CuseFan

Agree with @David D - including the 1099 situation not appearing correct unless something else going on. Are the owners each single member LLCs that own the company and company then pays the LLCs via 1099s. Even so, the LLCs would be either incorporated (C or S) or not (sole prop) and pay their owners via W2 or K1, respectively. Then (I think) the LLCs are disregarded entities and their earned income should count for 401k plan. If that's not the case then that whole 1099 situation is wrong IMHO - but I'm not an accountant.

The 80/120 rule only applies with respect to which 5500 form a plan may file, nothing else that I know of.

Paul I is spot on with everything. Remote or hybrid arrangement with zero industry experience, not going to happen. My guess is that an employer would want at least 2-3 years of direct on-site experience and supervision of a new hire w/o prior experience before entertaining a remote or hybrid arrangement. My experience is that you learn and retain more with the direct supervision, knowledge sharing, and professional discussions you get from being in an office, not to mention relationship building. From homicide detective to 401(k) administration? I'm sure she has her reasons and best of luck to her. Paul I provided great suggestions.

If the MPPP component is currently active then an advance 204h notice is required prior to such component being frozen/terminated. Only affected participants (active in the MPPP component) need get notice. If the MPPP component is not active as it was frozen previously, for which a 204h would have been required at that time, terminating the plan with that component does not trigger another 204h requirement. We see this all the time in DB world - issue 204h notice when plan is frozen, not again at termination (but is referenced in the Notice of Intent to Terminated - "NOIT").

Agree with your suggested solution but also strongly suggest some formal legal guidance which could also ascertain risk. I would not "cheap out" given the size of the assets. Other key thoughts: who made the mistake, when did it occur, when was it discovered, and how soon thereafter was it corrected? Was this one big errant transfer or a series of errant transfers? Were they caused by honest clerical errors or was someone asleep at the wheel not paying attention. Was this the plan sponsor's doing or a third party? Documenting all that and fixing ASAP at a minimum is what I would suggest - put the plans where they'd be had the mistake(s) not occurred. Maybe a VFCP filing would be appropriate. My only formal advice here - get qualified legal guidance.

What is the bonus practice of the employer? Even if allowed in form via a current amendment, you should verify that excluding bonuses would not result in a discriminatory definition. For example, if bonuses are across the board but HCEs are already at or near the 401(a)(17) maximum compensation such that little to none of their bonuses are excluded in practice, that could very well prove discriminatory.

I think Peter is correct and I think income tax withholding on such is legally required. I also wonder then, since the income tax withholding amount is also taxable income, doesn't that require withholding necessitating a circular calculation? That circular calculation yields $215.77 in income tax withholding that is equal to 22% of $980.77 ($765 + 215.77). However, I wouldn't split hairs on that and would accept whatever the payroll system delivered, provided it was at least Peter's details above. Of course, if there is mandatory state income tax withholding then all this must be adjusted for that as well.

Check the BPD - it should say that for a self-employed individual their compensation is their net earned income from self-employment, so whatever AA option gets checked I don't think it matters much.

True, but if the employer is locked in for gateway purposes, especially adding a CBP to the testing, discontinuing any SHNE isn't likely in the cards.

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!

First, I did not think you could tie your ICR to an equity index like the S&P500 but had to tie it to a specific S&P500 index fund. Second, as John stated, it is cumulative. The account balance goes up or down annually per the ICR and can and will be negative until such time as it gets paid out. Assuming future pay credits of $10,000, a 12/31/2024 first year balance of $10,000 has negative interest of $2,000 after the 20% loss and gets $10,000 pay credit at 12/31/2025 for balance of $18,000. 10% gain in 2026 yields interest credit of $1,800 and $10,000 pay credit makes balance $29,800 at 12/31/2026, and so on. However, if this person left and was getting paid out, they would get $30,000 ($10,000 x 3 years) - unless the plan has defined ICR floor as may be permitted by the regulations, as John noted.