Bri

the W-2 is going to show the too-big deferral, but the 1099-R will show the corresponding addition back to the income. (And the code 8 is right, a 2026 distribution taxable in 2026.)

Wouldn't the IRS go after the sponsor for failure to deal with the forfeitures properly when they should have? Gotta think they'd want THAT for the other participants' sakes, like if they are instructed to reallocate.

The identical ownership is 45, and the 45% they are deemed to co-own is identical, the same 45% of the company.

Yeah, it's not 45 MORE percent that they own from each other....

Is this a question of whether or not a defaulted loan for someone at 60% vesting, would then leave all their other funds at exactly 60% vested still?

Does the 60 days matter? This would be correction of an ineligible rollover contribution, so he has until next tax deadline to get it out with earnings to avoid the 6%.

The -11g amendment would be however you spell it out. If you want him excluded from the SH source, have the amendment say that. You wouldn't be making him eligible for the 401(k) portion itself, right? Of course, now I'm wondering why not just give him the 3% safe harbor and a twenty-TWO percent profit sharing contribution?

Technically, percentages aren't shifted, amounts are. This really only matters practically when the populations in the ADP and ACP tests are different, like if the match requires last day and/or 1000 hours.

Double up next time and hope the next paycheck comes before the cure period expires?

I did mean that, they missed the DEPOSIT, not that they missed offering the DEFERRAL opportunity. Sorry about the confusion....

if they really made those 401(k) elections, you just treat this like any missed deferral like for a staff person. Figure out when it should have hit and calc your earnings from there.

Combos with testing, or just the DB/CB calculations themselves?

I've seen plan documents that say if the person's going to share in the allocation, they don't actually forfeit the nonvested portion yet....so maybe just spot-check your section there, too.

The failure is the test itself, not the timing for that one particular option you could use to correct it.

Does the plan provide for forceouts after NRA? That could eliminate future problems for the sponsor, at least. (Still hoping someone suggests a sack of nickels with a big $ on the front, left on the guy's doorstep every December.)