Gadgetfreak

Ah. I forgot about the 12-month period. I was just thinking 500 hours in a calendar year. OK. I agree 1/1/24 is the earliest, which will bring in anyone who worked 500 hours in 2021, 2022 and 2023. But, without guidance on entry dates, future eligibility after 1/1/24 is going to be a nightmare. What is someone worked 500 hours spanning two calendar years, etc?

In your first example, you could have someone eligible on7/1/23 (if they worked more than 500 hours in 2021, 2022, and 2023). But everything else we read seems to indicate that we don't really need to worry about this until 1/1/24. Just add to the confusion. And then, of course, what if a Plan has quarterly, monthly, or even immediate entry dates?

When we speak about this new rule, is it just for service credit? How are entry dates handled? For example, if someone worked 500 hours in 2022, 2023 and 2024 do they become eligible to start contributing: A) The day they complete 500 hours in 2024? B) The next Plan entry date in 2024 after completing 500 hours? C) 1/1/2025 - The first day of the next Plan Year after 3 consecutive years working 500+ hours? Thanks.

Correct me if I am wrong, but doesn't the FTW Document Maybe language from November 2021 say something like "We will tell you by November 2022 if we are going to make it for the 2022 year". I don't believe there is a notice that says "No, we are not going to make it". Just the notice that says "Based on what we wrote last year, we ARE going to make it for 2022". Again, I could be wrong.

I am not usually a fan of any ACA but I do see the value in the 2-year vesting schedule of a QACA. That is definitely the main draw for my clients - much more than the 0.5% savings.

If it is truly a SoloK (one that only covers the owners/spouses) and the Plan has less than $250k in assets, then no annual work is needed. HOWEVER, what most of the "1-800" shops don't tell you is that you will need an annual 5500 when assets exceed $250k AND testing/calculations are required if there are other employees. Furthermore, I have found that they never tell their Solo clients about mandatory document restatements. Use (and pay for) a TPA that will offer those services or take on the responsibility on your own (and don't mess it up :)). TPAs offer value.

Thanks. I suspected it but I just wanted confirmation.

Anyone know if this is allowed? Same employer, two different plans. Thanks in advance.

Also, don't you need the 3% SHNE notice anyway if you want to have the ability to stop it in the middle of the year (and be subject to ADP testing)?

100% agree. I just wanted to confirm my understanding as well. If the employer wants to waive eligibility for existing EEs when they start a plan, they cannot exclude part-timers (unless the exclusion is by class).

"Just write the provisions to say anyone who has worked 12 month with 1000 hours into the plan enters the plan on the next entry date...." But if you are doing that, you wouldn't need a special eligibility provision. I can see a situation where an employer wants all FTEs eligible when they start a plan (i.e. waiving eligibility requirements using the special eligibility provision), all new EEs after that date would waive 12 months with 1,000 hours and never allow PT EEs to participate. I am just thinking that, absent excluding a class of EEs (subject to coverage testing each year), I don't think it can be done. Anyone disagree with that?

This brings up a different question I want to ask. They want the document to say that everyone working on 1/1/21 is eligible 1/1/21. Let's assume that, for everyone else they have a 12 month eligibility requirement using Counting Hours (1000 hours). What happens to all the part-time employees that never worked 1000 hours in the past? I think they come into the plan on 1/1/21 because you are waiving all service requirements if employed on that day. And you wouldn't do a special 1/1/21 eligibility that would say (only those that worked 1000 hours in any prior year) because that defeats the purpose of the special eligibility provision. So, I don't think so, but would there be any way to allow FTEs to enter on 1/1/21 but not part-timers?

Sounds like you are offering to do even more work for no compensation. I like the other options better - either give the doc to the new TPA or the client. Charge the client for your time if they want to "review" it with you.

You also need separate testing and, if JH is going to only have one account, their reporting may not make it as easy (even with divisions) - but not impossible.

Just to play devil's advocate: We send to anyone that had a balance during that year - even if paid out the current year and before we send out the SAR. And there is a downside - we get a bunch of calls from the paid-out participants asking why they got it and to help them check if they have more money. Dealing with those calls and emails takes time.

Penchecks may be one.

https://www.rpgconsultants.com/resources/company-retirement-plan-comparison/

Speaking from personal experience, starting and running a TPA and/or recordkeeping business takes a tremendous amount of work and expertise. It is not something to just "dabble" in. Furthermore, an unbundled platform (separate FA and TPA/RK) has many merits and the main thing we promote is that the client gets an expert in each field instead of a "jack of all trades - master of none". I would suggest you consider a small to mid-size TPA/RK (where you are a big fish in a smaller pond for the personal attention) that is specifically non-producing (they don't compete with you at all). Send me a PM and we can discuss further.

This is exactly what I was concerned about. Maybe one could do prior-year or a 4% SH but every bone in my body suggested that this wasn't "fair" to the other EEs. Yet I am curious if a different TPA would have really done this and not seen a problem.

An advisor approached me on 12/31/20 with a potential case. Company with no existing plan. Owner, mother, father and two FT employees that would be eligible under even the most stringent eligibility. He asks me to do a 401k/PS plan document so that the owner could participate and defer $19,500 on 12/31. I immediately think this is not allowed. Where is the chance for the other employees to participate? Even if there was an actual payroll on 12/31 for everyone, this certainly doesn't sit right with me on a BRF basis. Definitely violates the spirit of many of these discrimination rules. If the owner participates and no one else does, the Plan is TH and ADP fails so there would need to be an employer contribution anyway (QNEC and TH) which would be very high if it worked at all. I offered a cross-tested PS option but the FA said he found another TPA that provided him with what he wanted. The case is lost to me so it doesn't matter now but I am curious. Is there a specific reg that would be violated by starting the 401k on 12/31?

Thank you for your detailed response (and especially your acknowledgement that this is completely hypothetical and I would never think of actually doing this :)). So this would be pretty clear that we use common sense and not allow this as anything other than an ASG. Now my real situation isn't so clear cut. I have medical practice client A and a separate doctor is starting an offshoot of that practice called B. There is absolutely no common ownership. Work by A is not yielding revenue to B nor vice versa. However, B will pay rent to A to use one of their lab machines and for office rent. In this situation, A and B actually WANT to be part of the same plan with the same BRF. My only question is are they an ASG or does this need to run as a multiple employer plan with one 5500 but separate testing? Thanks again.

I have reviewed the regulations so many times I am afraid I am missing something. To me, it seems that there are 4 possible ways two companies can/should be combined (absent a MEP, PEP, etc.): 1) Controlled Group with Common Ownership 2) ASG as A-org (requires common ownership - albeit only a very small amount) 3) ASG as B-org (requires common ownership - albeit only a very small amount) 4) Management Group (does NOT require common ownership) If my understanding is correct, then only #4 requires common ownership of any kind. With that said, I am pretty sure this hypothetical situation isn't allowed but I don't know why: I am a TPA owner with 15 employees and a DC (401k/PS plan with 3% SHNE). I decide to open a new business that my best friend (not related) will own but not take a salary. I will move all the 15 employees to that company and they will perform the TPA services. That company will pay me a consulting fee. I will open a solo401k for my consulting company and get away with excluding all my employees from the plan. There is no common ownership and one company isn't doing management for the other. What am I missing? And is there a specific definition of what it means to provide management services? Thanks in advance.

Point taken. So yes, since bankruptcy and creditors prevent payment, they can't be considered guaranteed. I misspoke. But, if informally funded and part of the employer's general assets, I assume the employer must pay income tax on any earnings attributable to those allocated funds. If so, does the custodian of the account provide the necessary tax reporting?

Yes. The company "allocates" a certain amount to certain executives each year, sends the money to the custodian and allows the participants to choose the investments on a daily-recordkeeping platform (just like a 401k). Doesn't the Rabbi Trust guarantee the payments (except for bankruptcy)? But yes, I agree it is a corporate asset. Is there some tax reporting that the custodian of that account need to do?

A client wants to set up a funded 409a Top-Hat/SERP Plan for executives with participant direction. As I look for a provider that offers this, I wonder about any tax reporting requirements. The funds remain an asset of the employer until distribution and are in an investment account. Do the earnings on that account need to be reported as they have increased the value of the employer's assets? Or is their an exemption for a 409a Plan? Thank you in advance.