415 Limit

Thank you very much for your detailed response, it's very much appreciated!

Employer employs four employees, none of who are catch-up eligible. Employer currently has a SIMPLE with the 3% match approach. No salary deferrals have been made in 2025. It’s our understanding that the increased deferral limit of $17,600 in the SIMPLE is automatically in place for 2025. Is that right? If they terminate the SIMPLE as of 6/30/2025, then start a new SH 401(k) plan effective 7/1/2025, (distributing all required notices timely and communicating the pro-rata deferral limits in each plan ($8,727.67 / $11,846.58) specific to each participant), for the initial plan year: Is Compensation from 1-1-2025 to 6-30-2025 for purposes of calculating the 3% match in the SIMPLE, if any salary deferrals are made? Is Compensation from 7-1-2025 to 12-31-2025 for purposes of calculating the Employer contributions (Safe Harbor, Profit Sharing, Discretionary Match) in the 401(k) plan, or could the 401(k) plan be written to use full-year (1-1-2025 to 12-31-2025) compensation for allocation purposes for the first plan year? Can the new Safe Harbor plan use the Match approach, or does it have to use the Non-Elective approach? Is the SIMPLE match (if any) completely disregarded in the 401(a)(4) test in the 401(k) plan? They will be well under the 25% deduction limit between Employer contributions made to both plans. Thanks in advance for your input on this.

Thank you. Apologies, let me rephrase to make sure we have this right: If we bring in 1 additional employee to benefit in Plan A (for both the 401(k) component and the profit sharing component), 410(b) will then pass. This NHCE would receive a QNEC in Plan A (as described in previous post) in order to "benefit" from not being allowed to defer in Plan A. The NHCE would also receive a PS allocation in Plan A. PS allocations will be made to each plan respectively, according to the formula in the plan document, and then tested together. If this triggers the gateway in Plan A (which it probably will), I assume we would need to do a corrective amendment for A. Probably best to amend going forward so that they have the same formula... Thanks for your input, it is greatly appreciated.

Thanks very much for your input, is is extremely helpful. But the rabbit hole has gotten deeper - is this right? The Average Benefits test does not pass. Therefore, plans must be aggregated for all non-discrimination testing. One additional NHCE would need to benefit in Plan A (fail safe provision per the plan document). This NHCE would need to receive a QNEC equal to 100% of the NHCE ADP in Plan A. The QNEC may not be counted in the average benefits percentage test. How then, is profit sharing allocated in plan A? If allocating according to the integrated formula in the document, does that trigger plan B satisfying the gateway when aggregated with plan A, or are employees of plan B treated as not benefiting in plan A, or? Not quite sure where to go next with this. Thank you for any additional input in this complex maze.

I'm considering taking over the administration of three plans that are part of a controlled group. All plans have the same plan year-end, none of the plans are safe harbor, and all use the current-year testing method. Plan A - The profit sharing formula is integrated with Social Security, and they plan to allocate a $40,000 contribution. There are 3 employees (all eligible) in total, 1 is an HCE, and 1 of the 2 NHCE's also works for Employer B. Plan B - The profit sharing formula is cross-tested, with each participant in their own group, and they plan to allocate a $100,000 contribution. There are 100 eligible employees, of which 21 are HCE's, and 79 are NHCE's (the 79 includes the 1 employee that also works for Employer A). Plan C - no wages were paid by Employer C during the plan year in question, therefore there are no contributions. How would these plans be tested: 410(b) test on the 401(k) Deferral component - should the plans be aggregated for this test, or should each plan run its own test? 410(b) test on the Non-Elective component - should the plans be aggregated for this test, or should each plan run its own test? 401(a) - should the plans be aggregated for this test, or should each plan run its own test? ADP test - should the plans be aggregated for this test, or should each plan run its own test? I see a few issues here already, but before I go down a rabbit hole, I'd appreciate any input on how to move forward. Thanks in advance.

Thank you Bri!

I know this has been asked 1,000+ times, but I'm still not clear on the correct way to start the calculation of an individual's net earned income in this situation: LLC taxed as a partnership Schedule K-1 Line 14A = self-employment earnings (starting point) Is then Section 179 deduction on Line 12 of the K-1 backed out from Line 14A, or no? There are no oil and gas depletion expenses, nor unreimbursed partnership expenses from Schedule E according to the CPA.

Company A and Company B are owned 50/50 by the same two individuals. Each Company sponsors their own 401(k) plan (Plan A and Plan B), neither which are safe harbor. The owners and their spouses are eligible to participate in both plans. Plan B only employs the owners and their spouses. Plan A runs on a fiscal year ending 7/31, Plan B runs on the calendar year. It's my understanding that we have to ADP test these plans together, but I'm unclear on how to do this. Do we need 7/31 census data for the calendar year plan and then run the combined ADP test, or do we need 12/31 census data for the 7/31 plan and then run the combined ADP test, or? Sorry if this is an elementary question but I just can't wrap my brain around this. Mandatory Aggregation • Mandatory aggregation of HCEs is required when an HCE is eligible (not just deferring) for more than one 401(k) or 401(m) arrangement • Mandatory aggregation of HCEs is not applicable if the plans cannot be permissively aggregated (i.e., mandatorily disaggregated groups – union/non-union). However, mandatory aggregation of HCEs still applies if permissive aggregation is not permissible due to different testing methods, different plan year ends, or one plan is safe harbor.

Thank you for sharing your experience, Tom. I still find it hard to believe that they don't have a dedicated phone and fax number & e-mail address to reach a representative in the correct department (they shouldn't offer these types of accounts if they can't properly service them).

Hi there, We are a TPA taking over a 401(k) plan that has a handful of self-directed brokerage accounts at Fidelity (the "F" word). The existing Fidelity accounts are "non-prototype retirement accounts". Has anyone had any luck in getting a hold of knowledgeable representatives at Fidelity in the correct department that can answer questions about these types of accounts, and if so, what phone number (and extension) have you been successful with? I've tried different numbers and have had mixed luck with general questions. My goal is to try and save the Plan Trustee some time on the phone by getting him connected with the correct department / representatives from the start. 800-544-5373 800-756-0128 800-835-5095 800-544-6666 800-343-3548 What about a fax number (years ago we used to use 800-347-2805 but this may no longer be valid according to a few people I've spoken with). What about an e-mail address for the Service Support Group (SSG)? Thank you!

Thank you, Lou, I understand and appreciate your input.

Lou, thank you so much for your valuable input. All excellent points you mention and also stating the technical (correct) terminology. What exactly do you mean when you say 'And any limitations on amending mid year in or out a safe harbor would apply as if you had a single plan', can you give an example?

An Employer is in the process of establishing a new single employer plan (401(k)) effective in 2023. They will spin off (not terminate) from a PEP that they are currently in and transfer the assets from the PEP into the new plan. They do not have a safe harbor provision in place in the PEP, but they would like to add a safe harbor provision to the new plan for 2023. Is this permissible? How would the ADP testing work for 2023, would they need to test separately in the PEP for the short period and correct via refunds / QNEC (assuming the test fails for the short period), or are we permitted to test the entire year under the new plan (and the safe harbor provisions, assuming this can be added to the new plan in 2023)? Any input would be greatly appreciated. Thank you very much.

Someone (Paychex) convinced a very small Employer to join a PEP containing an EACA provision in early 2022. The ADP test fails (terribly) for 2022 so the goal is to get them out of the PEP and establish a new single-employer plan with a more meaningful plan design as soon as possible. Can they leave the PEP mid-year (i.e., now) or do they have to wait until 12/31/2023? The plan document doesn't specifically address leaving the PEP. They intend to transfer assets from the PEP to the new 401(k) plan, so would this be accomplished through a 'spin-off' (vs. plan termination)? What is the earliest effective date the new single-employer plan without automatic enrollment and including a safe harbor provision can be established? Any input would be greatly appreciated. This is all new to us. Thank you very much.

Plan year runs from 7/1 to 6/30. During calendar year 2017 a 44 year old participant deferred $18,000 pre-tax 401(k) plus $4,500 Roth 401(k) (total = $22,500, see breakdown below). The famous payroll company neglected to report the Roth deferrals in box 12 of the W-2 (AA) so this was not caught until after 4/15. Between 1/1/2017 - 6/30/2017: $5,200 pre-tax 401(k) plus $3,900 Roth 401(k) (total = $9,100) Between 7/1/2017 - 12/31/2017: $12,800 pre-tax 401(k) plus $600 Roth 401(k) (total = $13,400) Are we permitted to distribute the $4,500 in excess deferrals from Roth? Is it relevant that all but $600 in Roth deferrals were made during the prior fiscal year (6/30/2017)? Thanks for any input.