Tom

The spouse and adult children if they have 500+ hours in 2024 and 2025 (but <1,000) and are age 21, they are LTPT for 2026. The doctor owner wants them to be able to fund maximum elective deferrals as LTPT employees. He knows they will not receive any employer contribution. I just want to make sure these LTPT family members do not come into play for testing whatsoever with this cross-tested plan which only has to provide the minimum gateway for eligible NHCEs at 3.4% to max the doctor. Thank you

A plan sponsor wants to cover his LTPT spouse and children so they can make deferrals. I realize they will not receive any employer contribution. This plan is cross-tested and provides the minimum gateway for other NHCEs (3% SH and 1.4% PS) The family members' deferral rates will be a very high % of pay. I want to make sure their deferrals don't get included in the big average benefits test EBARs Otherwise they will cause that part of the test to fail and then cross-testing will become very challenging. Thank you, Tom

HR standpoint - not HRA

Plan sponsor wanted a plan that provided a 1% match to HCEs and a higher match to NHCEs. The match is calculated each pay period with the plan sponsor setting the match in with their payroll service provider at the beginning of the year. This provision is obviously problematic as employees might move from HCE back to NHCE and vice versa and from an HRA standpoint is not very employee-friendly. I should add they have many well paid employees who however over and under the HCE threshold each year and are not owners. So for 2025 we see a couple HCEs who received more match than they should have. The match is discretionary but rigid and so the notice goes out. Seems we would transfer the excess match along with earnings from the participant's account to the plan's unallocated cash account. So there would e no distribution to the participant nor 1099-R. Thank you, Tom

We have a small group of DB plans and work with an excellent actuary. Our plans are generally small but for one with several hundred participants. The sponsor wishes to start a new DB plan but would like it to look like their 401(k) - online access to see balance, process distributions online, etc. Does anyone know if Ascensus has such a product. I did a search on them and was directed to their subsidiary Future Plan. Thank you for any comments.

I doubt this is possible but I wanted to be 100%. We've always provided the 3% nonelective safe harbor to all eligible regardless of employment condition on last day or hours worked. A large client does not want the terminated employees to get 3% as the cost is fairly high. A 3% profit sharing plan to those still employed does pass coverage but the plan will not pass ADP and the client is firm - no corrective distributions. Is it possible to test the terminated employees ADP (there are no HCEs in that group) and only give the safe harbor to those still employed? The plan is not top heavy. Just taking a wild shot on this. Thank you, Tom

We've continued to provide the 3% notice even though the requirement has changed. A typical plan for us is 3% FIXED in the document nonelective safe harbor and profit sharing. My understanding has been if there is no discretionary match then the notice is not required. I went to ChatGPT which said it could be required if the safe harbor "interacts" with profit sharing. The explanation was lacking. I don't know what it means by that, This is a plan with 350 participants and i didn't want to burden the sponsor with the distribution as it is not distributed by the record keeper. Thank you

Record Keeping platforms - these are most of our distributions by far. TPAs generally get notification, log in, check vesting and approve. Is anyone doing anything extra to be protected? I'm thinking of requiring the plan sponsor to contact the participant (who likely is terminated) to confirm their request if the distribution is over say $10,000. A 3rd party could have hijacked their login credentials. If a problem, I'd expect the plan sponsor would point fingers at the TPA - "you approved it." I'm not sure all platforms require both TPA and plan sponsor. We do our part but we don't know if the sponsor always has to approve as well. We will need to confirm. Broker accounts and DB plans - for these, we provide distribution packets, plan sponsor requests funds be sent to us, we issue checks, deposit tax into EFTPS as needed and do tax reporting. We do not get funds for larger amounts - brokers get letter signed by Trustee to distribute as the participant has elected. For all check distributions we request driver's license unless small (under $1,000) to be provided to us at the same time they send their election form - not separately. Still there is risk the election form could have been completed by a 3rd party who also had access to the driver's license. All ideas welcome! Thank you, Tom

Is it possible for a terminated plan to file Form 8955 with an end date different than the 5500. Example: plan final 5500 2/28/2025; 8955 3/31/2025. Comments? Tom

We will push back on the TPA to make a decision about this. I believe cash basis makes sense. The participant sees no account balance as of 1/1/2024. To add to this - I just learned that 8 participants were 100% distributed but then residual earnings remained anywhere from $.02 to $.35. I see record keepers writing these off at times. It will be up to the TPA but it seems reasonable to count these individuals as zero balance as of 1/1/2024. This will eliminate the audit. Tom

A business is 100% owned by an ESOP. The question came up about RMD. The employee involved was a >5% owner 10 years before the business sold to an ESOP and he was well below the RBD age. I think we are ok with no RMD to this person. Thanks in advance for comments. Tom

This plan is our CPA client not our TPA client. The TPA is now indicating the plan needs an audit for 2024 which of course will not be done by Oct 15. The 2023 5500 shows 125 participants with an account balance as of 12/31/2023. So presumably there would be 125 as of 1/1/2024 which would mean an audit. The plan never crossed the 120 threshhold under the old or new counting rules until now. Why this is coming up now I don't know. But it got us thinking - does account balance mean actual money deposited into ones account or does an accrued contribution count. This employer likely funds the 3% nonelective and profit sharing contributions for 2023 sometime in 2024. So some employees have an accrued plan balance as of 12/31/2023 but not an actual plan balance. I believe admin systems count the accrual when determining the count for 5500 purposes. Also, I know this has been commented on but I don't remember what the consequences are of filing a 5500 without the audit report, and adding it later as an amended 5500. Thoughts? Thank you, Tom

I don't like dealing with this issue but we are being referred a chicken/egg farm. There are maybe 5 US citizen FT employees and maybe 20 foreigners on a work visa. The sponsor does not want to cover them. I'm reading that if they have US based wages they are not a non-resident alien. Well they always have wages in the US. They come and go frequently. The plan will exclude those under the "part-time" rule and I realize the implications if they do go over 1000 hours and the LTPT issue. I will also include exclude by job classification in the document. What is helpful is that there are no owners or other HCEs to be covered by the plan. Given no HCEs, I think I'm good on the coverage test by including the 5 US citizen FT employees but excluded the 20+ foreign workers. Agree? I think I'm solid but don't want any surprises! Thanks

An audited plan just told me today that there are 13 employees that did not have the correct amount of Roth withheld based on their elections. The amount withheld was based on the after-tax net pay, not gross pay. From what I'm reading since it is just past 9-15 the missed Roth needs to be contributed AND QNEC equal to 50% of the missed Roth plus earnings. Any ideas as to best way to credit lost earnings - so it is probably 26 pays, 13 employees. SO I will find a way to estimate plan earnings - perhaps look at the entire plan earnings for the year reduce 50% since missed evenly through the year. Thank you for any assitance. Tom

We have a tax client (not a TPA client) who is a participant in her medical K plan and a hospital 403(b) plan. Turns out her deferrals for 2024 between the plans are $10,000 over the 402(g) limit. My understanding has always been (and confirmed by ChatGPT) since not corrected by April 15, the amount is taxable for 2024 and in the year distributed. But also that it must be distributed and I assume as reasonably soon as discovered. Someone else here asked CoPilot and it says it does not have to be distributed but is taxable whenever it is. Comments? We all know we need to check AI for correctness. I have more confidence in this group than AI at this point. Thank you, Tom