justatester

So, if we are doing testing in the MEP prior to the spin off....would it be full year testing or prorated. I am struggling with prorating the comp/contrib limits as the MEP's plan year didn't change only that the participating employer decided not to participate any longer.

Sorry for the confusion...for SEP that references Single Employer Plan. So, yes plan to plan transfer.

Correct the withdrawal from participation is not a distributable event. The employer will transfer the plan assets to a "newly" established SEP plan as a successor plan but will not have any future contributions. The SEP plan will then terminate which becomes the distributable event. With this, where is the 2026 contributions tested? Under the MEP or the SEP?

A participating employer has chosen withdraw from participation of the PEP and terminate their plan. The employees with cease contribution and their assets will be moved to their own SEP plan. The SEP plan will be terminating immediately. Question: How is final testing completed? From the PEP or from the SEP? Short Plan year? Any thoughts would be appreciated.

Question: For the purpose of calculating the top heavy balances, are adp/acp corrective distributions added back in? Plan failed 2024 ADP/ACP testing: HCE/Key employees adp/acp corrective distributions of $5,000. These were corrected on 3/1/2025. When looking to add back in "In-Service" distributions, would these be considered that for top heavy balance for the 2025 determination? Or excluded from the Top Heavy balance. My argument is that these distributions were forced distributions because of the failing ADP/ACP test. The participant did not have the option not to take it, so why should it be added back in? Thoughts?

If you have an off-calendar plan (3/1/2025-2/28/2026): Plan Limit excess: a High FICA person has $1000 that needs to be redesignated as Roth Catchup as of 2/28/2026, since it is considered a 2026 catchup, can the sponsor correct the w-2 (2027 w-2 has not been created)? Or would it need to be corrected via 1099?

Parent Company is in Korea. US Company is part of the controlled group. They have some Korean Employees who soley worked in Korea for 2024. They are now in the US working and getting paid US dollars. For 2024 HCE determination, do we consider 2023 Korean income?

Here is the plan information: Plan has a prevailing wage contribution that is NOT an offset contribution, but a straight QNEC. Plan also has a 4% PS contribution: It excludes participants who "receive" the PW contribution from the Profit Sharing. In reality, they excluded all hourly employees from the PS contribution. Of course, the plan does not pass coverage testing on the ratio basis. Additionally, I believe the plan needs rate group testing as they have different levels of ER contribution. Question: Can the plan be tested on an accural rate for the ABPT for coverage, then on an allocation basis for the rate group testing?

Plan has SH Match. Eligibility is 1 YOS, 1000 hours, monthly entry Plan Excludes NRAs with US Source Income. I don't believe this group can be considered "Excludable". The company has approx 900 Employees of which 700 are in this "NRA" class. These employees are long term employees who work over 1000 hours each year. The ratio is about 35%. Plan fails ABT testing. Question: Can they do a QNCE to fix the 401(k) coverage only? This QNEC would allow them to pass the ABPT giving them a lower ratio threshold for the 401(m) coverage. I am thinking no since not all of those "eligible" for the Pretax would be receiving the SHM. I also believe it should be a 3% contribution since it is a SH Plan? They also have H2B visa employees. How are these employees treated?

Yes that appears to be the case for deferrals of 3 and 5%. Very strange.

We have a client that has a crazy match. Defer 2% get 300% match (6%) Defer 4% get 150% match (6%) Defer 6% get 100% match (6%) No match on deferrals less than 2%. If you defer something other that 2,4,6...then match is 100% of deferrals. No one in the plan defer more than 6% even though they could defer up to 100%. We think the plan sponsor verbally doesn't allow it. It is a very small company (45 participants). It doesn't seem correct. For BRF, everyone has the ability to defer and receive the match. Any thoughts?

Question: Is the employee's termination date the last of active employment or the first day of non-employment? For example: I worked on 1/31/2023 is that my termination date? or is 2/1/23 termination date?

Plan has a NCP PS allocation with each in participant in their own group. For 2023, the client has made 3 groups. Group 1 & 2 = 3% Group 3= 0% Do I need to run a 401(a)(4) General Test or if they pass coverage, am I good?

Participant defers $20,000 in Roth and $18,500 in pretax for 2022. Obviously, we are beyond the 4/15/2023 deadline. Does the participant have the option to tax the excess from Roth? What were the tax consequences on the 2022 filing? Did they have to claim the pretax as excess? Which source is the better option to take the distribution from?

Didn't think so...but trying to be creative.