TH 401k Posted November 25, 2024 Posted November 25, 2024 Hello, I'm currently working in PEP plan. My company A and another participating Employer Company is B. In the mid of the plan year (i.e., 12/31) employee transfer from company B to Company A on 6/20/2023. In the company B for the period of 01/01/2023 to 06/20/2023, he had $90,000 and in company A, he earned $ 100,000 for the period of 06/21/2023 to 12/31/2023. To determine HCE for 2024 plan year, which compensation I have to take to determine HCE? Total compensation ($190,000) or company A compensation?
Paul I Posted November 25, 2024 Posted November 25, 2024 Take a look at IRM Part 7: Exhibit 7.11.7-1 Specific Law Provisions and How They Apply to a Multiple Employer Plan Code Section Must be Met by Multiple Employer Plan Must be Met by Each Participating Employer Authority IRC 401(a) - Qualification requirements Yes 26 CFR 1.413-2(a)(3)(iv) IRC 401(a) -Exclusive benefit rule Yes IRC 413(c)(2) and Professional Employer Organization Rules in Rev. Proc. 2002-21 IRC 401(a)(4) - Nondiscrimination Yes 26 CFR 1.413-2(a)(3)(iii) and 26 CFR 1.401(a)(4)-1(c)(4) IRC 401(a)(26) - Minimum Participation (DB Plans) Yes 26 CFR 1.401(a)(26)-2 IRC 401(k) /IRC 401(m) - ADP/ACP Yes 26 CFR 1.401(k)-2(a)3(ii)(A) and 26 CFR 1.401(k)-1(b)(4) IRC 404 - Deduction Adopted before 1989 Adopted after 1988 IRC 413(c)(6) IRC 410(a) - Eligibility Yes IRC 413(c)(1) IRC 410(b) - Coverage Yes 26 CFR 1.410(b)-7(c)(4)(i)(A) and 26 CFR 1.410(b)-7(c)(4)(ii) IRC 411 - Vesting Yes IRC 413(c)(3) and 26 CFR 1.413-2(d) IRC 412 / IRC 430 - Funding Adopted before 1989 Adopted after 1988 IRC 413(c)(4) 26 CFR 1.414(l)-1 - Mergers or Transfer of Assets - see note below Yes 26 CFR 1.414(l)-1(b)(1) IRC 414(q) - Definition of Highly Compensated Employee Determination is made separately by each adopting employer 26 CFR 1.414(q)-1(T) Q&A-1 IRC 414(v) - Catch-up Contributions Yes 25 CFR 1.414(v)-1(f) IRC 415 - Limitations on Benefits All compensation is included 26 CFR 1.415(a)-1(e) IRC 416 - Top-Heavy Yes 26 CFR 1.416-1, Q&A G-2 and T-8 imchipbrown 1
Peter Gulia Posted November 25, 2024 Posted November 25, 2024 But might company A and company B be under common control or otherwise comprise one employer under Internal Revenue Code § 414(b)-(c)-(m)-(n)-(o)? PEP-HUB.com and Terry Power 2 Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com
QDROphile Posted November 26, 2024 Posted November 26, 2024 You didn’t ask, but if this is a 401(k) plan and Company A and Company B are not under common control or properly treated as a single employer, are they related in a way that allows the plan to be exempt from registration under applicable securities laws? Peter Gulia 1
Peter Gulia Posted November 26, 2024 Posted November 26, 2024 While this is beyond TH 401k’s question: An interest in a retirement plan or its trust might be a security, and—absent an exemption, or a no-action letter—an issuer, offeror, or distributor of such a security (which might include a plan’s sponsor, administrator, trustee, or investment manager, and might include a participating employer) might need or want the security to be registered under the Securities Act of 1933, the Investment Company Act of 1940, and other Federal and State securities laws. Some exemptions might be available regarding a single-employer plan, but might not be available regarding a multiple-employer plan (including a pooled-employer plan). Securities Act of 1933 § 3(a)(2), 15 U.S.C. § 77c(a)(2) http://uscode.house.gov/view.xhtml?req=(title:15 section:77c edition:prelim) OR (granuleid:USC-prelim-title15-section77c)&f=treesort&edition=prelim&num=0&jumpTo=true Investment Company Act of 1940 § 3(c)(11), 15 U.S.C. § 80a-3(c)(11) http://uscode.house.gov/view.xhtml?req=(title:15 section:80a-3 edition:prelim) OR (granuleid:USC-prelim-title15-section80a-3)&f=treesort&edition=prelim&num=0&jumpTo=true To sort out what is or isn’t a security and is or isn’t an exempt-from-registration security, get a securities lawyer’s advice. Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com
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