CuseFan

Agree with Effen, this isn't new and it hasn't gone away and there never is or was an exception for plans without NHCEs. What is interesting is that you say this is an IDP and that provision has been in the plan all along unless I misunderstood and that was added with CB conversion. So presumably they have received an IRS determination letter, probably two, with that anomaly of a disqualifying provision.

As we all try to navigate the year-end craziness and balance life with family and friends, I just wanted to wish everyone a safe, relaxing and enjoyable holiday season!

Exactly, this is either an owner-only play or may work in a very large plan that otherwise easily passes ACP testing, but is essentially a nonstarter in small plans that cover NHCEs.

This has come up before in this forum. My understanding is that if a consolidated return is filed for the control group then the contribution dollars can come from either entity in whatever proportions. If each business filed its own tax return then deduction is based on contributions for each one's respective employees and compensation. Here, you have two disregarded entities that just pass through income to the owner so you certainly have a "consolidated" return - one tax return for the owner, correct? I'm not an accountant and this is not advice, client should confirm with qualified tax accountant.

The SPD is not the Plan Document although care should be taken as not to mislead. I do not think your SPD is misleading but the language could be tightened up. I would suggest adding "to receive any Employer Contribution we may decide to give you." and could add "such as..." Or, at the start of second paragraph, begin "If we decide to make an Employer Contribution for you, ..." I do not think you are obligated to give such people a contribution unless required for TH, which could then trigger gateway. Also, these people are included in coverage and nondiscrimination (as zeroes) regardless of hours or termination because neither condition factors into them getting zero PS. The SPD says "we will inform you" - which could come in a variety of forms (letter, statement, etc.).

@justanotheradmin for the win! @Mleech this is excellent advice in each of those posts.

Doesn't the discretionary match formula, to be covered under ACP safe harbor, have to preclude any HCE from getting a higher rate of match than any NHCE contributing the same rate? If any HCE has >5 YOS and any NHCE <5 YOS that won't hold. Or am I confusing this with something else?

Depends on the circumstances. I don't think you want someone signing a plan on 4/14 expecting to fund a trust (that can't be set up earlier) on 4/15 so they can file on time. The advantage is for clients who don't want to extend their returns (and for those doing the work, fitting these new plans into their busy Q1 schedules). Also, some clients may want to begin funding sooner rather than later given market conditions at the time. And what's your guard against doing all the work up front so can accommodate, including the valuation, only to get hit with a late change of mind/chickening out and stiffing you on payment for work done? Personally, the earlier a plan gets implemented the more time we provide our actuarial teams to do their work and I do not like to commit staff to aggressive unrealistic timing - been on the other side of that, it's unfair and bad for morale, IMHO.

You can parse otherwise excludable employees but must test that group separately and you don't get a free pass because that group has HCEs. You may want to try restructuring and parse the young HCEs with older NHCEs and test that group on contributions. The question then is whether your restructured plans can pass using ratio percentage or if you can pass average benefits with those young HCEs (might need to calculate AB% on contributions as well).

If the plan was not terminated by corporate action (resolution, amendment, etc.) prior to the sale closing then it came over to the buyer as a result of the transaction and the buyer can maintain for however long it desires and contributions can continue. If the plan was officially terminated pre-sale then the only contributions that should have been withheld and subsequently remitted were those attributable to pre-sale payroll and receivable as of the sale closing date. If the buyer now has the plan, a termination thereof would mean a one year wait to establish another 401(k) if subsequently desired.

No. If initial eligibility is satisfied for 3% SHNE and someone enters the plan they get the 3% SHNE for however long they were employed and in the plan, whether a day, a week or through year-end.

And if you haven't been current year testing (SHM or otherwise) for five years, I think you need to stay current year on the change to discretionary match until you hit five years. Unless there is some exception to that requirement when moving away from SH plans of which a more knowledgeable contributor to this forum may be aware.

My context is for retirement plans, but agree with you that such language is too loose and open to a lot of different interpretations, which may be the intent so plan sponsors can interpret as they want. This can be dangerous when plan sponsors are not consistent with such interpretations from year to year. I would not use such a provision in a retirement plan. I would either simply specify an hours requirement for a specified time frame, or if "full time" is required for eligibility then that term must be specifically defined by clear and concise criteria.

I'm some years removed from that sort of detail, but as a SH design by definition is current year testing, so you'd have to have been SH or otherwise current year for five years (if the below is as intelligent as advertised). If that was the case and you could change, why wouldn't the applicable prior year ACP be the ACP as calculated with the SHM? Say they had a stated non-SH match and switched to discretionary match, you would use the ACP from that stated match, how the match is determined is irrelevant in that regard, is it not? A match is match is a match. AI Overview To change from current year to prior year testing for a 401(k) plan, the plan document must be updated, and you generally must have used current year testing for at least five consecutive years or for the plan's entire existence. This change is restricted by IRS regulations to ensure plan consistency.

Echoing @Belgarath and wishing you the best on your gradual exit from the industry. Hopefully others will continue your legacy so the next generation of service providers will know "who's the employer?" After 40+ years in the industry myself, I must say that my fondest memories of your contributions to us all were your musical renditions that added spice to otherwise boring and mundane (to most) topics. Enjoy life!