Lou S.

I think it's generally considered a prohibited transaction unless and exception applies. I've never had anyone do it fwiw. But you can try starting here and see if leads you where you want to go. But generally if I get the question, I say you should talk to your ERISA attorney and they usually come up with cash instead. https://www.law.cornell.edu/cfr/text/29/2509.94-3

Assuming calendar year tax payer and calendar year Plan for 2022 - Employer contribution only (PS/MP/DB/CB) - under SECURE the latest date would be the due date of the tax return with extensions. So deadlines would be 3/15/23 or 4/15/23 unextended depending on entity and extended deadline would be 9/15/23 or 10/15/23. And minimum funding deadline for plans subject to it would be still be 9/15/23. For traditional 410(k) Plan you can't make deferrals effective prior to the earlier of the signature date or effective date so you need plan adopted and 401(k) elections by 12/31/2022. For safe harbor 401(k) non-elective you need at least 3 months of effective deferral to be SH plan so you need the plan in place by 10/1 and elections starting the first payroll in October. For Safe Harbor matching you also need to give out a safe harbor notice in a reasonable time before the deferrals start. The IRS deems 30-90 days prior as reasonable. So you need to distribute SH notices by 9/1/2022. Now you can distribute notices between 9/1/22 - 10/1/22 and show that was reasonable but the burden of proof on reasonableness becomes facts and circumstances for you to justify less than 30 days notice as reasonable. Now how much lead time you need to do all this before those dates like design, documents, opening trusts, getting enrollment materials and ee notices, having ee meetings, setting up payroll, etc. I leave that up to each individual Employer/TPA/Custodian.

Is the aggregation group top-heavy and using the 5% DC contribution to satisfy 416? Is that what is causing concern? Because I don't think there is anything magical about 3%, 5%, x% allocation being used in a floor offset combo from a non-discrimination stand point.

http://www.cyberisa.com/books_erisa_tables.html For 2022 under ARP funding rules if you are using the 95% stabilization rates: 4.75/5.18/5.92 See link for full discussion and credit to Sal Tripodi Or the IRS site if you prefer https://www.irs.gov/retirement-plans/pension-plan-funding-segment-rates

I don't know if he started in 2021 he might not have known the deferrals weren't ROTH until he got his W-2 and filed his tax return. I mean the deductions came out and were showing 401(k), and the statements were showing it going in to the ROTH source. How is the employee supposed to know for sure that the payroll coding is wrong? It might have been his accountant who brought it to his attention. Now if this has been going on multiple years all bets are off.

JSample, but isn't this an employer mistake and not the employee mistake? It's fine for the employee to pay the taxes owed but the employer should be paying any penalties, interest and tax preparation fees the employee incurs dues to the employer error.

The other one who is employed on 12/31 but not reaching the 500 hour allocation requirement isn't getting the required TH minimum is my guess.

I'd refer them to an ERISA attorney for an opinion. I hate ASG relationships.

Can you amend the W-2s?

If you are concerned file IRS change of address From 8822-B

Then don't the existing trust provisions apply?

416 specifically mentions plans under 401(a) and states that SEPs are DC plans for purpose of 416. I don't see any mention of 403(b).

If you are willing to argue that one days notice is reasonable, sure. It might, it might not depending of facts and circumstances. The higher the percentage of NHCs that actually start deferring on that fist payroll in October would probably be in your favor for reasonableness if the IRS questions it. If most folks don't start til much latter and the owner drops in the 402(g) limit from his bonus in December that probably wouldn't be in your favor for a reasonable notice period.

Some plans prefer to have the QJSA rules apply for beneficiary reasons. If the plan does not have the QJSA rules, the spouse must be the 100% beneficiary unless they provide notarized consent for someone else to be the beneficiary. If the QJSA rules, you can designate someone else for 50% of the benefit. This comes into play when say the owner has kids from a prior marriage that he wants to be beneficiaries.

Are they adding a matching or non-elective safe harbor? If they are adding a matching safe harbor then the safe harbor notice still needs to be distributed 30-90 days prior to deferrals starting to automatically be deemed reasonable notification by the IRS. However, you can distribute the notice less than 30 days in advance and still be deemed reasonable based on all facts and circumstances. If you are adding the non-elective safe harbor the notice is no longer required.

If the Plan is subject to the QJSA rules, Spousal Consent is required. If the Plan is not subject to the QJSA rules, Spousal Consent is not required.

It looks like the CARES extension gives plans that didn't grant relief from CARES distributions and loans but did suspend RMDs until 2025 to adopt a conforming amendment. For folks who need to amend by 2022 because they did offer CARES distributions and/or loan relief I imagine they will incorporate the RMD piece in the amendment. I know I had several plans that suspended RMDs but did not offer distributions or loans so this would apply to them but fortunately for me the CARES amendments have all been completed. The SECURE Act relief is nice, since that's something I haven't actually gotten to yet.

Catch-ups occur when you have exceeded a statutory or plan imposed limit. If the plan has no restrictions on deferrals then catch-ups can generally occur in one of 3 ways: 1 - any contributions in the calendar year above the 402(g) limit that are not in excess of the catch-up limit. 2 - recharacterization of contribution due to failed APD test (it is recharacterized as of the last day of the plan year) 3. - recharacterization of contribution due to exceeding the 415 because of employer allocations. (it is recharacterized as of the last day of the plan year) If the Plan has an imposed limit (like 5% of pay) I'm honestly not sure the date that the contribution is considered catch-up. For non-calendar year plans it's possible to get 2 catch-up limits in one plan year if they exceed the 402(g) limit in the first part of the non-calendar year plan. For the most part I agree with you that catch-up are generally the last dollar deferred.

Too late, needed to be done by the original filing date if no extension. If the Client has a valid extension and did not file by the original deadline I believe that would change the response as the could can file an amended return. Or it may be a replacement return in this case as I'm not a CPA and think there might be a subtle technical difference that eludes me.

It's been a long time since I sent in an actual check for withholding for a 945 but if it's under $2500 don't you file it with the 945 in January? I suppose you could print the most recent 945-V and cross out 2021 and write in 2022, that might work but I can't guarantee it.

I'm not sure what you are getting at. If you can't use the forfeiture to off set reasonable administrative expenses (assuming the document allows) then you need to allocate them in accordance with the terms of the plan document in a non-discriminatory manner. You don't an IRS "free pass" to do it however you like because the plan is terminating or the forfeitures are small. I get the client doesn't want to pay you to do the reallocation but don't make their problem your problem by doing it wrong. Is there a large enough forfeiture account balance to pay your fees to do the reallocation correctly and allocate the remainder to participants according to the Plan document? That might make everyone reasonable happy depending on your point of view.

Thanks Luke. I have no idea how either plan would possibly every track that.

I could be wrong, but this seems like the exact situation that a "reasonable cause" letter should abate all penalties. Something along the lines of "We request the late penalties be waived as the return was not required to be filed."

It is eligible for rollover. Not a perfect analogy but essentially the excess acts like an after tax contribution going in and a pre-tax contribution going out. The interesting thing that I don't think the IRS tax code considers if what happens if both of the contributions went in as ROTH to separate unrelated Plans? Mechanically what will happen is the employee essentially doubling the ROTH limit for the year since they are already taxed going in but neither Plan knows about the other so they will both not be taxed coming out. I think it's because the Excess Deferral rules were written before ROTH existed and were not updated when ROTH was added.

Do the reallocation in a non-discriminatory manner in accordance with the terms of the Plan Document?