CuseFan

Precisely, just went through all this with a colleague yesterday. Solo or HCE-only plans - no reason not to allow this. But any NHCEs - fugediboutit!

I expect the plan has language for correcting this that involves the refund/forfeiture method you mentioned. I would think a retroactive amendment that allows for this participation would be OK, but would it be temporary, i.e., only allow what has happened so far but then exclude again prospectively, or allow continued participation? Could allowing this participation to stand, and especially allowing it to continue, create an HR issue for the plan sponsor? Joe and I are both hourly, union, department X, location Y, whatever the exclusion criteria but he was allowed to participate and get employer contribution while I was not - I want mine!

Exactly. Each disaggregated component is a "plan" for coverage and nondiscrimination testing.

https://www.napa-net.org/secure-act-tax-credit-qas Found this with the applicable Q&A shown below. Note that 2.0 just expanded what was available on this. Q3: How do not-for-profit organizations receive the 403(b)-start-up credit for offering new plan? Is the credit applicable to non-profit organizations? A3: The credit is not applicable to tax-exempt entities because it is not a refundable credit. Therefore, the credit is not available for the adoption of a 403(b) plan. The types of plan that can qualify for the credit (for plan sponsors that are subject to taxation) are qualified plans under 401(a), annuity plans under 403(a), simplified employee plans under 408(k), and SIMPLE plans under 408(p).

10/15 for calendar year plans. Cut & pasted 1.415(c)-1(b)(6) below: (B) Date of employer contributions. For purposes of this paragraph (b), employer contributions are not treated as credited to a participant's account for a particular limitation year unless the contributions are actually made to the plan no later than 30 days after the end of the period described in section 404(a)(6) applicable to the taxable year with or within which the particular limitation year ends. If, however, contributions are made by an employer exempt from Federal income tax (including a governmental employer), the contributions must be made to the plan no later than the 15th day of the tenth calendar month following the end of the calendar year or fiscal year (as applicable, depending on the basis on which the employer keeps its books) with or within which the particular limitation year ends. If contributions are made to a plan after the end of the period during which contributions can be made and treated as credited to a participant's account for a particular limitation year, allocations attributable to those contributions are treated as credited to the participant's account for the limitation year during which those contributions are made.

My understanding is such employers have no 404(a) limit on their contributions to retirement plans, which has been discussed previously in this forum. I remember administering a 401k plan for a very generous larger employer that provided employer contributions in excess of 17% of payroll (pre-EGTRRA, when PS limit was 404(a) limit was 15%). However, tax-exempt employers do file informational returns (990's) and I believe their contribution timing is tied to those for purposes of employer contributions being considered for 415 purposes for the respective year. I remember looking this up ages ago but do not remember where I found it (maybe 415 regs, I'll take a look, unless someone else finds out sooner).

Another reason why IRS is trying to require e-filing of as many forms as possible.

What about transferring the platform assets to the pooled account (after total RMD is calculated by TPA), and then paying the split lump sum (RMD/nonRMD) all from the pooled account, is that a viable option?

A "plan" must pass both coverage AND nondiscrimination. A "plan" each of your mandatorily disaggregated components and any permissively disaggregated components. You cannot choose to test "plans" A and B together for coverage but separately for nondiscrimination, whether nondiscrimination is ADP, ACP or general 401(a)(4).

I don't know if the same rules apply to HRAs, but I know that 401(k) plans can have mandatory employee (pre-tax) contributions as a condition of employment and those are generally not considered employee salary deferrals, but rather treated as employer contributions.

I agree with CBZ's initial interpretation, and hopefully future IRS guidance will confirm/clarify before this becomes effective.

Agreed, but also know the minute there is an HCE, the match rate that includes that HCE must satisfy coverage. No problem if the lower rate, but this isn't just a set it and forget it design unless by design no HCE can be covered.

You cannot sponsor (in CG) any other plan if you have a SIMPLE. SECURE 2.0 will let you terminate a SIMPLE mid-year and replace it with a safe harbor 401(k) plan but not until next year (2024).

And as always, check the plan document, almost all plans have provisions for mistakenly included/excluded employees.

Ditto

Meaningful benefit is facts and circumstances but apparently most actuaries and other providers (because of stubborn IRS agents?) are applying the 0.5% accrual rate as gospel. It would be nice to have formal guidance of some sort but all we have is that Schultz memo to argue for or against. If a 21-year-old gets 1.5% of pay credit and 4% interest and that creates an accrual rate of 0.5% or more, is that meaningful to that employee? (Show me any 21-year-old who think any retirement contribution for them is meaningful!) But a $10,000 credit for a somewhat older doctor making over maximum pay comes in under 0.5% accrual - not meaningful? Short his/her next account statement by $10,000 and you'll see how meaningful that is! Facts and circumstances are so subjective, having that 0.5% threshold (agree with it or not) provides some B&W to an otherwise gray area. We find the ASC calculations match our spreadsheets (when both are properly coded), so have confidence there. FYI, you don't need to provide the 0.5%+ accrual rate for everyone, only enough to satisfy your 40% or 50 threshold for 401(a)(26).

The transition period doesn't change plan provisions. Many (most? all?) pre-approved plans exclude from the definition of eligible employee those associated with a transaction until expiration of the transition period or, if earlier, an amendment to include them. Does the plan have such language and if so, does it give you ability to wait until 1/1/2024 to amend w/o potentially including someone you shouldn't (Canadian resident citizen)?

Check the plan document (always) for any guidance. Looking at a pre-approved document hour of service definition, those hours for back pay are attributable to the computation period to which they relate - so the prior year(s) in question. Does that mean that the compensation attributable thereto should also be considered for the prior year(s)? I don't know for sure, but that might be a logical conclusion and then require those makeup contributions and earnings for anyone who would have been eligible for the SHNE for the respective year(s). If compensation does not have to follow the hours back to earlier year(s) then you could treat it as current compensation for those employed. For former employees, could you then apply the post-severance compensation rules and plan provisions, which would likely exclude for all but the recently terminated? I don't see why not. I don't know the answer, just providing two possible ways of looking at this from my perspective - heads or tails. There might be some labor law concerns here as well and if they had legal representation for their DOL job audit, they might want to take that engagement one step further to get a legal opinion on this. As is often said in this forum, particularly with complex issues, free advice is very often worth what you paid for it.

No and no. It's similar, I think, to an employee repaying a distribution overpayment from a prior tax year. IRS position is that the amount received (or made available) is taxable (compensation in this case) for such year and that anything that happens in a subsequent year does not change that. The person also received $X in taxable compensation from the employer before terminating which I think is not affected by cutting a personal check back to the employer. The person may be able to get some sort of personal miscellaneous tax deduction for the repayment (subject to those rules) but that isn't your concern, it's a matter for this person and his/her accountant.

Gateway is 7.5% and includes profit sharing at applicable percent and the equivalent normal allocation rate (or NHCE average thereof) of the cash balance (which is usually significantly less than the CB credit %). The SHM does not count toward gateway but does count toward your 6% DC employer limit if you want to avoid the combined plan deduction limits as people have noted. Therefore, to enable large CB deduction skewed toward owner(s), you often must limit the owner(s) profit sharing to leave enough room for NHCE gateway. Usually a combo design is much better with a SHNE in the DC as it counts for testing and gateway, but that is a prospective conversation to have with the client.

Agree with Bri

Exactly, any limitations are service provider imposed, not regulatory.

Check the document, but that prior service is going to count and I don't think you can delay a re-hire's participation on entry dates, usually it's immediate. Even if you are able to exclude until after a YOS using rule of parity, participation (other than deferrals) is retroactive so you're in the same boat. Two years eligibility doesn't help either. If they never had a plan until now, maybe it's different, but I don't think so.

If it's a corporate trustee where investments are directed by the participants (i.e., a typical 401(k) plan) then there should be no issues.

Agree, I definitely would not do that. You are stretching to the maximum 15% MVAR range, how is that not significantly higher? Also, in all the past sessions I remember attending, the presenter said you never an HCE at the top of the group, or certainly not at the top of the top group.