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Happy Holidays from sunny Florida!

No, the bonus check will be issued on 12/31

But has the bonus check been paid to the 2 owners? If the answer is yes, no deferral allowed.

How about the amount that the State’s law counts as income? Or the amount that results from following the State’s law, regulations, guidance, or withholding instructions? Either of those might differ from either of the amounts you describe. And could vary for each State’s law. Under (at least) Alabama’s, New Jersey’s, and Pennsylvania’s law, withholding might vary regarding the portion of a distribution that (if not excluded as old-age retirement income) is treated as a return of previously taxed income. Under Pennsylvania’s law, old-age retirement income is excluded from income. Under New York’s law, some kinds of retirement income might be excluded from income, up to a limited amount. This is not advice to anyone. If my response is a winner, please send my cookie to the Bakers.

And what distribution amount from what source are you asking about?

State withholding is determined by state law and can vary from state to state. I know some states essentially adopted the federal tax code with respect to definitions, e.g. wages and gross income, and I suspect most states do. How many cookies do you available to award?

We are working on the document now and should be signed by Friday the latest and the Advisor can set up the accounts within a day of the document being signed. So it is a rush but appears that it can be done.

Feels like something you'd find in the actual plan document, whether eligibility would be preserved upon an amendment like that.

I see. Those are good points. Thanks!

Please help to settle a disagreement in the office - is state withholding calculated using the gross distribution amount or the federal amount? Winner gets a cookie.

A 73 year old has their first RMD this year of $8,000. After reading an article on Roth conversions, the IRA owner elects a $30,000 Roth conversion before withdrawing their RMD. It seems the IRA custodian allows this as the IRA owner's intent was to do a rollover, taking possession of the $30,000 withdrawal and within 60 days, deposit it in a Roth IRA (his first) as a Roth conversion. But the $8,000 will be considered the RMD withdrawal, not a Roth conversion while the remaining $22,000 will be considered a Roth conversion. So under these circumstances, assuming this 73 year old or his spouse has no earned income, that an $8,000 excess contribution has been made to his Roth IRA? If so, the IRA owner has until Oct 31, 2026 to withdraw the excess Roth contribution and its associated earnings. Is this correct?

Give me a call. I know a guy who can help someone or something 'disappear' 😉

Is there time enough to get the investment accounts properly set up?

I may or may not have seen some of these manually signed documents due to "issues with electronic signature software" and other similar explanations.

A firm’s mix of capital-interest partners, income partners, retired partners, counsel, senior associates, beginner associates, and assistants might affect: which workers seem likely to desire an opportunity to make employee (after-tax) contributions; how student debt affects a worker’s capacity to make contributions; how the expenses of QMACs are spread—for example: to capital-interest partners only? or to an income partner to the extent, wholly or partly, an associate or assistant in her income-measured practice gets a QMAC?; how much or how little leverage affects partners’ capital and profits interests; how the firm’s obligations to retired partners affects the firm’s financial capabilities; how a retirement plan’s design and features affects workers’ perceptions about the firm.

I'm definitely looking into the top paid group. I think the line will be north of $200K, but less than $500K. 2025 is literally the first plan year, so I don't have full data yet. What's the goal of your last question?

Targeted bottom-up QNECs to the ACP test with those rules. Sounds fun enough.

Now that service providers use electronic-signature regimes, have plan sponsors invented new explanations about why a signature was not received before year-turn?

What amount is the law firm’s line between the lower 80% and the top-paid 20%. Might the lower 80% include many or some with seven-figure compensation? Might the lower 80% include many more with compensation between $360,000 and $1 million? What is the firm’s mix of capital-interest partners, income partners, counsel, senior associates, beginner associates, and assistants?

Might everyone with a tie to R, A, or A’s broker-dealer or investment-adviser firm have recused and an experienced fiduciary independent of R, A, and the platform have decided, with no influence from anyone, to continue A’s services and approve the compensation arrangement? See 29 C.F.R. § 2550.408b-2(e)(2) https://www.ecfr.gov/current/title-29/part-2550/section-2550.408b-2#p-2550.408b-2(e)(2). Had the independent fiduciary confirmed that A’s broker-dealer or investment-adviser firm received full and fair disclosure of all of A’s outside business activities, including A’s indirect stake in R and that R’s retirement plan is a customer or client? Had the independent fiduciary confirmed that A’s broker-dealer or investment-adviser firm approved all dealings? Had the independent fiduciary confirmed that the platform received full and fair disclosure of A’s indirect stake in R, recognizing that R’s retirement plan is the platform’s service recipient and a source of A’s indirect compensation? Had the independent fiduciary confirmed that the platform approved all dealings? Have the plan’s administrator, its third-party administrator or other Form 5500 preparer, and the administrator’s independent qualified public accountant resolved how the Form 5500 report and the plan’s financial statements will report the transactions, including, even if exempt, related-party transactions? Does every fiduciary, including those who recused, have an absence of knowledge that the independent fiduciary breached its responsibility? This is not advice to anyone.

There was a time, in the days of old when knights were bold, (and with a prior employer) when we would receive a suspicious number of signed and dated resolutions and document signature pages at year end, and the rest of the document later on after the end of the year. Fortunately we don't see that these days.

Maybe top-paid group would help?

I have a large law firm client that recently asked about mega backdoor Roth and voluntary after-tax contributions in general. I explained the ACP test issue and after a slight pause, one of the partners said, "but that can be resolved by making a company contribution instead of refunds, right?" They are actually considering corrective QMACs to let their highly paid (and, coincidentally, HPI) participants do this. Sure, it works mathematically if they don't mind spending the money, but I have to wonder if it will really work out better than adjusting their class-based profit sharing.

Agreed with Artie. If it's a direct COBRA subsidy, it would generally be tax-free in the same manner as any employer-share of the health plan premium (active, retiree, or COBRA) under §106. The former employee would receive it only if they timely elected COBRA. If it's a taxable cash payment intended as a COBRA subsidy, in most cases the former employee receives it regardless of a COBRA election. That cash payment would always be taxable. The taxable approach is common for employers with self-insured plans to avoid §105(h) nondiscrimination issues. More details: https://www.newfront.com/blog/cobra-subsidies-reimbursement-2 Slide summary: 2025 Newfront COBRA for Employers Guide

Thank you!