Just Another Senior Moment

We recently took over a safe harbor 401(k)/profit sharing plan, new comparability, grp 1 officers and owners grp 2 all other eligible employees.

There are 4 participants: owner (100%), spouse, adult son over 21 and one common law employee.

The plan had passed 401(4) only because the son had not been treated as an HCE.

Under IRC Section 318, am I off base here, or is not the adult son an HCE as well?

The son of the owner is attributed the same ownership of the owner. If that’s over 5%, then the son is an HCE.

If the son was not coded as an HCE and because of that miscoding, the plan passes, then try other testing options or provide the amounts needed to the true NHCE so it will pass, or do both. 

And amend to everyone in their own group going forward.

On 8/18/2023 at 10:02 PM, John Feldt ERPA CPC QPA said:

or provide the amounts needed to the true NHCE so it will pass

with an 11g amendment - although you didn't say if this was just last year or ongoing for a number of prior years

Last few years, was thinking of reallocation, and tell Hancock to reallocate what had already been contributed.

At least deduction OK an no one over 415 limit.