C. B. Zeller

If they're not expected to return to work, aren't they terminated? Wouldn't they be eligible for a distribution then?

Loan payments can be suspended while a participant is on an unpaid leave of absence for a period of up to one year, so assuming that they expect the participant to return to work within one year, I would say that it probably is allowable, unless the plan's loan program doesn't allow for such a suspension. The loan would need to be amortized starting when the participant returns to work, including interest through the end of the leave of absence, to be fully repaid no later than 5 years after the loan origination date.

2023

That may be. The snapshot linked above contains a reference to IRC 414(c)(2) which discusses aggregation of church plans. It's not something I have any expertise in.

Also keep in mind that the deduction limit is only a limit on the amount that can be deducted; if any of the match is funded from forfeitures, that still counts as an allocation for the ACP test and the 415 limit, but it doesn't count towards the deduction limit.

For reference, here is the IRS snapshot on this issue: https://www.irs.gov/retirement-plans/issue-snapshot-403b-plan-application-of-irc-section-415c-when-a-403b-plan-is-aggregated-with-a-section-401a-defined-contribution-plan I don't see any special exemptions for the type of 403(b) sponsor (educational, medical, governmental or otherwise) or for the nature of the other business carried on by the participant. If a 403(b) participant owns or is deemed to own another business, and that business sponsors a 401(a) qualified plan, the 403(b) plan and the 401(a) plan are aggregated for purposes of 415.

If this would result in the daughter getting a smaller allocation, then no. 411(d)(6) prohibits amendments which would result in the cutback of an accrued benefit, even if it only affects HCEs. Unless the plan has a last-day requirement, or a service requirement which hasn't yet been satisfied, then you couldn't even make that amendment effective in the current year. It would have to take effect as of the next plan year. I would recommend that the plan be amended to put each participant in their own group going forward. This will give the plan sponsor the ability to give different allocations to each employee at their discretion each year. Regarding the testing issue, could restructuring the plan into component plans help?

Since there isn't anything in the code or regs that makes special reference to loans for hardship reasons, you can do basically whatever you want. I would just make sure that the plan's loan procedures say something like "a loan will be permitted only in the event that the participant certifies the existence of a hardship" just to be perfectly clear.

First off, it's 50% of the vested account balance - that's an important distinction. Second, as Bri points out, it's not correct in the event there are other loans. Even if the plan only allows a single loan at a time, the $50,000 limit is still reduced by the highest outstanding loan balance in the past year. If you wanted your language to apply, the plan would need to say that a participant may only have one outstanding loan at a time, and also that they may not take another loan until at least 1 year after the final repayment of the previous loan has been made.

In that case I agree with Belgarath. The law only says you can not discriminate in favor of HCEs; you can discriminate in favor of NHCEs all you like.

Does the match actually exclude HCEs though, or is it based solely on comp? Because you could have an employee who is a 5% owner (including a deemed 5% owner by attribution) who is HCE even if their comp is less than $75k. And if the $75k is determined in the current year, you could have an employee who is HCE because they made over the HCE limit in the prior year, but under $75k in the current year.

I have to disagree. Plans are not required to offer catch-up contributions in the first place, and if they do, there is no requirement that they allow the maximum amount of catch-up contributions. The only requirement under 1.414(v)-1(e)(1)(i) is that all catch-up eligible participants must be allowed to make the same dollar amount of catch-up contributions. This will have to be modified for SECURE 2.0 (since some participants will have a higher dollar limit than others) but the reg does not currently specify anywhere that the dollar amount has to be the maximum amount under the current annual limits - presumably the plan could impose a lower limit if it so chooses.

The small employer startup credit of IRC § 45E has a requirement that the plan cover at least one participant who is not a highly compensated employee. However I believe the original question was about the auto-enrollment credit of IRC § 45T, which does not contain the same requirement. The requirements under 45T are that the plan be a qualified employer plan as defined in 4972(d), that the plan include an EACA as defined in 414(w)(3), and that the employer is an eligible employer as defined in 408(p)(2)(C)(i). Scanning each of those sections, I do not see anything that would restrict the ability of an employer to claim the credit merely because their plan does not cover any NHCEs.

Nope, at least not if you want to have a safe harbor match and you might be top heavy. For top heavy purposes, you are allowed to disregard employees who are eligible "solely" because of LTPT rules. If you start letting in employees other than those you absolutely have to, then you can no longer ignore them for top heavy. SECURE 2 says you don't have to give the top heavy minimum to otherwise excludable employees, but the mere fact that they are participants means you lose your top heavy exemption for being a safe harbor plan. So your employees who have completed a year of service will now have to get a top heavy minimum. Or, you will have to include the otherwise excludable employees in your safe harbor match. But either way, the employer is going to be on the hook for more contributions.

I suspect that this particular provision was written well before the final bill was passed, and before the huge inflation adjustments that took effect for 2023 were known. In hindsight, we can see that the $10,000 limit is not likely to ever apply. The increased catch-up limit goes into effect for 2025. I suspect the exact dollar amount that applies for 2025 will be revealed in Fall 2024 when the IRS publishes the annual inflation-adjusted limits for 2025.

If the only nonelective contribution is an even percentage of compensation for all participants, that formula meets the requirements of the 401(a)(4) design-based safe harbor. There is no maximum under 401(a)(4), but of course the 415(c) limit and 404(a)(3) maximum deduction limit need to be considered.

Seems like it would be 1/1/2023. The participant didn't complete the requisite number of hours in their first eligibility computation period, so the eligibility computation period switches to the plan year. The first plan year in which they completed 1,000 hours of service was 2022. So they enter 1/1/2023.

The plan loses its top heavy exemption if there are employees who are eligible for 401(k) but not for safe harbor contributions.

What's stopping you from contacting the participant and asking them? If they're unlocatable or unresponsive, how do you expect them to cash the check (in whatever form ends up being paid out)?

Agree with Belgarath. If the plan has never filed a 5500-EZ before, you will need to check both the "First return" and "Final return" checkboxes.

The gateway is satisfied if all NHCEs in the test receive an allocation of no less than the applicable minimum. If this person who worked less than 1000 hours didn't get an accrual in the DB plan, then they have to get the entire allocation from the DC plan. Since they received a DC top heavy minimum, they will have to be included in the test, and if they're included in the test then they have to get the gateway minimum. If this person were otherwise excludable (because they are under age 21, or never worked 1000 hours in any year), then you might not have to give them the gateway minimum, if you can pass testing by disaggregating otherwise excludables.

The ADP is used when an employee was improperly excluded from a non-safe harbor plan. Automatic enrollment is considered to be equivalent to an affirmative election, so you use the rules for failure to implement, which use the employee's actual (or deemed, in the case of automatic enrollment) election.

You tend to see #1 and #2 when there was an improper exclusion from the plan, or when the participant's election was not implemented. #3 and #4 are usually associated with the situation where amounts were withheld from an employee's paycheck but not deposited to the plan trust. What actually happened in your case? Need more details to give you a better answer.

I don't see any reason why you couldn't amend the definition of compensation mid-year for employees who have not yet entered the plan. However, the plan's definition of compensation for allocations does not (usually) control its definition of compensation for testing. You can use post-entry comp for testing without amending the plan. You can also use comp net of deferrals (remember to also net out sec. 125 deferrals if you do this). Just double check that there isn't something in your plan document that would lock you in to a particular definition of comp for testing. If you think about it, though, allocation comp for deferrals is always post-entry comp; you can't defer on comp that was paid before you entered the plan.

Are you sure that's what the plan says? Read the exact wording in your plan document. I bet it actually says something to the effect that non-resident aliens with no U.S.-source income are excluded. If someone worked in the U.S. then they would not fall under that excludable employee classification, even if they are not a citizen and not a permanent resident.