BG5150

You said what I was thinking. LOL

But how many NHCE really defer at such a rate?

Just make sure there is no Fail Safe language elected. If so, you must address coverage per the rubric stated there.

Thanks!

I was looking over some correspondence that a national carrier put together for sponsors to send HCEs before they get ADP refunds. One of the blurbs says that Roth excess contributions are not taxable, and pre-tax contributions are taxable. But it also says that the earnings on BOTH Roth and pre-tax contributions are always taxable. Is that true? Even if the Roth account is eligible for a qualified distribution (ie the 5-yr rule was satisfied)?

I don't see a point in setting the auto enroll percentage too high. If I ignored the correspondence and all of a sudden had 10% taken out of my pay I might be like "heck with that, stop it right now." But if only 3% came out, I might be like "Hmmm, that wasn't too bad..."

5500-SF or 5500 w/ Schedule I, depending on the nature of the assets.

There's not much of a difference between the two. Hopefully the type of informational report you make to the DOL is not a determining factor as to whether you become an S-Corp or not.

I would be hesitant to craft such correspondence. For a couple of reasons: 1) Once it's out there, you have to maintain it with the current rules and regs. 2) What if you forget or omit something? What's worse: giving bad info or incomplete info? Well, the former is worse, but the latter isn't much better.

I agree with Luke. At least there is a paper trail showing the initial refund. And in this case, I would include gap earnings in the distribution just because it's been a year since it was supposed to have been distributed.

I would suggest even though someone becomes a participant on the day they satisfy the eligibility requirements, their actual entry date is the first pay date after that.

Was that language a standard part of the plan, or was that added in? Like Bird said, that setup smacks of a CODA. What's to say the ER and the EE aren't striking a deal with an HCE to limit her compensation to zero so she can get those funds just paid to her now as salary. For example, she could have a choice of getting paid $200,000 and $10,000 into the MPP (5%) or just "limit" her MPP comp to zero for the year and get paid $220,000.

Did that plan get a determination letter?

That's for loans.

You would not be able to carry a 2020 deposit over for a 2021 contribution.

Towards it, yes. But remember it's already in the plan. So if the participant's mistaken allocation was $1,000 and the total 2019 PS was $100,000, the sponsor probably deducted all $100,000. Say the total PS is again $100,000. They need to remember to only remit $99,000 and to deduct only $99.000 for 2020. Too often clients will just send in the number that's on the bottom of contribution report page. And don't forget that amendment!

How much would a straight QNEC cost? Weigh that against the cost of the VCP. Probably costlier to do the straight QNEC, but worth a look anyway.

I agree that it can be used for 2020. But tell them to be careful of the deduction and the deposit.

Only if they worked 1,000 hours in 2020 or they do an 11(g) amendment for this person. And provided they aren't an HCE.

Whenever we send out a document or amendment for signature, we suggest they go over it with their counsel.

But not when switching providers, right?

Often, the sponsors of the documents will also provide interpretation of the document to some degree. Or rather, they go back to the document's author (Relius, FT William, etc) with help for support. If the plan sponsor is no longer a client, the record keepers won't support it any more. Also, I sincerely doubt the new record keeper or TPA will want to do required amendments to plan docs they do not directly service. Can the cost of the new plan document be passed onto the participants? Or is that a settlor function?

It is too late to do that now. Any 11(g) amendment must be done by October 15 the following year (for a calendar yr plan). In this case 10/15/2020.

Earlier in the year I was getting a similar message, but with Relius. I think it was returning EFAST2 error code, not necessarily something in the software itself. I would contact FT WIlliam to see what they say. Their support is very good. Relius corrected that somehow. Whether just just eliminated that code from their validation or if EFAST fixed it on their end, I don't know. Side note: I see you typed "principals," plural. And "'common law' do not" also implying plural. So, why only two actives? Did people leave? And you said the principals defer. Only one acct if both (or more) principals deferred?

Did any Key employee have an allocation at all in 2020? Remember, salary deferrals count as an "allocation" for considering the TH minimum. The TH minimum is the lesser of 3% or the highest allocation to a Key employee. That said, if the plan has a 3% Safe Harbor contribution, chances are the TH minimum is already being satisfied. If the plan allows, the match MAY be able to offset the TH minimum due. I do not think it is mandatory that they do. Check the plan doc. Don't confuse Key EE and HCE. Though it is rare that a Key EE is not an HCE, it's quite common for an HCE to not be Key. Key EE's may not have to get the TH contribution, but check your plan doc.