justanotheradmin

Do you have an estimated wage compensation cut off for the employer contribution credit for new start-up plans? Originally $100,000.

Any thoughts on how the last week of the season will be impacted now that TE/GE has officially furloughed what appears to the the majority of their staff? Just curious what musing people have now that we are crossing the bridge.

Scenario 1: Plan has separate pre-tax catch-up and Roth catch-up contribution rates that are deducted concurrently with pre-tax and Roth contribution rates. A highly paid individual subject to the Roth catch-up requirement in 2026 has $10k in eligible comp each pay period and is contributing 5% pre-tax, 5% Roth and 5% pre-tax catch-up at the end of 2025 and does not elect to opt out of deemed Roth catch-up by zeroing out their pre-tax catch-up rate. My interpretation of the final regulations is that a pre-tax catch-up contribution should become available once the participant has contributed their catch-up limit in Roth YTD, i.e. after $8,000 Roth and Roth catch-up has been made in pay period 8. Q1a: Would the deemed 5% Roth catch-up election automatically cease to apply and revert back to a 5% pre-tax catch-up contribution rate starting pay period 9 without the participant making an affirmative election back to pre-tax or would it only revert if/when the participant makes that election? Q1b: If the participant is required to make the affirmative election back to pre-tax catch-up, is only making the pre-tax catch-up contribution rate change available after pay period 8 sufficient or do they need to be able to make the election sooner? If the plan allows, the participant would fill out an election form at the beginning of the year that says "10% pre-tax deferrals each pay period, less the following: 5% Roth deferrals per pay period, with the Roth portion capped at $8,000"

you are vastly over thinking this. First - participants don't get to say that their first $500 of deferrals (Roth or otherwise) are catch-up. Catch-up does not occur until a limit is exceed, or a reclassification occurs such as with a ADP test. they can say "If I have catch-up I want it done as Roth", or "if I exceed the regular 402(g) limit I want my deferrals to stop rather than have any catch", or "I think I will do the max deferrals, so I'm preemptively electing to do my deferrals as 50% Roth and 50% pre-tax" etc. Assuming there are no testing issues - At the end of the year - the HPI participant's deferrals are reviewed. If they are over the regular 402(g) limit, then the next question is "Does the participant have Roth deferrals that occurred during the year, such that the amount in excess of the 402(g) , is at least equal to the amount to be classified as catch-up?" Even if the person deferred Roth for the first half of the year, and pre-tax for the second half, if their Roth dollars are enough to satisfy the amount, then that's good enough. As far as an election by the participant - I would encourage plans to let their participants know - they can elect a portion Roth, and a portion pre-tax, and if the participant thinks they will go over 402(g) then they should probably try to elect enough Roth (either up front or throughout the year) so that it is going to be satisfied. If the participant election is such that "If I have catch-up contributions, I want them to be Roth" well then that's a different calculation. pre-tax would occur until the reach the regular limit and then Roth for the remainder of the year. If a participant is saying " if I am HPI and I have catch-up I want it done as Roth", and the plan would like to change the language on the deferral election form to be more specific, such that the election expires if the person is no long HPI, I suppose they could. but seems like it complicates things. "If I am a HPI and I have catch-up dollars I want them done as Roth and this election shall apply until I am no longer HPI, at which point my regular election will apply" "If I am not HPI and I have catch-up dollars my regular election will apply" "If I am HPI and do not make an election ..." the permutations seem endless... I think a simpler thing would a regular deferral election with an additional box: "If I am HPI I understand any dollars classified as catch-up will be classified as Roth deferrals unless I check the box below, in which case my deferral contributions will cease or be returned to me in the event I reach the regular non-catch-up deferral limit. This election shall remain in place until a new election form is completed" as an aside ERISApedia is having a webinar on this topic later this month. I plan on watching. I'm sure I will learn a few things and perhaps correct my understanding if i'm mistaken.

One issue I see is that Roth deferrals are withheld from pay. Is the employer planning on reporting Roth deferrals on the participant's W-2? And does the plan have a deferral election form on file for Roth from the participant? Would they plan on getting one? I often see voluntary after tax as a direct contribution from the participant, not processed as a deferral. Is that what occurred here? Is the person in question non-highly compensated? Lower paid does not always equal non-HCE. Without knowing more about the situation, I would hesitant to suggest reclassification to Roth deferrals as a solution.

were dollars withheld from pay as pre-tax deferrals? but they should have been withheld as Roth deferrals? Were they withheld as Roth deferrals , but just deposited as pre-tax? If the payroll is correct- but deposits were wrong, just as the recoredkeeper for a correction. If payroll was wrong- are you going to adjust payroll records? or are you leaving as is? If leaving as is - the participant should be offerred the option for an in-plan Roth conversion, which will convert the pre-tax deferrals into Roth deferrals, and the recordkeeper typically issues a Form 1099-R showing it as taxable to the participant.

absent the reasonable classification that CuseFan mentions, the standard ratio percentage test applies(70%). In addition to what everyone else already said about gateway and top heavy. Everyone in their own group - which is often how its written into the document - isn't a reasonable classification. at least not that I've ever heard accepted.

they can put a class exclusion in the document, and as long as testing passes with those folks as zeros in the test, its fine. same as any other class exclusion. But if the exclusion covers the majority of the NHCE, and all the HCE are in the plan, likely testing won't pass.

just minor additional thoughts - if you have made a written request for the SPD and have not received it, that is usually something the DOL, EBSA can get and forward to you. Are you/were you a highly compensated employee? If so, and you are requesting a lump sum distribution, it is possible the funding is not adequate to allow for a non-annuity distribution. If the new actuarial firm is redoing the work from scratch, back to the beginning of the plan, that can take some time, and might be drawn out based on all the things everyone has already mentioned. Did the employer have a 401(k) plan as well? Were you eligible for that plan? For very small employers, it can be more cost efficient to give large benefits as employer contributions into a 401(k) plan, rather than retroactively add everyone to a DB plan. If that is the case, or something they are considering, then likely compliance for both plans would need to be redone back to 2020. Many small business owners seem very entreprenurial to me, and if there are other businesses they have that were part of a related testing group, but weren't included in the plans correctly, the complexity of the correction might be larger than you realize.

they are still in your test. the test will pass though because the HCE group will be 0%.

the term new comparability is used in a variety of ways, but for your situation, you should pay attention to C.B. Zeller. Precision of language is important when talking about these tests and allocation methods. General test, rate group testing, ABPT, coverage, cross-testing, all refer to different things. Cross testing is specifically the idea of testing Defined Contribution benefits on a Defined Benefit basis. Or Defined Benefit accruals on a Defined Contribution basis (but that is far more rate). New comparability is a similarly used term. That's not what you are doing here, and everyone being in their own group or getting custom amounts does NOT require the use of cross testing. As mentioned above, general testing on an allocation rate (DC) basis is fine to use.

and yes there will be additional testing requirements. the EE who are eligible for deferrals, but not for SH, generally need to be tested for ADP/ACP. If there are no HCE in that testing group its usually not a problem, but is another thing to be aware of and perform each year.

Are the hours going to be counted forever? What if it takes someone three years to reach 1,000 hours, do they want the person let for the safe harbor and profit sharing at that point?

assuming this is via ach, sounds like its late then. hindsight is 20/20 the employer should have at least revised and submitted the people they could. and then only a portion would be late and in future years, they should get people added to the recordkeeper sooner, even if the deposit is going to occur at the 11th hour. no reason to wait to input employee data until the 11th hour.

you are going to need to provide more details. Late how? After the deadline in order to be deductible? Generally tied to the organization business tax return filing deadline? More than 12 months after the year end so that it creates a possible 415 issue?