Eve Sav

The question was related to a "safe harbor match" and a discretionary match. The reason your software is testing both, is because the discretionary match does not meet the ACP safe harbor, if the discretionary match requires 1,000 hours and last day. The safe harbor match gives you a free pass on the ADP test. If your document indicates that the plan is intended to meet the ADP and ACP safe harbors, you need to eliminate the last day and 1,000 hours requirement for the discretionary match. You have to completely separate your coverage testing for the two types of match (since they have different allocation entitlement requirements). You likely need to re-set your specs to ONLY test the discretionary match: if you do not have a formula for the discretionary match that limits the discretionary match to 4% of pay, or matches deferrals >6% of pay, or you have conditions to receive it, since those factors do not meet the ACP safe harbor.

Are they trying to take full advantage of the transitional period? Doesn't sound like it if they are contemplating merging in the middle of 2022. Why not have Company B adopt Company A's Plan for new contributions effective 1/1/2022, simultaneously amending Company A's Plan to relax eligibility to 3 months. The asset transfer/merger can happen in Q1 2022 (or later).

We have seen both circumstances: Filed without the audit, received 45 day letter form DOL, client got the audit done, filed an amended return, and sent a copy to the National Office: still get an assessment of penalty for number of days late from original filing date (extension null and void). Sometimes, there is a reasonable cause explanation that gets you a reduced or waived penalty. When amended return with audit is NOT provided in 45 days, no extension is permitted. They get an assessment of penalty letter. No longer eligible for DFVC or getting penalty waived, though maybe reduced with a very good story. I think that IF an auditor has been engaged and reasonably assume they can get the audit done, I prefer the "file late and complete return, under DFVC amnesty. A $2,000 DFVC fee is a lot less costly than an ERISA attorney, assuming it is just one year, and there are not compliance issues that hold up getting a clean audit. And no one is signing a form under penalty of perjury, falsely claiming the filing is complete and accurate.

You still need to deposit the lost earnings on the late deferrals in total; pay the excise tax if you are not filing under VFC, and allocate the total lost earnings to those that were effected inn 2017 and are still employed.

The loan from the second plan is a loan, not a taxable distribution. The participant can use loan proceeds for whatever he/she wants (unless the plan restricts purposes). The loan has to be repaid while you are employed by your second/new employer, or it becomes taxable. You would not be able to get a loan from an IRA. As long as you make the "rollover" , in total, equal to the total amount distributed (including the loan) from Plan #1, as reported on the two 1099R's you received (and file the correct tax documents in the correct time frame) it is permissible. This is an enhancement available as a result of the 2017 Tax Cuts and Jobs Act.

OK to add mid-year automatic enrollment for newly eligible only, and it can be an EACA for purposes of do-over withdrawal. You can sweep in existing participants effective 1st day of next Plan Year, and then it is an EACA for purposes of do-over withdrawals AND for extension of refund period.

Was there a 401(k) plan at the prior law firm? If so, did they defer, and how much did they defer, into the prior law firm plan?

Agree that at the beginning of a plan year, the amendment to create an excluded class is permissible (subject to coverage testing). But, the excluded class (prospectively) are still participants, with no immediate distributable event. They continue to earn vesting credit on any existing subject to vesting employer money sources (like profit sharing) and still have to receive all required notices, fee disclosures, SPD, SMM, educational material and continue to have rights to loans, hardships, etc. If the change classifications, to an eligible class, they must resume participation immediately. Complications lead to mistakes.

According to the IRS website, there is no relief from the QNEC if someone is terminated at the time you discover the error, since they cannot be subsequently automatically enrolled. They need a 505 QNEC and related match. If the participant has been automatically enrolled or affirmatively enrolled earlier than the latest date provided under SCP, they have to receive the special notice within 45 days of commencing deferrals to have relief from the QNEC. So if someone in payroll or HR discovers and "corrects" the error and does not tell the TPA (to provide the notice), or knows enough to provide the Special Notice within 45 days, then the 0% QNEC or 25% QNEC is not available.

If the loan deductions were set up correctly in payroll, they would each have a target amount equal to the sum of the principal and interest payments, and the deduction would stop when the target amount is met. The other issue is how the loan payments are reported on the payroll files sent to the record-keeper. Each loan should have a unique #. But if the payments are deducted under one deduction code, and reported as a sum of the amounts withheld on the periodic payroll file upload, the record-keeper will apply the payments to whichever loan is outstanding. It sounds like the fund company/record-keeper and the Plan sponsor/payroll person need some additional coordination and/or training.

Payroll company needs to be directed to set an annual $ cap on match (based on formula and comp limit) and use an accumulator in the match field (like they do for the deferral field) . When the $ amount of the match, YTD, hits the limit, then match stops. It may be up to the Plan Administrator to notify the payroll company what the dollar limit for the match (depending on formula and comp limit in effect) each year. If the record-keeper is ALSO acting as TPA and responsible for the compliance testing, the "over-match" should have been forfeited, and the error should have been identified and fixed, and prospective procedures put in place. If the TPA is not limiting the match in testing and identifying these issues, they are not doing their job.

But unless they have actually been cashed out (by forfeiting their balance) they still have an account balance at the end of the Plan Year. Are you saying you don't count them, even if their non-vested amount has not yet been forfeited as of the end of the Plan Year?

I would also consider this a potential prohibited transaction, since i assume the "Doctors" are either "named" or "functional" fiduciaries, and this decision sure sounds like self-dealing for their own benefit.

Thanks All. Larry- I did find some articles (though not the one you provided), but have not yet heard form any practitioners that have actually designed such a provision. I am troubled by this employer contribution being characterized in many of the articles as a "match" when there are no elective deferrals being made. I assume that is just semantics in the articles, and it would be structured as described as a non-elective contribution to a specific group or individuals.

There are some articles floating around related to encouraging younger employees to participate in 401(k) Plans while paying down substantial student loan debt, by making an employer contribution (described as a match) to the 401k plan. This is to encourage retirement savings, when younger employees are too saddled with college loan debt to participate in the 401(k) Plan. These have been described variously as an employer contribution conditioned to student loan debt payment, as a flat dollar incentive, or percentage of pay. This appears to be a very different employee benefit from employer provided student loan incentive benefits that "match" student debt payments, which (as far as I know) continue to be taxable to the employee with the student loan debt. My client is interested in this as incentive for attracting millenial employees, and encourage them to pay off debt sooner, so they can afford to make 401(k) contributions. But there is little information out there on this topic. I do not think there is any mechanism to call this a match, if there are actual employee elective deferrals. So I assume this would be incorporated into a plan as a "profit sharing" contribution. I suppose you could create allocation categories with one of them being "participants who are paying college debt", and providing a flat dollar allocation or % of pay allocation only to that group.....and exclude HCEs (in the event there are any in that category). There are companies selling this as an administration service, but it appears that in order to utilize this "service", the participants have to refinance their student loans through the service provider. This gives rise to additional concerns. Has anyone out there designed such a 401k plan provision?