John Feldt ERPA CPC QPA

I have extreme doubts that the IRS would just call and not have a standard form letter to mail out. I can’t be 100% certain this is a scam, but it’s got to be a scam or a very uninformed agent regarding IRS procedures.

Yes and No. They can use more than 1/7. No, check the rule on this, but I am pretty sure they can’t allocate toward 2024 by using money transferring in during 2025.

Under IRC section 401(a)(17), compensation is limited for qualified plans. For a calendar year 2024 plan, that limit is $345,000. For 2025 it will be $350,000.

Seems like it is to me.

I’m sure it will be super easy to have the plan document and the admin system be set up for 2YOS anniversary years for the PS and the “switch to plan year” method for everything else.

If any portion of the plan is cross-tested, then all benefiting NHCEs over 21/1 (those who are not OEEs) must receive the minimum gateway. Call that the over 21/1 'plan'. Those who are OEEs (under 21/1), if tested separately from the over 21/1 plan, are in a group that is almost never cross-tested (call this the 'under 21/1 plan'. Instead, it is contributions-tested, also called allocation based testing, so that 'plan' is not required to get gateway (again, if tested separately from the over 21/1 plan). If not cross-tested, no gateway. If a plan is cross-tested, the benefiting NHCEs must have the minimum gateway (perhaps even more to pass testing overall) but the gateway is not restricted by an allocation conditions like last day or a minimum hours requirement. If the plan is allocations-tested, not cross-tested, the 'EBAR' is replaced for testing with this: the employee's total nonelective allocation divided by the employee's testing compensation. Compare these rates HCEs to NHCEs and the rest of the math is the same.

If they received the 3% safe harbor, they are benefiting and thus not excluded from coverage testing and not excluded from nondiscrimination testing. To be ignored from the test, they have to meet all of these: 1) did not benefit, 2) did not work 500 hours, 3) terminated employment, and 4) the only reason they did not benefit was due to the failure to meet a condition, such as a last day or an hours requirement to get an allocation. If the terminee only gets the safe harbor, then you have only 1 of 2 NHCEs at the HCE rate group. You’ll need to run the average benefits test to answer your question. You can run that test either on a benefits-tested basis or on an allocations-tested basis. Gateway is not triggered by the average benefits test. Tell the system to not cross-test and that should turn off the minimum gateway.

There is no 30-day advance notice requirement for the initial period when deferrals first become allowed. Otherwise, if you had a safe harbor plan with immediate entry, you’d somehow have to give new hires a 30-day notice before they start working for you. If the plan already has deferrals now, then you can add a 3% safe harbor nonelective for this plan year that you’re in, but you can only add SH match as of the first day of the next plan year. 1.401(k)-something…

Yes, the plan can test the average benefits test on a benefits basis and test the rate groups on a contribution basis (no gateway required). Or vice versa (gateway required). All nonelectives, including the prevailing wage QNEC, are lumped together for coverage and nondiscrimination. FYI.

And if top-heavy, they accrue a top-heavy minimum life annuity in the DB plan that you need to track.

And according to SSA.gov, the Social Security taxable wage base will increase to $176,100 in 2025 from $168,600 in 2024.

The CPI-U for September 2024 was published with a value of 315.301. Based on Tom Poje's spreadsheet, the dollar limits for 2025 are projected to be: Almost all increased (NOT Official yet, of course): Deferral limit: $23,500 (up from $23,000) Catchup: $7,500 (unchanged) Compensation Limit: $350,000 (up from $345,000) Annual Addition Limit: $70,000 (up from $69,000) DB Limit: $280,000 (up from $275,000) HCE: $160,000 (up from $155,000) Key Employee: $230,000 (up from $220,000) Just for reference, the unrounded figures are: Catchup: $7,997.50 Deferral limit: $23,993 Compensation Limit: $354,260 Annual Addition Limit: $70,852 DB Limit: $283,408 HCE: $160,072 Key Employee: $230,269

A parent-subsidiary is when 80% or more of one company is owned by the parent company. Owned by company. If they have common shareholders, that’s is a brother-sister scenario.

Isn’t that only if it’s a parent-subsidiary? Not brother-sister?

Owners? If they have a 403(b) plan, how would the plan sponsor have any owners? How many participants have account balances? is it a deferral only plan with no employer involvement? If you have already quoted the 5500 instructions and pointed out the number of participants with balances, perhaps ask for their citation to the contrary. It’s not a belief system and not an interpretation. Try to find someone who will listen, but as a provider, you are engaged to prepare the 5500 properly, so the consequences to the plan sponsor are on them or they can engage another provider to do the work.

Today's CPI-U was issued for August. One more month to go for the full limit change to be known. Here's what we have if the September CPI-U is exactly the same as August: 2025 Estimated limits and the unrounded values: 414(v) Age 50 Catchup: $7,500 (unrounded 7,993) to become $8000, I think the annual inflation rate for September would need to be about 3.165% 402(g) limit: $23,500 (unrounded 23,979) to become $24,000, I think the annual inflation rate for September would need to be about 3.165% 401(a)(17) Comp limit: $350,000 (unrounded 354,080) to become 355,000, I think the annual inflation rate for September would need to be over 9.772% 415 DC annual addition limit: $70,000 (unrounded 70,816) 415 DB limit: $280,000 (unrounded 283,264) 416(i) Key Employee: $230,000 (unrounded 230,152) 414(q)(1) HCE: unchanged: $155,000 (but unrounded 159,992) to become $160,000, the annual inflation rate for September only needs to be just over 0.24%

If you have the right ratios of HCEs and NHCEs at each rate or above, test it on a contributions-basis to avoid the gateway. Maybe you’ll pass. If you have each person in their own allocation rate group and a rate fails, just find more NHCEs for that rate or tell the HCEs that they will receive a lower allocation rate that will pass.

Doctors can be wrong? Yes, have them engage an ERISA attorney and wait for the doctor to say “But that’s not fair!” - which was the funniest thing I’d heard that day.

I think the latest required restatement will be in 2076.

You must follow the terms of the written plan. Look at the notes or other parameters around the safe harbor and see if the employer has any discretion there. If not, follow the written plan provisions, as a plan must comply in operation with those terms to retain its tax friendly (tax qualified) status. The plan may be amended prospectively to exclude HCEs from safe harbor, of course.

Triple-stacked match and encouraging participants to defer. Well, that’s something! The ADP test won’t apply due to the safe harbor match. But, if a cap is on the other matches, as indicated, then I think you have the potential for different ultimate match rates based on deferrals. A low paid spouse of the owner can get a higher percent of pay match than an employee making $345,000 but is a NHCE due to last year’s wages. So, regardless of the demographics, I think the caps on the two extra matches will suffer from a malady known as ACP testing. I could be wrong about that, of course, since I did not quote the applicable regulation and its requirements.

And what does the statute, and for that matter, the regulation, say about this minimum meaningful benefit of 0.50% as a life annuity at Normal Retirement that all these pre-approved documents now require? Anyway, if a plan wants reliance on its written language, I am not seeing how this Chevron change would undo the power that the treasury holds there. Sponsors are still bound to the terms of their written plans.

Yes. ERISA requires the advance notice regardless of who is being reduced because the plan subject to ERISA.

You definitely did not overlook anything impofrtant.

The plan is safe harbor. I don’t have the plan document, but I doubt it has something that says you are not safe harbor when the compensation definition fails 414(s). So unless the document requires it, you don’t run ACP testing. Instead, the plan loses its nice tax-qualified status, that’s all. You then wonder why you got rid of an ACP test in exchange for a 414(s) in the first place. You can’t just retroactively tell everyone with commissions that you are now going to retroactively include commissions for the match and say “We sure hope you deferred enough under the old compensation definition so that now with this new definition you will retroactively get the full match. We’re sure your deferral election would have been the same if you knew this beforehand.” Maybe EPCRS has changed and I missed that this is now available to be self-corrected? I admit, that is possible so I’ll be happy to hear about it.