Tom Poje

the closest you come is a statement in the preamble to the 401k regs (though it doesn't really say how to fix) I would read it as saying such amounts are not the participants since they would based on his earned income The preamble to the 401(k) Regulations describes it as follows: One commentator asked for clarification of the interaction between these timing rules and the rule under the regulations that treats a self-employed individual's earned income as being currently available on the last day of the individual's taxable year and whether this last day rule precludes a partner from making elective contributions during the year through a reduction in the partner's draw. The restriction on the timing of contributions is not intended to prevent a partner from deferring amounts that are paid to the partner throughout the year on account of services performed by the partner during the year, and the final regulations have been modified to clarify this point. However, self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits (such as the limits of section 415) that will apply to the individual, based on the individual's actual earned income for the relevant period.

nothing else. the reason it is permitted is because otherwise the plan would be disqualified, and the IRS gives an opportunity to correct the problem the example was for a 2006 plan year, so it is even later than your situation!

according to EPCRS (self correction) you simply distribute the excess plus earnings (otherwise plan is subject to disqualification, assuming this is an excess not caused by participant in 2 different plans) Appendix A .04 Failure to distribute elective deferrals in excess of the § 402(g) limit (in contravention of § 401(a)(30)). The permitted correction method is to distribute the excess deferral to the employee and to report the amount as taxable in the year of deferral and in the year distributed. The inclusion of the deferral and the distribution in gross income applies whether or not any portion of the excess deferral is attributable to a designated Roth contribution (see § 402A(d)(3)). In accordance with § 1.402(g)-1(e)(1)(ii), a distribution to a highly compensated employee is included in the ADP test and a distribution to a nonhighly compensated employee is not included in the ADP test. NOTE: even though the participant didn't receive a 1099 for the excess, when they filed taxes their W-2 would show an excess, so they should have paid taxes on that amount in 2017. now they receive the distribution and a 1099 (form for 2018) and they pay taxes a second time. EPCRS section 9 .04 example 1 During the 2008 plan year, the Plan Sponsor made QNECs on behalf of the excluded employees, distributed the excess deferrals to the affected participants, and made a top-heavy minimum contribution to all participants entitled to that contribution for the 2006 plan year. Each corrective contribution and distribution was credited with Earnings at a rate appropriate for the plan from the date the corrective contribution or distribution should have been made to the date of correction.

and with a single entry date, then of course the contribution is based on full year comp/deferral , as opposed to someone entering mid year.

no more paper filings permitted for VCP in accordance with sections 10 and 11 of this revenue procedure or by filing paper VCP submissions in accordance with the procedures in sections 10 and 11 of Rev. Proc. 2016-51. However, the IRS will not accept paper VCP submissions postmarked on or after April 1, 2019. (3) Modifications to section 11. Section 11 sets forth filing procedures for VCP submissions. These procedures have been modified to reflect electronic filing of VCP submissions and payment of applicable user fees using the www.pay.gov website. An electronic VCP submission filed using the www.pay.gov website must include many of the same documents as a VCP submission filed on paper pursuant to Rev. Proc. 2016-51; however, there are procedural differences. First, an applicant must use the www.pay.gov website to create a pay.gov account. This pay.gov account will be used when filing a VCP submission and paying applicable user fees. Second, after a pay.gov account has been established, the applicant must complete Form 8950, Application for Voluntary Correction Program (VCP) Submission Under the Employee Plans Compliance Resolution System, using the www.pay.gov website. Beginning April 1, 2019, applicants are not permitted to submit a paper version of Form 8950. Third, documents relating to the VCP submission, including the description of failures, Form 14568 (Model VCP Compliance Statement), Schedules 1 through 9 of Form 14568, and any other applicable items (as set forth in section 11.04) for a VCP submission generally must be converted into a single PDF (Portable Document Format) document and then uploaded onto the www.pay.gov website. However, there is a 15 MB size limitation for uploading a PDF document onto the www.pay.gov website; thus special instructions are provided for PDF files that exceed that limitation. Fourth, section 11 provides new procedures relating to the payment of user fees using the www.pay.gov website, including the generation of a payment confirmation. For submissions made using the www.pay.gov website, the IRS will no longer mail an acknowledgment letter to the applicant. Receipt of a submission will be acknowledged through the generation of a unique Pay.gov Tracking ID on the payment confirmation after the VCP submission is filed and the user fee is paid. A Plan Sponsor may designate an authorized representative to file a VCP submission with the IRS using the www.pay.gov website. Section 11.08(2) sets forth specific instructions on how to designate an authorized representative using the Form 2848, Power of Attorney and Declaration of Representation.

if it helps... 1.401(k)-2(a)(1)(I)(A) the ADP test for the eligible HCE....eligible NHCE and 1.401(k)(6) eligible employee means an employee who is directly eligible or indirectly eligible to make a deferred election. so if the person quit before the effective date to defer he is not eligible directly or indirectly to defer.

going forward (e.g. for 2019), if the only contributions are deferrals and safe harbors then if the card isn't good enough, then the Code 416(g)(4)(H) can be used (H) Cash or deferred arrangements using alternative methods of meeting nondiscrimination requirementsThe term “top-heavy plan” shall not include a plan which consists solely of— (i) a cash or deferred arrangement which meets the requirements of section 401(k)(12) or 401(k)(13), and (ii) matching contributions with respect to which the requirements of section 401(m)(11) or 401(m)(12) are met.

Dr. Evil said I need to charge you as much as Belgareth suggested

if you call your Congressman/woman, tell him /her that 1.401(a)(4)-4(e)(3)(iii)(G) indicates right to each rate of match is a BRF issue and since the plan already has to pass the ACP test that should be enough and the BRF isn't needed.

Limit determinations are found in the regs. most limits are beginning of the year e.g. 1.401(a)(17)-1(b)(3)(ii) "...for the calendar year in which the plan year begins." The 415 limit is the only limit that is based on the end of the year, e.g. 1.415-5(a)(2)"...applies with respect to limitation years ending with or within the calendar year.

in the case of safe harbor https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-plans-or-safe-harbor-notices Shift the plan entry date for employees who meet the plan’s minimum age and service eligibility requirements from monthly to quarterly, provided that the amendment is limited to employees who are not already eligible to participate in the safe harbor plan.

Ground Control from Major Tom (Poje).... oh wait it's from as recent as permissible changes to a safe harbor. it would be strange you could change entry dates to a safe harbor and not a non safe harbor https://www.irs.gov/retirement-plans/mid-year-changes-to-safe-harbor-401k-plans-and-notices Examples of permissible mid-year changes If they satisfy the notice rules, if applicable, safe harbor 401(k) plans sponsors may mid-year: Increase future safe harbor non-elective contributions from 3% to 4% for all eligible employees. Add an age 59 ½ in-service withdrawal feature. Change the plan’s default investment fund. Alter the plan rules on arbitration of disputes. Shift the plan entry date for employees who meet the plan’s minimum age and service eligibility requirements from monthly to quarterly. Adopt mid-year amendments required by applicable law (for example, statutory law changes or court decisions).

probably more specific info needed. you indicated you were laid off (rather than terminated) without knowing the loan policy it might be possible to continue loan payments. if the lay off is treated as a 'leave of absence' it might make a difference. is it possible you will get called back? my quick search has LAYOFFS An employee who is laid off cannot claim termination pay under the act until the layoff exceeds 13 weeks in a 20-week period or — where a collective agreement is in place and includes recall provisions — until the layoff exceeds the period of recall under a collective agreement.The termination date, should the layoff reach this point, is deemed to be the date upon which the employee commenced the layoff. It is important to note that a layoff due to lack of work does not amount to termination for just cause. years ago someone (not me) posted the following. See Treas Reg. 1.72(p)-1 Q9, which is what I used when writing may FAQs. Here is how I answered this question in the FAQs I wrote. Q38: What happens to a participant’s loan when the leave of absence ends? A38: When the participant’s leave ends or after one year if sooner, the participant must repay the outstanding balance of their loan including interest that accrued during the leave by the latest permissible date allowed under IRC § 72(p)(2)(B) (i.e., 5 years from the date of the original loan, unless it is a primary residence loan). If the original term of the loan was for less than five years the IRS will allow the loan to be extended to 5 years. However, the new payment cannot be less than the original loan payment amount. If the original loan term was 5 years, the schedule may not be extended. Below are the repayment options: Option 1: Reamortize the loan for the remaining term so that the remaining loan balance plus accrued interest are repaid (note: The amount of the installments cannot be less than the original loan payment). Option 2: Resume making the normal payment amount and make a balloon payment at the end of the loan term for the remaining balance. Option 3: Make a lump sum payment for the missed payments and accrued interest, and then resume the normal payment amount. ............... this could mean if you are allowed to make payments for awhile you delay the distribution until 2019 rather than 2018, but without knowing all the details...

And then there will always be people like me.... http://www.addletters.com/bart-simpson-generator.htm#.W6DjhTbruJA

there are many things we might not want to do but assuming the person was a participant in the plan years ago then: the ERISA Outline Book sums it up this way: Chapter 2 Section V C2 2.d.Partially-vested participant. Note that once a participant becomes even partially vested (e.g., 20% vested under the plan's vesting schedule), there is no break in service rule that will permanently disregard his prior service for eligibility purposes. If a partially-vested participant incurs a break in service, the only rule that may apply is the one-year holdout rule discussed in 1. above, under which it is possible to get the prior service re-credited. In fact, the one-year holdout rule would apply even to a 100% vested participant who incurs a break in service. 2.e.Statutory requirement may be more than 5 breaks in service under certain circumstances. Technically, the minimum 5-year break requirement described in 2.a. is the greater of five breaks in service or the number of years of service credited at the time the break in service period begins. However, a participant with more than five years of service generally will have at least some vesting under the plan's vesting schedule and the rule of parity would not apply anyway. The vesting rules are discussed in Chapter 4. In most cases, it is correct (and simpler) to think of the rule of parity as applying after a 5-year break period. 2.f.Rule applies only to participants. Since IRC §410(a)(5)(D) and ERISA §202(b)(4) refer to a "participant" having the requisite number of consecutive breaks in service, it is presumed that this rule cannot be applied to an employee who has not become a participant in the plan at the time the break in service period begins. Apparently then, the rule of parity does not apply to an employee whose break in service period began prior to the effective date of a plan, even if the employee would have otherwise been a participant in the plan if the plan had been in effect and even if the employee has incurred at least five consecutive breaks in service.

if plan fails the comp test then you would have to test using total comp (or some other definition that satisfies 414s) anyway. so yes, you could test based on total comp without even running a 414s comp test

the form 5500 instructions have 1. Active participants (i.e., any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan). 2. is retired or separated currently receiving a benefit 3. is retired or terminated entitled to a future benefit 4. is deceased or beneficiary entitled to benefit since an excluded person is active but NOT covered I don't see how you count them under the instructions. edited to add NOT. my typo

a wild guess and stab in the dark 1.401(k)-1(b)(4)(iii)(A) indicates for purposes of testing the term plan means a plan within the meaning of 1.410(b) - 7(a) and (b) AFTER application of 1.410(b)-7(c) [this would included otherwise excludables. so I guess first step is separate the testing and now you can aggregate the statutory includables because they have consistent methods. at that point, hopefully there are no otherwise excludables who are HCEs because then it doesn't matter - 1.401(k)-1(b)(4)(iii)(B) indicates you can't aggregate a safe harbor with a non safe harbor and I would say you have a safe harbor for one group of ees and no safe harbor for another group. but if there are no HCEs you can treat NHCEs differently

Aug figure just released 252.146 next release is Oct 11, but barring a complete collapse or a tremendous increase the numbers are locked in what they have been since the original post in June

in the original notice 98-52 for safe harbor ACP test satisfaction only lists additional matching contributions. 1.401(m)-3(b) indicates a plan satisfies the SHNEC requirement if it satisfies the SHNEC requirement of the ADP test and 401(m)(11) indicates matching is met if it satisfies 401(k)(12) B or C which would include the 3% SHNEC 1.401(m)-2(a)(5)(iv) indicates if you satisfy the ADP safe harbor but fail ACP you are permitted to exclude some of the safe harbor match that satisfied the ADP test. there is no corresponding reference to what happens if you used the SHNEC to satisfy the ADP safe harbor. this sounds like you want to use the 3% used to satisfy the ADP test and then combine it with the match in the ACP test - I have never seen an example of this, nor ever discussed. so are you permitted to do this if the plan fails ACP test? I'd have my leanings against this, otherwise you could have a 2% match that goes only to HCEs, but when combined with the 3% would satisfy the ACP test. that would be 'cheating' in my opinion, and I don't think the intent of things. (Therefore when the 3% is used it is only used to satisfy ADP test) now, since the requirement is "at least 3%" I could see for example, if 4% shnec is made then 3% is used in the ADP test for safe harbor and the additional 1% could be used in the ACP test. but then I am just rambling on............

As far as I know the only place an excluded ee shows up is in the denominator of coverage (once he meets eligibility)

if it is in regards to the SHNEC can I ask in what situation would it make a difference? If the only contribution was the 3% safe harbor the ADP is satisfied. if there is no match then there wouldn't be an ACP test to worry about anyway.

there is an example in the ERISA Outline book that indicates no withholding if the remaining balance is rolled over Part E.3.b.3 though I would never remember any of this stuff in regards to loans.

Albany - something in your comment reminded me of an IRS comment at a Q and A session - dang, there it is 2010 someone asked about the issue with safe harbor contributions (but also QNECs to correct a failed ADP test. Basically what happens if made after 10/15. what year do they count for 415. the IRS response was Contributions made after the Section 415 timing date of 30 days after the tax return due date are considered to be annual additions for the following year. However, if consider the contribution a self-correction under EPCRS, it is permissible to relate this back to the earlier year. If the contribution is made after 12/31, you are clearly under EPCRS. [One of the exceptions to the 415 timing rule is an erroneous failure to allocate. See Treas. Reg. 1.415(c)-1(b)(6)(ii)(A). EPCRS clearly treats post-415-period deposits that relate back to a prior plan year as an annual addition for the year to which it is meant to be paid, but EPCRS applies only after the 12/31/09 deadline. Therefore, there is a lack of guidance for the period between 30 days after the tax return due date and the end of the 12-month regulatory correction period.] ...... basically saying, this makes no sense to say "for 415 purposes I'm better off not to make the required safe harbor contribution between 10/15 and 12/31, and simply wait and correct the following year under EPCRS"

but that is different because now you have an nhce who didn't receive under point 1