justanotheradmin

well typically its tied to the contribution year, and not a particular participant group. For example, if the QACA was originally written as 100% immediate vested. But then effective 1/1/2025 (for a calendar year) there is an amendment making it on a 2 year cliff. it needs to be clear though as there there are different ways to slice and dice. In my example, all of the QACA accrued for 2024 and earlier is 100% vested, and any QACA contributions for 2025 and future years is subject to the 2 year cliff. This does mean folks who have been there awhile will be 100% vested no matter what if they have enough vesting service, and newer folks will always be subject to the 2 year cliff, but that happens over time anyways.

is this a one person plan? DC? DB? Are there going to be any future contributions, benefit accruals, deposits? If no, then eventually will be deemed terminated whether the person likes it or not. If the business has closed because the owner retired - is there even a sponsor? is it an abandoned/orphan plan? If its an active plan, other than one retired person doesn't want to take their money - is it a big deal to let them leave it in? In additional to possible better protections, some plans have better investment options, pricing, etc than an individual would get themselves with a retail IRA.

they can have both - if the documents allow - the model SEP doc does not. If they do have both - the combined limits for 404 and such apply. I would be cautious of removing money from the SEP. The standard correction for a non-deductible contribution is an excise tax and carryforward, not removal of the excess unless it also violates 415 etc.

Something to consider - for the 401(k) plan is she treated as a terminated participant? or rather something other than an active employee participant for purposes of the 401(k) plan? Her husband's account is hers yes, but some plans do not allow terminated participants to roll money into the plan. Does the plan allow other terminated participants to roll money into it? Assuming she would be allowed to do a rollover in - some additional suggestions - the 401(k) account should be renamed/recoded (even if only on paper) to her as the participant - similar to how an Alternate Payee's account is set-up/segregated pursuant to a QDRO. The inherited SIMPLE IRA - she rolls to a regular IRA of her own first, then rolls that IRA into her 401(k) account in the plan. But all that work is pointless if she can't do a rollover into the plan. Just my 2¢.

Company A has a traditional 401(k) plan with a safe harbor provision, no automatic enrollment, plan has been around several years, well before SECURE 2.0. Company B - does not have a plan. Company B owners - purchase Company A as an equity purchase as of 7/1/2023. Company B intends to become a participating employer in Company A's plan as of 1/1/2025. It is a control group. Assume the transition period runs until 12/31/2024. The two companies are similar in size for number of employees, about 30 each. Is the resulting plan exempt from the automatic enrollment rule of SECURE 2.0? Or would it need to add an automatic enrollment provision that satisfies SECURE 2.0 as of 1/1/2025? what say all you lovely people?

Not relevant for this year - but for future years - Double check your plan document. If using a standardized document (as opposed to individual designed, or non-standardized) the basic plan document may preclude certain types of compensation exclusions particularly from safe harbor, not withstanding what can be written in to an adoption agreement, or actually allowed under the laws and regs. Fine print is important.

Jakyasar - what changes for the PS if you have comp excluded? does it actually change any amounts that someone gets? If not - amending that into the plan document for a future year - seems to add complexity that doesn't serve an actual purpose or change the contribution results or possibilities. If it is the HCE you want to receive less profit sharing, just give them less, as long as 401(a)(4) testing passes. With everyone in their own group, you don't need a change to the plan's definition of compensation to do that.

For this - you learn by doing. Use as many of the sample forms available on the IRS website, and construct and assemble and submit according to the instructions in the EPCRS Rev Proc. It tells you the order of the items to be put into the PDF and everything. Those issues are custom and won't be covered completely by the available sample schedules, so you will have to prepare your own from scratch. Alternatively - if these people have a missed opportunity to defer - is is cheaper to do a QNEC to correct that error? it will depend on number of years, number of affected people, etc. And might not be eligible for self-correction. If you are asking the IRS to allow a retroactive corrective amendment to exclude people, and to forgo a corrective contribution, particularly for NHCE, you will need to make a clear case about why that should be allowed, and include a supporting analysis in your VCP submission. If the plan is going to do the QNEC for those who were held out and shouldn't have been (the part-timers and the one year wait) and then amend the doc for future years, and just want the IRS's blessing on the QNEC, then that is an easier write-up for the VCP. I don't think I've seen or heard of a VCP being done without an attorney's involvement. Though I suppose some TPAs might have an ERPA or EA or CPA on staff that does them a lot. But that might be more of a reflection of the bubble I work in, than an industry practice. So I'd suggest they contact an attorney who can help, if they really want to go the VCP route.

well its too late for 2024 for deferrals and safe harbor..... what method does the plan use for profit sharing allocations? if everyone in their own group - does amending the compensation definition really change anything? Would they even pass §414(s) if the compensation exclusion was in place? Sometimes its hard to pass.

Ask your employer for a copy of the Summary Plan Description. That is a document that should have the plan provisions in easier to understand language.

I think the misunderstanding that many people have is that if the participant did not fill out a beneficiary form/designation, then the account is subject to the terms of a will, or if no will, then intestate rules. It isn't. 401(k) plans have default beneficiaries written into the governing plan documents, so that in the event a participant passes without a affirmative beneficiary designation, there is a default beneficiary. Typically that is something like spouse, children, estate, but it varies. Read the plan's document carefully. Even if the estate is where the benefits are to go - they go there because of the beneficiary rules in the plan document, not because of the application of a will or intestate laws. So If everyone else pre-deceases the participant (not what we have in this post) the estate is the named default beneficiary under the terms of the plan, and gets the $$ because of that.

Example: basic plan, 1 year of service (1,000 hours) eligibility requirement, age 21, semi annual entry etc. part time employee hired 5/1/2024, Works 300 hours by 12/31/2024. Works 300 hours from 1/1/2025 - 4/30/2025 Works 450 hours from 5/1/2025 - 12/31/2025. Option A If we use the more common First computation period is 5/1/24 - 4/30/2025, 600 hours: then yes over 500 hours, but less than 1,000 Second computation period is 1/1/2025 - 12/31/2025, 750 hours: yes over 500 hours, but less than 1,000. LTPT as of 1/1/2026 since two consecutive periods (as defined in the plan document as the overlapping periods as above) Option B Alternative version - if plan document allows: Initial computation period for regular eligibility 5/1/2024 - 4/30/2025 less than 1,000 hours, so switch to LTPT analysis First computation period for LTPT - 1/1/2024 - 12/31/2024, 300 hours: less than 500 hours Second computation period - 1/1/2025 -12/31/2025, 750 hours: over 500 hours, less than 1,000 Third computation period - 1/1/2026 - 12/31/2026 If they are over 500, then LTPT as of 1/1/27. If over 1,000 then regular part as of 1/1/2027 There are lots more ways to do it, but comparing just these two methods, option B gives an employer an extra year to figure it out. and I think is less likely to be done wrong. It gives a service provider a longer time as well to possibly notice and mention that someone might be a LTPT next year. So if a document provider can accommodate it, I think not using the shifting method, even if just for LTPT analysis, is a better way to go.

well, if the employee doesn't have 1,000 hours by their first anniversary date, why couldn't the first computation period be 1/1 -12/31? assuming a calendar year plan? I understand the plan is allowed to shift the second computation period, but what is preventing them from going back and considering the first period to be 1/1 -12/31? Just for LTPT purposes. Using the dates in the example: DOH 5/1/2023 - if they worked 1,000 hours by 4/30/2024 then they are subject to regular elig rules for the plan anyhow, not the LTPT. But if they didn't: Then the first period to look at could be calendar/plan year 2023, which is 1/1/2023-12/31/2023. Did they work 500 hours in that period? Yes or No? And then the second period would be calendar plan year 2024, Did they work 500 hours in that period? yes or no? The plan document would have to be written to apply such a computation period method just for LTPT employees, but I think saying to an employer - just tell me how many hours they worked in each year, period, is an easier thing when evaluating who might have to be offered the plan because they satisfied LTPT status.

Upon further reading, I think doing it my original way is fine too, as long as that's what the plan document calls for. Though I suspect many will still use the original computation method, whatever it uses for regular eligibility computations, for non LTPT. "I.R.C. § 410(a)(3)(A) General Rule — For purposes of this subsection, the term “year of service” means a 12-month period during which the employee has not less than 1,000 hours of service. For purposes of this paragraph, computation of any 12-month period shall be made with reference to the date on which the employee's employment commenced, except that, under regulations prescribed by the Secretary of Labor, such computation may be made by reference to the first day of a plan year in the case of an employee who does not complete 1,000 hours of service during the 12-month period beginning on the date his employment commenced."

I take that back. I see that is has to be from the date the employee commmenced, per §410(a)(3)(A). my apologies!

I disagree. It says "consecutive 12 month periods" https://www.federalregister.gov/documents/2023/11/27/2023-25987/long-term-part-time-employee-rules-for-cash-or-deferred-arrangements-under-section-401k So unlike regular eligibility, in which many plans using a shifting method, and the first 12 months and the second 12 months overlap because of the change over to the plan year, I don't see that as how LTPT rules are applied. Its much simpler than your analysis. For a calendar year plan, with a person's original date of hire in 2023: Did the person work over 500 hours in 2023? yes or no? Did the person work over 500 hours in 2024? yes or no? Don't worry about breaks in service, leaving and coming back, anniversary dates, etc.

Are you asking about deferrals? or regular employer contributions such as match, safe harbor, profit sharing etc? I would think deferrals count, but not the ER contribs based on this - but someone else can read and confirm. https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXI/Chapter151A/Section1 (s)(A) ''Wages'', every form of remuneration of an employee subject to this chapter for employment by an employer, whether paid directly or indirectly, including salaries, commissions and bonuses, and reasonable cash value of board, rent, housing, lodging, payment in kind and all remuneration paid in any medium other than cash; provided, however, that such term shall not include: (1) The amount of any payment, including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment, made to, or on behalf of, an employee or any of the employee's dependents under a plan or system established by an employer which makes provision for the employees generally and their dependents or for a class or classes of the employees and their dependents, on account of (i) sickness or accident disability but, in the case of payment made to an employee or any of the employee's dependents, this paragraph shall exclude from the term ''wages'' only payments which are received under a worker's compensation law; or (ii) medical or hospitalization expenses in connection with sickness or accident disability; or (iii) death. (2) Any payment on account of sickness or accident disability, or medical or hospitalization expenses in connection with sickness or accident disability, made by an employer to, or on behalf of, an employee after the expiration of six calendar months following the last calendar month in which the employee worked for such employer. (3) Any payment made to, or on behalf of, an employee or the employee's beneficiary (i) from or to a trust described in section 401 (a) of Federal Internal Revenue Code and exempt from tax under section 501 (a) of the Code at the time of such payment unless such payment is made to an employee of the trust as remuneration for services rendered as such employee and not as a beneficiary of the trust; or (ii) under or to an annuity plan which, at the time of such payment, is a plan described in section 403 (a) of the Federal Internal Revenue Code; or, (iii) under a simplified employee pension plan if, at the time of the payment, it is reasonable to believe that the employee will be entitled to a deduction under section 219 (b) (2) of the Federal Internal Revenue Code for such payment; or (iv) under or to an annuity contract described in section 403 (b) of the Federal Internal Revenue Code other than payment for the purchase of such contract which is made by reason of a salary reduction agreement whether evidenced by a written instrument or otherwise; or (v) under or to an exempt governmental deferred compensation plan as defined in section 3121 (v) (3) of the Federal Internal Revenue Code; or (vi) to supplement pension benefits under a plan or trust described in any of the foregoing provisions of this paragraph to take into account some portion or all of the increase in the cost of living as determined by the United States Secretary of Labor since retirement but only if such supplemental payments are under a plan which is treated as a welfare plan under section 3 (2) (B) (ii) of the Employee Retirement Income Security Act of 1974.

If there are no other employees - no Non-highly compensated employees - then yes, the nondiscrimination tests would be deemed to pass, and yes the plan would be top heavy, but there would be no minimum contribution due. So they apply, but don't impact the plan because there is no one else.

what does the plan document say? usually it addresses this. if not in an adoption agreement, then in perhaps the underlying plan document. I would expect the participants to stay enrolled at their default AE % unless notified otherwise they they would stop.

Just to be clear for anyone reading who hasn't encountered this - in this case there is nothing to actually move. The money gets recoded as a different type. Sometimes folks think investments will actually be liquidated and reinvested, and that is not the case if clear instructions are given and the recordkeeper (Hancock) does it correctly.

There are some out there that do not want to work with every TPA. Particularly if the investment provider's service model grants TPAs a lot of access/ control over the plan once they are set up in their system as one. Just as some wealth advisors have minimum investment requirements ($5 million, $10 million etc). If the TPA is large enough, I have seen some basic information given, certainly information about the TPAs insurance, data protection policies etc. It is reasonable for the TPA to also ask how their information is protected and who it is shared with before anything is disclosed on the form so the TPA can decide if it is worth it or not. Being a named TPA might just be one option. Is there an option to be noted as an authorized party for the retirement plan? More like a plan contact in general the similar to how a bookkeeper, payroll company, or CPA for the employer would be granted access? Just so they can get copies of statements?

that's a helpful way to frame it, thanks.

yes, it is more than 3%. I think the others are getting about 7%.

Hi Everyone, I've read through this link but its an older one, and I just want to make sure I'm understanding it correctly for a plan's situation. Profit Sharing only plan - plan document specifies pro-rata allocation method, so I recognize it is relying on the allocation method safe harbor, rather than general testing, 401a4. Plan has a 1,000 hours and last day requirement, and most years there are a few part-time folks who are required to receive only the top heavy minimum. The 70% test does pass if those folks are included as benefiting. It does not if they are not counted as benefiting. Based on my reading of the link above - it sounds like I can't include them as benefiting? The plan document does not have the 410(b) fail safe language, so if allocation conditions need to be waived for anything other the top heavy min, a corrective amendment will be needed. Or, the plan would have to move on to more general testing and see if it passes, if it still doesn't pass, then then aforementioned amendment comes into play. Am I understanding this correctly? Do you include top heavy min only participants as benefiting in the regular ratio percentage test?

This may have already been shared - but I didn't see if offhand, so thought I would pass it along. Exclusion from electronic filing requirement for Form 5330 is available now | Internal Revenue Service (irs.gov) The IRS has decided paper filing is okay, just document that the reason for the paper filing is lack of authorized vendors. " Treas. Reg. 54.6011-3(a) requires a taxpayer to file Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, electronically for taxable years ending on or after December 31, 2023, if the filer is required to file at least 10 returns of any type during the calendar year that the Form 5330 is due. Treas. Reg. 54.6011-3 (b) and Instructions for Form 5330 also provide, on an annual basis, exclusions from electronic filing requirements in cases of undue hardship. Form 5330 can be filed electronically using the IRS Modernized e-File (MeF) System through an IRS authorized Form 5330 e-file provider. Currently, IRS has only one authorized e-filing provider for the Form 5330. As a result of the lack of authorized e-file providers for the Form 5330, the IRS has determined that a filer is permitted to file a paper Form 5330 for the 2024 taxable year. The filer should document that the reason for not filing electronically and filing a paper Form 5330 is the lack of authorized vendors."