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Schedule R question 21b (or SF 14b)


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Posted

A 401k plan is a designed based safe harbor for both ADP and ACP testing; however, the plan allows after-tax contributions. The plan includes the match with the after-tax contributions to satisfy the ACP test (passes ACP just fine). 

My question is, how should Schedule R question 21b be answered (or 5500 SF 14b)? The question references both deferrals and match, without after-tax, the design would satisfy ACP. Thanks

21b If this is a Code section 401(k) plan, check all boxes that apply to indicate how the plan is intended to satisfy the nondiscrimination requirements for employee deferrals and employer matching contributions (as applicable) under Code sections 401(k)(3) and 401(m)(2).

_ Design-based safe harbor method

_ “Prior year” ADP test

_ “Current year” ADP test

_ N/A

Posted

And what would happen if you test ADP with prior and ACP with current?

Will an error be generated if there are two boxes checked for that item?

QKA, QPA, CPC, ERPA

Two wrongs don't make a right, but three rights make a left.

Posted

Check as many boxes as needed to cover however the tests were done.

EFAST2 checks to see if nothing is checked and has an edit that issues a Warning, but not an Error.  There is no edit for checking multiple boxes.

Posted

If it were me, I would just check "Design-based safe harbor method". I know the after-tax contributions are subject to ACP testing, and you're leveraging the safe harbor match in combination with the after-tax contributions to run the ACP (which is allowed), but the instructions ask how you're satisfying the employer matching contributions and you're doing that through the safe harbor match.

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