Mr Bagwell

could this be a partial plan term and the employee needs to be made 100% vested?

We do the best we can to remove the over-deposit with earnings. The premise is to make the particiapant and plan whole as if no error had occured. The section of EPCRS your post sites talks about removing the gains. It also speaks of not removing the losses as you point out. And I agree, too much time is spent fixing these types of errors.

Make sure there is no minor children.

If the plan year consists of only deferrals and the safe harbor contributions, the plan is exempt from making the top heavy minimum for that year. Or to say another way. The plan is still top heavy but is not required to make the top heavy minimum. The top heavy testing doesn't go away.

Timely question as I had been mulling through a scenario that I have been working on.... Does the new third partner personal corp adopt the existing plan?

I don't see how either. FYI.... Pretty sure you don't get to merge a 403b to a 401k.

Why not just go the participant directed route? Seems like a very straightforward approach to me. The plans that I see that are not participant directed are of the mindset that they are smarter then their employees and must protect them from themselves. That may be true, by why take the risk?

From a practical stance.... Don't forget about the benefit of no ADP test in the 403b. Often the non-profits have poor participation and the ADP test can get ugly real quick. I can think of a couple situations in my experience where the 403b was the best choice, but a 401k was done. So don't get sold a 401k because that's what paychex knows better than 403b.

Ah. Thanks.

Yes. The employee would need to get a sufficient amount to pass the gateway. The conundrum with a cross tested plan with 3% safe harbor is that the allocation conditions really go out the window because they are receiving 401a dollars at the 3% safe harbor level, causing them to be in the gateway. 401a dollars have to pass gateway before you get to nondiscrim testing. Contrast that with a plan with no safe harbor dollars 3%. the terminated employee would have no 401a dollars and would not be in the gateway. My curiousity is getting the best of me.... the plan doesn't pass nondiscrim unless the employees are receiving a 7.5% total? Normally, the gateway will pass with 1/3 or 5%. but you may have to bump up the employees to total of 7.5% to get nondiscrim to pass. Is there mostly young HCEs?

What/which processes are you trying to bot?

Not sure if TH is subject to coverage... would have to look into it.... But, HCE would be 0 of 1. wouldn't that cause the coverage to pass?

What part of 410b fails? 401k, 401m, 401a?

Experience leads us to this conclusion BG. I wonder if TPA is needing to "show the work"? If so, TPA is going to need guidance that we probably can't provide via a chat board. This is really a Safe Harbor plan design operation and processing vs. an OEE testing scenario. So I'm thinking that TPA will need to manually exclude everyone in Relius from the ADP test that receives the safe harbor contribution and run the ADP test. This should give the testing report TPA is looking to have.

What's the chance this plan has Participating Compensation?

I somewhat doubt that you fail the ADP test as most of the employees would be eligible for deferrals and safe harbor based on the previous eligibility requirements. The ADP test is only going to look at those employees that were hired after 12/3/2018. And most, if not all, will be NHCE. To be HCE for 2019 on a new employee is going to require ownership or ownership attribution. BTW, Relius does have a preceding entry logic. You will use the Plan Entry requirements for deferrals and Source Summary Overrides for Safe Harbor and other money types. BG beat me too it.....:)

Yes, you will have to separately test the ADP portion because you will have employees eligible to defer and not get the safe harbor 3%. To quote Bill, Yuck. Start watching Top Heavy. If plan is TH, the employees eligible to defer but don't get safe harbor may be required to get 3% anyway.

I was curious if the plan would require top heavy contributions?

Generally, HSA contributions would not be excluded compensation in the long run as they are Section 125 elective deferrals. So you're not excluding the compensation like you would, say, bonuses.

Rather, I doubt if you are missing anything. Your two terminated employees may have been important factors in passing the 401(a)(4). Especially, if they are young aged. I've run into this scenario before. Usually an analysis of the rate groups will help determine why the change in one year to the next.

I was waiting to see if this was going to come up for conversation.....

O man, this is hilarious that Frank Zappa was a referenced on this board. I only know one song that I know of...… something about moving to Montana and being a dental floss tycoon. LOL!!!!!!! Don't forget to look up one of his houses and check out the rooms. Definitely, a strange cat.

I'll jump in.... Look in the plan document for language about an "operational QNEC". I'd guess that the plan gives many options to pass the test in addition to the QNEC. Is the Plan current year testing? I would say, yes, the plan may have targeting limitations in regards to the amount of an operational qnec. You may not be able to give as much qnec as the plan would like to not have any refunds. So dig in and figure out the sweet spot of how much QNEC would it take to get to small refunds or no refunds, with or without catch-up. Without the compensation and the 2 NHCE comp and deferrals, I don't think we can do much for you. Hope that helps.

I think the first piece to solve is how much does the owner want to participate? How much does owner want to defer? Can he get to that number? Is the owner age 50 or greater? Depending on that answer is how I decide to move forward. You may have a plan that becomes TH the first year. all non-Key* I'm really smelling a 3% safe harbor is best. The cross testing is good option, but not giving employee 3 PS is not going to be a smooth as you think. Especially if plan goes top heavy.

Ah.... No. Sorry, I have in my head the owner would like to get the profit sharing. I haven't met too many owners so gracious to give the employees something and themselves nothing. Very rare.