"Company of 10 employees with 4 who were 'highly' paid: #1 - owner, #2 - owner's spouse (despite only making $50k), and #3 and #4 - regular employees. If we were going to determine HCE with the Top 20% (meaning 2 HCEs), who would be considered? Would it just be the owner and his spouse due to attribution? Or would it be the owner, the highest paid non-owner and the spouse?"

"An employer wants to pay end-of-year bonuses to employees based on a percentage of revenue they've brought into the company. This company also has a 401(k) plan with a dollar for dollar safe harbor match up to 4% of compensation. The owner wants to count the employer safe harbor match as part of the bonus.

For example, employee Z is due an $8,000 bonus. Employee Z is also due a $2,400 safe harbor match based on his deferrals into the plan during the year. The employer says the bonus is $8,000 minus the $2,400 safe harbor match that will be made on behalf of employee Z = $5,600 remaining bonus to be paid in cash to employee Z. So, employees that get a bonus and do not defer into the plan get their full bonus in cash.

Is that legal? If not, can anyone provide a reference to a statute or something so we can explain that to the owner?"

"With the final regulations published on Jan. 6, I want to make sure I am understanding these new requirements.

A plan loan offset that occurs in a DC plan solely due to either termination of the plan -- or, termination of employment AND an offset that occurs within 12 months after the employee's termination date (NOT 12 months after employee takes the distribution) -- is a QPLO.

Example: Participant terminates employment on 2/22/2021. Participant elects to take a distribution of the account balance in August. Total account balance is $50,000. Of this balance, there is an outstanding loan in the amount of $10,000. Participant receives a check in the amount of $40,000 as the $10K loan balance was offset. To report this distribution in January 2022, a 1099-R is issued reporting the $40,000 as a lump sum distribution (code 7, 1, or 2 depending upon the situation) in Box 7. A second 1099-R is issued to report the $10,000 QPLO using code M in Box 7. For 1099-R purposes from the plan it doesn't matter if the former participant does a rollover of the $40,000 within the 60-day period, and also does not matter if the participant funds and rolls over the $10,000 amount before their tax filing deadline for 2021.

Correct?"

"For the employers who suspended their discretionary matching contributions (calculated on a payroll period basis) in 2020, is the 401(a)(17) compensation limit required to be prorated under Reg. 1.401(a)(17)-1(b)(3)(iii)? The plan year was still a 12-month period, but the matching contributions ceased (for example, let's say as of 4/15/2020). Would that require a compensation limit of 4/12 x $285,000 to be applied to the matching contributions that were made prior to the suspension? If so, it could require forfeiture of a portion of a participant's matching contributions that were made early in the year (likely due to deferrals made from first quarter bonuses).

I'm aware that the preamble to the final regs regarding the suspension of safe harbor contributions provides the following:

'The preamble to the proposed regulations stated that a plan that is amended during the plan year to reduce or suspend safe harbor contributions (whether nonelective contributions or matching contributions) must prorate the otherwise applicable compensation limit under section 401(a)(17) in accordance with the requirements of § 1.401(a)(17)-1(b)(3)(iii)(A). Some commentators asked for clarification as to how these rules apply. Such an explanation of the application of the rules of section 401(a)(17) is beyond the scope of these section 401(k) and (m) regulations.'

However, because preambles are not law, and because the regs are specific to safe harbor plans, I'm looking for thoughts on whether the proration applies in the case of a discretionary matching contribution formula applied to deferrals made for a payroll period, not in excess of a specified percentage of compensation earned during such payroll period. It seems wrong to forfeit a match that was permitted when made, but became in violation of a limit when the employer ceased contributions."

"I thought I read on one of the other message threads that the DOL -- in some investigations -- will not issue a closing letter but will still close out an audit. Could this occur in a small case DOL Audit for an ESOP with less than $5k value? Or did I the posting mean to say that a DOL audit will always include some form of closing agreement or determination?"

"Would a match formula of 100% match on the first 1%, plus 50% match on the next 5%, qualify as a safe harbor match?"

"Plan Sponsor just amended a prior year 5500. The EFAST2 search now does not show any 5500 for that year -- original or amended. Just curious if this is standard, or if something might have gone wrong with filing?"

"Because someone who uses the care, skill, and caution that would be used by one who is experienced in managing an individual-account retirement plan would be mindful of privacy and security risks (including cybersecurity risks), there is a growing consensus that a plan's administrator must oversee prudent procedures for managing those risks.

For many plans, that means getting a recordkeeper's contract promise that it uses commercially reasonable privacy and security procedures.

But even good procedures might be ineffective if a participant, beneficiary, or alternate payee does not guard carefully her identifying information.

If that's right, does a plan's fiduciary have a responsibility to educate participants (and other individuals) about those risks?

If so, what do you think an employer/fiduciary should do?"