legort69

Our plan eligibility computation period is anniversary/plan year. Assumptions: Calendar plan year Normal entry is 1000/12: Monthly entry Over age 21 For LTPT entry with 500-999 hours / 12 months over 2 or 3 consecutive years. When will the plan entry date not be January 1 of the following year that the employee met the requirements?

Check this out https://www.irs.gov/pub/irs-drop/n-23-62.pdf

I assume further guidance is required, but The Secure Act text states that the lookback 145k compensation for determining the HPEs is from the employer sponsoring the plan. So if a worksite onboards with a PEO and the PEO sponsors a MEP, and the worksite adopts the MEP, then could we make a case that the lookback compensation is based on the compensation under the PEO only? Otherwise, the operational processes of onboarding a PEO, collecting prior-year FICA wages, and possibly year-to-date compensation plus deferrals (if HPE) will be a bigger administrative lift given that employers join PEOs continuously throughout the year. Consideration: Worksite now receives W2 from PEO EIN.

My thoughts are that the primary responsibility for determining an HPE and remitting Roth Catch-Up for Highly Paid Employees is mostly a payroll function. The TPA/Recordkeeper may be able to add processes and tools and communications to facilitate the proper administration, but ultimately the payroll companies will have to enhance their systems to accommodate this SECURE 2.0 provision. I am curious to know where the 401k community lands on this process?

Hi Bri - they are benefiting with a fixed payroll match in my example.

Plan funds a fixed match each pay period and also has last-day rule for profit share. A participant terminates before year end. 1) Are Participant wages included in eligible 404 compensation with respect to the deduction limit test? And would it matter if they actually fund the profit share? 2) If a plan does not have a last-day rule on the match in the AA, and does not fund a discretionary match, but they have a last-day rule only on profit share, would this participant compensation be in the test?

Thank you CB Zeller. I have a follow up question to your response. The deduction rates were corrected in April 2022 which puts us on the 45-day clock to fund a 25% QNEC for 2021. The 45-day notice addresses the time period which should include 2022 up to the correction to lock in 25 QNEC. Based on your suggestion, I am unsure how to respond to 2021 without flagging the continuation of the deduction error into 2022.

A payroll system error caused a Participant deferral to be deducted at a lower amount and as a result they did not get the opportunity to max out in 2021. The problem continued until April 2022. A 2021 QNEC for the MDO will be forthcoming. However, for 2022, do you give the participant the option to max out (maybe receive more match) or accept the QNEC. If they accept the 2022 QNEC then they cannot max out to the 402g limit for 2022 because the 402g limit takes into consideration the MDO. Or would you fund a 2022 MDO QNEC and notify the payroll admin to reduce the 402g limit for 2022? Thanks.

What if they are catch-up eligible and the plan allows match on catch-up? How would you determine the related match in this case?

If I find out that they are 2 businesses, then are they technically a controlled group or AFG?

The client is through an MEP and I have no direct relationship with them. I am working through a PEO contact only. She was not taking a W2 for many years. The LLC also has regular employees. Because her husband (also direct owner) started W2 for purposes of the 401k contribution only, I wanted to know if she would be an HCE for the testing in order to 1/2 his HCE rate. Meaning should her commission that is issued to her name from a broker c/o LLC be included in the ADP test?

Earned Income" shall mean the net earnings from self-employment in the trade or business with respect to which the Plan has been adopted, for which personal services of the individual are a material income-producing factor. Net earnings will be determined without regard to items not included in gross income and the deductions allocable to such items. At the least, if her commissions are paid directly to the owner c/o the business, then should that not be included in the plan testing .

LLC elects to file taxes as a corporation. Owner receives broker commission paid to her c/o LLC. She reports commissions on 1040 Schedule C and does not take W2. Would these commissions be eligible earnings for 401k purposes?

Thank you MS Hatlee. This is perfect and i was able to find in the IRS by searching on "Vinco" in a Google search. See below. In summary, although a missed match based on missed deferral is a NEC, it still would be counted as a contribution for purposes of the match limit ( both plan imposed or max comp). https://www.irs.gov/pub/irs-tege/epcrs_401k_phoneforum_presentation.pdf

This is the statement that I am getting hung up on. With respect to a match cap of $2000, if the missed match is a NEC then is it still included in the 2k limit?