Tom

Client restated for Cycle 3 in 2022 and after much discussion decided on the Flexible Discretionary Match primarily because they wanted 2 different match allocation groups. They are matching 100% of 2.5% for NHCEs and 100% of 1% for HCEs on a pay period basis. My understanding is the first notice is required for the 2023 plan year and within 60 days of making the final match contribution so likely in March 2024. First question - is the allocation groups they chose - HCE and NHCE, not job related necessarily. We can change that to define positions that are HCE if we have to such as CEO, COO, CFO, HR Director, etc. Do you think HCE and NHCE is ok? There are no working owners and so it is just prior year comp based. Secondly - under flexible match, must the match allocation groups be mentioned in the plan adoption agreement? Or can that be left unmentioned since this is a discretionary match and the notice isn't due until after the end of the year? This is the only flexible discretionary match client we have - fortunately. Thank you Tom

When oh when will the 5558 be electronically filed? Should be an easy project for IRS especially when 87,000 new employees get hired.

Plan documents appear to say that a default IRA rollover cannot be done for those who severed employment, attained the later of 62/NRA and have balance <$5,000. So if they don't respond to the distribution process, they get a cash-out less withholding and are not to be rolled to a default IRA. This seems to be something I had not noticed. I doubt we've had a case since retirees are diligent about getting their funds rolled out Am I right about this?

Good points - I forgot all about the old cash or deferred rule. Thanks

Great input Peter. That probably makes this next question moot. The client is asking fi they can give each person the option - wages of plan contribution. Any final comments on that aspect? Thank you!

A client asked about making prevailing wage contributions to a 401(k) instead of paying wages. It makes sense to save the FICA tax. So there is no eligibility requirement, no allocation conditions, 100% vested and can be used to offset the employer profit sharing allocation if there is one. I assume it can be included in nondiscrimination testing since it can offset PS. Of course this feature must be added in the Adoption Agreement. My question is what else has to be done? The client is already calculating the amount and paying as wages. Does this change need to be in the service contract they are serving, the affected employees notified it will no longer be in wages? Or can our client just make this change? I told the client to check with their legal counsel and/or tax advisor. As far as us as TPA - it's pretty easy. Tom

And HCEs get the 3% Non-Elective Safe HArbor not just NHCEs assuming the plan has not excluded the HCEs which sometimes it does with class-allocated plans (allows owner family members for example to be excluded from an employer contribution to help with testing.)

Thank you CB. I had just received one and thought I'd check if the rules changed on this. Thanks - I have to time get the client to hand sign, not much time, but enough.

Almost all of our clients hand sign the 5500 and a signing authorization. Over the early years of EFAST, clients just stopped wanting use/recover their PINs. One client just now did an electronic signature on the 5500 copy that we will attach to the filing before I e-sign. I'm sure ths has been discussed many times but appreciate comments on this. There is still time to get a hand signature but not much time.

Bagwell - I hear that about employment. I'd like them to find another TPA but it's our accounting firm's biggest client (dozens of doctors)and so we have to do whatever they ask. Out TPA service is a small part of our firm and so we can't wag the dog. They have a DB plan as well and PS has no allocation conditions. So if someone terminates and they have already received some PS, that is what they get allocated, subject anything more that might be needed for testing. generally yes it is a pain of a client. (Did I mention they allow for brokerage accounts?)

Bri what about the K plan - I believe no 2021 5500 for that plan either?

We have a client who provides health through a community plan. Employers pay into it, there is insurance and a trust with assets. Each participating employer has had to file their own 5500 under their EIN. The health plan has provided information for Schedules A and I in the past. I requested the information for 2021 and was told by our client - the health plan is filing the 5500 on behalf of the plan and participating employers no longer need to file a 5500. I have to think our client will need to file a 5500 marked "Final" as the IRS/DOL will be looking for one since there was a 2020 filing and since we filed an extension 2021. I am attempting to clarify this with the health plan people but still waiting for a response. If they don't provide any direction, we will prepare a 5500 for our client to sign and file. The 5500 program doesn't like a welfare benefit plan with no Sch A or I but I suppose I can ignore that validation warning. Better to get one filed and possibly amend later if needed. We only file a handful of welfare benefit plans and have never had to file a final.

We have a large client that funds safe harbor non-elective and profit sharing quarterly. So we make YTD calculations in Relius with pre-determined PS contribution rates for a couple classes and have the net cost determined by reducing for prior quarterly allocations. Getting it then into Ascensus format is a feat for 250 participants. Data entry routine I suppose could possibly work or just hand key, or cut and paste. It will be trued-up for the last quarter after the end of the year since the HCE PS rate is estimated on the low side during the year for discrimination testing purposes. As an alternative we will attempt to have the client code employees in Paycor for SH % and PS% for those eligible and have a file created by Paycor that can be uploaded to Ascensus automatically each pay period. Sounds idealistic and likely to take an act of God for the plan sponsor and Paycor to get done. The plan sponsor wants to automate the contribution process and wants contributions to go in dollar cost averaging each pay period. (Did I say it is a large group of doctors?) Anyone doing anything remotely like this? Thanks for any comments

Good point. Thank you

Can someone shed light on the difference between IRR and IRT? Our BPD Cycle 3 says IRR involves an amount "permitted to be distributed in an eligible rollover distribution" and IRT involves an amount "not otherwise distributable." An IRR I believe allows in-plan conversion of pretax deferrals at any age. Beyond that, I'm not 100% and can't seem to find sources that explain this well. We were to amend a plan to allow in-plan conversion - presumably both IRR and IRT. Amercan Funds RKD says on their website they do not support IRTs. Thank you for your comments.

True CuseFan. We followed up on Cycle 3 signature pages but there are always those special few where you can ask and ask and after that ...it's on them.

Never mind. The document was restated. He didn't remember remember signing it back in April.

So today one of our very few clients not on our document, tells me he just now is seeing my communication regarding the restatement deadline. I reminded these clients to contact their document provider to make sure this was done. It's possible the doctor just doesn't remember signing it. It is an owner-only plan. If it hasn't been updated, what is the fix step? Thank you

Oh you're right - I was overly focused on the effective interest part of the test.

Realtor is 50% owner in a real estate business with a 50% partner (not related). Realtor's spouse owns a business 100% - a salon. No services are performed for each other's businesses. The Realtor and his spouse have minor children so they are deemed to own the interest in each others' business. But to be a controlled group they need GREATER than 50% common ownership to EFFECTIVE control I believe from what I'm reading. Would you agree? Thank you!

We restated the Principal plan onto our document for Cycle 3 and it was executed timely. Principal continues to hold the plan under its Trust agreement but that will change. This one just made me a bit nervous since it is the only plan of ours whereby the plan document was signed but no trust agreement yet.

As we know the deadline for signing Cycle 3 Adoption Agreements has passed. What if a plan sponsor has not signed the now separate Trust Agreement timely - by July 31? The Trustees are the same before and after Cycle 3.

Is the Lifetime Income Disclosure needed for an owner-only 401(k) plan? I would think (hope) not. These often involve one broker account and thus the disclosure will not generate from an institutional record keeper. Tom

We don't work with these but a referring advisor is asking - they have a client who started a simple IRA July 1. The payroll company says compensation for the full year is counted. So that if the person contributes 6% from July through Dec they will end up at 3% deferral for the full year and get 3% match on their full year pay rather than 3% on their pay from July through Dec. I figured the reason the IRS imposed the Oct 1 set-up deadline was to make sure employees got the 3% match for at least 3 months since the owner could make the max deferral within those three months. The payroll company disagrees with that apparently. Comments? Thank you.

That happens often - clients want to pay the match through the payroll service provided as the year goes along and the the TPA does a true-up because plan says it's an annual match. I dont' think it's possible to have provided too much match on a payroll basis. The result is always to give more to some - who reach 402g limit early, make changes during the year, etc.