"I've run into an issue testing one of the plans that came on with us this year. I don't know who wrote their plan document but they absolutely should be a safe harbor, but they aren't. It's just 5 people, three of which are owners (one of them is the owner's son who didn't actually work at all or make anything though). Anyway, the ADP/ACP is.... bad. The two owners deferred 23k and 12k (40% and 23% respectively I believe) and as such the ADP is roughly 17.5% vs 1.06% for the NHCEs. The options are either a QNEC, which would be roughly 7.5k in order to pass, or returning almost all their deferrals to them. 

"So here's our proposed creative solution: The only HCEs who need money returned are both owners of the company who choose their own pay, and as such the line between their money and the business's money is really just up to how they want to receive it. Because it's only the two owners, we want to do a 'corrective distribution' on paper so they pass ADP/ACP, then use that money to do a profit sharing contribution to give both the owners that exact amount back (obviously, we'd discuss this with the owners before actually doing it). As the plan is new comp / cross tested and there's only 2 NHCEs, the cost they'd need to give to them would be far less than a QNEC and the owners would still get to keep the money they put in. 

"So, my questions: From a legal standpoint, is this iffy? It seems fine to me as it's no different than distributing that money back and then the employer 'deciding' to do a year end profit sharing, except we don't actually buy and sell those assets. Second: One of the two owners is over 50. The IRS page on ADP ACP corrections says that 'If the Plan provides for catch-up contributions, the refund may be recharacterized as a catch-up contribution (up to the catch-up limit)'. How would this rule factor in / be utilized to solve this? 

"And yes, we're already in the process of writing an amendment to make them a Safe Harbor NE for this year, we just can't retroactively do that."

"I'm (attempting) to create a kind of decision tree / flowchart to easily figure out what tests need to be run on a given plan. That said, it's quite nuanced and I'm by no means an expert. I've added a picture of my progress so far. My company works exclusively with DC plans, over half of which are safe harbor. This is my first year doing testing so I very well could be mistaken about some things. Generally I've had my boss looking over things with me and helping me with what plans need what tests on a kind of case-by-case basis, but I'd love to just have a nice algorithmic way to figure it out. Any thoughts? Things I have wrong or need to add?"

"While filling out a VFCP, I discovered that lost earnings were paid out of that year's forfeitures. Ok by IRS, not so much under VFCP. Does anybody have any experience with this or how to correct? My thought is to make an additional employer contribution to plan participants for that year in the amount used but will the DOL accept that and still accept the VFCP application? We could then show that the lost earnings were funded by the forfeitures but this was corrected (to include lost earnings on that amount as well) and the costs ultimately came out of employer funds and not plan assets."

"I started working at a TPA/Recordkeeping firm this past fall, I'm completely new to this industry as a whole so it's been quite a process. One thing I found very quickly was that the firm I work for was doing lot of manual data entry, as well as other things manually. I've spent a good portion of the last few months learning all the ins and outs of the system with things like automating things in Job queue, setting up file imports / exports for balancing, distributions, ACH Pulls, etc, and custom reports. It's such a small industry I really have no reference online for what other people are doing, so I'm curious, how many of the extensive features of Relius do you actually use?"

"I just received a final accounting on a terminated plan, from the fund holder for the period 1/1/24-7/1/24 (not 6/30/24) I'm assuming the plan year for the final return would then run 1/1/24-7/31/24, therefore the final return would be due 2/28/25? Saved from a late filing for 6/30/24?"

"I have a unique case where there was a separation agreement that stated the husband would receive 50% of the wife's IRA by QDRO. No QDRO was written. The husband died a few weeks after the divorce. This is in Ohio. Can a QDRO still be written with the estate receiving the funds? It has been a year since the death. Would the amount be based on the amount in the account at the time of the writing of the separation agreement, or at the time of the writing of the QDRO?"

"We have a client who over-funded profit sharing for 2022 and 2023. The 'over-funding' is not relating to testing or 415 limits. The TPA calculations provided a uniform profit sharing rate for all HCEs. The plan was funded accordingly. In providing the funding summary for 2024, the new CFO reviewed and indicated certain HCEs (non-owners) were not to receive PS at the same rate as owners and raised the question of prior years. The 2024 year can be fixed of course since not yet funded but 2022 and 2023 are an issue. One alternative is to short them going forward to make up for this but it is a large amount and will take several years. Another alternative would be to remove the excess from their accounts. Reduction of PS for 2022 and 2023 would not be an issue since they are HCEs and they are getting the top heavy. The 5500s would have to be amended as well as the corporate tax return. Comments about prior year 'claw-back'?"

"After-tax employee contributions in this DB plan stopped in 1969, well before the 1986 changes to IRC 72(d). The 1986 law eliminated the 3 year basis recovery rule for pensions starting after 1986 enactment. I have heard, but cannot find, a rule that employee contributions prior to 1986 will still have the benefit of the 3 year rule, even if the pension starts after 1986. Does anyone have that reference? Do these pre-1986 after-tax contributions still have the benefit of the 3 year basis recovery rule if the pension starts AFTER 1986?"