John Feldt ERPA CPC QPA

If the plan does not exclude them, my understanding is that their compensation is converted to a US dollar equivalent for purposes of the plan.

Use the definition of testing age in 1.401(a)(4)-12. I believe you can either round to the nearest age or use their attained age, as long as it is consistently applied to all employees.

If the post is regarding treas. reg. 1.414(v)-2(c)(3), then here’s what the end of section II of the IRS Special Analyses states: The regulations also contain a recordkeeping requirement that plan administrators maintain written practices and procedures designed to result in real-time compliance with certain requirements of section 414(v)(7)(A).

Simply make sure the nonelective portion of the plan passes coverage and nondiscrimination. Piece of cake!

Jim, Enjoy retirement. Suggest they find a good, reasonable TPA. -John

An amendment to end safe harbor was created in February but was actually signed back in December? Client has no new plan document for 2024, signing one now and refusing VCP? Due to human nature, when a sentence starts with “Is there still a Temptation . . .”, I think the answer likely “yes” regarding just about anything that follows.

It allows the full year compensation limit to apply. This is a very common practice in the industry. in your example, November was too late for a calendar year plan to be safe harbor in 2024. How did the ADP test turn out? Was there a top-heavy surprise?

Without the 3% safe harbor, then 410b coverage is only 100% if an PS allocation is provided to each nonexcludable employee.

It’s a QACA safe harbor match. I think that’s under 401(m)(12). The plan must have certain minimum automatic enrollment provisions in place to use this provision. Due to the mandatory automatic enrollment requirements for certain new plans, I see it much more commonly these days than even just five years ago.

As long as you follow the terms of the written plan document, sure. I could be wrong, but I think most IRS pre-approved plans specifically spell out how this must be handled by referring to the DOL regulations. You can always have a seasoned ERISA counsel review the document to provide their opinion.

Yes, that passes nondiscrimination. And #1 above does not require any reasonable business classification, that requirement only applies to the coverage test and only if the coverage test needs the average benefit percentage test to pass (the simple ratio percent test is under 70%). Just to clarify, the first requirement is to pass the coverage test. If that does not pass, you do something to make that pass. Then you test the amounts that passed coverage for nondiscrimination. Sure, sometimes that goes hand in hand, but it’s possible to get lost in the minutiae of the nondiscrimination test sometimes to forget that we still don’t have enough NHCEs to get through the coverage test first. In your example, you said the plan has safe harbor. If it that’s a safe harbor nonelective, and assuming there are no significant numbers of employees who are excluded from the plan by class, then you probably pass coverage under the ratio percent test as the safe harbor nonelective is provided to all the eligible NHCEs. As I’m sure you know, we don’t run extra coverage tests for each flavor of nonelective, such as “profit sharing”, we lump all of them together.

If you’re asking about a top-heavy test, my understanding is that you count receivables at the end of the first plan year, but thereafter, they are only counted if subject minimum funding requirements under section 412. Of course, I could be remembering that incorrectly, but I’m sure the 416 regulations explain how to handle it.

DOL regulations indicate that hours are based on the date worked (or the day for which pay was earned). Thus, hours worked in 2025 count in 2025, regardless of the payroll dates. Compensation differs and has an optional provision. Compensation is based on the date paid, unless the plan is written to use the “first few weeks” rule or “post year-end compensation” provision to pull in comp after year end and push out comp paid right after the plan year began.

Perhaps the 401(k) plan is an old grandfathered governmental 401(k) plan, and that’s how the 5-year cliff vesting can apply to the match.

Isn’t the good-faith interim amendment due 12/31/2026 for the language that brings in the exception for top heavy for OEEs? And the plan merely operationally complies with whatever language they will adopt until then? If so, I would believe the amendment can retroactively state how the plan operated regarding this new exclusion and say OEEs aren’t entitled to any DC-only plan top-heavy minimums starting 1/1/24. If so, and someone is not accruing a DB benefit and they are an OEE, then their top-heavy minimum is zero in 2024, 2025, and 2026 assuming that is the language that they adopt by the end of this year.