C. B. Zeller

It's actually based on the employer, determined without regard to controlled groups or affiliated service groups. So if you have a plan sponsored by two companies, A and B, which are members of a controlled group, and employee X earns $100,000 from each A and B, then even though their plan comp is $200,000, they are not subject to Roth catch-up from either employer since their comp from any employer was not greater than the limit. Meanwhile if you have employee Y in the same plan who earns $180,000 from A and $20,000 from B, then their deferrals from A would be subject to Roth catch-up while their deferrals from B would not.

Cuse is correct. If your client needs proof, you can point them to IRC sec. 401(k)(12) which requires that the contribution be made to "each employee who is not a highly compensated employee and who is eligible to participate in the arrangement." Also see Example 4 in 1.401(k)-3(c)(7) of the regulations which is exactly on point that you can not impose a last day requirement on a safe harbor contribution.

This particular provision has actually expired: However, SECURE 2.0 sec. 350 codified essentially the same correction method into law at IRC sec. 414(cc). See also Notice 2024-02 section I, which gives further guidance, including how to apply 414(cc) to terminated participants.

If they want to be more restrictive, then passage of time is not going to accomplish that. They probably want to use a counting hours method, possibly with an equivalency if they don't/can't track actual hours.

Passage of time typically means that the participant becomes eligible after a period of time without regard to any service or breaks in service. It's similar to elapsed time, but without the service spanning rules - or rather, if the service spanning period were forever, instead of 12 months. Say an employee was hired on 11/6/2025, works for 2 months and quits on 1/6/2026. Then they show up again a year later and are re-hired on 3/1/2027. They are in the plan immediately on 3/1/2027, because more than 6 months have passed since their original date of hire. Contrast that to elapsed time, where they wouldn't get credit for their period of severance (because it was more than 12 months) and would have to work another 4 months after being re-hired in order to have earned a total of 6 months of elapsed time. It's probably a good idea to keep the 1000 hours failsafe in the document. While I can't think of a situation where it would override a 6 month passage-of-time requirement, maybe there are some class exclusions that it would be needed for. It also gives you some assurance, because it sounds like this passage-of-time provision is custom language added to the document. So, on the off chance that the IRS finds issue with it on audit, then at least you have the standard language to fall back on. As far as applying break-in-service rules, I don't think they would apply. But ultimately the interpretation of the plan document is up to the Plan Administrator, so they should abide by their best judgement, taking into account what has been communicated to participants about the rule, and probably with they lawyer's advice.

The 1-rollover-per-year rule only applies to distributions from IRAs, which are rolled over to another IRA. They can roll over as many distributions from plans as they like. They could also roll over multiple IRA distributions to plans without violating the rule.

By "AI consultant," do you mean a human who consults on AI matters, or a piece of software which is intended to function in place of a human consultant? I don't have any recommendations either way, just wanted to clarify the question.

Whether a plan is subject to mandatory auto enrollment is based on the date the CODA is established. Presumably the CODA was established when the profit sharing plan was established, so it would be after December 2022 and therefore not exempt.

The proposed regulations say that you count employees using the rules of 54.4980B-2 Q&A-5. Which says... If the half-time employees come out as 50% under this rule, then I would agree with your calculation and the plan would be exempt from automatic enrollment.

Assuming she's catch-up eligible, then yes. Yes. My understanding is that this is how the IRS applies the rule under audit. A participant's comp is not counted unless they benefit under the plan for the year, meaning that they actually receive some dollars, and deferrals don't count.

When talking about coverage testing, don't forget about the average benefits test. Depending on the size and demographics and contribution rates, this might be an easy win. Assuming that coverage is not going to pass separately, then they will have no choice but to change their plan designs. Obviously they could make both plans safe harbor, or make both plans ADP-tested. Or they could merge the plans into one, which would be either safe harbor or not. Other options might include fixing the coverage test by excluding some HCEs, or giving additional benefits to NHCEs.

The rule is that a participant has to receive at least some profit sharing in order for their comp to count towards the 25% limit. I don't know what source you are citing, but I imagine the author just meant that the definition of compensation used to apply the 25% limit includes deferrals, which is true. You can't just reclassify deferrals as catch-up because you want to, you have to exceed a limit. That's why I suggested giving some profit sharing in order to a) intentionally exceed the 415 limit, causing some deferrals to be reclassified, and b) make her compensation eligible to be included in the 25% limit. If she's under 50, and hasn't deferred the entire $23,000 yet, then she could also reduce her deferrals to make room for some profit sharing.

No. Elective deferrals are disregarded for purposes of the 25% limit - see IRC 404(n). Therefore a participant whose only contributions are elective deferrals is not considered to be benefiting for purposes of 404(a)(3). Therefore their compensation is not included in applying the limit. In other words, in order to count her comp towards the deductible limit, she would have to receive some profit sharing. Is the wife over age 50? If so, give her up to $7,500 (or more, if she's 60-63) in profit sharing. Her deferrals will be reclassified as catch-up, due to exceeding the 100% of comp 415 limit, and she will have some profit sharing so her comp will count towards the deductible limit.

1.410(b)-7(c)(3) is the reference. The relevant part states, with formatting added to make the point clear:

You would file the 2025 5500-EZ and check the retroactive adoption box. Of course an SB is still required to be provided to the plan sponsor, it just doesn't need to be attached or filed with the 5500-EZ.