CuseFan

You and 401(k) provider are correct that new hires with lookback year pay below the HCE threshold are NHCEs initially and, if other eligibility criteria are met, if any, they should be eligible to enter that plan and defer until the first plan year in which they become HCE. Unless eligibility for the NQDC plan specifically excludes any employee eligible for the 401(k) plan, it is determined independent of that plan. Also, the determination of "highly compensated" for the NQDC is different and independent (I'll use HC). HC for that purpose is someone considered highly paid in the context of the employer, and someone could be HCE for 401(k) but not HC for NQDC, or vice versa but that is less likely. There is the 20% top-paid group election that can be made for 401(k) HCE. For NQ, there is no formal 20% rule but there has been IRS opinion (I think) that to be predominantly for the benefit of HCs a NQDC cannot cover more than 20% of employees. Your NQDC provider is correct in saying the employer must determine who is or is not in the top-hat group (select management and HC). If you use generic definitions, be sure that any management or compensation thresholds are not too low/too broad. In summary, new executives could be eligible for both the 401(k) and NQDC for their first (partial) year or two of employment. I hope this was helpful.

Fully agree ESOP Guy, that's how I learned and now how I share that knowledge with others as well. You just tell someone an answer and they're asking the same question sometime later. You teach them how to arrive at the answer then chances are better they've learned and won't need to ask again.

Also, some plans require (which is permitted) the person to be married for one year prior to death for the spouse to be treated as surviving spouse with respect to death benefits under the plan.

Yes, 5% of $345,000, the 2024 comp limit. The plan document should specify all that.

The compliant correction, if I recall, is to adopt all the missing pieces to bring the plan up to date and do a VCP filing. Whether the parties agree to simply do a current update and sweep prior issues under the rug is up to the attorneys. What about the recordkeeper(s) and/or TPA(s) that have serviced the plan, have they been contacted for copies of plan documents?

415(h) affects 415 limits for those who own more than 50% of multiple entities that sponsor retirement plans. That is, the control group is created with respect to the individual for purposes of their 415 limit(s), it does not create a control group for other purposes. 402(g) is an individual limit regardless.

Yes, but she would have one aggregated 415 limit on like plans (one DC limit, one DB limit) so there would be no advantage to her business adopting its own plan. Depending on her pay in husband's business, there could be an advantage to having her business adopt his plan as a participating employer, or adding a new DC or DB to the CG if there is currently only one plan.

VATs may but need not be reported on W2. Just answered this for a client this morning. Google is a wonderful thing. Generally, according to the instructions to IRS Form W-2, Wage and Tax Statement, an employer may, but is not required to, report non-Roth, after-tax contributions on Form W-2 in Box 14.

You have different issues at play here. You need to be considered an employee or self-employed and have "compensation" or net earned income upon which to base a contribution. Assuming you have that, the source from which the business funds the contribution does not matter although should consult with accountant regarding deductibility from certain sources.

This is an accounting and tax planning question first and foremost (including whether the proceeds are capital gains) after which the retirement plan question could be answered.

I have seen those arrangements over the years, but not recently as I don't consult in that space any more. I remember seeing it particularly in colleges and universities, where they had the ERISA plan with a mandatory employee deferral and a very generous match plus a non-ERISA plan that allowed voluntary deferrals beyond the rate of the mandatory deferrals. Although, as I remember, the investments/RK structure was often the same (TIAA-CREF and/or Fidelity) so there was some question as to whether those second voluntary plans were truly non-ERISA (especially if solely T-C or Fidelity). These arrangements may have been combined into single plans now because of all the new rules, as I noted, I'm not in this space any more. The ERISA plan document should state the 4% deferral cap as should its forms, and there should be a "document" (at least items of documentation) for the non-ERISA plan.

There is also the requirement for no US-source income, so I don't see how this person could be a statutory exclusion from any qualified plan, but the tax-exempt 457(b) is NQ, so they can include/exclude any top-hat type employee they want.

If this is a governmental, which is the only situation I could see this being permitted, you shouldn't be filing a 5500. Otherwise, what is the basis for moving qualified 401(k) plan money to a nonqualified 457 plan?

Seriously, other than maybe looking at a national average of birth and adoption costs, I have no reasonable thoughts as to how they arrived at those other amounts.

or what I said in response to Peter's subsequent question.

Yes, legislators are just pulling numbers out of their backsides, the same source as for all their political commercials.

true - thanks

If you HAVE to aggregate to satisfy coverage then you must aggregate for nondiscrimination and then there are no safe harbors. If each plan has an otherwise safe harbor formula, if the DB can pass coverage by itself using average benefits, then you're OK.

Maybe as a 403(b) plan the rules are different, but what this looks like to me is that the "mandatory" employee contribution is the amount required to get the employer contribution - say if you contribute 2% or whatever the specific mandatory % then you get 8% from the employer. Anything above or below the 2% or whatever % is "voluntary". In my opinion, that make the employer contribution a match not a non-elective contribution, and subject to ACP testing, as it is contingent upon an employee salary deferral ofX%. In regard to your question, I believe they can have a 1000-hour annual requirement to receive the match (assuming that passes 410(b) coverage testing) but could not (and really need not) have such for what you/they call the mandatory piece. I have seen similar type designs in tax-exempts companies and colleges and the employer contribution is a match, with the exception being the situation where the mandatory contribution is truly that and a condition of employment, and is therefore not considered an employee deferral and so the resulting employer contribution is not considered a match. If I'm off base because school district 403(b)s are different then I defer to our experts out there who work on these plans, as I do not.

I do not think your amendment creates a new last day for credit entitlement but it did create a 401(a)(26) minimum participation issue even if you are OK on coverage and nondiscrimination by aggregating with DCP (assuming you still have same PYs and can do). You will need to provide some NHCE CB credits, either via an amendment or maybe Plan Administer makes reasonable interpretation that freeze date is the last day requirement for a credit.

agree with that, think it should be business days

I agree with all the prior comments and wholeheartedly agree with just - the requirement is to segregate from employer assets (i.e., deposit into a plan account) but amounts need not be invested/allocated within that time frame. Leaving them univested for a prolonged time may have other fiduciary concerns, but not late deposits.

Exactly, thank you.

To satisfy RMD he can commence his monthly benefit or he could, if plan allows, elect a lump sum which could either be the equivalent of 12 monthly payments or treating the LS as a DC balance. I do not think you can lump in monthly annuity payments with interest into a single installment unless the plan permits, but I'll defer to other opinions on that. 2024 is his first distribution calendar year. Regardless of how/when he commenced RMDs, unless he takes lump sum in 2024, split between RMD and a rollover, he will have a 2025 distribution calendar year RMD no matter when the plan is terminated and assets distributed. If he does aforementioned 2024 split lump sum, he'll have an IRA RMD for 2025 attributable to the 2024 rollover.

Understand that frustration, but plans are required to follow strict rules in processing QDROs, and note that the Q standing for Qualified does not occur until the Plan Administrator reviews and accepts as Qualified, meaning all the requirements to be Qualified have been satisfied. There is often much back and forth getting from a divorce decree to a Domestic Relations Order to a QDRO, and any missing requirement can delay that process. Having a QDRO-knowledgeable attorney who engages with the Plan Administrator at the start and uses the Plan's model/preferred QDRO format would have served to facilitate, but doesn't help now, and hopefully you'll never be in this position again.