CuseFan

You don't get a free pass - you still have to satisfy coverage and nondiscrimination, so you'll need a DC plan to be aggregated. You get more favorable testing parameters and gateway satisfaction when aggregating with the DC plan and you do get 401(a)(26) relief.

I think EBECatty is spot-on. The $3/hour is definitely a CODA and the additional $1/hour, if applicable could only be a match. That does create a design problem in coordinating with any other deferrals or match (and potential coverage and/or BRF issue if you now have different matching formulae or match/no match deferrals). Unless, maybe if the employer would require everyone to make a one-time irrevocable election, and new participants to do the same upon eligibility, does that keep the $4/hour into the plan out of the deferral and match buckets? I don't know but that might be worth exploring with legal counsel. Regardless, I don't think this is supported in any pre-approved document, would need to be individually designed or through a pre-approved plan modification requiring d-letter submission - but get some ERISA legal counsel input before doing any of that. I would also put on your consulting hat and dig deeper into why the client wants to do this. There may be better ways to accomplish the objective. If it's because many/most employees do not appreciate the profit sharing, then scrapping the $4/hour PS for the $3/hour pay raise across the board might be the simplest way to go.

agreed

Still, if employees are not given same general investment opportunity as owners, isn't that discrimination in BRFs?

That was my recollection as well, and similarly (thankfully) had not had to deal with in a long time.

Just curious, how are assets in the employee plan #3 invested? Do they have individual brokerage accounts? If not is there a BRF issue?

Agreed, too late for 2022, you either give wife and daughter much less (or zero), give NHCEs more to pass, look at restructuring, or maybe an 11g to bump up necessary number of NHCEs (but not to create new HCE group). Also agree that individual allocation groups is the best/most flexible way to go and don't see a reason for nearly every cross-tested plan to be designed that way.

Agree with CBZ, as we had that exact situation with a university employee who was also a business owner and ended up doing a DBP because of the DC aggregation. I have no thoughts on the church plan side of the discussion.

Are you saying the participant must also self certify that "I am not a crook" in order to get the loan?

I looked at the FTW basic DB document, assume DC is same. In definition of year of eligibility service for elapsed time you count 12 months from the date of hire, and it says for periods shorter than 12 months you substitute such shorter period in that definition. The 3 months is satisfied 7/3 (7/2 - depending on how you interpret and there have been countless discussions on that in this forum) and entry is 1/1/2024. Note the document also says in aggregating elapsed time service for eligibility for non successive periods that 30 days equals a month.

I've been told we interpret in that fashion after a review of the regulations, but on a large plan adhering to the 4th month timing.

That is correct - any tax withholding election or lack thereof matters not, the permissible gross up is for (anticipated) taxes NOT tax withholding.

I don't know but I would be very careful. March could very well be deemed the 1st month of the plan year, making December the 10th month and 12/1 your deadline. I think that is just as supportable, if not more so, than using April as month 1. Look at it this way - if the plan year began 3/1 instead of 3/28, is there any question that March is the first month of the plan year? The regulations do not say full months or use days, and your issue is not a non-calendar year plan issue, rather it's a non-conventional non end of month plan year end issue. That said, we have a client with a floating fiscal and PYE (last Sunday in April?) and I'm checking with one of our actuaries on it to see how they have interpreted. I'll follow up if/when I hear more/differently.

We had client with multiple DBPs (3) that used a master trust and the MTIA 5500 was filed under the sponsor's EIN and plan number 005 (DBPs were #1-3 and there was a DCP for #4). This goes back 10 years as they had terminated the plans but I don't think those rules have changed.

If the person makes $500, a 3% TH costs the ER $15. If the person is deferring (s)he is still a participant so no added cost for the additional body attributable to TH. If you treat as terminated/re-hired each year, that might trigger annual cash-out processing, which could then be costing the ER or the (now ticked off EE) those distribution fees. Given the circumstances, is the person really an employee any more or an independent contractor?

Thanks Lou.

Is there a profit sharing provision that has just not been utilized or does the document specifically limit contributions to deferrals and safe harbor? I seem to recall past discussions that a PS provision could make plan subject to top heavy, but I'm not sure and don't deal with these (deferral and SH-only) plans.

So funny - yesterday I saw HCE post basically the same question but in a slightly different context, did a quick Google and found and posted this exact item in response to that question. Great minds, right?

Agree - and the plan document should be clear on all that.

Agreed. They are only excluded if they are (1) non-resident (live outside US), (2) an alien (non-US citizen, not Martian), (3) not on a US-based payroll AND (4) the plan document/AA excludes such employees.

No, they are not benefitting under the 401(a) section of the plan. BUT, if the plan is top heavy then they must get 3% TH - but still otherwise excluded so no gateway.

From the Pension Distribution Answer Book. QJSA can be waived w/o spousal consent provided there is a court order documenting the separation and there is no QDRO. From your description it appears that each of those conditions have been satisfied. Q 11:29,Are there circumstances when spousal consent to a participant's election to waive the QJSA or the QPSA is not required? Last Updated: 10/2022 Yes. If it is established to the satisfaction of a plan representative that there is no spouse, or that the participant's spouse cannot be located, spousal consent to waive the QJSA or the QPSA is not required. If the spouse is legally incompetent to give consent, the spouse's legal guardian, even if the guardian is the participant, may give consent. Also, if the participant is legally separated or the participant has been abandoned (within the meaning of local law) and the participant has a court order to that effect, spousal consent is not required, unless a QDRO provides otherwise. Similar rules apply to a defined contribution plan not subject to the minimum funding standards of Code Section 412, which pays the participant's vested accrued benefit to the surviving spouse upon the participant's death. [ Treas. Reg. §1.401(a)-20, Q&A-27] A participant may elect out of the QJSA in favor of an actuarially equivalent alternative joint and survivor annuity that satisfies the conditions to be a QJSA, without spousal consent. [ Treas. Reg. §1.401(a)-20, Q&A-16; Notice 2007-7, 2007-5 I.R.B. 395, Q&A-11] (See Q 11:17.) Because a QOSA (see Qs 11:38 – 11:46), by definition, satisfies the conditions to be a QJSA, no spousal consent is required if a plan participant elects a QOSA that is actuarially equivalent to the plans QJSA. If the QOSA is not actuarially equivalent to the QJSA, spousal consent is required for the participant to waive the QJSA and elect the QOSA. [ Notice 2007-7, 2007-5 I.R.B. 395, Q&A-11]

https://www.irs.gov/pub/irs-wd/0813042.pdf I was interested by your question and found this. It does seem that these are somewhat common and IRS views them as NQDC plans not ERISA pension plans. This IRS memorandum was contesting a FICA and Medicare tax refund, but supports the finding of NQDC (compensation and FICA). I know you have concern about broad-based versus top-hat, but are these people actually "employees"? If I remember, insurance agents are "statutory employees" and so they are treated as employees for some purposes (FICA) and contractors for other purposes (retirement plans?). Contractors can participate in NQDC w/o a top-hat issue is my understanding.

Your background info is not clear - who is the employer, what is this fund from where these two people get distributions from and how is this income reported to these individuals? To contribute to an employer's plan in any fashion one needs to be an employee of that employer (or employee of sponsoring union or participating employer) and have compensation or earned income from the sponsor. If they are not employees they cannot be in the plan. If they are self-employed contractors they can establish their own plans on their earned income.

What everyone else said, or maybe the employer whose employees participate is owned by the trust.