Santo Gold

Thank you for the replies. I would prefer to not use the names and will see if there is some category that we could squeeze those 3 HCEs into. If we have to name them by name as being not part of the excludable class, then that is going to show up in everyones SPD as well. Which isn't wrong but all things being equal, I would not want my name singled out in the SPD for any reason....

Can an employer have as an excludable class of employees by specific name? For the 401k plan we are drafting, the employer wants to exclude HCEs (about 15) but not exclude 3 of them. For excludable class, could they have in their plan document something to the effect that "all HCEs are part of the excludable class, except individual A, B and C"? Any thoughts? Thanks

Can a calendar year 403(b) plan have as a condition for matching contributions that individuals must work 260 hours each quarter and be employed on the last day of each quarter? Is it acceptable to have contribution conditions established on a quarterly basis rather than an annual basis, knowing that ACP and 410(b) will be tested annually? Thank you

We are drafting a new 401k plan for 2019, non-safe harbor. 200+ expected eligible participants. Initially the plan was to be written excluding HCEs (HCEs would have their own nonqualified Deferred Comp program). The question was now asked can we let the HCEs into this plan so that they can rollover any 401(k) accounts from previous employer (presumably unrelated) 401k plans, but not have the HCEs eligible to make 401k contributions or receive any employer match (only 2 money types, other than rollover, allowed in the plan). Does this sound acceptable? This would only affect HCEs so discrimination issues would not seem to matter. Thanks for any replies.

Thank you for all replies. I do not like the design that they are considering either. But what if they kept this as a non-ERISA plan but instead of the rolling 3 year vesting and/or holding the deposits for 3 years, they just not give contributions to anyone with less than 3 years of service? Keep the plan at 100 vesting but you have to be there 3 years before receiving employer contributions. They may or may not pass 410(b) in a given year, but if not under ERISA, would it matter?

We are looking at a larger Church plan (300+ employees) that elects not to be subject to ERISA. There are several HCEs. They have followed mainly vanilla plan provisions but are looking to make some changes starting in 2019. Do these changes sound permissible? For individuals hired 1/1/19 or later, they want to have a 3 year cliff vesting schedule apply annually to that year's contribution. So that if you are eligible to receive an ER contribution for 2019 plan year and have 1 YOS in 2019, you do not vest in that contribution until 2021. If eligible for contribution in 2020, you do not vest until 2022, and so on. Since this is non-ERISA, that seems to be acceptable for this type of plan. However, because it might be messy for the recordkeeper to track money in this manner, the ER was not going to deposit the money into the plan until they actually vest in it. The ER would keep those contributions in a non-plan ER account. So, from the above example, for those affected individuals, their 2019 ER contribution would be deposited into their accounts in 2021, 2020 ER contributions deposited in 2022.... If someone from 2019 leaves in 2020, their contributions never vested so that year's $$$ can stay with the ER or go to another year's contribution. Writing the language in the plan document would be a challenge, but assuming that can be done, is this allowed? Are there any 410(b)-type tests that have to be done since there are HCEs? Its not subject to ERISA so maybe not? Any comments are really appreciates.

Are all 403(b) plans with employer contributions subject to ERISA? If so, then this would not be an acceptable vesting schedule for a 403(b) Plan, is that correct? Thank you

If I am understanding this correctly, if the business really wanted to do this, there would really NOT be any employer contribution to the plan. Individuals who wanted this "Employer" contribution deposited into the plan would have this initially paid to them and they would defer into the plan. If they did not want it in the plan, then it would simply be additional pay for them. Either way, it is not an employer contribution. With all that said, could they still do this? This is a 403(b) plan so no problem with 401k testing issues.

In a qualified plan, an employer could not say have a 3 year vesting period apply to each year's contribution, which could for example have an employer with 20 YOS but would not be vested in that year;s contribution until she had 23 YOS. But if this were a church plan or other non-qualified plan, that type of vesting is acceptable, is that correct?

403(b) Plan sponsor wants to start offering a discretionary match in 2019. The formula they are considering is dollar-for-dollar match up to $250, determined each quarter. Participant's could received a maximum match of $1,000 for the year. They want to throw in a twist: They participant's can take the match either as a contribution to the plan or have it paid to them as cash each quarter. Is that acceptable? I think we could try to do something like this if it was pertaining to a PS contribution and we have each participant as a separate rate group. But for a match, can that option be available? Thanks

Thank you for that information. Would it be possible then that, in 403(b) plans with certain contracts, the plan sponsor is not responsible for ensuring that participants take their RMD?

We are the TPA firm for an ERISA 403b that has assets with a well known recordkeeper' plan sponsor has an unbundled service agreement with the recordkeeper. We have a terminated participant who will be due an RMD by 12/31/18 and are being told that only the participant can request the RMD. Not the TPA, not the plan sponsor. But, if the RMD is missed, it is the plan sponsor who is responsible and liable for the missed RMD, correct? If the RMD is missed because the participant either intentionally or unintentionally does not request the RMD, but the plan sponsor requests I, is the plan sponsor still liable? Is the answer different because this is a 403b plan? Thanks

I am meeting with an employer about starting a 401k plan. Details are sketchy but for now, I was told that its a husband and wife who own the business. However, the wife (who I am told is very much involved with the business) receives 1099 pay from the company. No W-2, no other compensation from the plan. (1) I've never seen this arrangement before; is this acceptable? (2) So the spouse has no company wages and would not benefit in a new company 401k plan. But could the wife have her own plan, based on 1099 pay? If so, controlled group issues come into plan. But she needs to have a business to have a 401k plan. Which she does. But is paid via 1099 from it. Any thoughts are appreciated. I will find out more shortly but this seems kind of odd. Thanks

Thank you for the great replies.

A non-key employee is still employed at her company that has a 401k plan. She turned 70-1/2 in 2017 and would have been due her initial RMD 4/1/18. But, since she is still employed, chose not to take that. Given her age, the plan allows for her to take all of her money out of the plan as an ISW. Although still employed, she wants to roll all of her money out of the 401k plan and into an IRA before the end of 2018. She would like to avoid taking an initial RMD from these assets until 2019. If she were to transfer the plan assets to an IRA before the end of 2018, would she then be required to take a 2018 RMD from the IRA or could that be delayed until 2019? Thank you

The existing plan does use W2 compensation. By paying fees, he will pay a portion of the rent (for the office space he is using) as well as a portion of the existing company's staff. who will be doing some work for him. Some/most of this "work" will actually be for the current company. I am not sure if his payments for the staff support will be only for work he does not related to the existing business, or if it will be for only work actually for the existing business, or both.

A small office has 2 owners and 2 employees. As of 7/1/18, one of the owners is selling his share of the business to the other owner. The former owner will still continue to work as an independent contractor for the business and will report to the same office and be paid via 1099. As of 7/1/18, should the former owner be considered an employee given that he is still doing mostly the same work as before even though he is being paid via 1099 and considered himself an independent contractor? He also expects to make some payments to the business to cover a portion of the costs of the other 2 employees who may do some work for him that could include work not related to the company business (but directly for him). The company has a 401k plan that he participates in so whether he is an employee or not needs to be determined after 7/1/18 to know if he can still actively participate in the plan. If not an employee and if he starts his own business (self-named) as a sole prop, given he is paying some fees for the other 2 employees, do you think there is a concern that he would have to include them in his own 401k plan? Thanks for any advice.

Can a 401(k) plan have a tiered match contribution based on service? There will be no HCEs eligible to be in this plan. For example: · 0% match for individuals with less than 1 year of service · 100% match up to 1% of EE contribution for 1-3 years of service · 100% match up to 2% of EE contribution for 3-5 year of service · 100% match up to 3% of EE contribution for 5-10 year of service · 100% match up to 4% of EE contribution for 10-20 year of service · 100% match up to 5% of EE contribution for 20+ years of service

Participant is going through a divorce and the plan administrator has been contacted by the spouse's attorney regarding information on the participant's 403(b) account. Currently, there is no QDRO, although that likely will be coming. The participant claims she needs to take a hardship from the plan. However, is that allowable if the plan administrator knows that the spouse may be entitled to a share of this account, even if no QDRO has yet been produced? Thanks

Thanks Tom. I think I understand. My concern was centered on what the date of participation actually is. By making the plan effective retroactive to 1/1/17, everyones DOP into the plan is 1/1/17. But that pertains only to the PS eligibility. Since no one can make 401(k) contributions until 12/1/17, would that allow them to use 12/1-12/31 comp for both ADP testing and QNEC contribution? It sounds like the answer is yes. Thanks

Tom - I'm not sure I understand your example. If we base the QNEC on whole year compensation, can we still test it in the ADP test based on 1 month compensation? Safe harbor for 2018 and beyond is a definite.

What is intended is that the owners bonus themselves around $25,000 each from now to year end. Each owner would defer $18,000 each. There is 1 NHCE who will not want to put anything in. So the ADP test would be HCEs = 72%, NHCEs = 0%. FAIL! So if we can provide a QNEC to the NHCE on compensation from now - 12/31, even one at 72%, it might only amount to $2,000. That would be acceptable to the owners. Even if we have to provide an additional 3% on whole year compensation to satisfy top heavy, that is still an overall good deal for the owner. They would want to avoid doing a 72% QNEC on whole year compensation for obvious reasons. We can use partial year compensation ADR calculation. But can we use partial year compensation for the QNEC as well? We need to have a 12 month plan year in order to not have to prorate the 415 limit. But the 401(k) effective on 11/15.

The plan is not going to pass the 2017 ADP test using either prior or current year testing. So the QNEC is how they want to pass. Which leads to the compensation on which the QNEC is based. full year comp will cost a lot more than 1 month worth of compensation.

We would have the participants entry date for the PS 1/1/17. For the 401(k), we would have a special entry date of 11/15 or even 12/1 if we simply have monthly entry dates. In which case particiants could only defer for a month out of the year. Would the QNEC have to be full year? The 401(k) test would be based on compensation from 12/1-12/31. Shouldn't the QNEC compensation be based on the same period?

Company is starting a calendar non-safe harbor 401k plan, document to be signed 11/15/17. The plan is effective retroactively to 1/1/17. 401k is effective 11/15/17. 415 limits therefore are not prorated. We will use current year testing. The owners, due to December bonuses, could deposit $10K+ in 401(k) contributions before end of 2017. Giving them a high ADR. The NHCEs would not be that high. A QNEC is being considered, which will cost $$$, but the question is whether the QNEC uses full year compensation as a basis or just the compensation from 11/15-12/31? This would obviously make a big difference in the QNEC. Hoping that 11/15-12/31 can be used. Thanks for any comments '