Search the Community

New Plan Effective 1/1/2020 to be adopted by due date of business return, as per SECURE Act. For 2020 it will be a cross tested Profit Sharing with individual allocation rates; 2021 will include 401k with Safe Harbor in addition to the Profit Sharing. NRA is 65+5 Participation, The Plan will exclude service prior to its Effective Date for Vesting credit purposes (actual hours credited basis). Owner wants to waive the eligibility waiting period as of the Plan's effective date (1/1/2020) for any employees actively employed on that date to enable his son to be a Participant (otherwise eligible 1/1/2021). This will make for three (3) HCEs for 2020. In doing so, there are four (4) NHCEs who will also be eligible as a result of this provision (note 1 of the 4 would otherwise be eligible as of 7/1/2020). Concerns are as follows: The owner is 79 years old and will of course be subject to Required Minimum Distributions. Though the entire contribution is receivable for 2020, would the owner be required to receive a 2021 Minimum Distribution based on his "12/31/2020 valance" including the receivables (up to his vested account balance, note NRA is 65+5P to avoid 100% vesting)? The owner is able to maximize his Profit Sharing allocation (allocation rate is 100% of eligible pay) with a 5% Gateway to all NHCE staff. This same 5% Gateway to all NHCE staff affords the son a PS allocation rate of about 18% and the third HCE (unrelated) a PS allocation rate of 3%. Total PS contribution is well within the deduction limitation, all rate groups and Average Benefits Test pass. Concern here is two (2) of the four (4) NHCEs that come in under the "eligibility waiver" are terminated during the 2020 Plan Year - since the Plan excludes service prior to the Plan Effective Date all Participants are zero vested. Is this a concern, or not since all receiving same 5% allocation rate? One of the two who terminated is counted in the owner's and his son's Rate Group testing -does this impact the answer? Both, of course, are in the ABT. Finally, I will add, even if past service is counted (actual hours 2019 and 2018), the referenced two who terminated would still be zero vested due to short service/insufficient hours. Thank you.

Safe Harbor 401k Profit Sharing Plan provides: 401k+Catch-up for all 3%SHNEC for all NHCEs only Discretionary PS, each Participant own rate group 25 HCEs, 2 are owners 100+ NHCEs Employer would like to contribute the following: 2 owners 9% PS Remaining HCEs 1% PS (Plan is NOT TH) NHCES only the 3% SHNEC, 0% PS -- this satisfies the G/W minimum Can this be done or must the NHCEs receive "some amount of" PS?

Background: We have a brand new cross tested plan. For the 401(k) portion, the eligibility requirements are 21/ 1 YOS (1000 hours). However, the owners would like a special participation date for immediate participation for themselves (no employees in either adopter). This is a plan for two new adopting employers, and the business entities were established in 2019 and 2020 respectively. For one owner, he has been performing services and on payroll since 2019. For the other owner, he started performing services on 1/3 and will be on payroll 10/1 of this year. The document has a specified place for special participation dates, but I wasn't sure what the date should be. My question is when can this special participation date be? Does it follow with when they started performing services for the business entity or when they started on payroll? In other words, with an owner who has performed services 1/3, but not on payroll until 10/1, what special participation date would I need to use? Thanks!

A plan decides upon a profit sharing contribution for 2017 that allocates a different dollar amount and percentage to each participant. This complies with the cross-tested formula in the plan document and passes testing. When preparing the notification from the employer to the Trustee (see Padilla memo), do we have to list each employee separately? Can we refer to an attachment, which would be our allocation spreadsheet? Alternatively, can we combine the 3% safe harbor and profit sharing when referencing the amount on the trustee notice? This would make it much easier for this plan. They basically were trying to allocate a set dollar amount to certain employees, but it is a combination of the 3% Safe Harbor and profit sharing, so the profit sharing is all over the board due to differences in compensation.

Hi all! The answer to this may be black and white and I apologize in advance if it has been asked before (I did my due diligence searching for the answer on here prior to posting) Basic info: 1 HCE, 13 NHCEs, multiple contrib allocation groups all of which get a contribution (no zeros), last day employment requirement so all terminees didn't get an allocation Plan passes ABPT but fails 410(b) ratio percentage at 60%. I understand that the plan can pass coverage with ABPT only, given "Reasonable Classification" was utilized in assigning allocation groups. Given the following excerpt, I would say it's okay to skip the 410(b), however one issue is not clear to me: Is giving a zero allocation to terminees due to the last day employment provision of the plan, not make a "Reasonable Classification" thus requiring us to pass the ratio test?? Thank you.