PensionPro

Could we recharacterize catch-up contributions from the prior calendar year when there is unused catch up in the prior calendar year but not in the current calendar year? For example plan year is 7/1/2025 - 6/30/2026, Participant is catch-up eligible in 2025 and 2026. He deferred $23,500 for calendar year 2025 (so no catch-up in 2025 even though he was eligible), and he deferred $32,500 (used full catch-up limit) from 1/1/2026 to 6/30/2026. Plan fails ADP test for PYE 6/30/2026. Can $7,500 of the 2025 catch up be used to recharacterize excess contributions as catchup? Thank you!

If eligible employees do not set up their SIMPLE IRA accounts in a timely manner, can the employer set up the SIMPLE IRAs on the employees' behalf and if so is there any IRS reg or guidance that permits or requires this? Thank you in advance!

Any thoughts at all? Thanks.

Division A employees are covered under Plan A. Division B employees are covered under Plan B. Employee E transfers from Division A to Division B on January 1, but continues to participate in Division A plan till May 31 before the error is discovered. It only affected one out of about 25 employees. The plans have the same provisions. Does EPCRS provide any guidance on fixing this type of failure? Our thoughts in order of preference are: 1. Move the contributions for the five month period to the Division B plan from Division A plan. 2. Do a retroactive amendment stating employee E is excluded from the Division B plan and included in the Division A plan for January through May, or 3. this does not make sense but - treat it as a missed deferral opportunity in Division B plan and impermissible contributions in the Division A plan? Thank you.

Is the penalty under IRC 6692 per day? The language says "shall pay a penalty of $1,000 for each such failure"

Agree with the responses that the operational failure should be corrected by forfeiting unvested funds for employees who incurred 5-BIS now. This issue went on for 15-20 years so reallocating the forfeitures or paying expenses for the applicable years is likely an administrative nightmare. Adding to the complexity, the employer does not want to file VCP so we are hesitant to recommend any creative solutions. So I think they will have to bite the bullet and fix the operational failures. Thank you everyone for the helpful thoughts!

Does someone here have insight or experience into whether the IRS would require full vesting for participants who incurred 5-BIS but the unvested amounts were not forfeited? i.e. the unvested amounts were eligible to be forfeited but were not actually forfeited. Thank you for your thoughts!!

To rephrase the question ... ees who terminated in 2025 and have balances need to be reported as A on the 2026 form, but they also have to be reported as having their benefit transferred to the surviving plan. So are they reported on two lines? Thanks.

Plan merged with another plan on 4/1/2026. How do we report on the 2026 Form 8955-SSA participants who terminated in 2025 whose benefits are being transferred to another plan - code A and C on the same Form? One option is to inform the ongoing plan to report those individuals as an A. Looking for suggestions. Thanks.

We are helping a takeover client with a DFVCP filing. The EFAST site only goes back to 2009 filings which makes sense. When going to the DFVCP payment web site, it lists Forms 5500 going back to 2004 as "late filings found in EFAST at this time." Question is how are pre 2009 Forms showing up on the DFVCP site as being on the EFAST site, but they are not actually displayed on the EFAST site. Maybe the client filed electronically, but it is not displayed on the EFAST site? In any case how do we amend those pre-2009 Forms and submit under DFVCP? Hope someone has experience with this. Thank you!

We had this question come up several times, but a search of the BL discussion boards did not turn up anything. Here is the situation. Different companies in a controlled group sponsor different 401(k) plans. They intend to satisfy coverage separately. One of the plans fails coverage even when the not otherwise excludable employees are tested separately. The question is this: can they expand the coverage group to bring in otherwise excludible employees of the employer or must they bring in not otherwise excludible employees even if they are from other employers in the group? For what it's worth, and based on the language of the regs, we are leaning towards the latter approach - that the additional employees must be not otherwise excludible to comply with the description of the two testing groups in the regs. I would appreciate any thoughts and insights!

The 5 HCEs have their own individual corporations. The new entity has employees effective in 2024. The reason we can't test otherwise excludable separately and automatically pass is because the HCEs have spouses who are participating in the separate plans who are statutorily excludable. The six entities are related under the rules. [I was trying to keep the question simple - focusing on the cutback and 401(a)(4) testing issue]. Thanks.

There are 5 HCEs operating their solo 401(k) profit sharing plans with pro rata profit sharing allocation formulas. NHCEs were hired in 2024 and became eligible in 2024 but there was no plan covering them. The employer wants to retroactively adopt a PSP effective 2024 covering the NHCEs as permitted under SECURE 2.0 with a new comparability allocation formula, and cross test the contributions in all six plans. To me, this seems permissible and not a cutback, because the NHCEs had not earned a right to the allocation formula. Am I missing something? Thank you!

There is no risk in prior years, NHCEs were only hired starting in 2024. Failures in 2024 are being corrected under EPCRS.

@justanotheradmin Here is some more context - the HCEs had solo 401k plans and did not realize there were NHCEs in other members of the affiliated service group. They want to get rid of the solo 401k plans and have all members of the ASG adopt the new 401k plan. TH issue is a consideration so a 3% SHNEC is the frontrunner. Thanks for your thoughts.