BG5150

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.

Plan has two key employees who are the only HCE. Plan passes ADP test b/c they defer low amounts, let's say $3,000 each (and they each make $100,000) for simplicity. Both are over age 50. The Plan is top heavy. Because they aren't failing the ADP test, nothing is re-characterized. They did not run afoul of any other limits. Do they owe the 3% TH? Or can we say b/c they are both over age 50 and their deferrals were less than $6,500, they can be considered catch-up and not used in determining the Key employee allocation for the year? (There are no employer contributions.)

So not in time to get it closed out this year...

Why remind everyone about the match every year if you do not have to do it for the NEC?

Is there a way of doing an 11-g amendment letting them keep the higher match? Are they mostly NHCEs?

No. Any SH Match (basic, enhanced, basic QACA, enhanced QACA) MUST get the notice. At least that is my understanding of the rules and the chart I got from the FIS seminar we did in September.

Geez. That's a lot.

But how long will that take?

I would err on the side of caution and make then 100% vested. Unless there is something in the employee's file that said they quit voluntarily (like a resignation letter).

How much was the extra match?

That is really none of your business.

One thing to examine is your firm's procedures regarding "EZ" plans. Our year-end correspondence always asks if the client hired any employees during the year, whether part time or full time, whether they were there at EOY or not. And who told him to stop contributing? Did he do that on his own? On the advice of his accountant? His TPA?

Before you start down that road, did any of those employees satisfy the eligibility requirements of the plan?

[Insert Dungeons & Dragons joke here]

Thing about IRAs, once over RMD age, can't you take what ever you want when you want to, it's just you HAVE to take at least the minimum? Qualified Plans don't necessarily have that feature.

In anticipation of other employees?

It was the sponsor's discretionary decision to move TPAs. But because of that, they need a new document, as the old one is no longer being supported. Let's just assume this is NOT a required restatement for Post PPA.

Plan is moving TPAs. Old TPA (obviously) will not continue to support their plan doc. When the plan is restated to the new TPA's doc, can that expense be passed on to the trust? Either forfeiture or participant accounts?

Is $54 really that big of a deal for him to contribute? How much was the match to begin with?

You may or may not. The partners will just be 100% in the 414(s) test. Just run the test. Can't be too hard.

If the revenue you derive from the 3(16) Service outpaces the fiduciary insurance premiums and covers the cost of the extra work with some profit at the end of the day, then I think it could be a win.

CLE401kGuy: I would certainly get a separate 3(16) Service agreement in place. Make it air tight--dot your t's and cross your i's. Get your counsel to sign off on it. If you are being paid extra for that, be careful of prohibited transactions. Especially, if the fees may come from the plan.

Who is paying if the funds have lost money since distribution, but would have gained money in left in the plan. For example, my distribution was $10,000 and I rolled it into my IRA. I was invested in Fund A in the plan. When the money hit my IRA, I put it all into some stock. I get a letter from the Plan Administrator that I have to return the money. But the stock sank, and is only worth $8,800 now. But if I kept it in the plan, Fund A was up 5% since I took it out. Who is compensating me for the loss in principal and loss of earnings in the plan?

I believe you can amend the profit sharing allocation mid-year if there is a last day requirement because no one yet has definitely accrued the right to share in the allocation. You will be fine to amend prospectively into 2022 to the grouping method. However, if you have plans with no allocation conditions for PS (I have several), then they will have to be signed prior to 1/1/22 to allow the change. Friendly advice: make sure you know what you are doing in/re cross testing. Just because FT William does the testing, doesn't mean you can just rely on the Pass/Fail results. It takes art and skill, sometimes, to decipher the nuances of the reports. And art and skill to "correct" a failed test to conform to the client's aims. You just don't keep throwing in 1/2 percents until the tests pass...

Maybe. The 3(16) Administrator may be engaged for only some of the general Plan Administrator duties, as long as they are spelled out. We had a 3(16) product where we would do SOME of the 3(16) duties and not be responsible for the others. We added plan language that "OUR FIRM will be considered a 3(16) Plan Administrator as outlined in attached 'NAME OF ADDENDUM'." In the Addendum, it outlined the the items we were responsible for such as signing the 5500; approving distributions, loans and hardships; and a few other things. It was noted that our firm was ONLY responsible for the items on the list and the Plan Sponsor, acting as Plan Administrator would be responsible for other duties of PA (or delegating those duties to another 3(16) administrator) such as distributing required notices, tracking eligibility, etc.