CuseFan

post separation the 100% FAE can be indexed/increased, see my response above (third post)

I don't think that's clear. If you want safety, maybe ignore the statutorily excludable and apply the 6% to the rest.

Yes, assuming the plan allows.

The compensation limit can be increased by some annual COLA percentage after a participant separates, I think most pre-approved plans allow for that. These are less than post-NRA increases but apply from separation. This might delay the required (retro) commencement date. From Google AI: For a participant who has separated from service, the IRC Section 415(b) 100% of compensation limit is adjusted annually for cost-of-living increases. IRS (.gov) +1 The specific percentage increase for recent and upcoming years is as follows: For 2026: The adjustment factor is 1.0284 (a 2.84% increase) for participants who separated before January 1, 2026. For 2025: The adjustment factor was 1.0258 (a 2.58% increase) for those who separated before January 1, 2025. For 2024: The adjustment factor was 1.0351 (a 3.51% increase) for those who separated before January 1, 2024. IRS (.gov) +4 Key Rules for Post-Separation Adjustments Annual Indexing: Under Section 415(d)(1)(B), the compensation limit (the "high-3" average) for a separated participant is adjusted annually using procedures similar to Social Security benefit adjustments. Cumulative Calculation: The adjustment is applied by multiplying the participant's compensation limit, as previously adjusted through the prior year, by the current year's factor. Plan Provision Requirement: A participant's benefit can only be increased to reflect these cost-of-living adjustments if the specific retirement plan document includes language allowing for such scheduled post-retirement increases. Comparison to Dollar Limit: The final benefit remains limited by the lesser of this adjusted 100% compensation limit or the overall 415(b) dollar limit (which is $290,000 for 2026 for those aged 62+). IRS (.gov) +6

Aggregate compensation of DC participants, so I would think so.

Also, it is the plan's fiduciary's decision to continue or forego attempts to recoup the overpayment on behalf of the plan. The RK can pursue or not in their administrative function and to mitigate their liability.

Those not eligible by age/service for PS and CB would not be included in your rate group testing. Good luck if you have to navigate a 6% DC limit to avoid combined plan deduction limit with a SHM.

I think yes, it would actually have to convert to PS as it would no longer satisfy requirements of an ESOP. However, if there was never a 401(k) provision and that component plan is new I believe it will be subject to auto enrollment rules.

The 415 100% of comp limit is prorated on service so it might be 100% at the start depending on past service. However, the dollar limit is prorated on participation so a 2025 accrual of an annual benefit of $28,000 is the maximum even if 12/31/2025 service is ten or more. I don't see how that formula would increase participation years and allow for an increase in future 415 limit and owner benefit. If it did and there were any other non-excludable employees there would be a 401(a)(26) problem and 410(b)/401(a)(4) issues if they were NHCEs.

Yes, and then the person can request however much of their excess from each of the plans as they choose. This is a tax compliance issue for the person, not a qualification compliance issue for either plan.

Any way this gets sliced, the person's net taxable income should deduct to zero.

Thirded!

It's a game accountants like to have their clients play to minimize their FICA and Medicare payroll taxes, which often screws them out of the ability to make maximum retirement contributions (not to mention limiting their ultimate Social Security benefit if below the SSWB). If W2 is already over the SSWB then it's only 2.9% Medicare taxes they are saving, which is not smart when the retirement contribution percentages missed out on are typically much higher. S-corp plan comp is W2, K1 is not included, that is not an item open to plan administrator interpretation and if they insist on doing so I would likely resign from that engagement.

No worries, no one is 100% here and we respectfully correct or disagree with each other when appropriate - that is what's great about this forum, it makes us all better.

The plan document should define the eligibility computation period and likely says first performed an hour of service. The 1/1 vs 1/3 start for a salaried individual is an interesting case. If they were paid for 1/1 then they were credited with hours of service for such date. One could argue that it is a reasonable interpretation to equate crediting with performing, but a strict interpretation of performed would be defensible. In such a case the PA should interpret and subsequently follow the precedent. In the case above, big gap from 7/1 to mid-August.

I think you are missing the point here - the question/issue is severance pay not post-severance compensation. The person is no longer employed and severance pay (per IRS) is never plan compensation.

I wasn't aware 1 was an option but sounds OK and yes, 2 is definitely OK. Correct, you need not use the same methodology for 410b, 401a4 and 401a26.

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.