Vlad401k

We have a plan that has a 2-20 vesting schedule. They would like to make everyone who was employed as of 12/31/2025 100% vested. Anyone who terminated before 12/31/2025 or hired after 12/31/2025 would be subject to the 2-20 vesting schedule. To me, this sounds like a potential Benefits, Rights, and Features (BRF) issue. Is that correct? If so, how would we determine if this amendment is discriminatory. Would we apply 410(b) Coverage Testing to the benefiting and non-benefiting group and determine if the NHCE to HCE ratio is at least 70% or is there another way? If coverage testing would apply, would we include all participants in the denominator (for example, would the denominator include employees who already met the 100% vesting requirement because they have 6 years of service?). Thanks!

Yes, it does have that failsafe. However, this employee never worked 1,000 hours in a year of service. Thanks.

A plan has an eligibility requirement that a participant must work 6 moths with 150 hours in each month in order to become eligible for the Profit Sharing source? Eligibility computation period is defined as anniversary year for the first year and then it switches to the calendar year. We have a participant who was hired a few years ago and worked around 500 hours per year, then was terminated and re-hired multiple times over the years. We count all years after a break in service. For eligibility determination, which option is correct: 1) We determine if the employee is eligible (worked 6 months with 150 hours in each month) for each eligibility computation period. So, if the employee did not work 6 months with 150 hours from date of hire to anniversary date, we switch to calendar year and determine if she worked 6 months with 150 hours during that calendar year, etc. 2) We determine if she ever worked 6 months with 150 hours (at any point since being employed). I believe option 1 is correct since the eligibility computation period is the 12 month period. Do you agree? Thanks!

A participant had a Missed Deferral Opportunity in 2025. There were missed match contributions associated with the Missed Deferral Opportunity. Should the Missed Match be included in Compliance Testing? Thanks.

Let's say a company has 1 owner and a few NHCE participants. They fund 3% SHPS during the year. Can the owner also choose to fund additional contributions to himself during the year? For example, let's say he decides to fund an additional 6% (in addition to SHPS of 3%) in Profit Sharing. Is this allowed? They would pass Gateway, but we don't know if the General Test would be passing based on 9% to owner and 3% to NHCEs. If this is allowed, can he fund more than 3% SHPS plus 6% Profit Sharing to himself during the year, while only funding 3% SHPS to NHCEs? At that point, they would not be passing Gateway and additional contributions would definitely be required for NHCEs to pass testing. Thanks!

Can you make an amendment to exclude HCEs from being eligible for a Safe Harbor plan (effective 1/1 and amended at least 30 days before beginning of the year)? These HCEs already met the plan's eligibility requirements. Thanks!

We have a plan with 2 participants (correction: employees) 100% Owner and another employee who is an HCE (but not a Key Employee). The plan excludes the HCE by name and only the Owner contributes to the plan. The Plan is Top Heavy. The plan passes coverage testing, since there are no NHCEs. Does the plan have to fund the Top Heavy Minimum 3% to the HCE who is excluded from the Plan? Thanks!

A plan has a Partial Plan Termination in 2025. None of the terminated participants have a balance. Should the terminated participants be 100% vested (in case they are re-hired in the future) or not (since they don't have an account balance at time of termination)? Thanks.

A participant is over age 73 and has an RMD for 2025. He terminated before NRA and because of that, he is not 100% vested. Is the RMD amount calculated based on full account balance or vested account balance? Thanks.

Hi, I have a question about a Controlled Group relationship. A sponsor owns two companies: A and B. For company A, she has a 401(k) Plan and there is no 401(k) Plan for company B. Company B is currently an LLC (that she also owns 100% of) where she has 1 household employee. She is thinking of dissolving the LLC to avoid the 2 companies being in a Controlled Group relationship. According to the plan sponsor, the household employee (at Company B) is not part of a trade or business (and their payroll and any 401k contributions would not be tax deductible) so they believe the household employee would not need to be covered by the Company A's 401(k) Plan if the LLC is dissolved. "Reading from IRC 414: (c)Employees of partnerships, proprietorships, etc., which are under common control (1)In general Except as provided in paragraph (2), for purposes of sections 401, 408(k), 408(p), 410, 411, 415, and 416, under regulations prescribed by the Secretary, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer." Is this still a Controlled Group relationship and would the household employee from Company B need to be covered by Company A's 401(k) Plan.

The plan document allows for the distributions of After-Tax Employee Contributions at any time. In this case, can you rollover the After-Tax Contributions (in a 401(k) plan) directly into a Roth IRA? I believe you can and the code should be code "G". Is that correct?

A former spouse of a participant passed away. The QDRO requires the distribution in this case to be made to the estate. If the distribution is paid to the estate itself, what are the tax and penalty consequences? Is it the standard 20% Federal Tax withholding and no 10% penalty? Thanks!

A standard document was used in this case. The only participant in the main company is the owner. The other employees would not be eligible until 2024 - the year in which the owner did not contribute anything. Given these circumstances, what would be the appropriate way to fix the fact that employees at the other company were not told about the 401(k) plan? Thanks!

A Solo 401(k) plan is part of a controlled Group. The owner of the company owns 100% of another company. He is not paid through that other company but has 2 employees. The owner is not contributing anything to the Solo 401(k) in 2024, but he did not tell his employees in the other company about the 401(k) Plan and that they are eligible. What would the correction process be? Based on this link: https://www.dwc401k.com/knowledge-center/missed-deferral-opportunities, it looks like the correction method is to fund the average deferral rate of participant's group. However, nobody is receiving any contributions in the Solo 401(k) plan. Would there be no Missed Deferral Opportunity in this case? Thanks!

If an employee is LTPT (but not yet eligible for the 401(k) plan under the Plan Document's eligibility conditions), is that employee part of the Average Benefit Test or is he/she excluded? Thanks!