C. B. Zeller

Assuming C has no employees, then A: (2/80)/(1/22)=55.00% B: (79/80)/(21/22)=103.45% So plan B passes the ratio percentage test, plan A fails ratio percentage but might pass average benefits. If A fails average benefits, then it would need to be aggregated with B for coverage. Whatever aggregation options you use for coverage, you have to do the same for nondiscrimination (i.e. 401(a)(4) and ADP/ACP). If A and B are aggregated for nondiscrimination, then A's safe harbor formula won't do you much good and you'll have to general-test them.

If the match formula is 100% of deferrals up to 2% of compensation, then that is a safe harbor formula. So as long as the document says that the 3% nonelective contribution is being used to satisfy both the ADP and ACP safe harbors, then no testing should be needed.

Absolutely correct and this slipped my mind when replying earlier. So either the safe harbor non-elective contribution is being used to satisfy the ACP safe harbor, which means it has to remain current year testing, but then there's no testing needed as long as the match formula meets the safe harbor requirements. Or, the safe harbor non-elective contribution is being used to satisfy only the ADP safe harbor, in which case ACP testing is required but could use either prior year or current year.

Not explicitly. However the regs do contain a general anti-abuse clause which the IRS could point to in the event of an audit. https://www.ecfr.gov/current/title-26/part-1/section-1.401(m)-1#p-1.401(m)-1(b)(3)

Does the plan currently permit a discretionary matching contribution, but the employer simply chooses not to make one? If so then the prior year's NHCE ACP is 0% since there were no matching contributions. If the plan does not currently permit matching contributions, then there is a special rule that deems the prior year NHCE ACP to be 3% in the first year that the plan permits matching contributions. 1.401(m)-2(c)(2) However, you said the plan is currently using the 3% safe harbor non-elective contribution, so the plan could be exempt from the ACP test, as long as the match satisfies the ACP safe harbor. Depending what you mean by a "small" match it very well might. Finally, you could just tell the client that if they want to add a match, there is required testing. If the test fails and can't be corrected until after the deadline, because they sent you the data late, then they will be subject to a penalty. It's their decision whether they want to figure out how to get you the data on time, or risk the penalty.

With regard to question 1, the rule is under treas. reg. 1.401(k)-3(e)(2) which says that if you are adding a 401(k) feature to a profit sharing plan for the first time, it can be safe harbor for the first year as long as the 401(k) feature is in effect for at least the last 3 months of the year. For a calendar-year plan, that means the 401(k) feature must be effective no later than October 1st. https://www.ecfr.gov/current/title-26/part-1/section-1.401(k)-3#p-1.401(k)-3(e)(2)

There is no 45-day requirement in the law or regulations. 1.401(k)-3(d)(3)(i) requires that the safe harbor notice be provided to participants "within a reasonable period before the beginning of the plan year." Subparagraph (ii) provides a safe harbor that the timing requirement is deemed satisfied if the notice is provided no less than 30 and no more than 90 days before the beginning of the year. The service provider may have an internal process that they can not update the plan specifications less than 45 days before the end of the year and still comply with the 30 day safe harbor. Plans using the nonelective contribution to satisfy the ADP safe harbor are no longer required to provide a notice at all, since SECURE 1.0. However a notice is still required if the plan wants to satisfy the ACP safe harbor, even if using a nonelective contribution.

Is this a DC plan or a DB plan? Also, he was working for 5 days after he died???

It's not straightforward to convert from the table to a factor. You really have to use software to do it. I posted a spreadsheet here a couple of years ago that will calculate the factors for you, if you paste in the table and enter an interest rate. Let me see if I can dig it up again. Edit: here it is

Paragraph 1.401(a)(4)-11(g)(3)(vi) of the regulations provides conditions for amending a plan to correct a failure of the nondiscriminatory availability of benefits, rights, and features in a prior year. The paragraph says: I have never needed to use this to correct an availability failure. It does seem a little strange to me as, if I'm reading it correctly, it only says to correct the failure effective prospectively and keep that amendment in place until the end of the next year. It doesn't seem to do anything to relieve the participants to whom the benefit, right or feature was unavailable during the prior year. Would be curious to know if anyone has actually relied on this method in practice.

...which would be a significant problem in a DB plan, as opposed to an IRA or DC plan. Based on the 2025 limits, the 415 maximum lump sum is about $3.5 million. If the husband and wife are the only participants and the assets grew to $5 billion, then they would be stuck with $4.993 billion that could not be distributed, but would be a taxable reversion to the employer, plus subject to $2.5 billion in excise tax.

It's probably merely a warning, not an actual error. If you have read the instructions and you are confident that you are eligible to file Form 5500 (and not required to file Form 5500-EZ) then I would say proceed.

If you have access to "Who's the Employer" by Derrin Watson, I have found it to be a very valuable and accessible resource for researching these kinds of questions. The original question was about attribution of ownership for HCE determination purposes; keep in mind that HCE determination uses attribution under section 318. IRC 318(a)(2)(B) contains rules about attribution of ownership from trusts.

From the 5500-SF instructions:

Frozen does not necessarily mean no contribution requirement. Even if the assets exceed the funding target right now, and the target normal cost is zero due to no benefits accruing, you could be subject to a minimum contribution in the future due to changes in interest rates and/or fluctuation in the value of assets. The plan is still subject to 430, and still required to have a schedule SB, until it is terminated.

The high 25 rule is part of 401(a)(4), specifically 1.401(a)(4)-5(b). Collectively bargained plans are typically treated as satisfying 401(a)(4), see 1.401(a)(4)-1(c)(5). So I would conclude that a collectively bargained plan is exempt from the high 25 rule.

IRC 401(k)(2)(B) Also, paragraph 1.401(k)-1(d) of the regulations.

Yes No

That's how I read it as well, although I have not actually had to do this yet.

I believe the answer to the original question is yes, assuming that the annuity purchase was handled properly. See SECURE 2.0 sec. 204, section 1.401(a)(9)-5(a)(5)(iv) of the 2024 final regulation, and 1.401(a)(9)-5(a)(5)(v) of the 2024 proposed regulations.

In the absence of any specific guidance, I do not think a plan administrator can be faulted for relying on the plain language of the law. My recollection is also that past disaster relief declarations have been for areas designated for individual assistance, but that does not appear to be the case for QDRDs.

The only guidance the IRS has published on this, as far as I am aware, is this FAQ: https://www.irs.gov/newsroom/disaster-relief-frequent-asked-questions-retirement-plans-and-iras-under-the-secure-20-act-of-2022 It doesn't say that a disaster has to be designated for individual assistance, only that it must be declared a "major disaster." Q5. What is a qualified disaster? A5. A qualified disaster is any disaster with respect to which a major disaster has been declared by the President after Dec. 27, 2020 (the date of enactment of the Taxpayer Certainty and Disaster Tax Relief Act of 2020). Use the FEMA disaster declaration search tool, filtering for declaration type: Major Disaster Declaration, to determine if a specific disaster qualifies. Note that, on occasion, the disaster declaration type identified by FEMA may change if new information becomes available regarding the severity of impact of the event on individuals and businesses. For example, a disaster may initially be declared to be an “emergency” but may subsequently be declared to be a “major disaster.” The relief provided under SECURE 2.0 only applies in the case of declared major disasters.

Yes, you are correct. It's in black and white in Rev. Proc. 2018-58 if that helps, section 8 item 26, on page 50. Although the rev proc has not been updated for SECURE, it stands to reason that the deadline to adopt a new plan would be extended likewise.

The 415(b) dollar limit is adjusted for benefit commencement dates later than age 65 using the 417(e) applicable mortality table and 5% interest. Note that the 100% of compensation limit is not adjusted. So by 85 (much earlier than that, in fact) the compensation limit will be lower than the adjusted dollar limit and will control.

Depends on the type of business. Partnership, yes. S-corp, yes as long as they are all 2% shareholders as defined in IRC 1372(b). C-corp, no.