CuseFan

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.

I believe that is correct, but check the plan language.

Great questions. The regulations use the words "in existence". If you adopt a plan now that is not effective until 4/1, is it in existence now? I wouldn't think so but who knows? If you adopt after 4/1 but have effective 1/1 (for PS anyway), is it in existence at 1/1? Maybe yes, maybe no, but it's treated as there for tax and other purposes. Other constructs often refer to the later of the adoption date or effective date but I don't know if I'd hang my hat on that. The safest bet is making it all effective 4/1. I'd spell out the options, lack of regulation clarity and the associated risks and benefits of each option and then let the client decide.

I found this an interesting issue and so I googled and found a nice summary here: https://www.paychex.com/articles/payroll-taxes/what-is-on-demand-pay There are other provider summaries as well. This seems to indicate constructive receipt doctrine, but that tax withholding still happens when the regular pay check is issued. Say my bi-weekly pay is $2,000 and $500 is typically withheld each payroll period for taxes and benefits (medical, 401k, etc.), and I get a full $1,000 advance mid-cycle, then my regular check will net $500 (and maybe less any fees if those get charged to the employee). I'm not sure how else that would work unless they treated the $1,000 advance as a paycheck and then applied withholdings - but that makes it complicated for employee who is targeting a specific amount and must calculate withholdings to gross up the requested amount. I think this only becomes a TPA issue if an advance is paid before year-end on a paycheck issued and otherwise taxable in the following year. I would hope plan/benefit design would prohibit that potential nightmare.

How is that person statutorily excludable? That only applies if the person terminated with 500 or fewer hours and did not benefit by reason of such. You don't need to increase CB accrual, you do need to include in testing and you do need to provide gateway. You can credit the average NHCE ENAR toward this person's gateway. If TH is provided under DCP and requires year-end employment, I don't think this person needs TH, but gateway requirement makes that a moot point.

It's easier for canned software to present all pieces of an if, then, else scenario rather than deliver select results based on logic and relevance.