C. B. Zeller

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.

1. Not included 2. Included 3. Not included For purposes of determining the deduction limit in a profit sharing plan, you only count the compensation of employees who are beneficiaries of the plan, defined as anyone who actually receives a contribution for the year.

Seems like your situation is similar to the one described in rev. rul. 66-144. The IRS ruled that the extension was valid for purposes of extending the deadline to make a plan contribution. https://www.taxnotes.com/research/federal/irs-guidance/revenue-rulings/rev.-rul.-66-144/d5wt

You are permissively aggregating the profit sharing and cash balance plans for testing. Anyone who benefits in that combined plan—that is, anyone who gets any contribution in the profit sharing plan or any accrual in the cash balance plan—must be included in the combined test and receive the gateway (unless an exception applies). So yes, your employee who works 1,000 hours in the year and terminates still needs to get the gateway. Remember, the gateway is based on the aggregate normal allocation rate, meaning it includes the equivalent allocation rate from the accrual in the cash balance plan. So the profit sharing contribution needed to satisfy the gateway should be somewhat less than 7.5%.

Perhaps, but it would certainly apply to a plan year beginning 8/1/2023. For a plan beginning its termination process today, I would not want to risk its qualification status on the termination being completed, including distribution of all assets, before 8/1/2023. Particularly if the plan is covered by PBGC.

There are a number of reasons why a recordkeeper might care about an employee's pay schedule. If the plan allows loans, and the recordkeeper produces the loan repayment schedule, that schedule would normally need to be aligned to the employee's pay dates. Some recordkeepers may provide missed contribution notifications to the employer, if an expected contribution is not received by a certain date.

If the plan has a variable interest crediting rate, it will need to be amended for SECURE 2.0 sec. 348.

If the employer is relying on an IRS-preapproved plan document, it might be difficult, if not impossible, to accommodate different benefit structures for the union and non-union employees on a single document. Not just the safe harbor contributions (or lack thereof), but if there are any different eligibility or distribution options for the two groups. If there are different pay schedules (e.g. weekly for the union employees and semi-monthly for the office employees), the plan's recordkeeper or other service provider may struggle to correctly account for that difference within a single plan.

401(k)(2)(D) says that you can not impose a service requirement longer than the maximum under 410(a), without regard to the 2-year eligibility rule. 1.401(k)-1(b)(1)(ii) says that a 401(k) plan (other than a SIMPLE) must satisfy either the ADP test, or the safe harbor provisions. 1.401(k)-1(b)(4)(iv)(B) prohibits the use of restructuring to satisfy section 401(k). Thus, the entire plan must satisfy either the ADP test or the safe harbor provisions; you could not, for example, apply the ADP test only to employees with less than two years of service and rely on the safe harbor for employees with two or more years of service. 1.401(k)-3(h)(3) specifically calls out the ability to use the option to disaggregate otherwise excludable employees as a means of satisfying section 401(k) for plans that require 1 year of service for safe harbor contributions, but allow early participation for deferrals.

No. However, when combined with certain entry dates, it is possible that an employee might not become eligible for safe harbor contributions for almost 18 months after their date of hire.

Wouldn't the participants have become fully vested when the plan terminated? Then the ACP excess contributions would be distributed, instead of forfeited. The amounts distributed would not be eligible for rollover, so you might need to issue corrected 1099-Rs and notify the participants that they need to remove the amounts attributable to the corrective distributions from their IRAs.

In general, you can exclude anyone from participation in a plan, as long as you have a definitely determinable way of doing so. You could exclude them by name; for example the plan could say that "The definition of Eligible Employee does not contain Joe Smith." There are other ways to do it as well. If the employees being excluded are all HCEs (and if they are the spouse/child/parent/grandparent of a 5% owner, then they are HCEs) then this exclusion should not cause any issues with your coverage test. How excluded classifications of employees will interact with the upcoming LTPT rules is still TBD.

It may not be a pooled account but it is still a single plan, and the contributions are assets of the plan - not of any particular individual - until they are distributed. Yes, reallocate the excess contributions (plus earnings) to other participants. The plan document presumably says that all contributions will be allocated to participants' accounts, with a maximum of the 415(c) limit. You have an operational error since that limit was not applied correctly. You can self-correct the error by undoing the excess (remove those contributions from the participant's account) and then follow the plan document's instructions as to what should have been done with them (allocate according to the plan's formula).

Reallocate to other participants who aren't at their 415 limit.