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This is an acutal, recent, fact pattern. Plan transferred into my tpa shop with a significant forfeiture balance. The employer stopped responding to the advisor and myself shortly after the assets transferred. The employees started requesting distributions, stating they were all let go and the company went out of business. The employer would not respond to authorize participant distributions, so an employee called the DOL. I explained to the agent that the trustee is non-responsive and there is a significant forfeiture balance that needs to be addressed. I had no census data to allocate the forfeitures as a contribution and no history to see what years the forfeitures started. The DOL agent told me to allocate the forfeitures based on prior account balance and payout the employees. I said the recordkeeper will not make distributions without a Trustee's signature. One of the former employes knew a prior trustee who still had authorization on the recordkeeper's system. The DOL said to use him to authorize ditributions and pay everyone out. There was a six figure forfeiture balance that got allocated to 40 employees, based on prior account balance. There is no way that reallocation of forfeitures complied with anything, but that's what the DOL agent said to do in order to close the plan.

Thank you all for taking the time to respond - and that is how the prototype document reads.

An employer wants to have a 3 month eligibility and 520 hours worked within the 3 month period. I was very confident telling the employer that if you want to attach an hourly requirement to a shortened eligibility period, using 1,000 hours for a 12 month period as my base, hours would need to be prorated accordingly, i.e., 250 hours for a 3 month eligibility period. The advisor pushed back, asking for the document provision that does not allow 520 hours worked in a 3 month period. Reviewing the adoption agreement and basic plan document, there actually is nothing in the document that prohibits having this in the adoption agreement. The employer is aware of the LTPT rules and also aware that no matter what the plan's eligibility requirement is, if an employee completes 1,000 hours in a 12 month period, they must be allowed to enter the plan unless they are in an excluded class. Does my alternative arguement to not allow this in the document hold water? While the document allows flexibility, IRS rules under IRC §410(a) still apply: A plan cannot impose eligibility conditions that effectively prevent participants from qualifying within the maximum permissible timeframe. If you reduce the service period to 3 months, the required number of hours must be reasonable for that duration. 520 hours over 3 months (~40 hrs/week) is seen as unduly restrictive by IRS standards. Therefore, even if the document doesn’t prohibit it, adopting a 520-hour rule in a 3-month window could jeopardize plan qualification if audited.

To answer the question asked - Automatic enrollment (including EACA and QACA) is treated as a plan feature. Treas. Reg. §1.410(b)-7(c)(1) lists examples of features subject to nondiscrimination testing, and while it doesn’t name auto-enrollment explicitly, features that affect how deferrals are made and how participants participate in the plan clearly fall under this. The IRS has informally confirmed that automatic enrollment is a BRF. See, for example, the IRS 401(k) Plan Fix-It Guide, which makes it clear that when two plans exist, the availability of different features (like auto-enrollment, loan provisions, hardship withdrawals, etc.) must be tested to ensure nondiscrimination.

I 100% agree with getting an attorney recommendation. But, if the Dr. is still well enough to maintain an outside relationship, why can't he take his distribution from the plan now, while he still can?

I would also check the Basic Plan Document and/or the ESOP document to see if there are any requirements the Other Plan needs to have in order to accept the SHNE. For example, what if the eligibility requirements are different in both plans? If the SHCE goes into the ESOP, you have to make sure the eligibility to receive the SHNE under the 401k plan eligibility requirements are met in the ESOP. For example, if the 401k has 3 months for eligibility and the ESOP has 12 months - if an employee is hired 7/1/2024, they would enter the 401k 10/1/2024 but not be eligible for the ESOP in 2024. They would need to receive the SHNE contribution, so ESOP guy is correct, conversation and planning needs to be done to make sure the SHNE is received by all eligible participants in the 401k.

Look into who will pay you tpa overrides. I always struggled with Hancock, selling 5 new plans or maintaining $100M in total assets in order to maintain my tpa payments (I was a small non-producing tpa). Some of the other recordkeeper tpa requirements were not as strict. Empower and Capital Group / American Funds were always very friendly to me as a tpa and their annual data was easily imported into ASC.

A calendar year plan can be operated using standard procedures consistent with IRS reporting, compliance testing (e.g., ADP/ACP), Form 5500 filings, and participant disclosures, all of which are designed around calendar-year rules. There’s no additional complexity in plan administration just because the employer’s fiscal tax year differs. The primary consideration in this arrangement involves the timing of employer contributions, particularly when deducting contributions on the employer’s fiscal-year corporate tax return. Switching the plan to an off-calendar year creates more administrative headaches in my opinion.

Response off the top of my head, no deep dive. If this is a 401k plan, if they retroactively amend to 2024, the participants did not have an opportunity to defer on their tips. If this is a profit sharing only or a defined benefit plan, the answer may be different. Plus I would think you have to see if any HCEs received tips, or only NHCEs.

And that is why there is always a session on Compensation at every conference. Even though is has remained basically unchanged in the regulations, it is still one of the most confusing aspects in the plan document and for administrators.

Don't forget about Long Term Part Time employees. LTPT employees may become eligible for the plan under the LTPT rules, even though they may not satisfy the plan's eligibility of 12 months / 1,000 hours.

Ask ChatGPT to set something up for you. Pay the $22 per month, money well spent.

Even though March 15th is the date to avoid excise tax, it really isn't. Each recordkeeper has their own processing date to get returns processed by 3/15. For example, ADP had a 3/1 deadline for failed testing to be processed by 3/15. I wish everything was June 30th.

Thanks for sharing. I like the rollover chart.

I do one of two things, I put the plan into the recordkeeping system, create a "managed account" investment and track the sources in the system. Manual entry of contributions and time-weight the contributions for the earnings allocation. Or I create an excel spreadsheet to manually maintain the sources and prorate the earnings. I generally use excel if it is a solo plan. I am not as precise as a recordkeeping system allocating gain / loss when I use excel. I advise the broker / client that a second brokerage account must be set-up when Roth contributions are involved. I do want those segregated into their own brokerage account. Next year when catch-up contributions must be Roth for many owners with W-2 compensation, there may be a lot of new brokerage accounts opening. I do charge additional for brokerage account reconciliation.