Tom Poje

it is all relative Austin. for some it is

in my case it was closer to "I stink, therefore I know I exist

yes, but at least to Descartes you exist. In my case there is much in doubt.

example 4 of 1.411(d)-3(a)(4) speaks of merging plans with different schedules, but the logic should still apply naturally the plan permits anyone with 3 years service to choose which schedule they want. one plan was 5 year cliff, the new schedule will be 3/20 (heck the example is before the 2/20 requirement and 3 year cliff requirements) Participant G has 2 years of service so he can't even choose a vesting schedule.. However, Plan is in violation because G has no right to the 5 year cliff(or anyone who could choose can't choose properly. if they pick 3/20 he loses out on the 5th year at 100%. if they chooses 5 year cliff they lose out on the 20% after 3 years and 40% after 4 years. the plan would be ok if it gave Participant G (and similarly situated ees) 3/20, 4/40 and 5 /100 but the example also clearly states "with respect to accounts balances attributable to benefits accrued as of the applicable amendment date" it does not say "and all future benefits accrued as well" so it is vesting attached to the benefits accrued as of the date, not the vesting itself. or at least that is my understanding.

correct, because the plan could have had entry dates of 1/1 or 6 months after completing 1 year and thus he never would have entered

well, if you trust the folks at the IRS. see option 1 underlined and boldfaced (emphasis mine) below. but remember, it is only the IRS interpretation. or maybe I am reading what it says incorrectly and you can't test him separately. https://www.irs.gov/retirement-plans/treatment-of-otherwise-excludable-employees-for-coverage-and-adp-testing Page Last Reviewed or Updated: 23-Jan-2018 Analysis In January 2016, the Office of Chief Counsel issued an advice memorandum (CCA 201615013) regarding the treatment of “otherwise excludable employees” for coverage and actual deferral percentage (ADP) testing. The term “otherwise excludable employees” refers to a group of employees who are participants in a plan but could otherwise be excluded because the plan’s eligibility requirements are more liberal than the requirements set forth in the Code and the regulations thereunder. A plan will use special testing rules for otherwise excludable employees when it cannot otherwise satisfy the coverage requirements in IRC Section 410 and/or the ADP test in IRC Section 401(k) taking into account all of the participants in the plan. The advice memorandum discusses an acceptable method of identifying the group of otherwise excludable employees, and identifies two additional methods that may also be acceptable. This Snapshot provides examples of plan testing methods described in the advice memorandum. Background Section 410(a)(1)(A) provides that participation in a plan cannot be conditioned on the employee completing a period of service with the employer maintaining the plan that extends beyond the later of the employee’s attainment of age 21 or completion of one year of service. Section 410(a)(4) provides that a plan is treated as not meeting the requirements of IRC Section 410(a)(1) unless it provides that an employee who has satisfied the minimum age and service requirements of such paragraph commences participation in the plan no later than the earlier of the first day of the next plan year after satisfying such requirements or 6 months after satisfying such requirements. Section 410(b) provides that a plan must satisfy certain minimum coverage requirements. For example, IRC Section 410(b)(1)(A) provides that a plan satisfies the minimum coverage requirements if it benefits at least 70% of the employer’s non-highly compensated employees (NHCEs). In determining if a plan meets the minimum coverage requirements, certain employees are disregarded. Section 410(b)(4)(A) provides that employees not meeting a plan’s minimum age and service requirements are disregarded. Section 410(b)(4)(C) provides that an employee is not treated as meeting the age and service requirements described in IRC Section 410(b)(4) “until the first date on which, under the plan, any employee with the same age and service would be eligible to commence participation in the plan.” Section 410(b)(4)(B) provides that if a plan covers employees not meeting the minimum age or service requirements of IRC Section 410(a)(1) “without regard to subparagraph (B) thereof” and the plan satisfies the minimum coverage requirements of IRC Section 410(b)(1) separately with respect to such employees, then such employees may be excluded. That is, two coverage tests are performed: one looking at plan participants who have not reached age 21 and completed one year of service (“otherwise excludable employees”), and a second looking at all other plan participants (“non-excludable employees”). Section 401(k)(3)(F) allows an employer to exclude from the ADP test NHCEs “who have not met the minimum age and service requirements of section 410(a)(1)(A)” if the employer applies IRC Section 410(b)(4)(B) in determining whether the plan meets the coverage requirements of IRC Section 410(b)(1). Treas. Reg. Section 1.410(b)-6(b)(3) provides that an employer may treat a plan benefitting otherwise excludable employees as two plans, one for the otherwise excludable employees and one for the other employees benefitting under the plan. Treas. Reg. Section 1.410(b)-7(c)(3) similarly provides for disaggregation and separate testing of plan populations consisting of employees who have satisfied the plan’s age and service conditions but not the greatest minimum age and service conditions permitted under IRC Section 410(a), and employees who have satisfied the greatest minimum age and service conditions permitted under IRC Section 410(a). Treas. Reg. Section 1.401(k)-2(a)(1)(iii) provides that if a 401(k) plan covers employees before they have completed the minimum age and service requirements of IRC Section 410(a)(1)(A) and the plan applies IRC Section 410(b)(4)(B) in determining if it meets the minimum coverage requirements of IRC Section 410(b)(1), then the plan can either perform one ADP test pursuant to IRC Section 401(k)(3)(F) or perform two ADP tests, one on each group of participants determined under IRC Section 410(b)(4)(B). Treas. Reg. Section 1.401(k)-1(e)(7) requires a plan to provide which of the alternative methods of satisfying the nondiscrimination requirements of IRC Section 401(k) will be used and, if with respect to that alternative there are optional choices, which of the optional choices will apply. The regulation permits a plan to incorporate by reference the provisions of IRC Section 401(k)(3) and Treas. Reg. Section 1.401(k)-2, relating to the actual deferral percentage test, if that is the nondiscrimination test being applied. The Commissioner may, in guidance of general applicability, specify the options that will apply under the plan if the nondiscrimination test is incorporated by reference. CCA 201615013 CCA 201615013 describes an acceptable interpretation of “otherwise excludable employees” that complies with the Code and applicable regulations (see Option 1 below), and briefly describes two other interpretations that may also be acceptable (see Options 2 and 3 below). Please contact Division Counsel if you have questions about Options 2 and 3. Option 1: The group includes participating employees who have not satisfied the IRC Section 410(a)(4) entry date period applicable to them – in other words, they are treated as otherwise excludable employees until the earlier of the first day of the next plan year after attaining age 21 and completing one year of service or 6 months after satisfying such requirements. This is the maximum waiting period under the Code. Option 2: The group includes participating employees only until the plan’s entry date after they attain age 21 and complete one year of service – in other words, they are treated as otherwise excludable until the date they would have entered the plan, using the plan’s entry dates, if the plan required age 21 and one year of service to participate. Option 3: The group includes participating employees until the actual date on which they attain age 21 and complete one year of service – in other words, no waiting period is tacked onto the maximum age and service conditions. When will a plan want to identify otherwise excludable employees? As noted above, a plan will use special testing rules for otherwise excludable employees when it cannot otherwise satisfy the coverage requirements in IRC Section 410 and/or the ADP test in IRC Section 401(k) by taking into account all of the participants in the plan. See IRC Sections 401(k)(3)(F) and 410(b)(4)(B), and Treas. Reg. Section 1.410(b)-7(c)(3). Plan language is required to perform this testing methodology. See Treas. Reg. Section 1.401(k)-1(e)(7). Also, although not the subject of this Snapshot, a plan can also perform the Actual Contribution Percentage (ACP) test using the special testing rules for otherwise excludable employees. See IRC Section 401(m)(5)(C) and Treas. Reg. Section 1.401(m)-1(b)(4)(iv). Examples of plan designs and testing methods Example 1: Employer A sponsors a 401(k) plan which requires attainment of age 20 and no service for eligibility, with entry dates on the first day of the plan year and a date 6 months after. The plan would fail the ADP test if it ran a single ADP test using all participating employees. Instead, the plan provides for Option 3 and tests those participating employees who have attained age 21 and completed one year of service separately from those who did not, but were otherwise eligible under the terms of the plan. In other words, Employer A runs two ADP tests, one for each group of employees. Each group must also satisfy the coverage test in IRC Section 410(b). The plan satisfies the ADP tests using Option 3’s criteria for identifying otherwise excludable employees. Example 2: Same as example 1, except the plan provides for Option 1. The group of otherwise excludable employees now includes participating employees until the earlier of the first day of the next plan year after they attain age 21 and complete one year of service or 6 months after satisfying such requirements. Employer A runs two ADP tests, one for each group of employees. Each group satisfies the coverage test in IRC Section 410(b). The plan satisfies the ADP tests using Option 1’s criteria for identifying otherwise excludable employees.

I realize a 1099 was issued. but the deadline for filing the1096 isn't until the end of the month. so if they haven't filed that, then the IRS doesn't 'know' about the 1099 yet. so there is a chance you simply crush kill destroy the form and get on with life.

of course if no 1099 has been filed yet I imagine they can simply fix the silly thing at their end and proceed on with life, but without knowing more...

if the loan was improperly deemed it still can be fixed, so saying nothing can be done is not correct. I'd go out to the IRS website and print their memo indicating each succeeding loan payment would cover the missed payment and ask them why this wasn't followed. and again, if you indeed continued to make payments, then whoever 'deemed' the loan should bear the cost of VCP filing https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-plan-loan-failures-and-deemed-distributions The Fix Employers may get relief from these adverse consequences through the Employee Plans Compliance Resolution System (EPCRS) by correcting the failures. Use the Voluntary Correction Program (VCP) to correct these mistakes on a voluntary basis. There are three correction methods for participant loans that do not comply with IRC Section 72(p). If successful, the use of VCP removes the IRC Section 72(p) deemed distribution tax reporting requirements (Rev. Proc. 2016-51). These corrections are only allowed if the normal maximum period for repayment of the loan has not expired. The IRS reserves the right to limit the use of the correction methods to situations that it considers appropriate, for example, where the loan failure is caused by employer action.

it's Friday. I don't understand your griping unless you 'mustard' gotten out on the wrong side of the bed this morning to not appreciate humor at its lowest form but then, after all, I am-omeba so its the best I can do

if you missed one pmt but have continued to make other pmts you are probably ok. when you returned to work you made a loan pmt. this can be applied to the one you missed. and this goes on and on until you would use up the maximum period of loan.(assuming there is a min cure period available which is generally the quarter following see example 1 in the IRS memo https://www.irs.gov/pub/irs-wd/201736022.pdf Office of Chief Counsel Internal Revenue Service memorandum Number: 201736022 Release Date: 9/8/2017 CC:TEGE:EB:QP4 PRENO-125977-17 UILC: 72.16-01 date: August 30, 2017 to: David A. Conrad Area Counsel, (Mountain States Area Denver) (Tax Exempt & Government Entities Division Counsel) from: Stephen B. Tackney Deputy Associate Chief Counsel, (Employee Benefits) (Tax Exempt & Government Entities) subject: Section 72(p) loan cure period This Chief Counsel Advice responds to your request for assistance. This advice may not be used or cited as precedent. ISSUES You have asked how a cure period, as described in § 1.72(p)-1, Q&A-10(a), is applied for a participant who fails to make installment payments required under the terms of a plan loan. To help address your question, we will analyze two different factual situations. For both factual situations, assume the following: (a) the taxpayer is a participant in a § 401(k) plan that permits plan loans; (b) on January 1, 2018, the participant receives a loan from the plan in an amount that does not exceed the limit provided under § 72(p)(2)(A); (c) the loan, which is not a home loan, is repayable in five years (the last installment payment is due December 31, 2022), as required under § 72(p)(2)(B); (d) level installment payments are due at the end of each month over the repayment term of the loan (the first installment payment is due January 31, 2018), as required under § 72(p)(2)(C); PRENO-125977-17 2 (e) the loan is evidenced by a legally enforceable agreement, as required under § 1.72(p)-1, Q&A-3(b); and (f) the plan allows for a cure period, as described in § 1.72(p)-1, Q&A-10(a), permitting a participant to make up a missed installment payment by the last day of calendar quarter following the calendar quarter in which the required installment payment was due. Situation 1. The participant timely makes installment payments from January 31, 2018, through February 28, 2019. The participant misses the March 31, 2019 and April 30, 2019 installment payments. The participant makes installment payments on May 31, 2019 (which is applied to the missed March 31, 2019 installment payment) and June 30, 2019 (which is applied to the missed April 30, 2019 installment payment). On July 31, 2019, the participant makes a payment equal to three installment payments (which is applied to the missed May 31, 2019 and June 30, 2019 installment payments, as well as the required July 31, 2019 installment payment). Situation 2. The participant timely makes installment payments from January 31, 2018, through September 30, 2019. The participant misses the October 31, 2019, November 30, 2019, and December 31, 2019 installment payments. On January 15, 2020, the participant refinances the loan and replaces it with a new loan (the replacement loan) equal to the outstanding balance of the original loan (the replaced loan), including the three missed installment payments. Under the terms of the replacement loan, the replacement loan is to be repaid in level monthly installments at end of each month through the end of the replaced loan’s repayment term, December 31, 2022. For purposes of this example, assume that the replacement loan satisfies the requirements of § 72(p)(2)(A) through (C) and § 1.72(p)-1, Q&A-3 and Q&A-20. CONCLUSIONS Situation 1. The participant’s missed installment payments do not violate the level amortization requirement under § 72(p)(2)(C) because the missed installment payments are cured within the applicable cure period. Accordingly, there is no deemed distribution of the loan due to the missed installment payments. Situation 2. The participant’s missed installment payments do not violate the level amortization requirement under § 72(p)(2)(C) because the missed installment payments are cured within the applicable cure period by the refinancing of the loan. Accordingly, there is no deemed distribution of the loan due to the missed installment payments. LAW Section 72(p)(1) provides that if a participant receives (directly or indirectly) a loan from a qualified employer plan, the amount of the loan will be treated as having been received by the participant as a distribution from the plan. Section 72(p)(4) generally defines a qualified employer plan as a § 401(a) qualified plan, a § 403(a) annuity plan, or a § 403(b) plan. PRENO-125977-17 3 Section 72(p)(2) generally provides that § 72(p)(1) shall not apply to a loan to the extent that the loan meets the requirements of § 72(p)(2)(A) through (C). Section 72(p)(2)(A) generally provides that a loan, when added to the outstanding balance of all other loans from all plans of the employer, must not exceed the lesser of: (i) $50,000, reduced by any excess, if any, of (I) the highest outstanding balance of loans from the plan during the 1- year period ending on the day before the date on which such loan was made, over (II) the outstanding balance of loans from the plan on the date on which such loan was made; or (ii) the greater of (I) half of the present value of the participant’s vested accrued benefit, or (II) $10,000. Section 72(p)(2)(B) provides that the loan must, by its terms, be required to be repaid within 5 years. An exception to this repayment term requirement is provided for home loans used to acquire the principal residence of the participant. Section 72(p)(2)(C) provides that the loan must require substantially level amortization of the loan (with payments not less frequently than quarterly) over the term of the loan. Section 1.72(p)-1, Q&A-3(a) provides that a loan from a qualified employer plan to a participant will not be a deemed distribution if the loan satisfies § 72(p)(2)(A) through (C) and is evidenced by a legally enforceable agreement. Section 1.72(p)-1,Q&A-3(b) describes the enforceable agreement requirement and provides that the agreement must specify the amount and date of the loan and the repayment schedule. Section 1.72(p)-1, Q&A-4, provides that, for purposes of § 72, a deemed distribution occurs at the first time that the requirements of § 1.72(p)-1, Q&A-3 are not satisfied, in form or in operation. Further, if a loan initially satisfies the requirements of § 1.72(p)-1, Q&A-3, but payments are not made in accordance with the terms of the loan, then a § 72(p)(1) deemed distribution of the loan occurs as a result of the failure to make such payments (see § 1.72(p)-1, Q&A-10, regarding when such a deemed distribution occurs and the amount of the deemed distribution, and § 1.72(p)-1, Q&A-11, regarding the tax treatment of a deemed distribution). Section 1.72(p)-1, Q&A-10(a) provides that a failure to make any installment payment when due violates the level amortization requirement in § 72(p)(2)(C) and results in a deemed distribution at the time of such failure. However, the regulations also provide that a plan administrator may allow a cure period (lasting not later than the last day of the calendar quarter following the calendar quarter in which the required installment payment was due). PRENO-125977-17 4 Section 1.72(p)-1, Q&A-10(b) provides that if a loan, when made, satisfies the requirements of § 1.72(p)-1, Q&A-3, but there is a failure to pay an installment payment required under the loan (taking into account any cure period permitted in § 1.72(p)-1, Q&A-10(a)), then the amount of the deemed distribution is equal to the entire outstanding balance of the loan (including any accrued interest) at the time of such failure. Section 1.72(p)-1, Q&A-20(a)(1) provides that a participant may refinance a loan if the loans collectively satisfy the amount limitations of § 72(p)(2)(A) and the replaced loan and the replacement loan each satisfy the requirements of § 72(p(2)(B) and (C) and § 1.72(p)-1. Section 1.72(p)-1, Q&A-20(a)(1) provides that a refinancing includes any situation in which one loan replaces another loan. ANALYSIS For Situation 1 and Situation 2, the cure period permitted in the plan does not extend beyond the period set forth in § 1.72(p)-1, Q&A-10(a) (that is, the applicable cure period does not extend beyond the last day of the calendar quarter following the calendar quarter in which the missed installment payment was due). In Situation 1, under the cure period, the two missed installment payments (March 31, 2019, and April 30, 2019) have separate cure periods because they occur in separate calendar quarters. For the missed March 31, 2019 installment payment, the cure period ends June 30, 2019, and for the missed April 30, 2019 installment payment, the cure period ends September 30, 2019. Each missed installment payment is cured within that missed installment payment’s applicable cure period. The missed March 31, 2019 installment payment is cured by installment payment made on May 31, 2019. Likewise, the missed April 30, 2019 installment payment is cured by the installment payment made on June 30, 2019. However, the May 31, 2019 and June 30, 2019 installment payments are missed because those installment payments are applied to the earlier missed installment payments (March 31, 2019 and April 30, 2019). The missed May 31, 2019 installment payment and the missed June 30, 2019 installment payment have a cure period that ends September 30, 2019. The missed May 31, 2019 installment payment and the missed June 30, 2019 installment payment are cured by the payment made on July 31, 2019 (which is applied to the missed May 31, 2019 and June 30, 2019 installment payments, as well as the required July 31, 2019 installment payment). Accordingly, under § 1.72(p)-1, Q&A-10, the level amortization requirement under § 72(p)(2)(C) is not violated and there is no deemed distribution from the missed March 31, 2019, April 30, 2019, May 31, 2019, and June 30, 2019 installment payments. In Situation 2, the three missed installment payments (October 31, 2019, November 30, 2019, and December 31, 2019) have the same cure period, which ends March 31, 2020, because they occur in the same calendar quarter. The replacement loan created by the refinancing of the replaced loan on January 15, 2020, pays off the entire outstanding balance of the replaced loan (which includes the three missed installment payments) within the missed installment payments’ cure period. Accordingly, under § 1.72(p)-1, Q&A-10, the level amortization requirement under § 72(p)(2)(C) is not violated for the replaced loan and there is no deemed distribution from the three missed installment payments. This Chief Counsel Advice does not address the tax consequences of the scenarios discussed in this writing, except as expressly provided, including the tax consequences of a § 72(p)(1) deemed distribution. Please call Patrick Gutierrez at ---------------------- or Clare Diefenbach at (202) 317-4102 if you have any further questions .

sounds good. In fact I 'relish' the thought thinking about.

agree. lets say the plan is non 401k and involved partners. at ASPPA Conference the IRS has voice the opinion "We would know abusive failure when we see it and probably treat such a plan as a CODA where none exists" and left it at that. so there is nothing written in stone. it could be how aggressive it becomes. just had a takeover in which the 6 lowest NHCEs were given 15% profit sharing. plan was tested on an allocation basis to avoid the gateway. that already smells bad. 3 of the 6 were terminated, only 20% vested. so now it goes from simply smelling bad to outright skunk land. (my opinion) might have been one whose hours was less than 1000 hours and might now be part time. did it pass everything mathematically? of course yes. client was actually happier with our allocation giving the gateway to all the NHCEs this year. go and figure. slightly more expensive, but they were more comfortable with the results.

A few years ago the IRS almost required plans with individual groups to pass the ratio % test, they were so concerned about the issue. they took that requirement out of the proposed regs, but only for 'future' consideration. I suspect, though I could be wrong, they will eventually put it back in. And I greatly suspect there are others who have a 'bigger' name than I do who have no problem allocating things in the manner you mentioned, because mathematically it does work. I honestly and truly merely mention it for consideration that there may be issues...but what is a 'reasonable' interpretation for one person may not be 'reasonable' for another, and I have heard others in the industry say since we can put everyone in their own group it is reasonable to allocate whatever to each person. so I am not saying you can't do things that way, just proceed with caution.

you do realize there is a good chance the IRS frowns upon such a design as violating a reasonable interpretation of the discrimination rules https://www.irs.gov/retirement-plans/discriminatory-plan-designs-using-short-service Qualified retirement plans must ensure “the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees.” (Internal Revenue Code Section 401(a)(4)). A plan that meets statutory or regulatory checklists, but primarily or exclusively benefits highly compensated employees (HCEs) with little to no benefits for nonhighly compensated employees (NHCEs), may still discriminate and violate IRC Section 401(a)(4). Discriminatory plan designs We’ve recently found discriminatory plan designs in defined contribution plans (DC), defined benefit plans (DB) and DB/DC combination plans that: provide significant benefits to the HCEs and a specified group of NHCEs, who work very few hours or receive very little compensation, and exclude other NHCEs from plan participation. The allocation to NHCEs is designed so this group receives the minimum to satisfy the mathematical portion of the nondiscrimination requirements of IRC Section 401(a)(4). For example, the plan may use a group of NHCEs who have at least one hour of service and received the least amount of compensation for the plan year. The actual number of NHCEs included in the plan described above isn’t a set group, but instead is defined as the minimum number required to satisfy the requirements of IRC Sections 401(a)(4) and 410(b). Although this design isn’t new, we’ve seen more plans using it or variations producing the same result. Examples of short service plan designs Some plans limit NHCE benefits to a specific job classification. The result, for discrimination and coverage purposes, is the same because this classification includes only the lowest paid or shortest service group of NHCEs. Another variation on this plan design provides coverage to NHCEs who work on an as-needed basis and earn very little each year. Some plan designs require 1,000 hours to earn a year of service for vesting but not for allocation purposes. In these plans, the low paid or short service NHCEs receive an accrual or allocation but don’t vest in the benefit because they never complete a year of vesting service. Other plan designs define a year of vesting service as the employee’s completion of 12-consecutive months of employment. This design allows the NHCE participant group to become vested in the very small plan benefit. Plans may discriminate even though they allocate a larger percentage of compensation to NHCEs. With this design, NHCEs, on average, may seem to receive a misleadingly large accrual or allocation level. For example, an NHCE participant with $200 of annual compensation may receive a profit sharing allocation of $200 (a benefit equal to 100% of compensation), while an HCE with compensation of $200,000 may receive a benefit of only 25% of compensation or $50,000. Although these designs may allow the plan to satisfy the vesting or numeric general tests for nondiscrimination and the associated regulations, they don’t satisfy Treas. Reg. Section 1.401(a)(4)-1(c)(2), which requires that the provisions of Sections 1.401(a)(4)-1 through 1.401(a)(4)-13 be reasonably interpreted to prevent discrimination in favor of HCEs. Page Last Reviewed or Updated: 25-Jan-2018

along with a very good question. just because of the way the Code reads, I think under section 411 termination is required because all references to restoring a benefit refer to when a participant is rehired, and such a person never separated, only had a break in service. otherwise the person would forfeit and then have no way of ever restoring his benefit unless he actually quit.

in the other day's newsletter https://www.spencerfane.com/publication/congress-eases-restrictions-hardship-withdrawals/ basically it says can include earnings from deferrals don't have to require ee to take loan first don't have to suspend deferrals for 6 months plan would have to be amended for these provisions, after 12/31/2018. entirely optional, not required to amend.

what does the document say? The FT William document has (emphasis mime) (b) Participants Not Receiving a Distribution. The nonvested portion of the Account balance of a Participant who has a Termination of Employment and does not receive a complete distribution of the vested portion of his Account shall be forfeited as soon as administratively feasible after the date he incurs five consecutive One-Year Breaks in Service (One-Year Periods of Severance if the Plan uses the elapsed time method); but no later than the end of the Plan Year following the Plan Year during which such break in service occurred.

so Dave - are you only allowed to use the Indian logo until 2019?

the original "notice 95-52" on safe harbors, section VIII Part D D. Qualified Matching Contributions and Qualified Nonelective Contributions To the extent they are needed to satisfy the safe harbor contribution requirement of section V.B, safe harbor matching and nonelective contributions may not be used as qualified matching contributions and qualified nonelective contributions, respectively, under any plan for any plan year. For example, if a plan satisfies the safe harbor contribution requirement using a safe harbor nonelective contribution by allocating a 7- percent safe harbor nonelective contribution to all eligible employees, contributions in an amount equal to the first 3 percent of each employee's compensation may not be used as a qualified nonelective contribution under the ACP test. However, safe harbor nonelective contributions in an amount equal to the remaining 4 percent of each employee's compensation may be used to satisfy the ACP test (subject to the requirements of § 1.401(m)-1(b)(5)). ............... wow, the IRS thought someone might actually put in a 7% safe harbor! so I guess since you are no longer using them to satisfy the safe harbor you can use them as a QNEC. they meet all the other conditions required of a QNEC. even the title refers to them as QNECs. ........... I suppose if you had enough new NHCEs enter the plan after the safe harbor was stopped you could fail coverage

dang it. there you go reading the regs and following them. why did you go and do that? even Dr Evil isn't that ethical. ................. and so you 'treat' everyone as if they have NRA of 65.(or later for those that are past 65) might be more troublesome if the plan with age 62 was more heavily weighted toward HCEs in contributions. This is especially fun if one plan is a DB. you have to calculate things out to 62 under the DB assumptions/interest rates and then convert to age 65 using the DC plans.

oh Dave, you are such a youngster. typical, thinking you are so special being able to avoid the penalty.

I hope, by your comment, you mean that simply by chance the only deferrals in the plan happen to be Roth according to the IRS Q and A https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts#13 Can a plan offer only designated Roth contributions? No, in order to provide for designated Roth contributions, a plan must also offer traditional, pre-tax elective contributions.

this one is considered no longer useful??? I must have missed that repeal back in 2014! Treasury Regulations § 1.501(k)-1. These regulations provide guidance under section 501(s) relating to nonexemption of Communist-controlled organizations. Section 501(s) was repealed by section 221(a)(62) of the Tax Increase Prevention Act of 2014, effective December 19, 2014. Public Law 113-295.

In my tradition of being long winded, instead of simply answering 'yes' or 'no'... I have the following notes that "magically" appeared from somewhere (they must have, since I don't have the cite which I usually include as well) probably come from a few years ago when the IRS talked about requiring passing ratio percentage test for nondiscrim if everyone was in their own group, then backed off on the issue.. but basically, at the moment, reasonable classification applies to 410b (coverage) (and indirectly to nondiscrim testing (401(a)(4). The second set of comments is the actually withdrawal of the IRS proposal. There is a potential problem for COVERAGE using the Average Benefits Test, due to the requirements of 1.410(b)-4(b), and whether the IRS believes that having each person in their own group is tantamount to “enumerating by name.” If they believe this, then the ratio test must be passed, because the average benefits test for COVERAGE requires a “reasonable classification” – and enumerating by name or having the same effect is by definition not a reasonable classification. When we are talking about the nondiscrimination testing under 1.401(a)(4) for rate group testing, there is a crucial difference. To satisfy nondiscrimination testing using rate group testing, each rate group must satisfy either the ratio percentage test (70%) OR the average benefits test. When determining if the average benefits test passes for a rate group for NONDISCRIMINATION purposes under 1.401(a)(4), it is a two part test: A. The nondiscriminatory classification test, and B. The average benefits percentage test. To pass the nondiscriminatory classification test, the coverage ratio must be at least equal to the midpoint between the applicable safe harbor percentage and the unsafe harbor percentage. The “reasonable classification test” does NOT apply – under 1.401(a)(4)-2(c)(3)(ii), the nondiscriminatory classification test including the reasonable classification test is deemed satisfied if the ratio percentage test for the rate group satisfies the midpoint test. So the 1.410(b)-4(b) problem never enters into the nondiscrimination testing, ‘cause when you pass the midpoint, it is deemed satisfied. ................. Announcement 2016-16 (released mid April (I assume 2016 since that is the announcement number)) Withdrawal of Proposed Nondiscrimination Rules Applicable to Certain Qualified Retirement Plan Benefit Formulas The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) announce that they will withdraw certain provisions of proposed regulations published on January 29, 2016 (81 FR 4976) (“Proposed Regulations”) relating to nondiscrimination requirements applicable to qualified retirement plans under § 401(a)(4). The provisions of the Proposed Regulations that will be withdrawn are the provisions that would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c). Following publication of the Proposed Regulations, the Treasury Department and the IRS have given additional consideration to the potential effects of the provisions that would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c) on the adoption and continued maintenance of qualified retirement plans with a variety of designs and have concluded that further consideration will be needed with respect to issues relating to those provisions. Accordingly, the Treasury Department and the IRS will withdraw the provisions of the Proposed Regulations that would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c).. Some examples of changes the proposed regulations intended are described below. Exactly what will get changed in the future remains to be seen. On January 29, 2016 the IRS issued proposed regulations that would require each rate group to pass the ratio percentage test if the plan did not satisfy the reasonable classification test. At this time the reasonable classification test only applies to coverage testing and not nondiscrimination testing. Plans that have grouped employees by name fail the reasonable classification test, and most likely plans that treat everyone in their own group would also be treated as an unreasonable classification. ..................................................................... I can only assume the estimator must really young if their is a daughter in the plan and you can pass rate group testing, avg ben % test etc. and provide 25% to owner and daughter.