Belgarath

Could be I'm missing something. Since it is a safe harbor match, which has no allocation requirements, I just feel like it is safer to waive eligibility for both if you are going to let them in early for deferrals. But your way may be fine. Typically, at least in most of the plans I see, eligibility for deferrals and SH match is identical.

That's an interesting question! Under RP 2021-30, Section 5.01(2)(b), "A plan does not have an Operational Failure to the extent the plan is permitted to be amended retroactively to reflect the plan's operations..." So, since this is eligible for retroactive amendment under Appendix B, I don't see it as an Operational Failure. (I'm also assuming this employee is not an HCE.) I'm not confident that this can be corrected under 5.01(2)(d) either, as this appears to specify that it is an amount that is credited on behalf of a "participant or beneficiary" - and this employee, absent the corrective amendment, is neither. So, the other alternatives would appear to be to refund the deferrals to the employee, or, to forfeit the deferrals and use them reduce the employer contribution to the plan - and make the employee "whole" outside the plan through payroll. Either way, the plan ultimately ends up in the position it should have been in absent the error. Personally, I'd favor the refund... I'll be interested to see what other folks come up with. P.S. - FWIW, my original answer above assumed that the corrective amendment was being made.

Yes.

Good point - Thanks for that analysis. I hadn't really thought about it in that light. And no, I'd say VCP.

Any opinions as to whether the SECURE 2.0 Section 305 will prompt the IRS to allow self-correction of scrivener errors? I'm guessing not, but it sure would be nice. For example (just saw this recently) safe harbor 3% nonelective, with an additional PS discretionary, was amended in 2021, mid year, to exclude a category of compensation for PS allocation purposes. Since 1,000 hour/last day for the PS, no problem. Problem is that on the AA amendment, wrong box was checked - instead of checking the box to carve this out to exclude for PS purposes only for 2021, it was checked to exclude for all purposes. Clearly unintended, client made the appropriate safe harbor contribution for 2021, etc. Now, technically this amendment appears to violate 1.401(k)-3(g), and would cause the plan to require ADP testing for 2021, etc. - a pretty harsh outcome. So a VCP filing appears to be required to correct this. Allowing as a Scrivener error would be much nicer. To be fair, I can see why the IRS generally is leery about allowing self correction for Scrivener error, as it might allow some pretty creative "revisionist history" on plans which isn't justified. So I'm guessing this won't change. Opinions?

What IRS district(s) are involved? Are both of these situations in a single district that has problems, or is more than one district involved?

And the Nerds Cheer? Secant, tangent, cosine, sine. Three point one four one five nine!

Yeah, sorry, I should have specified that. I'm looking at this in general terms.

I've wondered about this on occasion, but never really investigated. At what point is a recission no longer viable? For example, if participants have made distribution elections, but distributions haven't been made, can you still rescind, or would it be a cutback? Seems to me that there has to be some limitation. I would not want to attempt it if distribution elections had already been signed, (unless client's ERISA attorney opined otherwise) but perhaps I'm unnecessarily conservative on the issue.

I'm sort of thinking that IRS input won't be of any benefit - I expect it would need to be authorized by Congress? If so, I wouldn't hold my breath...

RP 2021-30, Appendix B, .07(4) provides a correction for early inclusion of an "otherwise eligible" employee. What about an employee (NHCE) in an excluded classification who was mistakenly allowed to defer, and received employer safe harbor nonelective contributions? Since EPCRS provides certain pre-approved fixes, but those fixes are not the exclusive methods of correction, do you think this fix (retroactive amendment) would be acceptable, to allow this person to participate? Or, must the deferrals plus interest be refunded to the participant, with the employer contributions being forfeited as an excess allocation, and used accordingly? Other thoughts? Have not ever seen this particular situation that I recall. It seems "reasonable" to me to permit the amendment to remove this person from the excluded classification, but might be risky. Wouldn't even consider if it was a HCE... Thanks.

My opinion only - such a plan would be subject to the auto enroll rules, absent another valid exception.

Yeah, sort of like what we'd do if cross testing was eliminated as an option.

I haven't spent any time thinking about it in-depth, but on the surface, I'm inclined to agree with you.

Here's the entire section quoted above. (ii) Elective contributions taken into account under the ACP test. Elective contributions may be taken into account for the ACP test only if the cash or deferred arrangement under which the elective contributions are made is required to satisfy the ADP test in § 1.401(k)-2(a)(1) and, then only to the extent that the cash or deferred arrangement would satisfy that test, including such elective contributions in the ADP for the plan year or applicable year. Thus, for example, elective deferrals made pursuant to a salary reduction agreement under an annuity described in section 403(b) are not permitted to be taken into account in an ACP test. Similarly, elective contributions under a cash or deferred arrangement that is using the section 401(k) safe harbor described in § 1.401(k)-3 cannot be taken into account in an ACP test. In addition, for plan years ending on or after November 8, 2007, elective contributions which are not permitted to be taken into account for the ADP test for the plan year under § 1.401(k)-2(a)(5)(ii), (iii), (v), or (vi) are not permitted to be taken into account for the ACP test.

At least under SECURE 2.0, if a goof is made, it can be corrected with "only" a 10% penalty. Some small consolation, anyway... And I agree that the plan sponsor should make the formal decision as to whether or not she is "retired."

I think I need a visit to Dr. Kevorkian...

Assuming that your plan document allows this type of flexibility, absolutely fine. I'd suggest that you make sure the employer doesn't have employment agreements with one or more employees that state something other than what is mandated in the plan document - I've seen situations where the plan documents specify one thing, but the employment agreement states something else, and then it's time for ERISA counsel...

Fine, but that isn't the question. The question was regarding HCE determination, not Key and Top Heavy.

Not only CAN the employee # 2 participate, employee # 2 MUST be allowed to participate, assuming #2 has satisfied the eligibility requirements under the SIMPLE document. Take a look at the instructions on the SIMPLE document, "Which Employers May Establish and Maintain a SIMPLE IRA Plan."

If I'm reading your post correctly, this participant would have been born on or after 1/1/1951? If so, then RBD is based on age 73. Assuming born during 1951, then age 73 would be during 2024. So RBD for the 2024 year could be as late as 4/1/2025.

Thanks. It turns out I was provided with a whole lot of incorrect information - after receiving the correct information, all of the above is negated. But, thanks for the reminder about the pre-approved language!

Update - the information I was given that led to this post was mostly all incorrect, so I'm deleting it so people don't waste there time. My apologies.

Without doing any research, I believe that it would be separate lookback years for the different plans. Does the PS/DB by chance use the calendar year election? That would at least make it easier to keep track of who is an HCE and who isn't, although it might potentially have other ramifications - ask the cash balance actuary!

Re first question - "because it does." I'm not being snarky or difficult - my early mentor from back in the 1980's told me "not to try to make sense of everything, or I'd make myself crazy. Just accept that this is how it is." I thought that seemed like good advice. But I went crazy anyway... Re second question - the very term "SECURE 3.0" triggers panic attacks, nausea, and deep disgust. But, if there is a SECURE 3.0, then yes, this would be a wonderful provision to be included.