Paul I

@Peter Gulia, having a cap on the percentage of a contribution that can be invested in a specific investment is used by some plans to limit investments in: publicly traded stock of the employer, self-directed brokerage accounts (particularly when there are few restrictions on permissible investments within the SDBA), investments in that are not easily tradable like gold bullion or real estate, and investments where the plan fiduciaries are concerned about the volatility of the investment. Most recordkeepers can support this type of limit. Note, though, that recordkeepers may not support automatic re-balancing when the value of these investments exceed a specified percentage of the value of a participant's overall plan account.

I agree with @justanotheradmin and also note that it is the Plan Sponsor's obligation to make sure that the plan amendment to the plan document was properly worded and fully executed, including doing so in a timely manner relative to the effective date of the change.

@Peter Gulia is on target with suggesting the plan to start is the plan's definition of compensation. Be aware that some plan documents have separate sections that address post severance compensation for various purposes such as calculating contributions or 415 limitations. Any operational practice must conform to a reasonable and consistent interpretation of the formal plan documentation. Your question, appropriately, asks about what is done in actual practice. When discussing the practicality of determining in which plan year compensation should be recognized, a precursor is understanding the employer's payroll practice and also understanding the accounting method. For example, are employees paid in arrears (after the time when they worked) and, if so, how long past that time? Are employees paid in advance (which is sometimes done for salaried employees)? Is there a mix of payroll practices within the employer (such as hourly versus salaried)? With respect to the accounting method, how is payroll reported for W-2s and for financial reporting? Ideally, how amounts that straddle a plan year are treated will be as consistent as practical for plan purposes (contributions, deferral limits, annual additions, HCE determination...), for employee purposes (W-2, tax withholding, health & welfare benefits, insurance...), and the basis for employer financial reporting (cash, accrual, or on a 5500 - modified cash). Taken together, all of the above doesn't answer your specific question. The answer will be derived from having uniform and consistent payroll and plan accounting practices that do not violate the plan provisions.

You only mention the ACP test. It's not often that a plan fails the ACP test but passes the ADP test. Are there also ADP refunds, or is there something funky about the match formula? You are correct to note that under-funding the match for a select group of individuals is not following the plan document. It's important to keep in mind that, even though a plan seemingly indiscriminately discriminate against HCEs, HCEs are participants who rights must be protected. Keep in mind that the amount of refunds to be made from the plan is calculated based on each individual's deferrals and match, but the actual refunds are determined by starting with the highest percentages being refunded first. This second step can shift the refund amount from one HCE to another. This likely is the reason for the TPA's position.

You must have an accounting process that tracks individuals' accounts for different type of contributions. This individual's Roth Catch-up is just one more account type to add to your collection of types of contributions. If this causes a problem with having to alter programs or even spreadsheets, then create an account for a participant named "Owner Roth" and, if needed, the owner's account number/ssn with one digit added or changed.

This seems to run afoul of the rules that the plan asset cannot be used personally by the participant. Consider that a participant can invest their account in works of art, but cannot hang the works of art over their mantle at home. Similarly, a participant can invest their account in a antique car, but cannot drive it. The whole scheme to hire leased employees from a PEO to run the entity seems to be at best window dressing, and more likely is (pick one: a facade, hocus-pocus, deception, dissimulation, funny business, pretense, an illusion...) I certainly would not want to be in a co-fiduciary role in any capacity that is associated with this arrangement.

Onboarding a plan requires attention to extremely granular detail that is customized to the plan provisions, the deconversion processes of the existing service providers including potentially the recordkeeper, TPA and investment firms, the client's internal administrative support including payroll, HR systems, and funding procedures, and to the you as the new service provider including everything needed to provide continuity of the rights and privileges of all of the plan participants. Coordinating all of this commonly takes 10-12 weeks, and starts with working out a detailed work plan in the first few weeks with all of the parties involved. The time for asking your questions is at the beginning of the conversion process and the people you need to ask are the client and the existing service providers.

Peter lays out the basis for arguing that the plans were closed out in 2025, and makes it clear that this is solely the plan's fiduciaries' (read client's) decision. I expect most practitioners would say don't sweat the $0.50 for Plan 1 and writing off the $0.50 with no adjustment to the 1099R, most would say it is really pushing it where the amount is $3,500 that was not closed out until 31 days after the end of the plan year. From the perspective of a service provider, I would explain to the client that it is their decision to make and their fiduciary responsibility and accountability for the consequences of their decision (unless you are a 3(16) provider). I would let the client know I disagree with the Advisor and I only would be willing to prepare a final filing for 2026 along with a 1099R for the residual payment. If the client chooses to follow the Advisor's "promise", then the Advisor can help the client find someone who is willing to close out everything for 2025. The plans are closing so there is no future work for you on those plans. If your relationship with the client is ongoing, keep in mind that if the client chooses to follow the Advisor's advice over yours, that says something about the relative value of your relationship to the client. This is also true about any relationship you may have with the Advisor.

If I understand the issue, the plan limit is 10% of the sum of the pre-tax and Roth deferrals for the year, the excess deferrals are excess amounts that must be refunded. The correction is to make a refund so the total of deferrals remaining in the plan are 10% of compensation. The correction method does not specify any requirement on whether that the refunded excess amounts must reflect proportion of pre-tax and Roth deferrals that were originally made into the plan. The plan also has no guidance. With the lack of specific guidance, its on the Plan Administrator to decide how the plan will address the situation. The PA needs to keep in mind that this type of operational decision establishes a precedent for future occurrences. One consideration for the PA to keep in mind is the time and effort involved in making the refund. Operationally, refunding from pre-tax first before refunding any Roth is far less complicated than either refunding pro-rata or refunding Roth first. Consider that refunds of Roth get into issues like tax basis accounting, possible taxation of earnings paid from the Roth account, and year of taxation. If these are not concerns for the PA or the PA is a masochist, then the PA could consider asking the participant to specify how much to refund from each account.

Terminology comes and goes. Two things are are most important. One is that the terminology is used broadly enough that there is a shared understanding of what is meant by it. The other is that the terminology does not conflict with its shared understanding within government agencies that oversee the industry. How many people today would understand what was meant by a Keogh plan or an H.R. 10 plan? How many know that today's hot Roth trend is named after William Roth, the Senator from Delaware that came up the Roth IRA in 1989 that in 2001 morphed into the Roth 401(k)? How many know that the concept of 401k deferrals was used in plans in the 1950s, frowned upon by the IRS, but then validated when section 401(k) was added in 1978? Interestingly, in the late 1970s people started out calling the 401(k) plan as salary reduction plans, and that terminology was not well received by employees. Today, solo-k generically is recognized as a one-person plan as does the IRS https://www.irs.gov/retirement-plans/one-participant-401k-plans. Some pre-approved plan document providers have products that basically are pared down adoption agreements of their 401(k) documents. These products use the term "owners only plan". Given the many ways that one-person plans get into regulatory trouble, maybe we should refer to owners only plans as "OOPs"!

The IRS on its website says you can file electronically or file on paper. All of the IRS rules about counting 10 forms to get to mandatory electronic filing apply to filing payroll forms (W2s, 1099s...) and to filing a Form 5500EZ. Here is another link https://accountably.com/irs-forms/f5558/ that does a good job talking about 5558s in plain English.

The instructions for the 5558 don' say anything about being mandatory but do say: What’s New Beginning January 1, 2025, Form 5558 can be filed electronically through EFAST2 or can be filed with the IRS on paper. and the IRS website also says so: https://www.irs.gov/retirement-plans/form-5500-corner

FYI, the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications lists 363 ERPAs. The list shows name and address, and can be searched by name or proximity to zip code. You can have a party and invite all your ERPA neighbors 🤣.

You will report credits earned in each year 2023, 2024 and 2025. It helps to see what the form looked like (https://www.irs.gov/pub/irs-pdf/f8554.pdf) to see what information is required, but renewals are easier using pay.gov. The place to start is here: https://www.irs.gov/tax-professionals/enrolled-agents/maintain-your-enrolled-agent-status Here is a fairly detailed description of the renewal process: https://accountably.com/irs-forms/f8554ep/ (my including this here is not an endorsement of their service). I agree the calendar-year dates for earning credits tied to off-calendar-year dates for the renewal application period and a different off-calendar-year dates for the expiration of the renewal makes it seem more complicated than it needs to be, but in our business most things that are tied to off-calendar-year dates seem more complicated than they need to be.

I, too, received the same message. I started receiving emails from the IRS related to Enrolled Agents (EAs) after having to make multiple requests to get my ERPA letter/card mailed to me after the last renewal. You can check your account for ERPA credits by year and your ERPA renewal date here: https://rpr.irs.gov/ptin?id=ptin_cecredits You have to have an ID.me account to login.

The Notice 2026-13 observes that "Section 1.402(f)-1, Q&A-1(a), provides that the plan administrator of a qualified plan is required, within a reasonable period of time before making an eligible rollover distribution, to provide the distributee with the section 402(f) notice." Further, the Notice observes that "The updated safe harbor explanations provided in this notice may be used by plan administrators and payors to satisfy section 402(f). The updated safe harbor explanations will not, however, satisfy section 402(f) to the extent the explanations are no longer accurate because of a change in the relevant law occurring after January 15, 2026. The IRS anticipates updating the safe harbor explanations to reflect relevant future changes, including provisions of the SECURE 2.0 Act that are not effective until taxable years beginning after December 31, 2026" Keep in mind that the 402(f) notice is a safe harbor and is optional so, if a plan wishes, it can fulfill its 402(f) obligation with alternative language as long as this alternate language covers all of the required content. Notice 2026-13 says the safe harbor will not satisfy section 402(f) if there are changes to the law after January 15, 2026. Putting this all together, we could conclude that a 402(f) notice that is distributed for an eligible rollover distribution payable after January 15, 2026, where the plan uses the safe harbor notice must use the updated safe harbor language. The implication is that a plan that uses alternative language must update the language before making an eligible rollover distribution any time after there is a change in relevant law. In the real world, I don't think this happens this quickly.

CuseFan is correct in pointing out that the 80/120 is used for determining whether the plan must file a 5500 versus a 5500-SF. BPF916, the 1-100 participants for the start-up credit really is not black and white. The count is based on the employer: having 100 or fewer employees (not participants) who had compensation of at least $5,000 (regardless of plan eligibility) in the preceding year (subject to an available election to have the first credit year be the year preceding the year containing the effective date of the plan) There also is a 2 Year Grace Period where the employer is considered eligible for the credit for the 2 years following the last year the employer was eligible. Check out all of the eligibility criteria because there are certain conditions that will disqualify an employer from taking the credit such as the employer was involved with a merger, or there are related companies with existing plans, or if the employer had a plan in the 3 years prior to the new plan. None of this has to do with the 80/120 rule.

Going fully remote with no experience in the field likely will be next to impossible. Consider a strategy that demonstrates a strong work ethic and commitment to learning the business along with establishing some personal contacts with people in the business. Pursuing starting to build professional credentials by enrolling in courses available from industry groups/associations like ASPPA. A QKA (Qualified 401K Administrator) would be a great start, as would a RPF Certificate (Retirement Plan Fundamentals). There are many different types of firms that work with retirement plans - third party administrators, recordkeepers, financial advisors, accountants, banks/brokerage houses... - so explore opportunities with any of these firms that are close enough for starting out with a hybrid approach. Look for professional associations that hold periodic, in-person events. They provide opportunities to connect face-to-face with industry professionals. There also are some mentoring opportunities such as the Thrive Mentoring Program. You can find additional here: https://www.usaretirement.org/get-involved/special-initiatives/thrive-mentoring-program/ It will be a challenge, but the professionals in the retirement plan industry welcome anyone who is committed to working in the field. Best of luck to your daughter!

Peter, you are not overlooking anything. Plans are designed to gather information beforehand about participants and money coming into the plan. This is not built into the Saver's Match design. There is a significant mismatch between how retirement plans are administered and how tax "refunds" (read money paid from the Treasury to an individual) are administered. The simplest way to characterize a recordkeeper taking on administering Saver's Match account is trying to pound a square peg into a round hole. The SPARK comment letter's great detail about the mechanics of moving the money around is just one example of the issues a recordkeeper will face.

Permissible if Pam works long enough to receive 7 paychecks during the year. The comp limit for 2026 is $360,000. Her maximum match is the lesser of 7% * 360,000 = $25,200 (calculated based on the plan match provisions) or 100% of deferrals = $24,500 (calculated based on plan deferral limit), so her maximum match is $24,500. Her maximum match limit is reached when her YTD compensation reaches 7% of $350,000 = $24,500. If she terminates before having earned $350,000 for the year, she will have an excess match that will have to be taken away with earnings (either at the earlier of a distribution or the end of the plan year). Note that Pam would not necessarily have to work 7 consecutive paychecks to get the maximum match. Note further that the plan should not have explicit provisions that apply the match formula strictly on a time period that is less than a full year. These issues would be avoided if the compensation in the match formula was not to exceed YTD compensation versus using the 401(a)(17) limit, and the plan has a true-up. Granted, this caps the match each pay period at a lower amount, but Pam quickly gets up to the max.

First, the Saver's Match has to survive 2026. The topic will start to gather attention based on the mandate for Treasury to report about it to Congress by July. The target recipients of the Saver's Match low- and moderate-income employees, replacing the pre-existing Savers’ Credit for low- and moderate-income employees who make contributions to retirement plans. There are elements rile up anti-DEI advocates such as the multilingual communications, and some analysis published in PlanSponsor magazine that concluded "Plan sponsors and participants both benefit from retirement plans implementing the Saver’s Match because adding it could reduce gender and race disparities in 401(k) balances, finds research from the Collaborative for Equitable Retirement Savings." IRS Notice 2024-65 says: "Section 104 of the SECURE 2.0 Act requires the Treasury Department to take steps to increase public awareness of Saver’s Match contributions, and to provide a report to Congress no later than July 1, 2026, summarizing the anticipated promotional efforts. The report must include a description of plans for: (1) the development and distribution of digital and print materials, including the distribution of such materials to states for participants in state facilitated retirement savings programs; (2) the translation of such materials into the 10 most commonly spoken languages in the United States after English ..." Assuming is does survive, a few recordkeepers at best will offer to receive and separately account for the match, and administer the more restrictive withdrawal provisions. No recordkeeper has access to the information needed to calculate the match or determine if the match calculation is accurate. Since retirement plans are not required to accept Saver's Match contributions and since IRAs can accept the Saver's Match, it is very likely that most plan recordkeepers will not accept it and refer clients to direct employees to IRAs. It is possible that some state-run plans built around IRAs would be more interested in pursuing this.

This issue has hung around since ERISA. The never has been a clarification in regulations or other formal guidance. It was included in a Q&A with the IRS that the IRS again addressed from the podium. Here was the question and response: "59. In a 401(k) plan, does 401(a)(17) preclude the following: A. A earns $300,000 annually. He enrolls in 401(k) calendar year plan in August, after earning $175,000. He defers $10,000 in the balance of the year. B. A earns $300,000 annually. He participates in a calendar year 401(k) plan making monthly deferrals of a flat dollar amount of 1/12 of $10,000 in 1998, even though his pay exceeded $160,000 before he was done making elective deferrals. C. Same as 2, but deferrals are a percentage of pay (3.33333%). We believe that all three scenarios should be ok. This will be discussed additionally from the podium." That's all of the formal guidance, folks! That having been said over a quarter century ago, and after the many, many plans that apply the limits on an annual basis have reviewed by the IRS and not found to be deficient, @401kology it is fair to say you understand correctly. A plan would (and could) have a provision that stops deferrals and match once a participant has YTD compensation that reaches the 401(a)(17) limit, but why would anyone except an uninformed payroll processor think this is a good idea?

@OrderOfOps suggested steps are consistent with the IRS position that, for purposes of determining the year a distribution is taxable, a distribution occurs when the check is written and not when a check is cashed (and likely @ESOP Guy also had this in mind). The IRS took this position what asked about the year of taxation when a participant delayed cashing a check beyond plan year end. If this concept is applicable here, then the check represents an asset in the deceased participant's estate and would be dealt with consistently as any other assets in the estate. Mechanically, the check would be treated similar to checks that age out if not cashed timely.

Check as many boxes as needed to cover however the tests were done. EFAST2 checks to see if nothing is checked and has an edit that issues a Warning, but not an Error. There is no edit for checking multiple boxes.

Assuming (always risky) that the plan in question applies its defined Break In Service (<1000 hours) anywhere where breaks in service are used (determining years of service for eligibility, or vesting, or benefit accrual), then I agree the answer is No. Breaks in service using hours for these purposes are based on no more than 500 hours (or a lower number if an alternative method of calculating hours of service is used). Let's also keep in mind the a plan does not have to use break in service rules (i.e., a Break in Service is 0 hours.) If the plan defined the term Break in Service (<1000 hours) and used it solely in place of some other provisions (like eligibility for an allocation), then this is very poor and misleading plan drafting - essentially replacing a widely understood term of art with a narrowly applicable alternative definition.