Mr Bagwell

402g limit is calendar year. So no issues. 2020: 18,000. less than 19,500. all good 2021: 16,500. less than 19,500. all good The participant will need to keep an eye out for 402g limit if deferring into another plan. Shouldn't be an issue with you as long as new employer is not related to old employer.

Of course there was contributions to KEY employees.

Duck, That was awesome help! I did a search, but this one did not pop up for me. Thanks again.

We have a plan that will be terminating in 2021 at some point, date has not been determined. However, the employer has been sold to new entity and employees are terminated as of 6/30/2021. The plan is Top-Heavy as of 12/31/2020. Non-key employee who is a participant and employed by the employer on the last day of the plan year gets a top heavy minimum. Is it too simple to say the the plan is terminating as of 11/1/2021 and therefore, no top heavy contribution is required? I don't want to miss anything being this feels like such an easy question.... Thanks

I agree with you that "all" participants would need to satisfy the top heavy. (Based on plan doc, of course)

Yes, the plan maintains the top heavy exemption for the year. If there is a new employee hired and plan has SH Match: The employee will need the top-heavy contribution if still employed at the end of the year because the plan would not get the top-heavy exemption.

Sorry, my bad. Yes, I agree, for a plan that has dual eligibility and is "solely" funded with deferrals and SH, all good. Thanks for the correction BG!

Are you talking about a Top Paid Group kind of question? Or are you saying can I treat 3 HCEs as NHCEs?

Yes. But when a new employee is hired, the new employee will need a top heavy contribution because the plan is top heavy. Talk about a time sucking plan.

The ability to have different investment directions for non-Roth and Roth and/or different sources is baked into most recordkeeping systems. After all, once it's coded, it shouldn't be a problem. The challenge and difficult conversations come up when the participant decides to invest the assets differently and then wants to split the assets up between non-Roth and Roth to move forward. Of course, they always want the best performer to be in the Roth side of the equation. So to answer your questions above.... maybe typical, maybe not. I've worked at a company that opened the sources to different investing. I'm currently at a place that does the one investment strategy for all sources.

Wall Street Journal.... article dated 7/9/2021. maybe posted to site 7/10/2021

It might to some. I have some notes describing Back Door Roth as "Roth contributions are typically made as after tax elective deferral contributions to a 401(k) plan or IRA". This whole extra Roth thing gets people really excited. And it should. The problem is that not every Plan can take advantage.

Just, The Mega Roth's, also called Back Door Roth, success is extremely dependent on the employee demographics of the plan. This scenario you asked about won't work. You already pointed out that 4.5% deferrals (plus some catch-up) is about all the HCE can get through the ADP test. So why bother maxing out deferrals to only get it refunded. The match side is only worse because the ACP will include the EE after-tax. Most of the match will be refunded. So the HCE is right back where he started, about 4.5% deferral and 2% match. Your best bet would be to get the plan in some form of Safe Harbor and HCE could defer the 26,000 and get 3% or 4% employer money. So to answer your question... O yeah, there will be an impact on the rollover in your scenario. It would not be available for rollover, and then let the fun begin.

Thanks for the clarification, Mike.

From a practical standpoint, I have no issues with the safe harbor 3% being deposited quarterly. You come to the end of the year and true up as needed. Money is 100% vested. No big deal. The profit sharing being deposited each quarter does annoy me because at best it is an estimate based on the Plan Year Comp. Sure you could true it all up at the end of the year. But, I don't want the plan to be putting in too much money for some and then you have to remove it with earnings.... yuck. The scenario for profit sharing does not feel efficient at all for me. Cross testing can be challenging in and of itself one time a year. Does the plan have self employed individuals? If so, the difficulty goes up in my mind. What is the vesting schedule? You don't want to get into a participant getting a guesstimate of profit sharing at end of second quarter, terminating, and then getting paid out the wrong amount. I'm assuming too much, but it seems to be more efficient for the ER to set aside funds quarterly in their own bank account and then do the profit sharing at the end of the year. Takes the sting out of coming up with the funds all at once. Maybe they just want to dollar cost average the profit sharing into the plan 4 times instead of once. I understand that position from the ER's side, but not from our side. I'm sure others will have thoughts on this too. I have not personally had a plan try to deposit cross tested funds into the plan more than once a year.

Thanks Lou!

Sorry for they typos.... What normal plan year end was: 6/30 last normal 6/30/2020 First short plan year because of fiscal year end change: 7/1/2020 to 9/30/2020 Short plan year because of plan termination: 10/1/2020 to 2/28/2021

Trying to do final ADP test for a terminating plan. Short plan year 10/1/2020 to 2/28/2021. However, I am coming off of a short plan because of plan year end change. 6/1/2020 to 6/30/2020 ***meant 7/1/2020 to 9/30/2020**** By experience, I know of one employee that is HCE because he has been HCE last several years. There may be one more. I think I am looking for compensation for the time period of 10/1/2019 to 9/30/2020 to determine if HCE, correct? And being that the plan year started in 2019, I'm looking for compensation over 125,000, correct?

CB, The plan does allow the profit sharing. Thanks

Thanks for the thoughts Bird. Notice 2020-86 is the piece that talks about having to go 4% if done after the beginning of the year. So if the plan had no safe harbor design at 1/1/2021 and wanted to be safe harbor non-elective for 2021 at 5/1/2021. No problem, amend the plan, give the 4%, done. But I have a 3% NHCE only safe harbor plan at 1/1/2021 and wasn't sure the right answer. Maybe the answer is in the question of "what is a safe harbor contribution"? A Safe harbor contribution is a nonelective contribution of at least 3% of compensation to all NHCEs eligible to defer. So giving the HCEs a 3% contribution that is a 100% vested is fine, No testing needed because everyone got the 3%? ???

Plan is designed as safe harbor 3% non-elective to NHCEs only. Appears that employer would like to add the HCEs now with a Mid-Year change. I'm pretty confident this is doable. But, because of the timing of the change, I think this requires a 4% safe harbor non-elective to both the NHCE and HCE? Am I correct? Thanks

You may have to do a plan amendment... Check into it.

Now that's funny!!

Congrats!!!

I have a very difficult time believing the big P software cannot do what you are wanting it to do.