30Rock

Great news. No match is due since the plan does not match catchups. I am wondering how to word the 45 day notice since a 25% QNEC will only be funded if HCE does not max out catch up by 12/31. I guess notice could say corrective contributions will apply to the extent there are missed catch up contributions at the end of the plan year?

As a follow up question, is it common to wait until after the plan year to fund a QNEC for a missed deferral for an HCE? This way the administrator can give the HCE an opportunity to contribute and make the QNEC only to the extend any additional amounts are due - i.e. offset the QNEC by what the HCE actually contributes for the plan year. Thanks!

Thanks I will look for the presentation.

Due to the new Roth catch-up mandate, we have a couple plans with situations where the Roth indicator did not get turned on properly to allow the deemed Roth spillover. This is some new territory for me! I am checking on corrections - 1. any QNEC will be pre-tax for missed Roth, 2. if the missed contribution occurred more than 3 months ago then a 25% QNEC will be due based on missed deferrals during the applicable period of the year. How is this correction feasible under the Roth catch up mandate? It does not make sense that their catch ups will be a pre tax QNEC. Any thoughts would be appreciated.

Great input Peter. The vendor is telling them they cannot add Roth it due to limited involvement rules (I am assuming now that the catch-up rules are complex and require monitoring the 402(g) limit so that catch-ups switch to Roth for the high earners who elect to make catch-ups under the new rules. I could argue that the vendor can assist with this conversion and it does not require employer involvement. Can they add another contract or annuity provider at another company, assuming this provider will allow Roth? Unless they can find a solution, they will forced to restate the plan to an ERISA plan document and start filing 5500's. Thank you!

Can the employer amend the plan to add Roth if the 403b plan is structured as not subject to ERISA under the limited involvement safe harbor regulation 2510-3-2(f)? If Roth is not added, then any high earner over the FICA limit cannot do catch-ups. Due to this SECURE 2.0 requirement, I would think adding Roth could be permitted. Any thoughts?

Thank you all. I am following what you are saying. I will get in touch with the client and try to find the APA and other legal documents, or push to have their M&A attorney review and advise us. Thanks again!

Thank you Artie. Here are some additional facts - the buyer bought the company's assets correct. However, the buyer then hires all the employees of seller and creates a new subidiary company as the employer of these sold employees, similar name but new EIN. This subsidiary has not yet adopted the buyers 401k plan - by the way both plans are safe harbor. So as of yesterday our plan was to do as you are saying and unwind all the contributions in sellers plan and have new company adopt buyers plan. But today, I learn they (the buyer) have a "TSA" in place with prior company until end of 2026. I am not clear on what the TSA allow for. I guess the sold employees are still under sellers payroll. So, can the sold employees stay in the sellers 401k and continue to contribute and receive match thru end of 2026, then become participants in buyers plan 1/1/27? Seller can then terminate sellers plan. This would be the ideal outcome. Thoughts? BTW - this is small plan market - approx. $7MM total 401k assets.

Thank you Peter!

I have a question to present as there is no clear answer in EPCRS. There was an asset sale in April (4/2/26) and the employees were hired/transferred to the newly formed company with new EIN of the buyer. I have finally received confirmation by legal counsel that the buyer did not agree to take over the sellers 401k plan after the sale. However, the newly formed company continued to contribute to the plan of the seller after the sale closed - deferrals and match. What is the correction here? Distribute deferrals to the employees as 1099 income for 2026, but what about the match? Normally under EPCRS excess amounts attributable to match would be forfeited but the match was funded by an ineligible employer since there was an asset sale. Following that line of correction, the match would be forfeited, the plan terminated by the seller, and then there will be forfeitures to deal with. So after any plan expenses, lets say that forfeitures remain. Do they get reallocated - Ineligible match contributed after the 4/2 asset sale by an ineligible employer gets reallocated to the participants? Or, could this be viewed as a mistake of fact and return the match to the buyer? I have not had this come up before, can one of you M&A experts chime in maybe? Thank you !!

Why would they be excluded - I meant the plan could be subject to 410b testing if there is an HCE in the lower group then you have to do coverage testing. You even said above that "410b is always invoked..."

So if part time never complete 1000 hours to earn the one year, it requires 410b coverage, just as if they do not earn one year under elapsed time? Is this what you are saying? THanks!

I would appreciate help from the TPA compliance experts here! If a 401k ERISA plan is drafted to have a 12 month elapsed time eligibilitity for matching contributions for full time employees and a One Year of Service under the hours method for match for part time employees, does this invoke 410(b) coverage testing? Thank you!

I am not sure if you can true up for part of the year and then revert back to payroll. I think the IRS Notice says you switch to annual based match for the year if you want a retro increase.

Hello - just wanted some clarification on this issue. A current safe harbor plan provides for an enhanced safe harbor match of 4% and use a payroll computation period. Sponsor wants to increase it this year to 5%. What are the mid year requirements - 30 day notice, the increase must be retroactive to 1/1/26, can the plan do a true up match retro to 1/1 and then continue with the payroll match going forward, or does the match computation period have to change to annual for the remainder of the 2026 plan year? I appreciate your thoughts!