AlbanyConsultant

Yuck. The plan is a pooled 401k (yes, they still exist!) and now the owner needs do to Roth catchup deferrals. I really don't want to commingle the pre-tax and Roth in the same account. Is there a discrimination issue if only the HCE HPI has a self-directed account? I have been suggesting that they move to a participant-directed model for years and I was hoping that this would be the thing that clinched the decision... but the owner says that he's retiring in 2-3 years and doesn't want to go through all the changes for a short term, so I'm looking for a different solution. Part of me hopes there isn't one... Any other suggestions (other than "you can't always get what you want, even if you are a doctor")?

I've been presented with this situation: Two spouses own two S-corps - MS owned by J 51% and her husband O 49% OC owned 100% by O It's a controlled group because O owns part of MS. Each business has only one other employee, an NHCE. OC has a 401k plan (I don't have any other details yet). Of course, J wants a 401k plan to cover MS... and only MS. I want to say that as long as the populations are stable, then this is OK. No matter what feature I put into the MS plan, I'll either have: 1 HCE benefitting, 1 HCE nonbenefitting, 1 NHCE benefitting, and 1 NHCE nonbenefitting = 1/2 / 1/2= 100% or 2 HCE benefitting, 2 NHCE benefitting = 2/2 / 2/2= 100% This seems... simplistic? Like I'm missing something? What trap am I unwittingly walking into (other than the one where one of the NHCEs leaves and the testing fails and it's a disaster). Thanks!

We've known that our client NR is in a controlled group with RR (has their own plan but not our client) for several years, and we actually get the RR data every other year or so to prove that it passes 410b for all the various BRF, which it does. We've convinced the owners to let us take over the RR plan, and as part of the discussion they mentioned the RR plan includes union employees (they were included in the data we received, but not identified as such). NR's plan excludes union employees, and there are union employees that are excluded. They want to keep the two plans separate (getting close to the audit threshold, don't want a conversion, etc.). Is this union thing going to be a problem for coverage? I'd like to think that since we can exclude all union employees, it's OK to include some class of them. Thanks.

In a MEP, one of the adopting employers (AE) has said that they intend to leave the MEP soon - I don't know all of the details. This was an informal conversation, no official formal notice has been given. The owner of the AE followed-up by asking for some kind of trust report for the participants in that employer as of 12/31/25. I presume the intent is to use that to bring to a new recordkeeper for pricing, conversion discussion, etc. However, the trustee of the MEP has asked me to not provide this until we get a formal letter of the intent to separate from the MEP. I don't think that's a tenable position. Surely, the owner of the AE must have some rights to information? They're not officially a "trustee" since they haven't signed a trust agreement (though maybe they should?), but since they do handle plan money...? Obviously, it would be great if everyone would just play nice. But in the absence of that, any ideas as to what I can lean on? I'm perusing my basic plan document, but so far it's not that detailed. Thanks. UPDATE: I convinced the MEP sponsor to stop being difficult and I provided the data, so now this is just a theoretical issue.

I see. Those are good points. Thanks!

I'm definitely looking into the top paid group. I think the line will be north of $200K, but less than $500K. 2025 is literally the first plan year, so I don't have full data yet. What's the goal of your last question?

I have a large law firm client that recently asked about mega backdoor Roth and voluntary after-tax contributions in general. I explained the ACP test issue and after a slight pause, one of the partners said, "but that can be resolved by making a company contribution instead of refunds, right?" They are actually considering corrective QMACs to let their highly paid (and, coincidentally, HPI) participants do this. Sure, it works mathematically if they don't mind spending the money, but I have to wonder if it will really work out better than adjusting their class-based profit sharing.

We started a new plan for Company R in 2025, and we just found out that the plan's financial advisor (through a shell company he owns 100% of) purchased 10% of Company R's stock sometime in 2025. The plan is on a recordkeeping platform that pays the advisory form some amount of bp (50, I think). This seems to be a prohibited transaction; I don't see any way for the FA to keep getting paid on this. And he should return all the fees paid to him since the purchase (with earnings) to restore the plan. Anything else I'm missing? Thanks.

Sadly, telling a potential plan sponsor about how the safe harbor works during a sales meeting has no bearing on what they remember over a year later when you provide the contribution amounts.

Guess we got the official answer! I'm just not patient enough.

Are we all agreed that the rule is $145K of FICA wages to be a Highly Paid Individual (or High Earner or whatever your favorite acronym is) for 2026? I thought I heard something about it being increased for cost-of-living from 2024 to 2025 and that might make it $150K, but I don't see anything official on that. Thanks.

Talking to a potential plan, and there are two f/t employees and 10 who are 'half-time'. Assuming that these people really do work only half of a f/t schedule, do the rules really let us treat this as 2 + (10 x 50%) = 7 and therefore exempt from the mandatory automatic enrollment? I realize that it might be safer to just include it for many reasons, but if the client is really against it... it's OK, right? Thanks.

Thankfully, this plan is not going to cover the union employees. So while I understand the possible issue with putting that on a union employee when it's not in their contract, that isn't my problem (at least, not today). I came to the same eventual conclusion - if nothing says I can't count them, then I have to count them, even if they're not eligible for the plan. I suppose it is similar to having a class exception (that meets 410b) - they are still employees even if you're not offering the plan to them. Thanks!

I'm not seeing anything specifically on this, so maybe that's my answer, but... Company with 7 regular full-time employees and 5 full-time union employees. Are they considered "normally employing" enough people to trigger mandatory automatic enrollment, or do we get to not count the union employees (presuming their retirement benefits are properly subject to their collective bargaining agreement)? Thanks.

That is something I literally never even considered. I will raise it to the UK company, but given that they intend to terminate the plan and pay everyone out in the next six months, I don't think that they are going to take this step.