"Seems ok, but smells funny. Medical practice hires a new doctor, NOT as an owner or partner. Plan has 1-year eligibility for everything but they want to let this doctor in immediately. Amends plan to credit service with prior employer so that doctor enters immediately. This doctor will not be a HCE for 2021, as there is no lookback year comp, so it doesn't technically seem discriminatory. Thoughts?"

"A 401(k) plan excludes some compensation for allocation purposes. 414(s) passes the ratio test, but ADP results, although failing using gross and net comp, are better using gross comp. Suppose a participant's gross comp is $40,000, and for extremes let's say allocation comp is $10,000. Let's say we give the participant a QNEC of 20% of allocation compensation, which is 5% of gross compensation. This the only employee getting a QNEC so the representative rate would be 0.

If we use gross compensation in the ADP test, are we allowed to use the full $2,000 QNEC (as 5% of testing compensation) in the ADP test, or are we limited to 5% of allocation compensation even though we are not using allocation compensation in the ADP test?"

"Client wants to purchase real estate in the plan but doesn't have enough of cash balance in his account. He's asking whether the plan can take out a bank loan to purchase the real estate for the plan. (Apparently there is current property in the plan that would be used as collateral for a loan.) Wouldn't this be a prohibited transaction?"

"The SECURE Act eliminated the notice requirement for SHNE plans. Our plan document requires a plan amendment. Does the amendment need to be done if they are making the contribution, and can it be adopted by March 15? The plan document says it needs to be adopted 30 days before the end of the plan year."

"My organization adopted a SARSEP while they were still permissible. Later, the organization incorporated as a non-profit. The IRS has told us that nonprofits cannot have a SARSEP. I see in the code where a nonprofit can't create a SARSEP, but if an existing SARSEP is in place and then nonprofit status is attained, is that a bar to keeping a SARSEP?"

"Treas. Reg. 1.403(b)-5(b)(4)(ii)(B) provides that one can exclude employees who are eligible under a 401(k) plan of the employer (my emphasis). An employer sponsors a 403(b) plan that excludes union employees. The union employees also can defer into a 401(k) plan. I don't yet have information here, but I don't have much contact with union plans. I'm not sure whether the employer is technically the plan sponsor, or whether the union is the plan sponsor. Would that matter? If the employees are eligible to defer into the 401(k) plan, wouldn't the employer need to be a 'participating employer' in the union plan in order to even submit deferrals on behalf of its employees?

Also, what happens if a collective bargaining agreement excludes union employees, but there ISN'T a 401(k) plan? This would seem to require a change in the CBA, or the 403(b) plan would be in violation of the universal availability requirements. Anyone ever seen such a situation?"