Bri

I'm looking at the last "hey you owe a Form 10" correspondence the PBGC sent a client a year ago, and the text you provide here is similar but not identical. In fact, the PBGC did not use the passive voice that the reportable event "has happened." They directly said the PBGC found the unpaid MRC on the 5500 and immediately provided the website for more information on the filing requirements at www.pbgc.gov.

I suppose that depends on your coverage ratios of NHCEs/HCEs with the availability to access the feature.

Document will specify if non-owners are defined as an entire excluded class. Maybe not the adoption agreement, but the basic plan document. Not unreasonable for a marketed "solo plan" to have such language, under the category of allowing time to address document issues like this before a new hire can get immediately swept in.

You have to treat him as benefiting since he actually qualified for that $0 match, rather than not qualifying for it.

Sounds right.

Was it a pre-ERISA money purchase plan such that it already allowed for deferrals?

That's the basic idea - pretend you had the longest allowable wait period, and then the folks who would STILL be in the plan even then make up your non-excludable group.

The division of the employees is NOT based on whether or not they've met your specific plan's match eligibility condition, but whether they'd met the IRS statutory 1 year/21. As you have only a 6 month wait for match, it's readily conceivable that you have people who qualify for the match, but are nevertheless in the otherwise excludable group's test.

Your "main" coverage and nondiscrimination tests - and by that I mean the people who aren't excludable because they're short service - will include everyone who qualified for the safe harbor match. So those will pass automatically (presuming no other exclusions written into the document like job categories). Your test for the otherwise excludables - those who are in, but only because your plan's eligibility is easier than required - will include some people who are not eligible to receive a safe harbor match yet. As such that subgroup does not automatically pass its ADP/ACP tests. However, it's very likely you have no HCEs in that group (but not definitively the case automatically), and so those tests probably pass by default.

I think it was just a point a CPA or tax attorney had made at a session sometime somewhere, but I also don't recall whether that opinion ended up as any official position. But it sounded to at least be reasonably constructed.

Isn't the argument for this not being allowed that there's no justification for a contribution that can't be applied for 2024 to then be a 2024 deduction?

Right, it sounds like a request that they point to something that says you can't do what you want differently from the one way it's officially spelled out as okay in those rules. But in practicality they shouldn't matter, since top heavy minimums to otherwise excludable employees can be stripped from a plan's provisions these days.

Was it small enough to be able to force him/her out before the filing deadline? Anyway, a little common sense that you would have reported them earlier if they'd had that balance all along. Now they do, so the reporting obligation kicks in because after all, the whole point of the 8955 is to try to pair participants with their long lost funds so that they are reunited when applying for SSA benefits.

If you've got people who don't tie out, you're going to need the client to give you their amounts week by week. It might reveal an entire screwed-up week company-wide for you, though, so there's that silver lining, right?

Coverage testing isn't hurt because an eligible person contributed 0 and got no match specifically because the match calculates to zero, though.

What's the nature of the industry for the plan sponsor? The plan may also be under the jurisdiction of the PBGC, only the sponsor wouldn't have originally thought so if he thought the plan could be "just for him." (Might add something to the delay, although a year sounds like negligence somewhere.)

The loan only has to be capped at 50% of the vested balance at the time of origination. The "loan first, hardship second" approach is acceptable and common, actually.

I'd say not so much 90 days, but as of the end of the cure period for the missed payment (of the entire due/payable outstanding balance) under the plan's policy, often the end of the following quarter.

Plan document will have that spelled out, whether the match compensation is determined on the whole year, pay period to pay period, and/or only from one's participation date in the source.

No, SEPs are for everyone who was eligible. No last day (or 1000 hours) allowed. Usually the SEP may require 3 of the 5 prior years having above the IRS annual stated earnings (not hours) threshold, but that's how you can exclude newer or very part-time folks. And sometimes that costs the HCE itself being eligible. The SEP paperwork should let you liberalize the eligibility to be even easier (fewer past years required) but the idea is that they're simplified, everyone who met eligibility shares, and with a uniform rate (not going to go into an integrated SEP here).

I think that means that the you're okay because the correction amount is part of the overall total. But that's presuming you're saying this was a taxable cash payment. If the HCE did a rollover then the plan has still satisfied the requirement to distribute the corrective excess, but it would result in an ineligible rollover contribution.

They have the service for the sponsor but had been previously ineligible because they were a nonresident alien with no US source income? Sounds like they're likely immediately eligible upon the switch to an eligible class of employees.

Look at it as, 401(m) test money is 401(m) test money, regardless of if it's 401(k) match or after-tax or even a match based on the after-tax. I see no issue.

Well, inasmuch as such a plan with individual allocation classes "typically" has to cross-test. Your plan might not need to test, but it can't run afoul of the document's allocation rules. Maybe there's an out if you're stuck with pro rata, but the higher paid person hits 415 first such that the rest of the contribution has to go to remaining participants

That's going to depend on the allocation rules in the document. It should say how to split a contribution, or whether the employer determines individual specific amounts by individual classes.