Lou S.

I'm not sure you need an amendment to test as otherwise excludable. If they never work 1,000 hours they will always be in the otherwise excludable group as not having a year of service. But you do need good records on the hours by year.

No you can't establish a SIMPE-IRA if you maintain another qualified plan. I'm not 100% certain but i think that is maintain at anytime during the year so even if they terminate the SH Match plan, I don't think they can start a Simple-IRA until 2026 but it's possible I'm wrong on that. SIMPLE-IRAs aren't something I deal with much. The "best" way to do it would be to terminate the SH 401(k) effective 12/31/25 and establish the SIMPLE-IRA 1/1/26 (for a variety of reasons). If the "cost" of the SH match is the problem they could terminate the plan or eliminate the SH match, with 30 days notice to employees, but they'd be subject to ADP/ACP for 2025 and if the Plan is TH they would not get the "deemed not top-heavy" exemption.

Fixed 425% of first 6 works, but discretionary it doesn't get ACP pass (or t-h exemption). What I'm getting from the first post is they have a discretionary match and SF either match or NE almost no one but the owner deferred and they are looking for a cheap way to max the owner without giving any more to EEs.

In a SF 401(k) To get a free pass on ACP the discretionary needs to met the following 3 conditions - 1-Match is on no more than 6% of deferral (you are OK there) 2-Match does not increase as deferrals increase (also OK there) 3-Can't be more than 4% of pay (you don't meet that one) That's why in the "triple stacked match" the discretionary match piece is usually something like 2/3rds of the 1st 6%. I'm sure this is somewhere in the regs on SH match but I don't have a cite handy.

If your gateway is 5% then yes, that's exactly what it means. But check your document to see if they come in automatically for gateway, many but not all are written that way. I see Bri already covered that. As for your failure to pass testing are you failing 410(b) or 401(a)(4) or both? How is the document written? Everyone in there own group or you have specific group classifications? Does your plan use the fail safe method or 11(g) approach.

If you are going through VCP, suggest the lower amount as the correction to the IRS and see if the IRS agrees. Calculate it both ways so your client knows the potential liability if the IRS doesn't agree with the proposed correction and requires 3%. But I think the IRS would likely allow your correction, especially if you can show 3% to everyone would cause a business hardship.

I'll assume everyone is getting at least a 3% match to cover that t-h min since once you make additional employer allocations you don't get the "deemed not top-heavy exemption". If that is the case then your original $8,548 (1.54% all, 1.54% excess) and $415.80 (1.54% all, no excess comp) looks correct. There is nothing magical about a 3% floor in an integrated plan unless you are trying to satisfy t-h with the contribution. The excess is limited to the lessor of the base percentage or 5.7% if you are using the TWB as the integration level.

The simple solution to avoid that is to exclude key employees from the T-H minimum in the plan document. Otherwise yes if the key employees get the TH minimum along with everyone else then any key deferral or VAT would trigger a 3% for everyone when it is all said and done.

As others have said, read the document, the answer is probably there. I'd be surprised if the answer was not "THE ESTATE" in this case but that's just a most likely guess on my part and not legal advice.

Is the Plan Top-Heavy? If not, calculations you have look correct as everyone seems to be getting 1.54% of total comp and 1.54% of excess comp. Assuming these are all the employees. Of course assuming these are all the employees then yeah you are almost certainly top-heavy which is going to bring you back to pro-rata until you hit 3% of pay for the non-keys.

Then I see no problem with it. I mean assuming it's not restricted by under funding or something.

Unless your plan excludes Keys from the TH minimum, that is the circular result you are going to get. If the highest allocation rate is 1.6% and you then give the key another 1.6% "because everyone is getting it" then that key's highest allocation rate is now 3.2% so everyone now needs to get 3%. At least that's how I understand how the rules work.

I'm not sure if the rule is the same for 403(b) and 401(a) but my guess it it probably is, but adding a last day requirement if this was a 401(a) (think 401(k) with match) that would be a prohibited cutback because participants had already earned the right to this year's match and the amendment would need to be effective 1/1/26.

I think you can create a short plan year as of 4/30 but then you don't have a 12 month year and would be subject to ACP testing for the short year so probably refunds with "substantial 401(k) and only 4/12 of 401(a)(17) limit". The 3% SNEC should cover your TH for the 4/30 year, unless some unusual things apply, then if all Key EEs stop making any 401(k) your TH minimum would be 0% if all key allocation rate is 0%.

Try this old thread.

Yeah the key is job classification. And I agree you could do it to all cashiers or you could grandfather the old ones in and have it apply only to new ones.

Eligibility is not a protected benefit. So if they wanted to amend the Plan to exclude all cashiers going forward past/present/future you can do that. It doesn't change the distribution rules for for the employee. They are still subject to the plan terms, they continue to accrue vesting service, they just don't get future contributions. Two caveats, 1st you can't cut back a benefit they have already earned a right to, so if you are trying to exclude a current cashier who has already satisfied the allocation condition for 2025, you couldn't make it effective for them until 2026. 2nd those folks still go into your nondiscrimination tests, they are just no considered "not benefiting" so if you exclude too many NHCEs you can run into testing problems.

No RMD is required because they died before their RBD. Found a 10 year old thread hear that clarified it. Some of the rules have changed slightly in the 10 years since the there have been a few changes to the RMD rules, but dying before RBD still puts you in Non-RMD status. For full details see §1.401(a)(9)-3 Q&A 1 through 6.

I'd double check the rules on "death before RBD section of the regs" since the first RMD year year is 2024 but the RBD is not until 4/1/2025. But I think if they die before the RBD it does stop the RMD. I'm just not 100% certain on that.

Paul, thanks you summary is excellent and pretty much matches what I thought already. Peter, thanks so much for the IRS memo, that's exactly what I was looking for! On a different somewhat related note, does anyone have a good missing participant search company that they like? If you don't want to post in the thread feel free to shoot e a PM. Especially one that will do a detailed death search in case the participant has passed? The one we used came up with an address the participant is known to not have been at for some time.

If he has not reach RMD age at time of death and the spouse is the beneficiary I don't see why she couldn't elect a rollover to her own IRA unless there was something in the Plan restricting that.

I don't think the IRS would question it if you had proof it was initiated by the deadline. Since as you say they will take a timely mailed check I don't see why they would not also take a timely submitted electronic transfer.

Client has a participant that has 1st RMD coming up. Assume the 401K balance is more than $10K and less than $100K. This participant has been missing for some time. They have scoured their own records and a commercial participant locator service produced an older address that the participant has not been at for some time. What to do with the RMD and what to do with balance that is more than cash out limit in on going plan?

I would assume the correct way to fix is through EPCRS. More than 5 years ago would reduce the audit risk as that's a now a closed year but I'm not sure that changes the answer if you want to fix it properly. Has this been an ongoing problem or a one time more than 5 years ago problem that was just discovered for some reason.

Why would the W-2 be affected? He should get a 1099-R from the Plan for the refund. Any reasonable method to determine earnings can be used. I believe we assume deferrals ratebly over the year and apply the annual earnings rate for 1/2 the year if that makes sense.