John Feldt ERPA CPC QPA

Is there any intent or need for the plan to be exempt from top-heavy? if yes, then allowing deferrals prior to safe harbor entry can be a problem with these entry requirements. The OEEs won’t get TH, but some non-OEEs might.

The only exception to the exclusive plan rule for a SIMPLE is a safe harbor 401(k) plan. The rule required the SIMPLE to end and the safe harbor 401(k) deferrals to begin the next day and the deferral limits are then pro-rated for the year. I agree that the safe harbor 401(k) plan must have at least 3 months of deferrals in the year to allow the plan to be safe harbor, so you may likely be out of time for 2025.

The rules under 408(p) rules say a SIMPLE must be the exclusive plan for the Employer and Employer is defined as all businesses in the controlled group/affiliated service group.

Austin, You queried, “what if the purpose of the amendment is to reduce how much you need to contribute to the plan to get testing to pass? Is that a "Retroactive plan amendments that increase benefit accruals? I think it would be hard to argue yes...” I would say 100% yes. Isn’t a retroactive increase in an amount to a NHCE under treasury regulation 1.401(a)(4)-11(g) sometimes exactly that scenario? I believe so and the regulation specifically allows it. Otherwise, one could almost always argue the plan could have passed in another way without that -11(g) amendment, and if so, then that defeats the purpose of the reg.

Yes, as long as they are getting some form of employer contribution, then their wages must count in the limit.

No, the 6% and 31% are limits, not offsets. Suppose you have a plan that defined the benefit as $X minus the value of a benefit provided to the participant under another employer’s plan. That’s an offset.

Yes, of course. Thank you!

If the cash balance plan is not subject to PBGC coverage and if there is at least one employee who is in both plans, then the deduction limit for both plans combined is 25% of eligible compensation, ignoring the first 6% of pay contributed to the defined contribution plan (count all employer contribution types but not salary deferrals). This combined plan deduction limit is avoided if the sum of all employer contributions to the DC plan (all employer contributions, but not salary deferrals) is not more than 6% of the sum of all eligible compensation.

The plan lives on within the surviving plan. The company does not execute a resolution to terminate for a merger of plans.

Be sure to be aware of the predecessor plan rules for counting service for vesting. Especially Treasury Regulation 1.411(a)-5(b)(3)(v)(B)(1). ”within the 5-year period immediately preceding or following the date another such plan terminates” - my understanding is that the “preceding” requirement can retroactively cause service prior to the plan effective date to be counted for vesting when such plan terminates.

If coverage passes and the nondiscrimination test passes for the year, then you’re almost there. Take a look at the Carol Gold Memo and see if the benefiting group of NHCEs are primarily short service, low paid, and receiving nominal benefits. There’s no bright line for that. So after reviewing that, does the employer think the plan satisfies treasury regulation 1.401(a)(4)-1(c)(2)? It’s their call.

The CPI-U for July 2025 was published with a value of 323.048. If inflation is 0% in August and September, based on Tom Poje's spreadsheet, some of the dollar limits for 2026 are projected to be: NOT Official yet, of course: Deferral limit: $24,500 (up from $23,500) Catchup: $8,000 (up from $7,500) Compensation Limit: $360,000 (up from $350,000) Annual Addition Limit: $72,000 (up from $70,000) DB Limit: $290,000 (up from $280,000) HCE: $160,000 (unchanged) Key Employee: $235,000 (up from $230,000)

Is the argument that the adoption of a new plan is treated like an amendment to the existing plan or plans of the employer? Even if the plans are not identical? (For example, one allows deferrals and safe harbor, the other does not allow either) The rules distinguish between a discretionary amendment and the adoption of a new plan, as the rules apply differently for amendments than for the adoption of a new plan. See Rev Proc 2016-37, section 15.04. And if it is the adoption of a new plan, not an amendment, what prevents it from applying a different method for allocations than the existing plan? I know some attorneys who might argue you can just adopt another type of PS in the existing document, if the language allows, and not bother with another plan (for example, to avoid the pro-rata no conditions allocations in the existing plan). Vesting changes under 411(a)(10) appear to only apply to an amendment to the plan, so that’s why the new PS only plan is suggested. Of course, if there is evidence or citation that such a new plan is really just an amendment to the existing plan, let’s go over that. I’m not sure if this helps or changes anyone’s opinion. Maybe calling a new plan an amendment is not the argument being made here?

I think Excel was commercially developed. That should do the trick, plus at least a 50 hours of billable time.

Contributions under 408(p) are included under IRC section 415(c)? I am looking for that in 1.415(c)-1 and I’m missing that. Must not have read far enoug!

Probably not. Was one of the businesses the result of a recent transaction that would fall under 410(b)(6)(C)? If not, and if they are a controlled group or affiliated service group, then you don’t combine for 415. Instead, all the SIMPLE contributions are all treated as excess IRA contributions for the years in which both plans are in effect.

That’s not the issue as I see it. The new plan is counting all the predecessor service, but is the statement above saying the new plan cannot adopt a 6-year vesting schedule using all that service? If so, where’s the citation for that?

The new PS plan would count service before the plan for vesting, but what citation prevents that new plan from using a 6-year graded vesting schedule?

Or, if the document allows, perhaps declare no profit sharing, but the plan will override that with a top-heavy minimum requirement. Be sure to check if the plan document only gives top-heavy to the nonkey employees or to everyone, I’ve been surprised a few times to see it apply to all employees. Next, if cross-testing, the DC plan may also override the top-heavy allocation for the NHCEs by requiring a gateway minimum. Too bad for the key employees and HCEs, not getting a high PS amount, but this might be good enough to avoid setting up an extra retro plan, to pay for it, administer it, to also write a merger agreement to merge, and to do the merger. Be careful if this is a professional service employer and the 6% contribution limit applies. If for some crazy reason, a key employee is not getting a match, they might have to declare some small profit sharing amount for everyone just to get a small allocation in their so their compensation can be counted in the 6% contribution limit, then after that add the top-heavy and the gateway to the others. i have seen a lot of takeover 401(k) plans that have 100% immediate vesting for profit sharing, so if that is against the employer desires or if they do want a higher profit sharing amount for the owners (if there is room to do so) then they would need to adopt a retro PS only plan with a vesting schedule and each participant in their own allocation rate group. When the plans merge, have the merger agreement state that this new plan will be the surviving plan in order to retain the vesting schedule. Sounds really easy, right? Be sure to bill properly for all of that!

If I had a nickel for every takeover where the coverage testing had only considered the employees eligible for the plan instead of all the employees of the Employer under 414(m) etc., I’d have a bag full of nickels.

Plan A coverage = (9/20 NHCEs) / (2/2 HCEs) = 45% Plan B has no HCEs covered, so plan B coverage is an automatic pass, and we assume it has the same safe harbor as plan A to allow aggregation with plan A if necessary to get plan A to pass coverage. Plan A’s 45% result is greater than the safe harbor percentage for coverage, which is 27.50% based on the concentration percentage, but it’s less than 70%. So without aggregation of plans, the average benefit test for coverage is necessary. Does plan A satisfy the nondiscriminatory classification test of 1.410(b)-4? Meaning, does it cover a reasonable business classification? If not, and you aggregate the two plans to get plan A to pass coverage, you must now also aggregate the two plans for purposes of nondiscrimination testing, and if allocations are tested on a benefits basis (cross-tested), then the gateway minimum allocation does apply. Shut you want plan A to pass coverage without aggregation with B so you can avoid the gateway in B. If you do have a reasonable business classification defining who is covered by plan A, then you run the average benefit test. You can run that on a benefits basis or on a contributions-basis. You need that to be 70%, and if it is, then Plan A passes coverage without aggregation with plan B, and no gateway applies to Plan B even if Plan A is cross-tested.

Seems okay to me.

Does this possibly create multiple rates of match that could require BRF testing?

Yes. Assuming the plan covers a reasonable classification under 1.410(b)-4(b) and also meets the safe harbor percentage under 1.410(b)-4(c)(2), the average benefits test prong of the coverage test can be done on a contributions-tested basis or on a benefits-tested basis. The gateway minimum only applies if, after passing coverage, you run the nondiscrimination test on a cross-tested basis (or a component is cross-tested). Meaning, the method used to pass coverage does not trigger a gateway minimum.

Isn’t this addressed in Rev Proc 2021-30?