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Hi There is an ongoing discussion in one of the companies I work with. They are evaluating moving from a SIMPLE 401k plan to a Safe Harbor plan, to ensure that the compliance tests are passed and to enable a possible Mega Backdoor Roth plan. I have been able to simulate the tests and with the Simple 401k plan, the ACP falls into non-compliance quite quickly. However, I've done some research and found that Safe Harbor plans offer some type of waiver over tests. But I've also found that after-tax contributions do not qualify for safe harbor test exemption, meaning that even when the company adopts a safe harbor strategy, it is very likely we would fail the ACP test. Can someone help me confirm if safe harbor plans with after-tax contributions are subject to ACP testing? (and, why are they called safe harbor if they are not entirely safe?). Thank you so much for your help! FR

Have a plan that failed the adp acp test. Participant is 60% vested. Relius is showing Allocable Income on the ACP correction. Is it 60% of the Refund Amount that is forfeited? How does the Allocable Income come into play then?

Hey Y'all! Quick question for my fellow practitioners. I am studying the DC-2 book to eventually get my QKA and I came across a sentence saying that corrective distributions (ADP & ACP corrections) are subject to 10% withholding unless the participant completes a Form W-4P. I was wondering who all was practicing this? I don't recall ever seeing a corrective distribution with any withholding applied in my short tenure. Thanks in advance!!

Greetings, I am in the process of preparing a VCP for the below described errors. Where I'm at a loss (despite extensive review of the forums) is (a) Can the correction for the use of the incorrect match be limited to just those participants making deferral (those with "account balances") by using a QMAC instead of a QNEC correction; and (b) If a prohibited transaction occurred as a result of the incorrect match % and the loss earnings, thus requiring a VFCP. FAILURES: 1. Failure to correctly apply the Plan's matching contribution provisions to employees during 2012 and 2013 (Plan Sponsor applied lower matching % to all new employees, despite the Plan language limiting this to only acquired Company A employees) 2. Corrections necessary to pass the non-discrimination tests for 2013 and 2014 due to the three tier matching contribution formula (Plan Sponsor used the wrong matching % in performing tests) Proposed Correction under VCP A. For those participants that received the smaller incorrect match AND that had "account balances" (i.e., limiting the correction only to those participants making elective deferrals). a QMAC (as opposed to a QNEC) could be made under VCP. [i know there's a strong argument this correction should go to all eligible participants - even those not deferring - but such a correction would be astronomically higher] B. Since the incorrect employer match was used, resulting in lost earnings, I believe this would be a prohibited transaction (outstanding match % became plan assets when PS filed tax return) and thus I would propose a VFCP be filed with the DOL (meaning no filing of Form 5330 Return of Excise Taxes). However, looking at the VFCP Application, there is no box to check for "missed employer matching contributions/earnings" Any insight would be most appreciated. Thank you...

Client failed testing. Refunds issued and cashed. Discovered bad data was used. Tests rerun and client still failed but refund required for HCEs was less than what was issued? As to issue of refund, can they self correct?