Kevin C

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Kevin C last won the day on May 10 2016

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  1. Also, a 1-participant plan with assets under $250,000 isn't required to file. Going back that far, it used to be a lower threshold for filing, but I don't recall off-hand when it changed. If they were required to file a 5500 for 5500-SF and did not, the filing fee for the delinquent filer program for 27 filings is the same as for 2 filings. If the forms were prepared each year and just not filed, I would be inclined to file all of the late ones under the program, just to be safe. Even if they were not prepared at the time, the fees to get the forms done if you have good records should be much less than the potential late filing penalties.
  2. bad.1963, I suggest you contact the IRS and DOL about your issues. Employee complaints are one of the ways they select plans for audit (IRS) / investigation (DOL). If violations are found during the audit/investigation, the government can be very persuasive in getting the plan sponsor to correct the problems.
  3. If no contributions are made other than salary deferrals and the safe harbor contribution, why wouldn't the plan be deemed to not be top-heavy under 416(g)(4)(H)? There is nothing in the code or regs that says you must have eligible NHCEs for the year to be safe harbor.
  4. A mid-year amendment to the match formula is prohibited under 1.401(k)-3(e)(1). The modifications to that rule in Notice 2016-16 provide that the only mid-year formula changes allowed are ones made with at least 3 months remaining in the year and that increase the safe harbor contribution. See Section D of the notice. The amendment under discussion would result in lower SH amounts for at least some individuals. So, if they do the amendment mid-year, they would fall under the rules for reducing or suspending the SH contribution under 1.401(k)-3(g) and lose the SH for the year.
  5. Mike, I hope not. Would you care to elaborate? Compliance with section 415 is required under 401(a)(16), which I hope means the reg quoted above that applies for 401 applies for 415 as well.
  6. The issue isn't whether the company has any assets at the time the stock is purchased, it's whether the stock is purchased for no more than fair market value. If the stock isn't worth the purchase price until after the proceeds have been received, it was purchased for more than fair market value. What Peter described is the definition of fair market value.
  7. I ask the CPA what earned income number will be used for the SE tax calculation and whether the number given has already been adjusted for the employer contributions for the employees. Sometimes the answer you get is not what you expected.
  8. We have a client that did this with his plan last year. He hired one of the big promoters to do the document, testing and reporting, with us just doing recordkeeping on the non-stock 401(k) assets. The promoter claimed to have special language in their document. In his case, the plan purchased stock in his existing company based on an independent third-party appraisal, so it should work if he follows their instructions. However, the typical pitch seems geared towards starting a new business using plan assets and I don't see how that works. When you have an unfunded start-up corporation, how can the fair market value of the stock at the time of purchase possibly be anywhere close to the amount the person wants to invest? If the plan pays more than fair market value for the stock, it's a PT.
  9. The regs have a clear description of who can be excluded under the <20 hours per week exclusion. As noted in the reg, this rule conflicts with ERISA's service based participation rules. There is also an all or nothing rule in 1.403(b)-5(b)(4)(i) where if a single person who could be excluded under this exception is allowed to participate, you lose the ability to use the exception. With that kind of situation usually becoming apparent after the fact, be forewarned that it can get expensive to fix if someone messes up. Use the exclusion at your own risk.
  10. For a self-employed person, you count the earned income or loss from all of the trades or business that have adopted the plan.
  11. Dave, is there a way to get the Portal view to sort by the date & time of the last post in each thread instead of by when the thread was started?
  12. There is also a timing rule for when the contribution must be deposited to be considered an annual addition for the year. Underline added since I can't change colors.
  13. Does the plan also allow a discretionary match, or after-tax contributions?
  14. My perspective on this is influenced by regulation changes early in my career that significantly restricted an Employer's ability to use discretion to affect what participants receive. See 1.411(d)-4, Q&A 4. Personally, I would not be comfortable using vague plan language to justify using employer discretion in determining who gets what level of match or who gets a match. I would prefer to take a different route and amend the plan to provide for a separate limit on the match that only applies to HCEs. Our VS document AA match section has a place for special limits on matching contributions that can be used to provide for the lower limit on HCE match like the one asked about in the OP.
  15. Other than possibly a few cents from rounding, I don't see how anyone can get less of a match with a year-to-date true-up than they would under the same match formula applied on a payroll-by-payroll basis. As the OP points out, some will get more match with a true-up. You can amend during the year to make a contribution more generous retroactive to the beginning of the year. As BG mentions, you can't amend to retroactively reduce a contribution someone has already earned. I don't see 411(d)(6) being a problem here unless for some strange reason you tried to reduce the match allocated for periods prior to the amendment. I don't read the OP as saying they want to reduce anything.