Kevin C

As long as it's not an ADP or ACP safe harbor match, there is no requirement that a 414(s) compliant definition of compensation be used to determine the match. However, for testing, you have to use a 414(s) compliant definition of compensation. 1.414(s)-1(a)(2).

Rollover of a death benefit needs codes 4G on the 1099-R. It's mentioned starting at the bottom of page 14 of the instructions. As mentioned, depending on the ages of those involved, it may or may not be to the surviving spouse's benefit to roll over the distribution into an account in her name. We had a couple of these recently where the deceased was older than the surviving spouse and rolling the death benefit into an account in the surviving spouse's name significantly reduced the RMDs going forward. Our plans allow distribution of rollover accounts at any time, so they still have access to the funds after the rollover. We've also had a couple of cases where the surviving spouse was under 59.5 and better off keeping it as a death benefit.

The DOL agrees. The initial eligibility computation period is the 12 month period beginning on the employment commencement date. If the plan defines later eligibility computation periods based on anniversaries of employment, the second 12 month period begins on the first anniversary of the employee's employment commencement date. 2530.202-2 (a) & (b)(1). So, the initial period ends the day before the one-year anniversary.

Well, annoying songs aren't the only things that can get stuck in your brain. It's an academic exercise for me, too. I've looked at this every way I can think of and keep ending up at the same place. So, we will have to agree to disagree.

pskadot, Sorry, but the discussion is going to get technical. Belgarath, that is interesting. Part A. 1 says that procedures are needed "... by which an employee can designate whether his deferrals are pre-tax or Roth, or a combination of both." That doesn't seem consistent with the later section. You're making me read more (which is a good thing). I still think it is a tortured reading of the portion of the reg I highlighted in red to say that a plan can require a Roth election to be all or nothing. But, let's see where that gets us. 1.401(k)-1(a)(4)(iv)(B) says that "the right to make each level of elective contributions under a cash or deferred arrangement and the right to make designated Roth contributions are rights or features subject to the requirements of section 401(a)(4)." Under a plan where you can't make both pre-tax and Roth deferrals at the same time, if I elect to make pre-tax deferrals, I don't have the right to make Roth deferrals. And, if I elect to make Roth deferrals, I don't have the right to make pre-tax deferrals. Doesn't that mean the plan needs to test benefits, rights and features for the different types of deferrals? If I currently have an election in place to make pre-tax deferrals, I can't make Roth deferrals unless I give up the right to make pre-tax deferrals. You can disregard a requirement to apply for benefits or similar ministerial acts in BRF testing. But, I'm having a hard time seeing having to give up the right to make pre-tax deferrals before Roth deferrals are available being considered similar to not being eligible to make Roth deferrals because you didn't make a deferral election.

The exemption for certain underfunded frozen plans applies to PBGC covered plans and non-PBGC covered plans that are not top heavy. 1.401(a)(26)-1(b)(3). The other exemption mentioned for certain plans that do not benefit any HCEs is in 1.401(a)(26)-1(b)(1).

This came up back when Roth became available. If you don't believe me, will you believe Sal? The most recent EOB I have access to is from 2015. It was in Chapter 11, Section XV, Part A.1.

If the plan allows Roth, they can't restrict you to only making one type of deferrals, pre-tax or Roth. One of the requirements for Roth contributions is: I suggest you approach your employer and ask them what you need to do to get your deferral election changed to be 6% pre-tax and 3% Roth. There are a lot of possible reasons why your first try didn't work. If they tell you that you can't do both pre-tax and Roth at the same time, they are getting bad advice.

When was the plan document adopted? Everyone is assuming it was adopted in 2019, but "just starting up" makes me wonder. The rules for determining if the timing of an amendment, including the establishment of a new plan, is discriminatory are in 1.401(a)(4)-5.

Have you checked the base document to see if there is a fail-safe provision for the gateway? Our VS document has a provision that provides for an additional contribution when needed to pass the gateway.

It also makes a difference if it was an asset purchase or a stock purchase.

Section 410(b) doesn't apply to 403(b) deferrals. It does apply to other types of contributions in a 403(b) plan. If it is not a Church plan, the universal availability requirement of 1.403(b)-5(b) applies to 403(b) deferrals. Even with the recent IRS guidance on once in - always in for the < 20 hours per week exclusion, we recommend against using it. A single mistake can result in expensive retroactive corrections because of the all or nothing rule that applies.

Back when we used Datair prototype documents, the language requiring each participant's accounts to be credited with investment returns as of each valuation date was in Section 3.1.2 of the base document. That part of the document was titled "Accounting". There should be similar, if not identical, language in their current document.

1.401(k)-3(k)(2) says that when applying 1.401(k)-3(c) [the SH Match] to a QACA, the basic safe harbor match formula is replaced with the QACA match formula. The basic SH match is the minimum that must be provided to be safe harbor. 1.401(k)-3(c)(1) includes the option to have an enhanced match [1.401(k)-3(c)(3)]. So yes, you can provide a larger match in a QACA than the minimum required. If you are using a pre-approved document, it should have an option to use an enhanced QACA match. Our volume submitter document allows it.

The total refund will be the $3,135.58 of excess contributions plus earnings, since it is larger than the excess deferral of $2,800 plus earnings. If the excess deferrals are distributed first, it reduces the distribution needed to correct the excess contributions. If the excess contributions are distributed first, it reduces the amount needed to correct the excess deferrals.

Which argument? That a retroactive -11(g) amendment must comply with 411(d)(6)? Or, that the IRS position in TAM 9735001 is that a retroactive amendment under the circumstances listed in the TAM violates 411(d)(6)? You and Mike are reading things into my comments that are not there. What I'm saying is that the retroactive amendment described in the OP is very close to the situation in the TAM that the IRS says violates 411(d)(6). If you want an -11(g) amendment to be retroactive, it can't violate 411(d)(6) [1.401(a)4)-11(g)(3)(i) & (ii)]. I don't see the IRS conclusion in the TAM changing just because the employer tries to call it an -11(g) amendment. The only retroactive amendment discussed in this thread that I've said I think would violate 411(d)(6) is the one in the OP. Mike asked me where the line should be drawn. I don't know, but I think it is somewhere before you get to a complete replacement of the existing allocation formula like the situation in the TAM. That still leaves plenty of room for -11(g) amendments.

I'm not sure when they added this, but it's been on the IRS website for several years. https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-failure-to-provide-a-safe-harbor-401k-plan-notice

Mike, I don't understand where you are trying to go with this. One requirement for an 11(g) amendment is that "... the corrective amendment may not result in a reduction of an employee's benefits (including any benefit, right, or feature), determined based on the terms of the plan in effect immediately before the amendment. " [1.401(a)(4)-11(g)(3)(ii)] How is that completely different than the way 411(d)(6) applies to any other amendment? I still don't know where you draw the line on 11(g) amendments, but I think it is somewhere between wholesale retroactive replacement of the allocation method (the TAM situation) and adding a new allocation class or two to an existing plan. With the OP situation, I still think the TAM is pretty clear that it can't be done. I would amend for 2020 and go on.

Larry, do you have inside information? All I see is that no one has comp over the TWB in 2019, not that there are no HCEs.

I agree with you that a testing failure is not required to be able to do an 11(g) amendment. After a discussion a few years back, I found the preamble to the regs that added 11(g) where it specifically says a testing failure is not required. I don't know where you draw the line, either. Yes, zero is too low for me. I think a conservative approach would be to give the HCEs the desired allocation under the current formula, with the NHCEs getting what the document says they get, and then add on the 11(g) amendment. The line may be somewhere in between. I wouldn't want to be a test case. Of course, put everyone in their own allocation group before anyone is eligible for the contribution for that plan year and it's a non-issue going forward. The question really boils down to what is protected by 411(d)(6). If an 11(g) amendment can have the effect of completely replacing the allocation method after the end of the plan year, then 411(d)(6) is meaningless.

Our reference source has the a4 regs tagged as published 9/3/93. The following language was in the regs published 9/3/93. The exception listed includes the language "(to the extent permitted under section 411(d)(6)) ". I thought the typical 11(g) situation was that an allocation is done under the existing terms of the document, it fails testing and the 11(g) amendment gives additional benefits to NHCEs sufficient to pass the testing? I don't see anything in the TAM that conflicts with that. The TAM addresses replacing an allocation formula after the end of the plan year, not adding additional benefits to it.

The situation under discussion is almost an exact match to the situation in TAM 9735001, which says amending the allocation formula after the end of the plan year would violate 411(d)(6) if anyone receives less under the new formula than they would have received under the old. It also says a formula change after the end of the plan year is analogous to a change in the conditions for receiving an allocation after they have been satisfied that also violates 411(d)(6).

The first ones that come to mind are 1.401(k)-1(a)(6), "Rules applicable to cash or deferred arrangements of self-employed individuals" and the universal availability requirement for catch-up contributions in 1.414(v)-1(e) that would be violated if catch-up eligible partners are not allowed to make catch-up contributions. A more amusing approach would be to ask the CPA to provide cites supporting his claim.

I'm having trouble seeing how a correction for a late discovered partial plan termination could result in additional matching contributions. I can see reduced matching contributions if the reallocation correction method is used to correct an improper forfeiture resulting from a late identified partial plan term. And, I can see the correction of a 410(b) failure resulting in additional matching contributions. What exactly is being corrected that results in the additional 2018 matching contributions? Your question about re-running the ADP/ACP test can't be answered without details about the correction being made. In some cases, corrections are done after ADP/ACP failures are corrected and the ADP/ACP tests don't need to be re-done. (for example, Rev. Proc. 2019-19 Appendix A .05(2)(g)).

Is there any guidance on testing the prior benefit structure for a hard frozen plan? 1.401(a)(26)-3 doesn't have much detail. The preamble isn't much help. It just says that "...an ongoing defined benefit plan will typically satisfy the prior benefit structure requirements concurrently with satisfaction of the general plan requirements." There is plenty out there on soft frozen plan issues with 401(a)(26). I did find the attached transcript of a 2016 IRS presentation on soft frozen plans that says freezing the plan is one option to fix it if you hit the 401(a)(26) "wall" (pgs 1, 4 & 17). That seems an odd thing for the IRS to suggest if a hard frozen plan would have the same issues going forward. If anyone can point to some applicable guidance, even informal, it would be greatly appreciated. Transcript - Nondiscrimination Coverage and Participation for Closed Retirement Plans webcast 7-21-16 .pdf