WCC

The above thread may help. Below is information from the DOL. I know the website is not official guidance, but note my highlight, which states that amended filings are not eligible for DFVCP. I am not saying I agree with this position; I am simply pointing it out because I believe this is a new addition to the webpage, or I may not recall seeing it previously. https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/dfvcp

I think it is feasible because the participant is still being taxed on all of their income except for the $24,500 pre-tax, which I believe was the intent of the mandate. While there may be some pre-tax earnings growth, I do not think the federal budget is concerned with that, nor with the fact that the company receives a tax deduction for the QNEC.

Yes. Any hourly excluded employee who moves into a non-excluded class would become immediately eligible. The bigger problem I see is how did the plan pass coverage in prior years? They excluded Hourly employees as a class (some of them reaching Age 21 - 1 YOS.) They have had hourly employees (over 23 of them) over the years - some reaching Age 21 and 1 YOS - but have never allowed them in the plan.

(1) what does the plan document say? (2) if you are planning to satisfy ACP safe harbor, not sure how you get to $20,000 on the discretionary match tier, maybe I am missing something, but isn't the max match on the discretionary tier $14,000 ($350,000*4%) for 2025? The fixed match tier can be greater.

Unless the plan document says otherwise, this paragraph from the preamble to the 415 regs is what I have relied on when this question comes up. You are not required to count compensation on a FIFO type accounting basis. Pending wording in the document, this individual is match eligible. Not because the compensation is ineligible for match, but because you are not required to count the first dollars earned towards the limit. https://www.federalregister.gov/d/E7-5750/p-111 "As noted above, the final regulations provide that a plan cannot take into account compensation in excess of the section 401(a)(17) limit. In addition, the final regulations provide that elective deferrals can only be made from compensation as defined in section 415(c)(3). However, in applying these two rules, a plan is not required to determine a participant's compensation on the basis of the earliest payments of compensation during a year."

Yes, that would satisfy both ADP and ACP safe harbors.

100% on 9% satisfies the ADP safe harbor (assuming all other safe harbor conditions are met), but this formula does not satisfy the ACP safe harbor. IRC 401(k)(12)(B)

I have worked with clients who have documented the following, this is not an exhaustive list: (by documented I mean either wrote these answers in a word doc or excel file and shared them with the applicable individuals who are responsible for the tasks). determine if the plan will deem pretax to Roth When will the plan deem? when total deferrals reach 402(g) or just when pretax reach the 402(g) limit? who will control the deeming process, recordkeeper or payroll (usually payroll) how will the payroll system be updated/programmed to control the limits who is monitoring the payroll system to ensure it is working how will employees be notified about deeming What I think does not work is if the sponsor ignored how they are going to manage this. Letting payroll run as it always has, then expecting to convert the excess does not comply (IMO, and not implying that was the intent of your OP). Yes, earnings/losses should be calculated in the conversion correction. 2. A plan may correct a section 414(v)(7) failure by transferring the catch-up contribution (adjusted for earnings and losses in accordance with § 1.402(g)– 1(e)(5)) from the participant’s pre-tax account to the participant’s designated Roth account ... Lastly, the final regs are effective 1/1/2027, the sponsor can make a good faith interpretation for 2026.

(1) did the plan have practices and procedures in place at the time the error was made? If not, the plan is not eligible to use the conversion correction method (2) this is not a normal in-plan conversion elected by the participant. This is a plan correction procedure instituted the sponsor. From the final regulations: (i) Practices and procedures designed to avoid section 414(v)(7) violations—(A) In general. For a plan to be eligible to use either of the correction methods described under paragraph (c)(2) of this section with respect to an elective deferral that is a catch-up contribution because it exceeds a statutory limit described in § 1.414(v)–1(b)(1)(i), the plan sponsor or plan administrator must have in place practices and procedures designed to result in compliance with section 414(v)(7) at the time the elective deferral is made.

Maybe someone here will correct me, but I was always taught that as far as the plan is concerned (no comment to any other tax/accounting rules), there is no such thing as a "W-2 contractor". The employer first needs to determine if these individuals are employees or contractors and treat them correct for tax reporting purposes. If they are indeed employees, then follow IRS Notice 2016-16. If the determination is made that the individual in question is an employee (not a contractor), then reducing the group of covered employees is prohibited mid-year. D. Prohibited Mid-Year Changes The mid-year changes described in this section III.D are prohibited mid-year changes (for purposes of the provisions in the first paragraph of section III.B of this notice). However, a mid-year change described in section III.D.1-4 is not a prohibited mid-year change under this section III.D if it is required by applicable law to be made mid-year, such as a change mandated by a statutory law change or court decision. 2. A mid-year change to reduce the number or otherwise narrow the group of employees eligible to receive safe harbor contributions. This prohibition does not apply to an otherwise permissible change under eligibility service crediting rules or entry date rules made with respect to employees who are not already eligible (as of the date the change is either made effective or is adopted) to receive safe harbor contributions under the plan.

Thank you for the newsletters!!! I have relied on them for many, many years and they have always been a very valuable resource for me. Just came here to say thank you! Wishing you all the best.

Not a rehire transaction since the participant is not a rehire. The plan administrator should be able to call the recordkeeper and explain the situation. Depending on the recordkeeper they will ask for either an email with instructions or ask that a service request be submitted through the recordkeeper website by an authorized plan contact. If the employer is managing the change from part-time to full-time with a term date and a rehire date - that is a problem. Depends on the size of the company. In a "small" company sometimes the same person runs payroll, HRIS and benefits. In a "big" company, there is usually separation of these functions and this change would generally lie with HRIS or benefits. I have seen this type of error corrected both ways, but generally more often in an ad hoc correction. The plan administrator would have to implement the controls, the recordkeeper is not going to do that. Employers can obtain demographic reports from the recordkeeper and compare those to their payroll / HRIS records. Consider changing the process at the recordkeeper so the recordkeeper escalates issues to someone at the company who can answer questions. Consider taking the managers out of the middle if they have no authority to make changes or provide answers. If the managers are the first line of escalation, the employer should provide direction to the managers of how to handle escalated issues. Lastly, you may want to consider (1) the missed deferral opportunity rules if the employee has been excluded for the last two years and unable to enroll (2) any non-discrimination testing / reporting impacts due to an incorrect status code.

Does the plan intend to keep safe harbor status after the mid year amendment? I am of the opinion the plan cannot be amended mid year to exclude bonuses as this will reduce the match formula which the participants have already accrued the right to receive. The exceptions to this are found in 401(k)-3(g) and 1.401(m)-3(h). My opinion is based on IRS Notice 2016-16 Section III B(iii). There are a handful of prior discussions on this topic in these message boards with other commentary.

number of days from 7/1/2024 to 7/1/2025 (including both the beginning date and ending date) = 366 days number of days from 7/1/204 to 6/30/2025 = 365 (excluding leap years) By counting 7/1/2025, the service condition would become one year and one day, they already worked 7/1/2024, they don't have to work one more July 1 date to complete one year of service.

7/1/2025. Participant completes one YOS on 6/30/2025, next entry date is 7/1.