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Found 25 results

  1. Facts: Plan is top-heavy; Has a 3% non-elective safe harbor contribution; Has a stated match of $0.25 for each dollar deferred up to 4% of pay for Non-HCE only – has last day/1000 hour requirement; Has a discretionary profit sharing plan, but has decided NOT to make a profit sharing contribution for 2020. I know if they make a profit sharing contribution (which they always have in the past) that they would need to satisfy top-heavy minimums, but in 2020 they are not going to make a profit sharing contribution. My question is if for 2020, do they have to satisfy the top-heavy minimums? I know that adding allocation req's to a match makes nondiscrimination more difficult to pass, but does the fact that the match is for non-HCE only help? Any insight you can provide would be much appreciated! Thanks!
  2. The plan sponsor for a law firm 401k plan is set up as an LLC taxed as a partnership - equally owned (1/3) by three different Affiliated/Participating employers all taxed as an S-corp. The LLC employees a few non-owners, and each of the 3 S-corp partners are 100% owners of his or her respective firm. Since the three affiliated, participating employers (S-Corps) pay their owners W-2 compensation, the W-2 compensations are eligible for deferrals and contributions for the plan. For Pre-tax deferral contributions, payroll deductions are withheld for the owners (W-2 comp) and funded by the individual S-corp. It's a Safe Harbor match plan with a Plan Year/annual determination period for the match. Since the pre-tax deferral contribution will be deducted via payroll and funded from the owners' individual S-corp, does the corresponding Safe Harbor match need to also be funded from the individual S-corp. - or does the match need to be funded by the LLC taxed as a partnership?
  3. I've been researching what is considered a reasonable time for an employer to deposit a 401k contribution/match of an employee’s compensation and was wondering if there are there any exceptions/exemptions for 132(j) types compensation? Some situations I am looking at have 132(j) compensation that is hard to get a number on quickly as they are paid in advance and then, what is not used by the employee, is later refunded. Any guidance would be appreciated. Thanks!
  4. Ongoing debate regarding whether a safe harbor 401(k) plan can impose different eligibility requirements for deferrals than for match. Opinions please!
  5. Would you be permitted to have two matches where the first match would go to everyone but the second one would only go to employees employed on the last day (meaning the active employees would get both matches). I am trying to think if there are any discrimination issues.
  6. Does anyone happen to have an excel spreadsheet template that would calculate match true up on a bi-weekly payroll basis, instead of an annual basis? Match is .50 for every dollar match up to 8% and payroll is bi-weekly.
  7. We are the TPA and we calculate the match for the client on a per pay basis. Their pay period ending date was 5/22 but the pay date was 5/29. The next pay period ending date is 6/5 with a pay date of 6/12. A participant met match eligibility on 5/24 and they are immediate entry. The client is thinking the person should not get a match until the 6/12 pay date because the pay on 5/29 is for time worked prior to her entry date. Our system processes based on the pay date and as 5/29 is the first pay after her effective eligibility date, we are thinking the participant is ok to get match. Any thoughts on if we should use the pay period end date versus the actual pay date? Thanks!
  8. A plan has a safe harbor match allocated on an annual basis. The client has realized that there were 4 employees eligible on January 1, 2018 who have not been given the opportunity to defer. I will advise them on the correction under EPCRS, which is a 25% QNEC based upon 3% missed deferral and a missed SH Match plus earnings. They will notify employees as required. Question - Is the compensation based upon compensation from 1/1/2018 through the date the employee is given the opportunity to participate? I would think yes, but when I calculate the annual safe harbor match for ALL employees at year-end, this portion of compensation will be included in the calculations. It would seem as though the affected employees will get matched on this compensation twice. Is that how it is meant to work? Thanks!
  9. I'm working with a plan that is considering implementing a QACA SH match on 1/1/2019, but they would also like to match additional contributions over the QACA match. Specifically, they want to match 50% of contributions on deferrals between 7-10% - auto escalating up to 10% using the QACA AE provision. They want to try and get total employee contributions over 15%, but encourage it with the discretionary match over the QACA formula. is the discretionary match subject only to ACP? are there other considerations with offering this additional match above the SH match limit? any help would be appreciated.
  10. Plan is safe harbor non elective with a 100% of 2% non safe harbor match. A rehired employee was not giving the opportunity to defer for 2017. I know that the fix for the deferral piece is 50% of the 3% plus the 3% safe harbor. My dilemma is the match piece. If my brain is working correctly, I understand the regs to be... 2% match. The employee's missed deferral was 3% (because of safe harbor non elective) so the match is 100% of 2%. Can I get a confirmation or denial? Thanks
  11. I am a recent college graduate and just landed my first full-time job, so am very new to understanding 401(k)'s and retirement plans. My company says that they will match "up to the first 6% of your pre-tax contributions each pay period." For example, if I contribute $100 every pay period, they will match $6? EDIT: The rate is as follows: 200% on the first 2% that you contribute per pay period 50% on the next 4% that you contribute per pay period
  12. Employee received too much match from too much compensation. The calculation of the match did not stop at 265,000. Employer thought the 265,000 was only for the safe harbor calculation....lol. The employee received his 2% match on 444,000... I need to remove the extra match and place into unallocated acct. The employer was questioning if they could reallocate the extra match as an employer non-elected contribution for 2016? Is this permissible? (I didn't use the term forfeiture because I don't think this is a forfeiture situation)
  13. C-corp is changing to a safe harbor plan, due to issues with testing. The goal is to use the enhanced testing method and avoid all testing requirements for ACP/ADP/top heavy . Is it possible to use the following enhanced match: Contrib/Match 1%-1% 2%-2% 3%-3% 4%-3.5% 5%-5% My concern is the "step-up" from the 3.5% match to the 5% match,,,,,,,, The goal is that employees that contrib 5% continue to receive a 5% match -- does that mean that 4% contrib would need to receive a 4% match? Thanx, SD
  14. 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...
  15. Just trying to make sure we don't miss anything.... Below is the current client match scenario: Deferral contributions are allowed first of the month following employment. Match begins first of the month following six months of employment. Match is 100% vested. For anyone hired after January 1, 2017, the client would like to change to the following: Deferral contributions are allowed first of the month following employment. (No Change) Match begins first of the month following employment. Match contributions become subject to 5 year graded schedule. (2-25%) Anyone hired prior to January 1, 2017 would stay on the 6 month, 100% vested match. I can't think of any pitfalls, but boss wants to use fine tooth comb on this one. Thanks
  16. Client with a LDP for match. They sold a few locations during the year. The client considered the sale date to be the late day of employment for those effected ppts, and matched those ppts. Is this proper treatment to consider the last day of a participating employer's participating in the plan to satisfy the last day provision when that date does not coincide with the documents definition of plan year?
  17. Client would like to have one match formula for executives & office staff and a second match formula for warehouse staff. We are told that the match for the warehouse staff will be a better formula than the formula for executives & office staff (which is where we are told HCEs are). We don't have a breakdown by group yet. If we do this in the FT William document, we were told to use the discretionary match of D.6.a "A discretionary amount and percentage of Matched Employee Contributions". The Note in document states "The discretionary formula in D.6.a. must meet the nondiscrimination requirements regarding benefits, rights or features described in Treas. Reg. section 1.401(a)(4)-4. While I understand that if you have different match formulas for different groups of people, you must do BRF testing, I'm not convinced that it is o.k. to use a discretionary match option in the document. Using discretionary in the document should mean having one discretionary formula for everyone in the plan, shouldn't it? And, I understand that while the client is telling us that the match formula for the warehouse staff is better than the one for executives & office staff, we wouldn't know that until we actually saw what formulas they are thinking of using. And who knows what they would think up for the match formulas for future years. Anyone else run into a formula like this or have any idea where/if it will fit into the FT William document? I'm not looking forward to this at all as the BRF will be something we have to calculate manually as the testing software doesn't do that test for any match formulas. Any thoughts? (maybe I should say useful thoughts )
  18. I am sick of sponsors that insist on allocating matching contributions to participant's accounts over the course of the year AND insisting on having allocation conditions (last day, 1000 hours, or both)! I am looking for support for the propostion that allocating a match to participant's accounts before the allocation conditions have been met is a Code, Reg, or IRS or DOL Guidance violation. Any thoughts?
  19. I have a plan that wants to use a fixed match for "Administrative and Hourly" employees (50% on 4%), and a discretionary match for "Patternmakers". Any HCE's would be in the Administrative and Hourly group, and the Patternmakers would have no HCEs. I assume if the fixed match for Administrative and Hourly employees exceeds the match made for the Patternmakers we would have to test for Benefit, Rights or Features (BRF) issues since the rate of match available to an HCE would exceed the match available for a NHCE. However, if the sponsor decided not to make any match for the Patternmakers in a plan year, would that simply be a coverage issue, or would the rate of match for the Patternmakers be considered to be zero and, therefore, BRF testing comes back into play? Clearly, excluding certain groups from receipt of match completely is just a coverage and ACP testing issue, and I guess I am struggling to see the differnce between saying the Patternmakers are excluded from the match, and saying the Patternmakers are eligible for a match, but the matching rate is zero. That leads me to the conclusion that BRF testing wouldn't apply in years where the discretionary match for Patternmakers is zero. Can someone please clarify when Benefits Rights and Features testing would apply to this situation? Thanks LANDO
  20. Thank you in advance for all responses -- Client began matching in July 2014 (plan was not amended - that's just when they began matching again). One HCE had maxed out at $17500 in June, therefore the client did not give him a match contribution for 2014. Is this allowable? Match is discretionary and there is a discretionary cap on the match. No conditions to share.
  21. My client has a sole prop/corp controlled group. The owner has compensation coming from both entities. She only has employee deferrals from the corp. Can she use comp from the sole prop to calculate the discretionary match to her account?
  22. I have a client that fails the ACP test and is required to refund match to two HCEs. One of the HCE is not fully vested in the match contriubution. How is the refund handled in this case - does he still receive the full refund, or is part of it forfeited?
  23. A plan has a match formula in the Document for which they only make once a year after we do the calculation. At the same time we do the match calculation, we run the ACP test using our calculated numbers. In this case, the ACP test fails using the numbers we projected but were not yet made. Does this need to be done in chronological order (i.e. they make the match and then ACP returns/forfeitures)? Or can any steps be saved in the process and, if so, what? We know that to handle the ACP returns, unvested match amounts get forfeited and vested amounts are distributed. Thank you.
  24. Must eligible employees (whether deferring or not) under a safe-harbor (match) 401K Plan receive a 5% top heavy minimum contribution if the employer also sponsors a defined benefit pension plan? Can the safe-harbor match be applied toward the 5% top heavy obligation? Thank you.
  25. A colleague of mine and I are disagreeing over a plan's ability to provide a disproportionate match as a Safe Harbor contribution. A disproportionate match, defined at 1.401(m)-2(a)(5)(ii), occurs, generally, where an NHCE receives a match that is greater than both (a) 100% of deferrals and (b) 5% of compensation. So, for example, a match of 200% up to 3% of comp would be fine until you defer past 2.5% of comp (at which point the contribution exceeds 5%). Generally, the consequence is that the disproportionate portion is ignored for testing purposes. Because only NHCE amounts can be disproportionate, it's meant to prevent trying to game the ADP/ACP test with weird matches. Here's the issue: In defining a safe harbor match, 1.401(m)-3(j) says the contribution will only be taken into account if it meets 1.401(k)-3(h)(1), which, in turn, says the contribution needs to meet the requirements of 1.401(m)-2(a), which of course includes our friend the disproportionate match rules. The implication, then, is that you couldn't have a safe harbor matching formula that could produce a disproportionate match. However, there doesn't seem to be any other support such a position. There's been no guidance that I can find on the interplay one way or the other. In all the articles/resources on permissible safe harbor matching formulas, nobody's mentioned the disproportionate match rules as an issue. Further, in laying out proposed safe harbor matching contributions, a number of the big-name providers have included formulas which would run afoul of the disproportionate match rules. Of course, none address the issue explicitly. Has anybody ever heard of this analysis? Have you dealt with safe harbor formulas that may trigger disproportionate matching contributions?
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