C. B. Zeller

$237,500 is the maximum that the employer can take as a deduction for all plan contributions (other than elective deferrals). All employer sources count. If the employer is carrying forward an undeducted contribution from a prior year, that reduces the deduction limit for the current year.

Does the plan document address what happens to the match when excess deferrals are refunded?

Funding is due 9/15 after the plan year. AFTAP must be certified by 10/1 of the current plan year. For example: plan adopted 12/1/2021, effective 1/1/2021. The 2021 AFTAP has to be certified by 10/1/2021, but 2021 minimum funding isn't due until 9/15/2022. If restrictions applied in the first year, you would have to say that the 2021 AFTAP wasn't certified timely and therefore no benefit was allowed to accrue for the 2021 plan year. Which is clearly ridiculous. Even more so if you consider a plan adopted in the following calendar year, under the SECURE Act. No, I am saying that 436(e) (and (b) and (c), for that matter) does not apply in the first 5 years of a plan.

These links might be of some interest: https://www.irs.gov/retirement-plans/cumulative-list-of-changes-in-retirement-plan-qualification-requirements https://www.irs.gov/retirement-plans/list-of-preapproved-plans

The transferred assets have to be allocated no less rapidly than ratably over 7 years. So you have to do at least 1/7th in the first year, then 1/6th of what remains in the second year, and so on. 415 limits permitting. You can use a non-safe harbor method to allocate, as long as it is permitted by the plan document and satisfies all applicable testing. I don't know that the IRS has ever actually come out and said that the 20% excise tax applies on any amounts that remain unallocated after 7 years. However, to be on the safe side, I would suggest not leaving any unallocated assets if at all possible, meaning get everyone to their 415 limit rather than leave unallocated assets. No. It's not a forfeiture account. However if the plan generally pays certain expenses, I don't see any reason why those expenses couldn't be charged against the QRP account the same as any other account.

I think they can't technically call it a match, because there weren't actually any deferrals. So calculate what the match would have been, and make that as a nonelective contribution.

If you are saying that 436(e) does apply in the first 5 years if the AFTAP is not certified timely, then how are you handling new plans adopted retroactively after October 1?

It doesn't matter whether the AFTAP was actually certified less than 60% or merely deemed less than 60%, 436(e) does not apply in the first 5 years of a plan.

You didn't say how old the plan is, but I'm assuming more than 5 years. The restriction limiting benefit accruals does not apply for the first 5 years of the plan. I'm also assuming there have never been any distributions from the plan or amendments increasing liabilities, so the only concern is the restriction on benefit accruals. What you might do is certify the AFTAP now, then amend the plan to reinstate the prior years' benefit accruals. If you are already restricted for 2021 because no AFTAP was certified before October 1, then wait until January to amend. If you feel this constitutes a significant qualification failure, and it has been more than 3 years since the restrictions should have first applied, then have the client file VCP.

Because the employer set a precedent for the date that the contributions can be segregated from their general assets by always depositing on Wednesday. It is not late until the time established by their usual process and procedure has passed.

I think there is a discussion about in in the EOB. If you are worried about it, put in a limit of $1 instead.

If payday is Monday, and they usually make the contribution on Wednesday, then I would start the clock on 1/6.

The rule is that you use the balance on the last valuation date in the calendar year immediately preceding the distribution calendar year, with adjustments. For the 2021 distribution calendar year, you would use the account balance as of the 9/30/2020 valuation date. Increase it by the amount of any contributions allocated to the participant's account, or decrease it by the amount of any distributions made from the participant's account between 10/1/2020 and 12/31/2020.

Would both plans pass coverage if tested separately? If so, then you can do whatever you want, including using a non-safe harbor design for plan 2. If not, then you are out of luck. There is a rule that you cannot aggregate plans that use different methods of satisfying the ADP test, including different safe harbors.

Only if the plan document says that the contribution will be a discretionary amount. If the document dictates a fixed contribution (not allocation) formula, then there could be an excess contribution. Regardless, I strongly suspect the answer to the original question is to be found in the plan document. Assuming that the plan document provides for a discretionary profit sharing contribution amount, it probably also says that the contribution will be allocated according to the allocation formula specified in the document (which might be pro rata, individual groups, or something else). In that case the contribution must be allocated to participants. If the contribution was designated as a match by the plan sponsor at the time it was made, then apply the same analysis, but with respect to whatever the plan document says about matching contributions. If it says that the matching contribution will be a discretionary amount, then it has to be allocated under the formula described in the plan document for matching contributions. If the document says that the matching contribution will be determined using a fixed formula, then it is possible that there was an excess contribution, which would be a failure to follow the plan document.

On the face of it, yes, they owe the top heavy minimum. Personally, I am of the opinion that you can do the following: Shift all NHCE deferrals into the ACP test The ADP test now fails; since the NHCE average is zero, the max ADP for the HCEs is zero Correct the failed ADP test by reclassifying all of the HCEs' deferrals as catch-up No more top heavy minimum I don't see any reason why this wouldn't work, but I am also not aware of it having ever been met with approval by the IRS on an audit. A better approach would be to set a deferral limit of $0 for HCEs in the plan document. Any deferrals would then automatically get reclassified as catch-up by exceeding a plan-imposed limit.

The notice requirement was eliminated solely for the 3% (or 4%) safe harbor non-elective contribution, and solely for purposes of the ADP safe harbor. If you want to use a non-elective contribution to qualify for the ACP safe harbor - for example, you want to make a discretionary match that is not subject to the ACP test - then you still need the notice.

Under IRC 401(b)(2), as added by the SECURE Act, a profit sharing plan can be adopted as late as the sponsor's tax filing deadline for the year, including extensions. Yes. The issue preventing you from adopting a 401(k) retroactively is that you have to make the actual deferral election no later than December 31. While the plan could be adopted retroactively, you can't make a retroactive deferral election, so there is no way to make a contribution into a 401(k) plan if it was adopted retroactively. 10/1 is only the deadline if you want to have a safe harbor 401(k) plan. A non-safe harbor 401(k) plan can be adopted as late as December 31. Although if you have non-HCEs who would be eligible, and the HCE is the only one who is able to make a deferral election between the time the plan is adopted and the end of the year, your testing is going to be problematic, to say the least. If you mean for a PS plan to add a safe harbor 401(k), that is also 10/1. The 401(k) feature has to be effective for at least 3 months.

I agree with ESOP Guy, once you have a required beginning date, there is nothing that would allow you to stop or suspend RMDs merely because you were re-hired. Even though the RMD due 4/1/2021 was waived, it still counts as the RBD and RMDs would be required for 2021 and every year thereafter. The question becomes, is 2020 really a distribution calendar year? As CuseFan pointed out, if she terminated in 2020, it could only be a distribution calendar year if her date of birth was on or before 6/30/1949; otherwise her first distribution calendar year would be the later of when she turns 72, or retires. There is, unfortunately, no definition of "retires" in the regulations. If she was born on or before 6/30/1949 but, at the end of 2020, the employer reasonably expected her to return to work in a couple of months' time, I think you could argue that she did not retire, and therefore it would not trigger a RBD. This is not a terribly aggressive position in my opinion, but there is no official support for this stance either. If you want to play it on the safe side, have the employee take the distributions regardless.

Although it is not required, you could notify the PBGC that the sponsor is eligible for disaster relief before actually submitting the comprehensive premium filing; that could help avoid having them send a notice to the sponsor. See emphasized section below. https://www.pbgc.gov/prac/other-guidance/Disaster-Relief#notifying

The 415 limit is separate for each unrelated employer.

The way the relief works is that if the number of active participants on 3/31/2021 is at least 80% of the active participant count on 3/13/2020, then you do not have a partial plan termination for any plan year that falls within the 3/13/2020-3/31/2021 period. If it's a calendar year plan, that would mean that if you met the requirement on 3/31/2021, then you wouldn't have a partial plan termination in 2021, regardless of any reductions that might or might not happen later in the year. I think it's incredibly poorly thought out, and far too broad, but as written by Congress and interpreted by the IRS, that appears to be the rule. I agree that in normal years, a reduction of less than 20% does not mean there was not a partial plan termination.

Without looking up the details of the PTE, my recollection is that you take the amount you would have paid as the excise tax, but pay it to the plan instead. You also have to provide a notice to participants explaining what happened. There are limits on it; you are only allowed to use it for PTs below a certain dollar amount, and you can't use it if you've done it within the last X years. But in my experience, it's the notice requirement that drives people away from using this. Most employers would rather send the IRS a check for a few bucks than have to tell their employees they messed up the 401(k) plan.

Are you sure? A significant reduction in the number of active participants, particularly when the reduction is the result of an employer-initiated action (such as the sale of a division that was participating in the plan) would tend to indicate that a partial plan termination has occurred. When there is a partial plan termination, all affected participants must become 100% vested. There was a special rule in the Consolidated Appropriations Act passed at the end of last year that granted partial termination relief. If this employer is eligible for the relief, they may not be required to vest the affected employees.

Plans are not required to permit this. Check the plan document and make sure terminated participants are allowed to request amounts in excess of the RMD but less than their full account balance.