Vlad401k

We have a participant who passed away in 2024. He has both Traditional and Roth balances in the 401(k) plan. In the past, he has been taking RMDs from the Roth source. For 2024, which balance would we use for RMD calculation (just the 12/31/2023 Traditional Balance or 12/31/2023 Total Balance - that includes the Roth) and can the RMD for 2024 be distributed from the Roth source to the beneficiary? The reason I ask is because I know that for Roth IRAs, the RMDs are required after the person's death, but is that the case for deceased 401(k) participants with Roth balances? According to this link from the IRS, it seems like only the Roth IRAs have RMDs for deceased participants: https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs#:~:text=Roth IRAs do not require,required from designated Roth accounts. In my opinion, only the participant's 12/31/2023 Traditional Balance would be considered for RMD calculations and the RMD must be taken from the Traditional source. Would you agree?

We have a Safe Harbor Plan that would like to add Automatic Contribution Arrangement (ACA) mid-year for 2024. I have 2 questions. 1) Can a Safe Harbor Plan add an ACA feature? To me, it seems like a Safe Harbor plan can only be a QACA, so ACA feature cannot be added. Is that correct? 2) If the ACA feature can be added to a Safe Harbor Plan, can the feature be added Mid-Year (I realize that a Safe Harbor plan cannot be changed to QACA mid-year)? Thanks.

The additional question is... can an ACA arrangement be added to a Safe Harbor Plan mid-year?

Bill, Thank you for your response. In the IRS link in my original post, there is the following quote: "However, a plan isn’t limited if the: change is adopted at least 3 months before the end of the plan year, change is made retroactive for the entire plan year, and the plan sponsor gives an updated safe harbor notice and election opportunities at least 3 months prior to the end of the plan year." Based on that link, it seems like retroactive amendment to the match formula is possible. Would you agree? The following link (https://www.irs.gov/pub/irs-drop/n-16-16.pdf) also has Example 3 on page 7 that shows that increasing the Safe Match is permissible retroactively. In my case, the Safe Harbor Match is not increased (it's still 4% total), but the formula is more favorable. Thanks.

We have a Safe Harbor 401(k) plan that has a basic match formula (100% on the first 3% and 50% on the next 2%). They would like to add the automatic contribution arrangement that would be a flat 4%. Can a Safe Harbor plan add ACA (not EACA or QACA) at 4%? Also, can they change the formula to 100% match on the first 4% instead of the current formula? Based on what I found here: https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-401k-plans-and-notices, it looks like it's permissible assuming it applies to the entire year. In this case, I believe we will need to do 2 amendments. One amendment would amend the Safe Harbor formula effective 1/1/2024. The second amendment would amend the plan to flat 4% ACA, effective now. I would think that we can't combine these amendments in one, since the effective date for the Safe Harbor formula change has to be 1/1/2024, but the ACA feature was not available for the entire year, so it can't have an effective date of 1/1/2024. Would you agree? Thanks!

Let's say a participant in a 401(k) plan has $100k in Traditional sources and $50k in Roth sources as of 12/31/2023. Since RMDs from the Roth sources are no longer required in 2024, would it be correct that only the $100k Traditional balance would be considered for calculation of RMD required for 2024? Thanks.

One of our participants overpaid a 401(k) loan. The company failed to stop withholding loan payments after the loan was repaid. He then took out another loan. Is the only way to correct this mistake to send the check to the participant for the overpayment? Thanks.

We have an employer who owns 2 companies: 1) Company A: has employees. Currently has a 401(k) plan. 2) Company B: has no other employees besides the owner. Currently has no plan. Can the owner set up a SIMPLE IRA for company B? Based on my research, it seems like it's not possible, but wanted to make sure. Thanks,

We have 2 plans (A and B - they are part of a Controlled Group) that we are trying to test separately. They fail Ratio Percentage Test when tested separately. My question is how should the Average Benefit Test be done? Based on my research, the correct approach is one of these 2 ways: 1) Average Benefit Test is done on an aggregate basis (so, the contributions of all employees in both plans are taken into account). If the ABT is passed this way, then the plans can be tested separately. 2) Average Benefit Test is done by considering all contributions of Company A and $0 and 0% for Company B's participants (since none of the participants of Company B are benefiting under Company A). And, the test is also done for Company B (in which case, all contributions of Company A participants are counted as $0 or 0%). Which way is the correct way to test Average Benefit Test for a Controlled Group where we would like to test each plan separately for compliance testing? Thank you!

We have a plan where only 1 person (100% owner) was a participant. The plan's assets never exceeded $250k, so no Form 5500 has been filed in the past. The plan terminated on 12/31/2023 and the owner took a full distribution in April of 2024. We'll file one Final Form 5500-EZ - for 2024. I have a couple questions: 1) Since the owner technically has a termination date of 12/31/2023 (plan's termination date), is 8955-SSA form required for 2023? Is the 8955-SSA form required for 2024? 2) The SAR is not required for any year (including 2024) because this is a Solo 401(k), correct? Thanks!

A Safe Harbor Match plan currently has no allocation conditions for Profit Sharing and the formula for Profit Sharing is defined as pro rata. Can the plan change the formula to New Comparability - One Group per Participant mid-year? No profit sharing has been funded to the plan yet in 2024 and the plan document defines the period for determining the amount of an allocation of Non-Elective Contributions as End of Plan Year. Thanks.

We have a Safe Harbor Non-Elective plan that wants to terminate the plan in January of 2024. The plan's only participants at this point are the owner and his spouse. What would be the requirements to terminate the plan? The owner would like to terminate the plan as early as possible. Thank you.

We have a new plan with 2 participants. One of the participants is a 100% owner. The other one is an HCE. There have been no contributions funded to the plan so far. The owner would like to fund at least 3% to herself. Would it be possible to exclude the non-owner HCE (by division, for example) and not have to fund the 3% Top Heavy Minimum to this participant? Or would the excluded HCE still be counted in the Top Heavy Test and therefore would have to receive the 3% minimum? Thanks.

I have a question about if this plan can file using Form 5500-EZ. There are 2 people in the company: 100% owner and his child. The child does not yet qualify for the 401(k) plan because he has not met the eligibility requirements (the plan requires participants to be age 21 and the child is not yet 21). Since the 100% owner is the only participant in the plan, can a Form 5500-EZ be filed instead of Form 5500-SF? Below is the text from the 2022 Form 5500-EZ Instructions: "1. Covers only you (or you and your spouse) and you (or you and your spouse) own the entire business (which may be incorporated or unincorporated); or 2. Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC §1372(b), as a partner); and 3. Does not provide benefits for anyone except you (or you and your spouse) or one or more partners (or partners and their spouses)." Thank you!

Let's say an employee makes $10,000 a year. He is not catch up eligible and he decides to contribute $9,000 as Roth in the 401(k) plan. He also would like to contribute $6,000 to a Roth IRA. Since the 401k and Roth IRA contribution limits are separate, I believe this scenario is fine (even though he's contributing more than his total income for the year into the 401(k) and Roth IRA combined). Do you agree?