mandate of a deferral minimum of 3% and escalate up to 10 or 15%? Or, can the QACA follow the QACA rules of 3% minimum and escalate up to a 6% required maximum? Thank you!