Jakyasar

Not at all conflated. Dealing with keys only. No HCE and no key are benefitting under the DB plan and only getting non elective safe harbor in the DC plan. In my case they are one and the same.

I want to add twist as I have never seen this situation before. If the 401a26 prior benefit structure fails, can I do the following, assuming it is an acceptable method according to law: 1. Provide a few participants enough benefits to bring them up to 0.5% when testing for prior benefit? If ok to do so, do I need to bring the annual accrual to 0.5% level as well or could be lower to bring the prior benefit structure just to 0.5%. 2. Now that I am providing some slight accrual to these few participants, do I need to provide them the extra 2% PS allocation for top heavy purposes. As a reminder, no key is getting any benefit under the db plan. I hope I am making some sense. Thank you

David, thank you for your input.

On a separate note (and hopefully on topic) for the plan documents and related services provided by RKs, I have seen enough of clients who were provided blank documents for their restatements where the RK's simply told the client to fill out the documents by a certain date. Many of these clients did not do them simply by either ignoring them or not understanding them. When they contacted RKs for help, no one was there to help them out. I have seen and heard this by more clients than I care to count and they were all late for their restatements or not done. Surprisingly, they all got help for the initial set either by RK or the broker who set them up and then totally disappeared. If the client is informed about the ramifications of not being in compliance and also offered a good deal by the TPA, why not have them come over (assuming everything else is in good order). Both Paul and Bill had very good points and observations and yes, they mostly come with compliance errors that need to be fixed, I certainly have seen quite a few myself. as a reminder, nothing is free and good service does not come dirt cheap. if a client wants good service and free/dirt cheap, I certainly let them go somewhere else. My 2 cents FWIW

Hi Having a brain freeze for a change. DC/CB combo. Both plans are top heavy, separately and combined as well. CB is hard frozen i.e. no one gets an accrual. There are quite a few participants excluded from the CB plan categorically. DC document says, top heavy is satisfied by DC plan but no % is provided. In addition to the 3% NESH already being provided under the DC plan, do I need it to provide another 2% PS allocation at all, especially for the participants who are excluded from participating in the CB? The only allocation to the key employees is the 3% NESH. There is no gateway requirement. Thank you

A follow up situation, in theory. If 26 active participants were achieved during 2025 but 3 of them terminated during 2025 (entered 7/1/2025 but terminated 8/1/2025) with no vested balance (or vested balance), would this plan still be covered as 26 actives were achieved during 2025 and once the plan hit 26 actives, no going back?

Thank you, really sucks that the rules are so stringent and have no flexibility.

Thank you for sharing your information. When you say "no", do you mean it must be covered? I just cannot find any way out of it by law.

Hi Law firm. CB plan, effective 2024. For 2024 had 15 active participants with 0% vesting - vesting effective with inception of the plan. During 2025 exceeded 25 active participants (26 in total), again all with 0% vested balances. During 2026 dropped to 20 active participants. No partial termination issues. It will never exceed 20 again. So, during 2025, plan is covered by PBGC and will be so for 2026 and all future years, at least according to PBGC rules that I am aware of. Any way out of this, is there anything I can do? Am I missing an option here? Really sucks that for 1 year only they are paying the price for it. Thanks

Thank you for your input, yes I would be testing OEX separately. Everyone in the main test is getting whatever they need to. Forgot about the no t/h requirement for OEX but I was mostly concerned about the ADP test.

Not a 401k expert and the client asked the following: Calendar 401k plan with 3% NESH and PS provisions, it is combined with a cash balance plan. Plans are top heavy and top heavy is provided under the 401k plan. Eligibility is age 21/1 year and dual entry Hiring a new employee on 10/1/2026 and sponsor wants to amend the 401k plan so that the employee can start deferring immediately. Not amending the CB plan, just the 401k provision. Does this employee also need to get SH i.e. ADP testing would be an issue if not? Possible top heavy issue too, at least in my opinion. Not providing PS allocation. Thank you

I have a situation and I use the cheat sheet Austin3515 provided long time ago. Paragraph 4 of the attached states: “The rule of parity can be only applied with respect to the service of a Participant. If an individual never met the eligibility or plan entry date requirements; if they terminated before the Plan was effective; or if they were excluded from participation in the Plan, their service cannot be disregarded under the rule of parity. A calendar plan with standard eligibility age 21/1 year service (1000 hour requirement) and dual entry date. A rehired employee was never a participant prior to rehire so that means (according to above), their service cannot be disregarded. Employee in question was rehired 5/1/2024 and worked 1000+ hours thru 5/1/2025 but did not work 1000+ hours during calendar 2024. He was an employee some years ago (2 scenarios, 1- did not have 5 breaks in service and 2 did have 5 breaks in service) It the statement above correct from the cheat sheet is correct then, since he never worked 1000+ hours at any given 12-month period in the past, the fact that he worked 1000+ hours from 5/1/2024 to 5/1/2025 is no longer relevant and he should not be eligible on 7/1/2025 since he also did not work 1000+ hours during calendar 2024. The 1000+ hours from 5/1/2024 to 5/1/2025 method would have applied if and only if his was never employed prior to 5/14/2024. He worked 1000+ hours in calendar 2025 and therefore eligible 1/1/2026. What am I not reading/understanding here or am I making a correct statement or am I making sense? Thank you

John, are you saying if they made 140k CAD of salary in Canada (not a US based income) and the equivalent of it which is roughly 100k USD, the US company can make a contribution on their behalf for a pension plan maintained in US under IRS/DoL regulations? If that is what you are saying, where would they deposit the monies (apart from what currency)? Would the US company even be able to take a deduction for it? I must be missing or not understanding something here.

I understand the non citizenship/non resident exclusion but again, not sure about the lack of US based income. May be an exemption for Canada?? A foreign employee working with an H-1/H-2 visa and have US income is included for testing purposes. May be excluded from the plan categorically. Also a foreign employee working outside US but the income is from US is also included for testing purposes. The above is based on a multi national client that I worked with and had a good ERISA attorney involved with all this but this was 10+ years ago so commenting from memory. Things may have changed or I may be remembering wrong but one thing always stuck with me was US based income.

Isn't there a requirement that they need to have US based income?

No census thus no compliance testing no matter what. Late 5500 due to lack of information is the client's issue, not yours. How can one complete the 5500 forms without knowing how many participants you have, active, terminated, with account balances, terminated with less than 100% vested balance? RKs o not always have the correct data, depending on who is inputting the data. As a TPA you would be taking a huge risk and responsibility by preparing incorrect information with nothing and also putting in incorrect data knowingly. As RBG said, do not make it your problem if the client is not incompliance with providing the data. They can always file late with DVFC. If the client insists on not providing census, resign. My 2 cents FWIW

Will the taxation be for 2025 or 2026? I agree with being a distributable event.

Owner only plan. Loan was not paid off in 5 years (5 years ended 12/31/2025) and 3 left. Is there any self correction? Otherwise, what needs to be done? Never dealt with this before. Thanks

Client fell victim because the broker said it was ok to do so without consulting me. Now the broker states that the client is preparing the 1099s for paying capital gains taxes on all stocks transferred. I will refrain from commenting further.

Just was informed that the client made 300k of db contributions in all kinds of different stocks held by the corporation rather than cash. This is the first time I am dealing with this and any guidance on how to correct it is appreciated.

Any takers?

Any takers?

Have not dealt with this 10+ years so memory not good. Hopefully some DB gurus out there are still using/remembering. May be looking into taking over plan a db plan which has a good amount of prefunding balance. The sponsor wants to use portion of it for MRC for 2025. I do not see an election signed by 12/31/2025 - are they late of they have till 9/15/2026 to make the election? Does FTAP need to be over 80% or 100%? Does prior year funding % need to be over 80% or 100%? I recall being 80%+ Thank you for the reminder before I decide what to do.

This is an AFN related question as I am not sure the info is correct for calendar 2025. My valuation program provider generated an AFN with 2025 PBGC maximum benefit however payable in 2026 and they think this is the right way to reflect on the AFN with the new changes. In the past, before they changed their programming for 2025, it would have given me 2026 PBGC limit and payable 2026. I have it checked it with another valuation program provider and it provided 2026 PBGC limit and payable in 2026. Anyone checked this?

My 2 cents, 2 years is equal to 3 years. Since amendment to increase for an HCE was for 2024, for 2024, 2025 and 2026 you need to adjust the cushion. The way I do is run 2 vals concurrently, one before amendment (I call it B4) and one after. The cushion is based on B4 val and that is the limiting number on the new val for deduction, regardless of whatever the FT is on the new val. FT is not limited, only the cushion is limited which must be based on the prior benefit structure. Remember, this is for deduction purposes only. FWIW and I hope I am not wrong as this was discussed with many different actuaries and collectively agreed upon.