pholosofizer

For a 7/1/24 - 6/30/25 plan year, would participants that are age 60-63 at 12/31/25 be able to make the additional catch-up (if the plan wanted to allow)? Or is it effective for plan years starting after 12/31/24? If a plan fails 6/30/25 PYE ADP testing and someone age 61 has all C/U available, would 11,250 or 7,500 be reclassed for this PY? 402(g) limit is tied to the individual and calendar year. Everything I'm seeing about special catch-up references taxable year. But perhaps 401(a)(30) / plan's responsibility to monitor the limit changes effective date of this? Thanks in advance!

Just curious on how others will treat the new distributions for top heavy testing purposes. The main concern is the ability for participants to contribute the funds back into a plan. If the money isn't paid back, I assume it'd just be treated like other in-service distributions. If the money is recontributed though, would these funds be ignored? Or would the balance associated with it be included in the top heavy balance (and then you'd probably have to back out the in-service so it's not double counted)? Thanks for your thoughts!

Always the voice I'm looking for, Tom. Thank you. So the reason I ask for this one - a supermarket chain that allows employees in after 6 months with no exclusions. A large percentage of these could simply be part timers in school, based on compensation figures.

It's actually 2 questions! 1) If a plan defines a year of service for eligibility as 1,000 hours, would you HAVE to look back at hours history to determine the otherwise excludable employees (to see if any never met 1,000 hours). Or could you just use hire date (and birth) for administrative ease/sponsor does not provide hours? Especially for new takeovers, it's tough for sponsors (especially large ones in certain industries) to provide hours history for a long period of time. I'd just assume a part time employee who has been at a company for 20 years met 1,000 hours once. I think it's common practice to make certain assumptions but can't find any language anywhere. 2) If a plan uses elapsed time for eligibility, could they not use the 1,000 hours to determine if they ever met a year of service for otherwise excludable classification? I think the regs just reference year of service, which would then come down to how the plan defines it. Thanks!

Situation where 3 employers in a controlled group all have their own safe harbor match plan. The formula is the same for all 3 plans. Definition of compensation will be different for one of them (not safe harbor definition - 414(s) comp ratio testing needed ... I'm going to refer to this as Plan 1), while Plans 2 and 3 just use 415 compensation. It's possible participants will be in multiple plans in any given year. I've read/researched too much about it today and would like some input at this point as I might start overthinking everything. When it comes to 414(s) testing, a couple questions come to mind- 1) When running 414(s) testing for Plan 1, if there are any participants that were with one of the Plan 2 or 3 during the year, would those participants ratios be calculated using: Plan 1 eligible comp/All compensation earned from any employer in the group? 2) Would 414(s) testing be required for Plans 2 or 3 if there are any participants in either that also participated in Plan 1 (assuming their compensation from Plan 1 employer is not eligible in Plans 2/3)? If all plans had the same definition of compensation, would this change anything? 3) Does being able to pass coverage separately (not requiring aggregation) change anything regarding 414(s) testing? Thanks for your help!

Hello, What should we do if a plan previously corrected a failed ADP test timely but then years later, inform us that compensation was incorrect and after re-running, the refunds should have been even higher? Would this be considered a late correction (after 12 months ... and would we have to go through VCP)? Or could we simply just have extra corrections processed for the affected participants still in the plan and perhaps inform the ones that have left that they might have ineligible money sitting in whatever account they moved to? I can't find anything for this scenario. I know if the refund amounts that came out were too high to begin with, we make an effort to have the money returned to the plan. Thanks!

Hello, Does anybody have any language (perhaps from a conference) that shows what would be considered a timely corrective distribution? I know it's 2.5 months after PYE but I'm looking for something specific like check date, assets segregated from account by, etc ... Thanks!

I'm going to just suggest they amend their allocation classes either way. For this year, I was able to accomplish everything they wanted with an additional ~$1000 to the lower tier group (which is a very small % of the total contribution). Thanks for the ideas!

Thanks!

Hi there! I have a plan that has always been an easy one to administer. Generally max out the top tier (and near max to execs) and give the minimum to others to pass gateway. *Plan excludes pre-entry comp* However, they hired a younger person in 2015 (and made enough comp to be an HCE in 2016) that became eligible in 2016. He is part of the tier that receives the max and his EBAR is through the roof. I won't be able to individually target young NHCEs because they are also lumped together (just 3 tiers in plan overall...hundreds of people). My question - can I use full year comp for everyone when running ABPT/calculating EBARs rather than plan comp? His EBAR would nearly cut in half. Gateway would still be using plan comp. Thanks!

We were just told that a 2013 ADP refund (processed by 3/15/14) was done for the wrong amount. Lets say the correct refund should have been $2,000 but the amount processed was $1,500 (so we're short $500 now). Since we're in 2015 and passed the 12/31/14 deadline, do we have to do a 1-1 QNEC plus remove the remaining excess+earnings? If we do the QNEC, each participant will end up with $1-2. Is there anyway to write this off as a clerical error and just process the distribution? If the QNEC is necessary, could we avoid deposited the $1-2 for NHCEs from the 2013 plan year that are still active but never had/still don't have an account? Thanks!

For plans that have an exception to the allocation conditions, specifically retirement, I've always treated as: if the person had reached normal retirement age they would receive the contribution regardless of reason for termination. On the ERISA Outline Book, it mentions: "Another common exception is for a participant who has reached the normal retirement age stated in the plan, and retires before the end of the year." A coworker questioned the "retires" part because we can't find any definition of retiring in the AA, BPD, EOB. When you say retire, many would assume leaving the workforce and enjoying endless margaritas on a beach/etc. The only reference that can be found is NRA, which is easily determinable. Outside of using a dictionary... So, is this exception solely in reference to NRA? Could a plan modify the reason for leaving work as part of the conditions?

Well I like the idea of not having to test together

So just test them separately no matter what?

We have a situation where a company with a 6/30 PYE 401(k) started up a separate 401(k) plan with a 12/31 PYE for a company they own. If they can separately pass coverage, then ADP/ACP could be run separately. However, if coverage fails, then wouldn't they have to be tested together? If that's the case, we couldn't know the results until after 12/31, which would be well after the 2.5 month correction period for the 6/30 plan. What are you thoughts on this? I was under the impression that they couldn't be permissively aggregated because of the different PYE but what if they have to? Thanks!

That's our thinking (and I have no idea why the document would be set up this way).

I don't see any problem with the setup, it seems like a great idea. Why not just have a 403(b) only though? Is there a match made that would require ACP testing as well?

We have a plan that limits employee deferrals to 20% of annual compensation. The AA also says they may defer 100% of their bonuses, regardless of the above limits (which is in reference to the sponsor electing to use the IRS limit or to limit deferrals to a specified $/%. The BPD doesn't really clarify anything. I would be under the impression that the 20% limit would supercede the bonus election (for example, someone defers 20% all year and then gets a bonus...could they then defer 100% of it which would put them over 20% of plan compensation?) I couldn't find any references on EOB or elsewhere. Thanks!

Thanks Tom. I figured that but couldn't find any examples after scouring the internet and EOB had no mention of it. Refunds would change a lot based on the response.

I have a plan that has defined imposed limits on elective deferrals. There are HCEs that went over the limit (and already used their catchup). Question - would the amount over the plan imposed limit be included in the ADP test for the HCEs? For NHCEs it definitely would not be but for HCEs, it's unclear. I could only find reference to amounts over the 401(a)(30) limit being included in the test for HCEs. Thanks!