BG5150

Company missed a deferral opportunity for one employee. Failure to implement an employee election. No doubt here. Correction is 50% QNEC. I get that. But to make up the match, it's: What does "nonelective contribution for the matching contribution" mean? Is it a convoluted way of saying it has to just be a match? If not, what kind of nonelective contribution? This is NOT a safe harbor plan, so it won't be a QNEC.

You can do it in-year, I beleive

Can you share that correspondence? Redacting any privileged info?

Why do you have to remind the participant EVERY YEAR? Are they going to forget there is a match? And for most people, I would think, just the 3% employer contribution isn't much in the way of retirement planning. The way (I think) it should be done is that you look at what your desired income after retirement should look like. Then you see what percentage of your pay should be put aside each year to get to that number. Then you figure out how much of your pay to defer in combination with anticipated employer contributions. For example, if I think 7% of my compensation will be enough to fund my retirement, then, with only a 3% NEC, I would need to defer 4%. If there is a dollar-for-dollar match up to 4%, the I will defer 3.5%. If no employer contributions at all, then 7%. As long as the Participant has access to the information on employer contributions (NEC or Match), then why MUST you go out of your way to tell them about ONLY the match EVERY year? That said, why not have to send a notice out each year for ALL kinds of matches, not just the safe harbor? I think it would be more important ro remind people there is an hours requirement and/or last day requirement for a match. It may keep someone on the job through December. How cruel is it to deny someone a match if they leave the company on December 20? Might they stay if they knew? Check the SPD you say? Them check it for the safe harbor match then, too.

Then how do you know there were excesses?

Plus, I feel so important now! (Don't worry, the feeling will pass quickly)

A retirement plan is like a gym membership. You have to keep paying for it even if you are not using it. When you cancel your membership/terminate the plan, you can stop paying.

How about that! Hey, IRS,I think my tax rate should be 0%

So, in the absence of anything making the deferrals a catch-up, they will have to make the TH contribution. I don't want to hamper the HCE from making more than just the catch-up.

The amounts in this case will be merely pennies. Not to each participant, but the whole earnings calc.

PS, give us an example of one of the people. How much should they have received via the formula and how much they got? Show the formula and comp.

The usual is about 5 days later. I don't think it's when it clears the participant accounts, that's for sure. Oddly enough, the rules are not necessarily pro-participant, but anti-employer. The DOL wants to make sure the ER is not getting unfair use of the money. So, to me, it's when the funds leave the ER's control.

Just taking the temperature of the room here. What date do you use as the start to determine how late the deposit was. Is it the pay roll date, or the end of the 7-day safe harbor? For example: Pay date: 1/4/21 Seven day safe harbor: 1/13/21 Deposit date: 1/15/21 You you use 1/4 as the starting date for interest calc (9 days late) or 1/13 (2 days late)?

Unless the plan has quarterly valuations, I would go with the 9/30 balance.

thanks!

Company formerly was two partners. One left in 2015, now sole prop. Former partner still has balance in the plan. Can they still file an EZ?

Does anyone have a version with page numbers?

Is this a pooled plan, or individual accounts?

There is no "final" 5500 until the plan is officially terminated.

So, how do I go about contacting the IRS to remedy this miscarriage of facts?

I would think that the nonelective contribution would factor into a "fully-informed decision," too. Are you saying people will remember that 3% but would forget about the match?

Is there still time to do an 11-g amendment? Is it even possible?

Or, at least I think the site is wrong in this case. On the page Is my 401(k) Plan Top-Heavy? (https://www.irs.gov/retirement-plans/is-my-401k-top-heavy), the section titled "Making Minimum Contributions..." it says: "If the average contribution for all key employees is less than 3%, non-key employees also receive that lower percentage instead of 3%." I do not believe it's the average, but the HIGHEST Key EE contribution that is considered here. So, I have one Key EE with a contribution of 2.5% and another with 1.5%, the the TH minimum is 2.5%, not 2%. So who do I contact at the IRS to ask about it? (Or am I really wrong? I consulted Treas Reg 1.414-1 M-7 and the EOB Chap 3B Sev IV Part A.2 which seem to agree with my position)

If it was a pro-rata allocation based on participation pay, but got allocated on full-year pay, it would be considered an excess allocation (unless an 11-g amendment was done and testing then passed--which it would b/c it was only NHCE). Or pro-rata and these people just so happened to get allocated too much by accident.

Update: one of the Key EEs is under 50. I thought they were brothers, but the owner is the father and the otehr key is the son. Ages 60 & 28.