C. B. Zeller

You can't really "fail" the top heavy test. The plan is either top heavy or not top heavy. If the plan is top heavy, then you have minimum allocation and vesting requirements for non-key employees. That's it. So when you said you are "failing" top heavy, what do you mean? Is your system telling you that the minimum allocation requirement isn't being satisfied? If so, did the report from the system identify which non-key participant(s) are not receiving the minimum allocation? How is the 18% of pay contribution calculated? Are there any exclusions on compensation (including pre-entry compensation)? The top heavy minimum is 3% of total annual compensation without any exclusions.

You can't shift contributions between the ADP and ACP tests unless both tests are using the same method. Since the ADP test is being satisfied by the safe harbor non-elective contribution (regardless of whether the ADP test would have passed without the safe harbor), I think that prevents you from shifting contributions.

Safe harbor counts the same as profit sharing. Here is an article from ASPPA from a few years back: https://www.asppa.org/sites/asppa.org/files/PDFs/GAC/ASAPs/13-05.pdf

I have to disagree with Bird on this. The compensation used to determine the 25% deduction limit takes into account only those participants who actually receive an allocation other than elective deferrals. If an employee's only contributions for the year were their deferrals then you do not count their compensation when determining the deduction limit.

There are many factors to consider here, and you are not likely to get a simple yes/no answer on this board. If the leasing company were my client, I would advise them to have a lawyer make this determination. If you have access to "Who's the Employer" by S. Derrin Watson, read chapter 4 to get a good understanding of the issues involved and to understand how to go about analyzing the situation. IRC 414(n), Notice 84-11, and Rev Proc 2002-21 are all required reading for this topic.

I think the original question is being posed backwards, and the fiduciary relationship is possibly being misunderstood by members of the US Senate. Selection of retirement plan service providers is a fiduciary decision; for selection of an investment provider, the fiduciary needs to consider (among other factors) the investment alternatives offered by the provider. If Fidelity's offering is not prudent, then the fiduciary has a duty to select a different provider. If the fiduciary lacks the experience to determine whether the investment menu is suitable for the plan's participants, then they should retain an investment advisor or other professional who is qualified to help them make that decision.

A major disincentive to allowing all employees to participate immediately is that if the plan is top heavy (or becomes top heavy in the future) then those employees would be entitled to a top heavy minimum contribution, even if they would not otherwise be eligible for employer contributions under the plan. 401(k)(15)(B)(ii) provides that employees who are eligible solely because of 401(k)(2)(D)(ii) may be excluded from the top heavy minimum. It remains to be seen how the IRS will interpret the word "solely" in this context. It could mean that an employer who restricts their employees' eligibility to the minimum allowed under the LTPT rules may come out better in terms of their required top heavy minimum contribution than an employer who allows their employees to participate immediately.

Not quite. EPCRS permits a plan to correct a 401(a)(30) failure, because 401(a)(30) is a qualification requirement. If the limit was not exceeded in a single plan, or within plans in the same controlled group, then there was no qualification failure and hence no opportunity to correct under EPCRS. Mechanically, the way it works is that the participant is limited to a deduction of $19,500 (assuming under age 50) on their 2021 tax return. Therefore, any amount contributed in excess of that is effectively an after-tax contribution. However, when it is distributed in retirement, it will be taxable as a normal distribution from a pre-tax account. So it will have been taxed twice - both going in and coming out.

From the EBSA Fact Sheet on adjusting ERISA civil penalties for inflation https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/adjusting-erisa-civil-monetary-penalties-for-inflation.pdf Since the $100/day penalty is under section 502(c)(1), it would appear that it is not adjusted for inflation. It does appear, however, that it was increased to $110 effective since 1997 under 29 CFR 2575.502c-1.

Getting back to this part of the question—particularly the word "should"—it may be worthwhile to request a sample of these statements and compare them to the requirements of ERISA 105(a)(2) (apart from the lifetime income disclosure, which has already been addressed in this thread). My guess is that the platform-generated statements likely meet all the requirements, but the brokerage-provided statements may be missing things like the amount of the participant's vested balance, the diversification statement and the link to the DOL's website. If the brokerage-provided statements are found to be lacking, you may wish to remind your clients of their obligations as the Plan Administrator, and see if that informs their decision as to whether or not they want to pay you to prepare statements.

Congress added the requirement for lifetime income disclosure to ERISA § 105 in the SECURE Act. You provide it because it's legally required, and because if you don't, there is a penalty of up to $100/day/participant.

By the way, a request for guidance on the LTPT rules was the very first item (actually the first two items) on ARA's recent letter to the IRS: https://araadvocacy.org/wp-content/uploads/2022/07/22.06.03-ARA-Comment-Letter-2022-2023-Priority-Guidance-Plan.pdf

The use of conditions other than age and service are still limited by the coverage test of §410(b). In effect the coverage test provides "guard rails" against the (ab)use of class exclusions. However, §401(k)(15)(B)(i)(II) provides that the employer may elect not to apply §410(b) to long-term part-time employees. Without the coverage test, I would want some other guidelines by which to determine that a particular exclusion is not abusive. Otherwise, an employer could come up with a classification that would allow them to exclude all, or nearly all, of their long-term part-time employees, which seems contrary to the intent of the law.

DFVCP is not available to EZ filers (it is a DOL program, and DOL rules do not apply to EZ filers). The IRS has a similar program, you can read about it here: https://www.irs.gov/retirement-plans/penalty-relief-program-for-form-5500-ez-late-filers Since you said $500 for a single filing and not $750, I'm guessing you are already aware of the IRS program, but were just referring to it by the wrong name. Strictly speaking, the IRS program is a penalty relief program; so if there is no penalty to relieve then I am not sure you are eligible for it. However, if you went ahead and filed under the program anyway for all years, I think it's likely that they will just cash your check, stick your returns in a box somewhere, and never think about it again.

The client is correct - you do not have to file 5500-EZ if the assets are below $250,000, even if you filed in the previous year (unless it's the final year of the plan). However, you are inviting a contact from the IRS by not filing. They won't be able to assess any penalties, since the filing was not required. But it's easy to file, so why not go ahead and do it anyway?

I can't see any basis for the IRS taking that position. The 100% up to 3% plus 50% up to 5% formula is an enhanced matching formula with respect to a QACA.

Did any participant receive less under the formula that was used in operation than they should have under the formula in the document? Presumably the answer is no - the 100% up to 3% plus 50% up to 5% formula is equally or more generous at all contribution levels than the 100% up to 1% plus 50% up to 6% formula. Assuming that's the case, then you don't owe anybody any money, but you still have an operational failure for failure to follow the terms of the plan document. This can be corrected in one of two ways: either pull the extra contributions, adjusted for earnings, back from the participants and put it in an unallocated account where it will be used to fund future employer contributions; or adopt a retroactive amendment to increase the matching formula to the formula that was used in operation. Whether either of these options can be done on a self-correction basis or whether it will have to go through VCP depends on how many years is "several" and whether the error is significant or insignificant.

I agree with Bri. I don't see any reason why the vesting granted by an -11(g) amendment would have to be equal to a percentage that would otherwise be available under the plan.

The 20% reduction in active participants only creates a presumption of a partial plan termination. Whether or not a partial plan termination has actually occurred, and whether a given participant is affected by the partial plan termination, is a facts and circumstances determination. If a partial plan termination has occurred, then all affected participants must become 100% vested. If the participant being brought in under the amendment was affected by the partial plan termination, then you could not give them lower vesting on a portion of their benefit merely because that benefit was granted under an -11(g) amendment.

Loans are not a protected benefit, and eliminating the availability of loans is not a prohibited cutback. 1.411(d)-4(d)(4)

What is ALC?

Nitpick, it's the Average Benefits Test that may be used to pass coverage. The Average Benefits Percentage Test is a component of the Average Benefits Test, along with the Nondiscriminatory Classification Test. In my opinion, merely having an individual-groups allocation formula does not disqualify the plan from using the ABT to pass coverage. However the classification of employees who are benefiting and not benefiting under the plan must be still be reasonable, and not merely identifying employees by name. For example, a profit sharing plan is sponsored by company A, which has two divisions, X and Y. Under the terms of the plan, employees of division Y are excluded from participation. A makes a profit sharing allocation to all eligible employees of X under an individual-groups formula. The plan may use the ABT to satisfy coverage, since classification by company division is a reasonable classification. However, if an employee of X were considered non-benefiting because they were in a group that received a $0 allocation, then the classification would have the effect of classifying employees by name, and would not be reasonable. In that case the ABT could not be used.

Before becoming an enrolled actuary, I had a client whose plan was selected for audit. The IRS agent conducting the audit said I could be named on the 2848 as an unenrolled return preparer, since I had prepared the 5500 under examination.

The position expressed by Nate S is, in my experience, the most common position among practitioners. However, some practitioners may choose to incorporate discretionary plan design changes into their restatement; for example they may choose to change the plan's eligibility requirements or vesting schedule at the same time they are restating the document. If those changes are included in the fee for the restatement - or even if no changes are made, but if the TPA consults with the plan sponsor on possible plan design changes, and the charge for the consulting is included in the fee for the restatement - then you should think carefully about whether or not some part of the restatement fee might not actually be a settlor expense that may not be paid from plan assets.

What purposes does the sponsor want the amendment to be retroactively effective for? If for 401(a)(4) or 410(b), you can do it as a 1.401(a)(4)-11(g) amendment, although you indicated that there was no coverage or nondiscrimination failure that would need correcting. If for 401(a)(26), you can do it as a 1.401(a)(26)-7(c) amendment, which operates under similar rules to -11(g). If for minimum funding/maximum deduction purposes, too late. The deadline to adopt a 412(d)(2) amendment for 2021 was March 15, 2022. If none of the above: then just make the amendment effective in 2022, and give them credit for 2021 for accrual service.