C. B. Zeller

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.

Notice 2016-16 prohibits a mid-year change to reduce or narrow the group of employees eligible to receive safe harbor contributions. I think you could do either: 1. Amend the plan effective 1/1/2024 to change the eligibility requirements for everyone, or 2. Amend the plan effective immediately to set a 1 year of service requirement for employees hired after the date of the amendment, and retain the existing service requirement for current employees.

Because the law says it does. There is a specific rule - IRC 402A(c)(4)(E) - that says amounts transferred from a pre-tax account to a Roth account will be "treated as a distribution" which is why you can do this. There is no rule that says you can net your RMD against your planned contributions for the year and avoid taking a distribution if you contribute less. "Seems to" is not the same thing as "is." The main thing you're missing is that qualified plans have to have their assets in a trust, under the control of a trustee. Under your method, the trust never has control of the amount, so it can't be considered to be plan assets, so it can't be used to satisfy the RMD requirements. Your chart also seems to be saying that the $10,000 will simply remain in the business account. The RMD doesn't get paid to the business, it gets paid to the participant. The business would have to pay it out to the participant in that case, and there might be questions why a payment directly from the business to an employee isn't being treated as wages. If the goal is just to avoid making a payment out of the main plan account, what you might be able to do is to open a checking account in the name of the plan. Then deposit the $15,000 to that account, transfer $5,000 of it to the main plan account, and pay out the remaining $10,000 to the owner. That seems unnecessarily complicated to me, but maybe it will accomplish your aims.

You might find this helpful: https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/public-disclosure/foia/form-5500-datasets

The table of inflation-adjusted penalties is available here: https://www.govinfo.gov/content/pkg/FR-2023-01-13/pdf/2023-00271.pdf

If you're talking about SECURE 2.0 sec. 312, it says "the administrator of the plan may rely on..." which implies that is is not mandatory. If the plan allows self-certifications and it later turns out that the employee lied about the hardship, I do not believe that there would be any penalty on the plan or on the plan administrator, unless the plan administrator had actual knowledge that the hardship did not exist and allowed the distribution anyway. That is what it means to "rely on" the self-certification. The law does say that the IRS may issue regulations addressing what happens if it turns out that the employee misrepresented their hardship. If the plan does not allow self-certification, and the plan administrator allows a distribution for a hardship which later turns out not to exist, then the plan faces disqualification.

You have one gateway for your one aggregated plan. You can't test the gateway on a restructured or component plan basis. I'm disregarding disaggregation of otherwise excludable employees here, since I don't think that's what you're asking about. This person would need the 7.5% gateway (if that's the gateway minimum).

The wording here confuses me a little - I'm going to assume you mean that the employee met the 1,000 hours of service required to enter the plan in one year, but has not and is not expected to complete 1,000 hours of service in any later year. Otherwise your post does not make sense. Since the employee has met the plan's eligibility requirements, they will continue to be a participant for as long as they are an employee, and will be non-excludable for purposes of the coverage and nondiscrimination tests. So they have to receive whatever contributions are necessary to satisfy those tests. They could be required to receive a top heavy minimum contribution, too. Even if they never attain 2 years of vesting service, they could still become vested if they reach the plan's normal retirement age, or if the plan terminates. The one-time irrevocable waiver of participation would not be of any help in this case, as it a) must be executed before the employee first becomes eligible in any plan of the employer, and b) does not get you a free pass on coverage; the employee who waived participation is treated as non-excludable and not benefiting in the coverage test. This situation could have been avoided by designing the plan with the 2-year eligibility rule, but it is too late for that now.

If you mean "solo CB" as a plan which is exempt from Title I of ERISA, then I agree. However, a plan can be subject to Title I and exempt from Title IV. ERISA 4021 defines several categories of plans which are exempt from PBGC coverage, including a plan "which is established and maintained exclusively for substantial owners." It then goes on to define substantial owner, and says that in the case of a corporation, constructive ownership rules apply.

Attribution of ownership for purposes of the substantial owners exemption applies only in the case of a corporation.

Who are the owners and in what amounts? What type of entity is the sponsor (corporation, partnership, sole proprietorship)? Is the sponsor a professional service employer?

If no HCEs benefit in the plan, then the plan automatically satisfies 401(a)(4), including the gateway.

Does the plan have a determination letter? If so then there's your written evidence that the IRS finds the plan is compliant (in form, at least) with the qualification requirements, including sec. 401(a)(31). You could also point them to code sec. 401(a)(14) which says that a plan does not have to begin distributions before the latest of the year of termination, age 65, or 10 years of participation. But for real, the participant clearly doesn't really understand what they are reading in the regs, or they are just seeing what they want to see. You can explain to them that the reg doesn't say what they think it says, and if they really feel they are being denied a benefit that is due them under the plan, then you can always point them to the plan's claims procedure.