CuseFan

Congrats! Enjoy those new challenges - I think it is important to retire TO something rather than FROM something. Good luck!

Non-elective, yes, but for nondiscrimination I think you have a problem if the amendment benefited only or primarily HCEs.

I think Magill's issue stems from the circular nature of compensation and contribution calculations for self-employed individuals when net earned income is just above or less than the 401(a)(17) limit.

My first thought is this is a money-making scheme by the RK, possibly to make up for the lack of check-writing/distribution fees it does not get when there is no de minimis cash out provision. $30 per year once someone is deemed missing or unresponsive seems excessive to me, although googling the subject shows fees ranging $10-$30 and PBGC charging $35 if account > $250. But usually these searches are done once for a person, not annually. Maybe twice, the first time when a benefit first becomes payable and the second time approaching RBD or plan termination. I can see charging an account once or twice in those instances, but annually because I refuse to open/answer a letter? And who and how does that service get monitored to ensure the RK is effectively/efficiently attempting to find and engage participants? If your locator service doesn't find someone in year one, is it really going to have better success in year two or year three? Doubtful. And when do these fees stop, when someone is found? As a fiduciary, I would not engage the RK for this service. I might contract for one year and see what the success rate was, and then contract year to year for new occurrences only. The cynic in me is thinking why should the RK find and engage someone in one year when they could string out the process another year or two, doubling or tripling their take, and still claim success to their client because they found and paid the person. Do they also get a distribution processing fee at the end? I also presume the RK is already collecting a per head charge on these idle accounts? I see this as a big win for the RK with marginal, if any, benefit to the participant and plan sponsor/fiduciary, and a LOT of unanswered questions/issues and potential pitfalls. Or as my avatar would exclaim, "it's a trap!"

Correct It can, the rules on that changed some years ago, but check the terms in the plan document to verify it is allowed by that particular plan.

I think amendment after year-end to increase the match only for HCEs is problematic, even if it is to simply bring their percentage up to NHCE rate. I think forfeiting amounts allocated in error along with attributable earnings is the proper correction. The design/practice is burdensome, but at the end of the year the payroll provider has sufficient information to identify the following year's HCEs and should be able to implement. Maybe if payroll is weekly the timing is tight, so why not have the employer make deposits monthly? In addition to solving a current problem, put on your consulting hat and help them avoid its recurrence.

I would instruct the payer to make the check payable to Corp IRA FBO Participant, not over think and be done with it. Joe Participant is not going to be cognizant of all those nuances.

Another unfortunate case that we see all too often, the questions that should have all been asked, answered and documented before the transaction are surfacing afterwards when it it likely too late to do what the parties had hoped to do. As the consultant to at least one of the parties (which I assume you are) the best you can do is assemble all the relevant facts and communicate what you believe (in your professional opinion) the parties (or at least your client) can and cannot do in accordance with your understanding of applicable law and regulation.

What do you mean "wants to cover"? Make them employees? If they are already employees he either has to cover them under the LTPT rules if they qualify or he can provide coverage for them on a different basis in which case they are otherwise excludable employees. Either way, I believe they are excluded from average benefits test. However, I think you need to careful how they get added because as otherwise excludable they are HCEs and you would have separate coverage and nondiscrimination testing. From a prior ASPPA presentation, link to which is provided below: An LTPTE is an employee who: completes two consecutive years with 500 hours of service (HOS), and for plan years beginning before 2025, three consecutive years of 500 HOS; attains age 21 by the second (or third, if applicable) year of 500 HOS; is not a union employee/nonresident alien (union HOS count); and does not otherwise satisfy normal requirements. An employee who satisfies normal requirements before (or at same time) as LTPT conditions is never an LTPTE. An employee who satisfies normal requirements after becoming LTPTE ceases to be LTPTE and becomes a former LTPTE (FLTPTE). If the employee becomes eligible for any other reason, he or she is not an LTPTE. If the plan has eligibility requirements that are more lenient than those of the LTPT rules (e.g., in which HOS are not an issue or where the otherwise LTPT will enter faster than required under the law), the employees are never LTPTs. The effect of not being an LTPTE is that the LTPT vesting rules will not apply. https://www.asppa-net.org/news/2024/5/close-look-ltpt-rules-asppa-spring-national/

Personal opinion is you use only the non-union prior year ADP and ACP. Those are numbers for the disaggregated component plans and you still have that for non-union, just a larger population for 2025. Look at it this way, what if union covered employees were excluded from the plan before, now enter 1/1/2025 when union is dissolved. Is there any question you'd use the 2024 ADP and ACP from those (non-union only) participants? You look at that union disaggregation as if it was a separate plan.

There has been some discussion on that before in this forum. The consensus seemed to be that this is definitely a gray area and that the amendment and document language matters - meaning either interpretation is possible. You could likely amend to unfreeze if needed to accomplish your objective, if not for the entire benefit formula at least for average compensation.

125 contributions are pre-tax and not subject to FICA/Medicare as you note. Typically, a W2 compensation definition will specifically say, somewhere and somehow, that 125 and all sorts of other pre-tax deferrals are included (or excluded). Are you looking at an IDP? If pre-approved, look at the BPD, and you may need to bounce around for definitions within definitions. There are also some plans that intentionally use W2 taxable wages, although not common.

If a Key EE has a CB benefit and a DC account, yes. The Q&A below are from a Wolters Kluwer (ftwilliam) webinar on top heavy in 2013. Also, it looks like they are of the opinion that a non-key in both the frozen DB and the DC needs 5% for TH. Looking at the regulations, they say "covered" by a defined benefit plan, not "benefiting" in a plan, so it does look like it's 5% for non-keys who are in both plans. If some were excluded from the CB (like maybe non-owner/non-key HCEs) they would only be entitled to 3%. Q. How are frozen plans treated for purposes of the top-heavy rules? A. For purposes of section 416, a frozen plan is one in which benefit accruals have ceased but all assets have not been distributed to participants or their beneficiaries. Such plans are treated, for purposes of the top-heavy rules, as any non-frozen plan. That is, such plans must provide minimum contributions or benefit accruals, limit the amount of compensation which can be taken into account in providing benefits, and provide top-heavy vesting. Note that a frozen defined contribution plan may not be required to provide additional contributions because of the rule in section 416(c)(2)(B). Q. An employer sponsors both a DB and DC Plan and the TH minimum is provided in the DC Plan. If the DB Plan accruals are frozen, what is the TH minimum % required in the DC Plan? A. Frozen plans continue to be subject to the top-heavy rules (typically, top heavy minimum of 5% of compensation is provided by the defined contribution plan - see slide 35).

I don't think that's a requirement that goes away once it applies, and I expect you had PS here too, so TH did apply. I don't see how you could have a TH combo plan and then freeze CB/stop PS and then avoid TH going forward, that does not make sense to me. Since no one is benefitting in the CB then I think your TH minimum does revert to 3% and which can be satisfied by the SHM. However, if TH, those not getting at least 3% in SHM need a TH allocation, IMHO.

Generally, no, that would not be allowable as it (deposit timing) would be a discriminatory BRF. Maybe 6% owner PS and 0% NHCE PS deposited throughout the year would be OK but as you say, there's no guarantee it would pass testing. If more NHCE PS is then required, would that create retroactive BRF discrimination? Maybe, probably would not know unless and until audited, if ever. Certainly going more than 6% is not a good idea. How important is getting that extra 6% in sooner compared to the possible risk? You can communicate the issues and, where there may be compliance ambiguity, the owner can decide how to proceed and accept any risk (but get it in writing). Another concern may be if PS provision has any conditions for entitlement in the document.