metsfan026

The document includes it, but the client says they didn't pay any. So the total salary is under the HCE so that what it is? I just want to make sure I'm understanding

This is a situation I've now encountered, so I wanted to check. - Participant has no ownership stake in the company. - In 2023 they made about $200k, therefore they were considered an HCE in 2024. - In 2024 the participant missed several months due to being on active military duty, thus earning about $75k So, my understanding is that for 2025 they would not be considered an HCE. Is that accurate? Thanks in advance!

We have a few Plans that were adopted in February or March of 2026, as of December 31, 2025 (as allowed under Secure 2.0). Should we be filing extensions and Form 5500 for these Plans? I know under Section 201 of Secure 2.0 it technically isn't required, or is that just for Plans adopted after the extension date? I don't want to miss anything, or file an extension if we aren't supposed to. Thanks in advance!

Good morning, we just took over a plan with a unique Safe Harbor formula and I just wanted to make sure it was acceptable. The formula is: 100% of the first 1% deferred + 50% of the next 5% deferred So, you basically get 3.5% if you defer at least 6% (instead of the typical 4% of comp if you defer at least 5%). Is this an acceptable formula? Just not one that I've seen before, so I wanted to double check. Thanks in advance!

We'd use everyone's salary for the 6% cap, correct? So technically everyone's salary is eligible, so it's 6% of all of the eligible compensation for the Safe Harbor + Profit Sharing limit? I just want to make sure I'm thinking it through correctly

Thanks. That plan was in place already, obviously the recommendation is to go to a 3% Safe Harbor but they may not want to take it away

I'm running into a problem and just looking for some insight. We have a Plan that has immediate eligibility for the 401(k)/Safe Harbor Match, but we are looking to do 21 & 1 year for the Profit Sharing & Cash Balance portions. I know the Safe Harbor Match (for everyone) gets factored into the 6% maximum deductible contribution for the employer contributions. That said, for the people who are eligible for the 401(k)/Safe Harbor, are they factored into the rest of the testing for the PS/CB? For instance, when we are doing the rate group testing are those people factored in? Or do we only test for the people who are eligible for the Cash Balance Benefit? I hope that makes sense. Just trying to make sure I have all of my bases covered

I'm 99% sure I know the answer, but I wanted to be 100% sure. If a participant is on maternity leave at the end of the year, are they still considered employed on the last day of the Plan Year in order to be eligible for a Profit Sharing contribution (the participant had worked over 1,000 hours prior to going out on leave)? Thanks in advance!

Right, but technically the participant isn't employed on the last day of the Plan Year so they shouldn't get the Top Heavy contribution. I'm problably overthinking this though

We have a client who has an employee who is only receiving severance payments and no other salary. I just wanted to confirm that all of that compensation is ignored, and therefore they wouldn't get any type of contribution (Profit Sharing, obviously not since they are under 1,000 hours, but a Top Heavy contribution was my only thinking). Thanks in advance.

Thanks! And, just so I'm clear, the Safe Harbor Match doesn't override the Top Heavy requirement in this case due to the presence of the Cash Balance Plan? (And, unlike the 3% Safe Habor, the Match doesn't apply to this Top Heavy requirement so participants who are getting the match will also get the full 5%?) Sorry, I just want to make sure I'm not overthinking this. Thank you!

Would we still test the plans combined?

We have a Plan that was once a dual Plan, but has since Frozen the Cash Balance Plan leaving the Profit Sharing Plan to operate as a stand alone Plan for now. It's a Safe Harbor Match (safe harbor formula). The Top Heavy Testing is right on the border, but since it is a Safe Harbor Match I believe they are exempt from the testing and are only required to make the Safe Harbor? I just wanted to make that was still the case, since there would be no Cash Balance Contributions and the Key Employees are only going to receive 401(k) and Safe Harbor Matching contributions. Thanks!

We have a participant who is asking if this situation falls under a Hardship: Due to a legal divorce, the participant has to move out of their house and needs a deposit for an apartment (first and last month's rent). It's not purchasing a primary residence, so I wasn't sure if this would apply. Thanks in advance for your input!

We have a Cash Balance Plan that froze it's benefits early in 2025 (before anyone incurred 1,000 hours). Generally they have been making the 7.5% Profit Sharing contribution, in conjunction with the Cash Balance Contribution. My question is, with the Cash Balance frozen are they still obligated to make the Profit Sharing? Or is that back to a discretionary contribution and they can make any level since there's no Cash Balance contribution being made (there is no requirement).? Thanks in advance!

Great, thank you! Is there any limit? Or they can go as high as they want to?

I was just reading something and came across a note I had never seen before. Is it true that if the Plan is covered by the PBGC, the 6% limit on employer contributions into the Profit Sharing Plan doesn't apply? We always adhered to the 6% rule, even for PBGC Plans, but what I read seemed to imply that it wasn't the case. So I just wanted to make sure I was reading this right. Thanks in advance

That's definitely possible, but as long as the investment options are the same and they are tested together you agree there are no issues? I just want to make sure I'm not overlooking anything (these questions are all the same points I had already brought up to them)

I'll be honest, I'm not 100% sure what their reasoning is. I told them they can't have investment options that no one else had, and they understood that.

I don't disagree and that's why I'm questioning it. If they want to setup it up with te same benefits and willing to make the same opportunities available to the rank and file, then there shouldn't be an issue though? It seems odd to me, but they are pretty clear they want to have a separate plan. I've said they all have to have the same opportunities, which they seem OK with.

I agree, the situation seems really odd to me but this is what I'm being told (and I have questioned the situation). At the end of the day, if they do separate 401(k) Plans for themselves, as long as they aren't getting benefits that the employees under the main plan are getting, would there be an issue?

We have a potential client where they have a company 401(k) Plan, but the two owners technically aren't on payroll. Instead they are paid via 1099. Can they setup their own individual 401(k) instead of participating in the company plan? Is there any testing issues if they opted to go that route? Thanks in advance!

Right, so they can technically make a larger contribution and just not get the deduction for it?

I know the general rule is that an employer can only contribute up to 6% into a 401(k) Plan when they are also doing a Cash Balance Plan. I just wanted to confirm that the 6% limit also includes the Safe Harbor Matching contributions that they are currently making? So if they are making a Safe Harbor Match, that's going to severely limit (or possibly eliminate) the opportunity to make a Profit Sharing Contribution as well? I think I know the answer, I just wanted to be 100% sure I wasn't confusing myself. Thank you!

We have a 1 person Cash Balance Plan (owner only) that we are taking over. I just want to make sure that they have compensation defined correctly in the Plan Document. The choices given are: 1) W2 2) Code 3401 3) Code 415 Safe Harbor Thanks in advance!