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Client currently funds 7% Profit Sharing to all participants. This is cross tested plan. They also allocate the 3% to all participants. For the upcoming plan year, the HCEs will not receive the 7% - testing will not be an issue. However, the client wants to know if they can allow the HCE to decide if they will take the 7% as cash or defer into the plan. The 7% would be paid as wages in the current plan year and deferred to the 401(k). If the employee has already deferred for the 2023 plan year, the 7% would push him over the deferral limit, so he would be capped at the 402(g) limit. I thought the IRS had some guidance when you allow the employee in this case to take the cash or defer. I am trying to figure out if the client is opening themselves up to an issue down the road.

The client has until the filing of his tax return to fund the 3% safe harbor. He is making the safe harbor on a monthly basis. Is there is an issue if he does not make the payment for a couple of months when the cash flow is low?

Plan has immediate eligibility. However, Part Time and Seasonal Employees are excluded. Obviously if the employee in these groups complete 1,000, they were eligible for the plan. There seems to be different opinions if the LTPT rule applies to groups specially excluded from the plan. Question, if the plan specially excludes a group (part time and/or seasonal/interns etc.), does the new LTPT rule apply to this group. Thank You.

The participant was over the age of 59 1/2 so taking the CSV would be an in service distribution as allowed under the plan.

Plan allowed insurance and the participant was paying premiums from his account. Participant decided he no longer wanted the insurance and contacted the insurance provider and cancelled the policy. The provider sent him a check for the Cash Surrender Value. The insurance company was not responsible for the 1099R. The Cash Surrender Value was $56,000. The plan issued a 1099R to the participant for the full Cash Surrender Value. The participant stated the insurance company told him he would only pay tax on the gain of the policy - difference between the Surrender Value and the investment in the policy, this was approximately $9,356. Since the premiums were paid with pre tax dollars, isn't the total Cash Surrender Value taxable income? I am not sure the insurance company realized this was held under a 401(k) Plan vs a private policy. Thoughts Thanks.

On 1/1/2023 Company B merged into Company A's 401(k) Plan ( controlled group). Prior to the merger Company B had a match tied to a vesting schedule. Company A maintains a Safe Harbor 401(k). At the time of the merger there were funds in Company B's forfeiture account. Company A needs to fund a QNEC and Match for participants. Any issue with using the forfeitures that came from Company B to fund this contribution. Once the plans merged, there is no distinction as to where which company generated the forfeiture, correct? A forfeiture is a forfeiture and can be used to offset, SH match, pay admin expenses, or used to fund QNEC and missed match

Company B is merging into Company A ( controlled group issue and surviving plan). Company B's definition of disability - determined by a licensed physician Company A ( the surviving plan) does not require physician approval. The document states The Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months. The permanence and degree of such impairment must be supported by medical evidence. Company A wants to use the Social Security Administration as the determination for disability. Is there a protected benefit issue here? Can the plan change licensed physician to Social Security and not have any protected benefit issue?

Deferrals and match for three payrolls posted to the participants account ( all deposits made timely). The employer discovered the employee was actually terminated an not eligible for the compensation paid. The employee returned to compensation to the client. However, he took his distribution from the plan before the incorrect match and deferral could be returned from the account. Is the correction to request the participant return the overpayment? Vendor will need to modify the 1099R to reflect the overpayment If the participant does not return the funds, can the deferral and match be excluded from the ADP/ACP Test ( NHCE)? Based on this updated compensation, his match will exceed the match formula. We are pretty sure the participant will return the funds, but need to figure out plan B in case he does not step forward and correct the error.

Employer sponsors a 3% Safe Harbor and and ESOP Plan Employee deferred the max ( no catch up ) for 2021. When you take into account deferrals, safe harbor and ESOP contribution he exceeded the 415 limit. The ESOP Document says to refer to EPCRS for correction of 415 excess. The recordkeeper is telling us the excess will be treated as a return of deferrals ( plus income). Since the only other contribution in the 401(k) account is the Safe Harbor, is the only way to correct the excess is by returning deferrals vs pulling the excess from the Safe Harbor and holding it in an excess account to be used to offset next employer contribution?

Plan states forfeitures are reallocated - must be employed on last day and 1,000 hours. Exception death, disability or retirement. Platform stating the client wanted to use forfeitures to reduce the contribution. Amendment signed 5/1/2021. This was part of the amendment changing eligible to date of hire vs 1,000 hour. Employee eligible 4/1/2021 and died the next day. Platform saying the amendment would be a cut back in benefits for her. She was eligible for the reallocation of forfeitures before the amendment was signed. Client never wanted to use forfeitures to offset the employer contribution. No one can figure out why the platform made this change. What if anything an they do to reallocate the funds for 2021. We are not talking about a lot of money. I know this is a document issue. The amendment states - Costs of Administration. All reasonable costs and expenses (including legal, accounting, and employee communication fees) incurred by the Administrator and the Trustee in administering the Plan and Trust may be paid from the forfeitures (if any) resulting under Section 11.08, from the suspense account described in this Section, if any, or from the remaining Trust Fund. All such costs and expenses paid from the remaining Trust Fund shall, unless allocable to the Accounts of particular Participants, be charged against the Accounts of all Participants as provided in the Service Agreement. This is what the recordkeeping is saying requires the forfeitures to be used to offset the er contribution. I There is not an option in the AA to say forfeitures are reallocated Need some help......

Facts - Company A has a Safe Harbor Match Plan - 1 year of service Company B has a non Safe Harbor Plan - 2 months service requirement Company A wants to merge Company B's plan into their plan. Can a non safe harbor merge into a safe harbor plan did year? The only thing I found was is if the surviving plan is Safe Harbor and a maybe notice was provided, the merger can happen mid year. Company A has a Safe Harbor Match so do they have to wait until 1/1/ to merge the plans? thanks

Company A has a standard 401(k) no allocation restrictions for match - passes coverage Company A purchases Company B ( stock purchase) will be a controlled group. Company B has a Safe Harbor 401(k) and passed coverage before the purchase. Intent is to maintain two separate plans. Company B may move to non Safe Harbor. Since all employees of the controlled group are deemed employees of Company A, am I correct is saying coverage testing must be satisfied for each. However since one is safe harbor and one is not, cannot aggregate. Company A HCE 56 Company B HCE 6 Company A NHCE 343 Company B NHCE 1043 Based on these number Company A will fail Coverage. If after the transition period Company B is amended to a standard 401(k) with the same eligibility and match as Company A, is the coverage testing issue a moot point as long as each passes coverage separately/ This hurts my head!!

Plan has 450 employees that are only paid when called to a job site. During 2021 these employees were not paid w-2 wages (no job site work). The plan has 90 day service requirement 1. The recordkeeper is assuming these employees are all non excludable for 410(b) testing. 2. Recordkeeper stated "employees with zero compensation are included in the number of non-excludable employees but are not benefiting. They are considered as not benefiting because they had no compensation and thus did not have the opportunity to defer into the plan or receive contributions." 3. As a result of including this group in the 410(b) test, the coverage test fails. If an employee has no wages, why are they included in the coverage test? Assuming they have to be included in the coverage test, how would you correct the failed coverage test? There is no compensation to calculate a QNEC or match Not sure how to proceed. Thought was to show them as terminated as of 12/31/2020. Then if they are called to a job site in 2022, treat them as a "rehire". Thanks

First we do not agree a QACA is the best choice. It was suggested because the match was less than the Basic Safe Harbor. However the overall cost difference between 4% and 3.5% is negligible. Second, the plan does have the same option as yours. It specifically states under Application for Existing Participants - Provision does not apply to existing employees (may not be selected for QACA). so unlike an ACA plan were they could say the Auto Enrollment does not apply to existing employees this is not allowed for a QACA. However the document does allow the choose Non existing Affirmative Election which is the same as your option 3. So if they use option 3 and the employee elected 0% then the QACA default does not apply, correct? The document states No existing Affirmative Election - so if the employee never completed any documentation to say they did not want to join is the assumption that was his/her affirmative election, or are they treated as never making an election and therefore are enrolled in the QACA.

Employer currently offers a 401(k) Plan, no match. Vendor has recommended QACA for the 1/1/2023 Plan Year. Question - When setting up the QACA, I know you can not elect that the Automatic Deferral percentage does not apply to existing participants. If a participant is currently deferring 0% and there is a affirmative election showing they declined, does this mean the 3% QACA does not apply to this participant? The employer has about 40 employees currently not deferring, I am trying to figure out if the addition of the QACA means this group is swept up in the Auto Enrollment unless they make an affirmative election not to participate. Thanks

For 2020, the Owner received $ 150 above the match formula. We are being told that since it is less than the $250 EPCRS allows the excess to remain in the account. In other words, the the Plan Sponsor does not need to forfeiture the excess amount. The question is, does the $150 remain in the account and then used to offset the 2021 match? Or does the owner get the benefit of the excess contribution for 2020. I am trying to wrap my head around the fact the owner is receiving an allocation higher than the NHCEs. If the excess is used to offset the 2021 contribution I could understand leaving the money in the account. Having to remember to track the excess as an advance for 2021 could be a nightmare.

Employees would receive a gift ( not cash) or profit sharing allocation. The amount of the profit sharing increases after the completion of 5 years. so if the employee had 10 years of service they receive $1000 profit sharing, at 15 years they receive $2,000. By taking the gift, in lieu of the profit sharing, does the gift make this a CODA?

Employer has a cross tested plan. Employees in their own rate group. In addition, outside of the plan, they award gifts to employees once they reach a 5 year milestone. The employer wants to offer the gift or the profit sharing allocation. The employee chooses which one they want. The plan would need to remove last day requirement since the employer will fund the profit sharing once them employee meets the 5 year mark. Is this even acceptable? Allowing the employee to decide if they want the contribution or the gift? Even if a number of rank in file select the gift over the contribution, the employer makes a 3% safe harbor and this is sufficient to cover the gateway. Just doesn't seem right. Looking for reasons to tell the client to back away from this design.

Back in February of 2020, the plan sponsor received a draft QDRO to review. Everything was in order and client was to tell the attorney to submit for signature. The signed QDRO was delivered to the plan sponsor in March of 2021 ( signed by the judge one year after the draft was reviewed). In September of 2020 the participant took a COVID-19 withdrawal. Leaving an account balance of about $1000. The account balance as of today is only $5,000. 1. Is that that the amount the plan pays to the Alternate Payee? The Alternate Payee would then have to seek legal action against the participant for the balance? 2. Is the plan sponsor responsible for the balance of the QDRO Payment since they allowed the withdrawal in September? Since the signed QDRO was not recorded by the court, was the participant able to access funds from the account? Bottom line, does approving the draft QDRO require the plan sponsor to put a hold on the account and limit any withdrawals, or is the plan sponsor only responsible once they receive the signed QDRO.

Plan has a fixed match 50% up to 4% Effective 10/15 the match was changed to discretionary - the employer will match 50% up to 6% - funded each payroll for the remainder of 2020. In addition, the employer added the true up feature as of 10/15/2020 for the 2020 plan year. Questions. On 12/31/2020 when the true up is calculated , is the match contribution based on the formula in place as of 12/31? Therefore, even though the match was 50% up to 4% for the first 10 months, you use the total wages and deferrals as of 12/31 and determine the true up base on the 50% up to 6% formula. Thanks

former participant received a notice from Social Security she had a benefit under her former employer's plan. the participant terminated back in 1989. The plan has changed TPAs and recordkeepers a couple of times since the 1989 termination date and finding the detail as to what happened to her account (paid/rolled to default IRA) has been challenging. What is the employer's responsibility regarding this matter. If they can not prove the benefit was distributed is the employer responsible to pay the former participant? Does the employer have to fund the amount on the notice to the plan then have the plan issue payment and tax reporting to the participant? thanks

The plan sponsor's new legal counsel wants to review all contracts with their vendors. Due to the complexity of the agreements they want to use outside counsel or a consultant. The question is - can the cost associated with this service be paid from the forfeiture account. Forfeitures are used to offset admin fees. This is not a plan design issue, just looking at agreements to be sure they are current and encompass all features provided. Ok to pay for forfeitures?? Any site I can reference?? Thanks

Employer A sponsors a 403(b) - immediate eligibility. They also make a fixed match contribution. Employer A will fully own the new entity Employer B. They want to offer all benefits under Employer A with the exception of the 403(b) Plan to the Employer B group. Whether the employees are paid under Employer A's EIN or the Employer B's EIN, can this group be excluded. Doesn't the universal availability preclude the exclusion of a class of employees ( in this case the employees of the new entity) When there is a controlled group, can the sponsoring employer , excluded one of the controlled groups in a 403(b) Plan? Or does the universal availability supersede the ability to exclude a group of employees?

Employer ( controlled group) has three plans 403(b) and 401(a) for the not for profit entity 401(k) Safe Harbor for the for profit entity The for profit entity will move to a not for profit status late in September. The employees in the 401(k) will be enrolled into the 403(b) Plan. They are paid by the employer of the 403(b) Plan. They want to merge the 401(k) into the 401(a) Plan. 1. Can 401(k) plan merge mid year since it is s Safe Harbor Plan? 2. Does the 401(k) lose its Safe Harbor status for 2020 since the contributions stop as of 9/1? 3. If the merger is not permitted, does it remain "frozen" for new contribution until it can transfer on 1/1/2021? Again does it lose it's Safe Harbor status in this event? thanks

Charged tips will be paid via W-2 wages. Participants are able to defer on these tips. The employer makes a Safe Harbor Match Contribution- They want to exclude tips from the definition of compensation for the safe harbor match. 1. Can tips be excluded from compensation for the Safe Harbor Match? 2. If yes, since the plan is safe harbor, this mid year amendment to change formula and definition of compensation is not allowed for 2020? 3. Since this would not meet the safe harbor definition of compensation, the plan would need to pass compensation test at year end ? 4. Not a Top Heavy Plan. Thanks