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Showing results for tags 'Safe Harbor'.
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Please confirm the compensation earned from all members of a controlled group of businesses is aggregated for purposes of allocation, coverage, ABT and General Testing. Facts: LLC (single member, taxed as S-Corp) sponsors a Safe Harbor 401k with Discret PS features. The LLC controls all plan provisions. There are several nonHCE covered by the Plan in addition to the "owner" C-Corp (owned by same person who is Member of LLC) adopted the LLC's Plan, follows the LLC's provisions as stipulated, is a "participating employer." Suppose for this question the LLC Member's elig compensation is $50,000 and his/her C-Corp is $100,000. Total earnings $150,000. Is compensation for purposes of SHM $150,000, irrespective of which source of income (LLC or Corp) it was deferred from, meaning if the 401k deferral is deferred from the LLC source, wouldnt you still determine the SHM on the aggregate of both compensation sources? In this instance, the SHM w b $6,000... Further if the Corp fails to contribute its proportionate share of the SHM, the LLC will (be forced to contribute it to satisfy the SH) and can deduct it? Is compensation for purposes of the PS allocation $150,000? Deducted by entity who contributes it, correct (Same as above)? Further if the Corp fails to contribute its proportionate share of the PS, the LLC will (be forced to do so) and can deduct it (subj to 25% limitation)? For purposes of the ABT and Rate Group testing, the aggregate compensation is used for the Accrual Rates, correct? For determination of HCE status, aggreg is used? Each entity tests based on its compensation for 25% deduction limitation? Thank you -
FACTS: - The Plan is a 401kPSP with 3% Safe Harbor NEC - It's the 2015 Plan Year - Employer business and 5500 returns were on extension to 9/15/2016 and 10/15/2016 respectively - Business returns were filed in June, deducting the Employer SH contribution In August, the Employer decided to contribute PS for the 2015 plan year QUESTIONS: 1. Is there any reason the PS can not count as a 2015 Annual Addition? It was deposited timely (before due date of tax return) for 415 and therefore seems it should count as a 2015 Annual Addition even though the employer failed to take the deduction for it on the 2015 employer return 2. Since the 2015 Business Returns were actually filed PRIOR to (the deadline to file and) the employer's decision to make this 2015 PS contribution, no deduction was taken on the 2015 returns -- Other than the 25% deduction limitation for 2016, is there any reason the employer can not deduct the 2015 PS on his 2016 business return (along with any other 2016 employer contributions)? The employer does not want to amend its 2015 tax return if it can be avoided. 3. If for some reason the deduction of the 2105 PS can not be taken on the 2016 return, can the 2015 PS be recharacterized as 2016 PS? Thank you
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As an employer, our employees are classified as Full-Time (35+ hrs per week,) Part-time (30-34hrs per week,) and per diem (less than 30/when we need them.) We charge our insurance premiums based on those classifications. The less hours you work, the more the employee share is. Due to ACA classifying everyone over 30 as full time, when calculating affordability would we need to calculate both the lowest share single coverage price for 30-34 and the lowest share single coverage price for 35+? Or is it just based on our lowest price no matter what hour category we put them in? It is the same MEC and MV plan.
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I have a 3% nonelective safe harbor 401(k) Plan that is terminating effective 10/31/2016. The safe harbor is to be calculated based upon compensation from January - October. This is due to a business acquisition, so safe harbor status is maintained. There is one owner who receives Schedule C income. Safe Harbor has been deposited for the 3 non-owner employees throughout the year. The owner has taken $10,000 distributions periodically and the bookkeeper has made 3% safe harbor deposits based upon these amounts to the owner's account. The owner's actual earned income for the year will not be determined until sometime in the first quarter of 2017, but we would like to have all assets paid by 12/31/2016 to prevent another plan year. So...how do I calculate the owner's safe harbor contribution from 1/1/2016 through 10/31/2016? 1) Treat him as having earned $0. This would be a problem because, not only did he have safe harbor deposits, but he also deferred during the year. 2) Have the CPA estimate his earned income from 1/1/2016 through 10/31/2016 and calculate the safe harbor for the owner based upon this estimate. Any other options? Has anyone dealt with this conundrum? Thank you!
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Client's old FA set up a calendar year non-SH 401(k) effective 4/1/2016 which excludes leased employees. Can it be converted to a SH-401(k) covering leased employees now? Client has leased employees that he is happy to include now that he knows he needs to in order to pass testing. Solutions much appreciated. -
Is it possible to design a plan using a Safe Harbor basic match for anyone who is contributing and also simultaneously use a Safe Harbor non-elective for anyone who does not contribute?
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Employer has 1 HCE (the owner) and 75 eligible NHCEs. Wants to adopt a 3% safe harbor 401(k) plan. Owner's compensation is normally paid as $120,000 base pay and $150,000 year-end bonus. The NHCEs receive tips amounting to about 50% of their compensation. If the plan excludes bonuses and tips for purposes of all allocations, would this still retain its safe harbor status? If so, it seems like the employer is getting away with a safe harbor contribution of only 1.5% of compensation. We understand that it might eventually become top heavy with all the turnover they have, but that could take several years.
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A plan is sponsored by a partnership of 75 partners. It is a safe harbor nonelective (3%) 401(k) with profit sharing. A handful of partners are leaving the organization over the next few months. If their earned income is all deemed to be paid on the last day of the taxable year (12/31/16), then they would have no earned income while still "employed" by the partnership, and thus no safe harbor nonelective contribution for the year. Is that treatment correct, provided no plan provisions to the contrary? I know this has been discussed previously, but I don't think I will be able to find it until BL offers a "Remedial Search 101" webinar. -
Facts: 401k Safe Harbor with Profit Sharing Plan (cross tested plan design) the 3% non-elective Safe Harbor is provided to NHCEs only Calendar Year Plan payroll is monthly professional staff, mostly HCEs, a few age 50+, many less than age 50 2 employees who are HCEs, elected the maximum 401k+catch-up, 1 of whom unfortunately passed away early in the year payroll vendor changed starting with April 2015 payroll all prior 401k+catch-up amounts were accounted for with change by new payroll vendor (error is not because of this). Error: HCE (age 50+) elected BOTH the maximum 401k deferral be withheld proportionately from each pay for the 2015 Plan Year ($1,500 per pay) AND the maximum catch-up be withheld proportionately from each pay for the 2015 Plan Year ($500 per pay). Total per pay withholding $2,000, representing deferral + catch-up. In addition this participant elected 100% of any bonus pay be withheld up to the maximum limits permissible. As it turned out for 2015, the only bonus pay was late December (no deferral was withheld). $2,000 deferral + catch up amount was withheld from monthly pay January through September (old payroll vendor and new payroll vendor). Starting with October's pay, the payroll vendor ceased withholding the $2,000 amount, and this continued through December 2015 (3 months). A late December bonus was paid but no deferral was withheld. Total missed deferral and catch-up: October 2015: $1500 deferral and $500 catch-up November: same December: same Total $4,500 deferral and $1500 catch-up Starting January 2016, the same withholding recommenced $1500 401k deferral + $500 catch-up (2016 limits unchanged) and are to this date continuing. Questions: 1. Given the withholding recommenced within 3 months is there a correction necessary, given the recent IRS new correction methods announced to avoid "windfall" to employee receiving full compensation and contribution? 2. If correction is necessary, is the catch-up amount included in the correction of missed deferrals, i.e. a corrective contribution is made for missed catch-up? 3. Is there any way to recharacterize the contributions totaling $18,000 (withheld as $1500 401k * 9 = $13,500, and, $500 catch-up *9 = $4500) that were made as $6,000 catch-up, $12,000 401k deferral? In this way the employer PS contribution can be maximized, assuming passes n/d testing, and the overall total maximum to this participant still achieved... in a good faith effort to make the participant's total annual additions for the year "whole." Thank you
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Company A is a professional corporation with a Safe Harbor 401k Plan. The son of Company A's owner is interested in buying the practice via an asset sale, mid-year, and he would like to acquire the 401kSH Plan with the purchase, as all employees will continue on with the "new company" or successor employer. It is my understanding the transfer of the Plan should be addressed in the buy / sell agreement, including service to be credited, contributions/deductions for year of purchase. Questions/Concerns: With it being a "401k Safe Harbor" plan is there any problem with the new company amending the Plan to reflect the successor Plan Sponsor's Name, EIN mid-year, coincident with the buy/sell? The new company does not intend to "change" any of the Plan's provisions -- simply wants to become the successor plan sponsor. I am not familiar with any "mid-year" Safe Harbor Notice provisions. Other than providing an SMM to participants, is there any other Notice requirement? My concern here is the SHMatch -- Company A will fund the SHM for all payroll through Company A; the successor Company will fund the SHM for all of its payroll -- is this considered an impermissible change mid-year. They do not anticipate a PS contribution for this year. Assuming the new company is permitted to Amend the Plan mid-year to reflect its successor sponsorship, Name and EIN (no other changes are intended), is there anything further necessary to affect this transfer of Plan from old sponsor to new sponsor? Thank you
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New safe harbor plan was executed timely to begin deferrals and safe harbor on October 1, 2015, plan is a December 31 year-end. They failed to offer deferrals until sometime in November. Under Revenue Procedure 2015-28, if the problem is found and deferrals start in the 3 month period, no QNEC is needed for the missed deferrals assuming the proper notice is provided? Seems like that's the case since an Employee Elective Deferral Failure includes a failure to afford an employee the opportunity to make an election. Agree? -
What are people's thoughts about starting a new 401(k) plan (or adding a CODA to a PS only plan) , when the deferral effective date occurs late in the year, after October 1. Clearly it is permissible until October 1(for a calendar year plan), as evidenced by the 3 month rule written into the SH regulations. What about for non-safe harbor plans? Effective availability for benefits, rights, and features? I'm not concerned about an employer that is 100% highly compensated, nor am I concern about an employer with zero highly compensated. I'm concerned about a classic small employer with a mix of highly and non-highly compensated employees who would be eligible to participate in the plan. I have my thoughts on the subject, but I'm curious to hear others' thoughts. -
Employer knowing their plan would be top heavy for 2014, intended to implement safe harbor provisions for existing 401(k) starting 1/1/2015 providing instruction to service provider in early-December 2014. Document was restated and a 4% match with 100% vesting added in order to comply with Safe Harbor requirements. Many, but not all employees made changes to increase their deferrals before 1/1/2015. The plan has been operated according to Safe Harbor rules throughout 2015. However the prototype plan adoption agreement did not have the box for the Safe Harbor election checked when it was signed in 12/2014. How can the document be corrected to accurately show that it is a Safe Harbor plan? Much documented evidence of employer intent and instructions to document preparer going back over a year.
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A small 401(k) plan is written to provide a safe harbor match. If the employer provides no profit sharing and no forfeitures are allocated (or they are allocated as ACP-free match), the plan is top-heavy exempt. Suppose the plan is also written to partially exclude one sales person who is a Non-Highly Compensated Employee (not an owner and makes under $115,000). They are only excluded from the deferral and match portion of the plan. The plan easily passes coverage by covering the other 8 NHCEs. The employer wants the sales person to still get profit sharing in the years that they actually make a profit sharing contribution. However, in the years where no profit sharing is contributed, is the plan still top-heavy exempt (assume no forfeitures)?
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We are taking over a client that is currently funding a 5% non-elective safe harbor. Can they reduce this to 3% mid-year without having to do ADP/ACP testing?
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A 401k Safe Harbor Plan has the following provisions: - 6 mos elig for 401k deferral contributions (no min age) - 12 mos/1000 hrs (no min age) for employer SH (3%), discretionary PS (cross tested) - dual entry dates, 1/1 and 7/1 2015 Plan Year, there are 2 employees newly eligible as of 7/1: - 1 HCE (spouse of owner) - 1 NHCE Question 1 Assuming the Plan is NOT TH for the 2015 plan year, the 2 newly eligible participants will not receive SHNEC or PS but if their deferral %s pass the ADP test (testing only them), is it correct that the Plan will not fail any other testing (e.g. Gateway mins)? If this is incorrect, can the Plan be amended to correct via accelerating eligibility for SH and PS to same 6 mos requirement and not lose its Safe Harbor status for the year? Question 2 Assuming the Plan IS TH for the 2015 plan year and all other statements above apply... Assuming ADP test for 2 newly eligible passes, can the employer contribute 3% TH for these 2 newly eligible (assuming they are still employed on the last day of PY) without tripping the Gateway testing (assuming the GW minimum is at least 5%)? If this is incorrect, can the Plan be amended to correct via accelerating eligibility for SH and PS to same 6 mos requirement and not lose its Safe Harbor status for the year? Thank you for your assistance.
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I think Jim Holland may have opined on this at the ASPA 1999 Q & A Session --- A 401(k) Plan complies with the nondiscrimination rules for one or more years by using a safe harbor matching formula. Prior to beginning of next year, it elects to not use the safe harbor rules. The employer adopts a discretionary matching formula and informs participants accordingly. May the employer use a graded vesting schedule with respect to matching contributions made after the change to a non-safe harbor plan (giving credit for all prior service) or must the participants who were covered by the safe harbor formula continue to be fully vested in future discretionary contributions? The mutual fund company states the employees who were in the Safe Harbor Plan must all now be fully vested in the new discretionary matching accounts…..their record keeping system keeps all these in different source buckets, so there's no co-mingle issue. what????? Is this correct???? I either want to laugh or cry. -
Potential prospect is a controlled group, 2 employers each with a plan, plans started a couple years ago. ER 1 plan: safe harbor match, 60 eligibles total, 10 are HCEs, no profit sharing. ER 2 plan: non-safe harbor match. 450 NHCEs, no HCEs, no PS. Matching formula is the same structure as the match formula in plan 1. Can't aggregate a SH plan with a non-SH plan. Coverage for plan 1 is 10% Suggestions for passing coverage?
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I have a scenario where I have a safe harbor match of 100% of 4% and for 2012-2014 they didn't have a cap on the match at the annual compensation limit, so some received thousands more in match because their gross income was over $250,000. How do I get participants to return funds if they have already taken distributions? Are there any correction methods for this?
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Hello All, I have a question regarding a Safe Harbor Plan that also happens to have a last day requirment. The plan also has crosstesting thus everyone is in their own rate group. I have a participant that has termed before the year end, and was a participant in the plan throughout the year entitling him to SH. The plan is also maximizing the owners and needs to satisfy gateway requirement. Since the participant is technically not eleigible for the additional 2 % that he needs to satisfy gateway (because he was not employed on the last day), do we have to amend the plan so that he is eligible for PS for the year or is it understood that a participant that has recieved SH can also receive profit sharing to recieve gateway? Please advise.
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A Safe Harbor 401(k) plan currently has a 3 month eligibility with entry dates of October 1 and April 1 (off calendar plan). The employer would like to amend the entry date to monthly. Would this be acceptable using the rationale of the IRS at the 2012 ASPPA Conference? Or is that rationale only applicable if you have a classifcation of employee that was not previously covered?
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Say you have a safe harbor match plan and you no longer wish to be safe harbor. When is the ealriest you can amend to not be safe harbor? Do you have to give the employees a certain amount of days notice? In this case, the client wishes to implement a regular match as soon as possible. thanks
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We are TPA for a safe harbor nonelective plan that is terminating. The practice was sold (asset sale) on January 6, and all the employees terminated, but the corporation was kept alive and continued to generate income, which resulted in the owner making a full 401k contribution. I believe i am correct in stating that to terminate the plan, the 3% safe harbor contribution must be made AND the plan must be subject to ADP testing. The testing would not go well, as there were no deferrals taken from the 6 days of employee pay. It would seem to me that the best thing to do would be to make a QNEC, since the 6 days of compensation won't be much. Right now, I'm thinking that we need 4% of pay to pass testing. The question is whether we can apply the 3% safe harbor contribution toward testing, such that the employer would only need to fund an additional 1%. i would think so, but want to make sure before we give it the thumbs up. Any assistance during this very busy time is most appreciated! Dog
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Are corrective amendments permited with a safe harbor plan? I know you can't amend a safe harbor plan (expecially after year end) but what if you have a situation where you need to - does that take you out of safe harbor?
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We had a Safe Harbor 401(k) plan in 2013. During that year we adopted a Cash Balance plan. It had started with an eligibility window that brought in Employee "A". ("A" is not eligible for the 401(k) Plan in 2013 as of the date of this post.) Turns out, the plans cannot satisfy the Special Gateway requirement because "A" did not get a benefit in the 401(k) plan. The perfect solution would be to adopt a corrective amendment within 9.5 months admitting "A" into the 401(k) plan and giving him the same 7% as all others. Question: Would a corrective amendment that admits a new participant constitute an impermissible (mid-year) amendment of a Safe Harbor plan? I think it is permissible because it does not conflict with anything in the 2013 Safe Harbor Notice. It is also the kind of amendment that IRS says it would be inclined to permit (but to my knowledge, they have not yet expressly permitted). What do you think? Thank you very much.
