austin3515 Posted September 23, 2015 Report Share Posted September 23, 2015 Anyone have a problem with a SIMPLE Plan sponsor setting up a 0% money purchase plan to allow the owner to do a rollover and take a loan? Yes, the employees can make a rollover contribution as well. Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Peter Gulia Posted September 23, 2015 Report Share Posted September 23, 2015 Could this idea be done with a profit-sharing plan? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
ETA Consulting LLC Posted September 24, 2015 Report Share Posted September 24, 2015 No problem Austin. Fiduciary... The problem with attempting to do this in a profit sharing plan is that qualified plans must receive """substantial and recurring contributions'''' in order to be valid. The Money Purchase Plan is subject to a fixed formula (even zero), the would appear to preempt the substantial and recurring requirement. Good Luck! CPC, QPA, QKA, TGPC, ERPA Link to comment Share on other sites More sharing options...
ESOP Guy Posted September 24, 2015 Report Share Posted September 24, 2015 I know a few attorneys that object to a 0% MP plan. They always set up a 0.5% MP plan. They fear that Government will take the position this isn't a real plan as the purpose wasn't to provide benefits but as you say simply allow for money that you couldn't take a loan from to now take a loan. They also questioned if 0% is really a benefit level. I never have heard of a 0% MP plan blowing up but I know lawyers that don't like them. I am not sure why it matters if you don't have substantial and recurring contributions. I thought the only effect was you had to vest people. If 100% of the money is rollover money isn't already vested? It has been a long time since I had a substantial and recurring contribution problem so I could be forgetting something. Link to comment Share on other sites More sharing options...
BG5150 Posted September 24, 2015 Report Share Posted September 24, 2015 ^^ I've seen MP plans go from, say, 3% to 0%. I see it like freezing the plan. However, I've never seen one at 0% from effective date. Maybe they could set up 1/2%, exclude HCEs, for the first year and amend it to zero the next. QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
austin3515 Posted September 24, 2015 Author Report Share Posted September 24, 2015 I think the EOB is pretty clear that a 0% MP is ok, and it was in the section of "can a plan JUST allow for rollovers." Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
K2retire Posted September 24, 2015 Report Share Posted September 24, 2015 But doesn't the existence of the MPP interefere with the ability to continue the SIMPLE? Link to comment Share on other sites More sharing options...
austin3515 Posted September 24, 2015 Author Report Share Posted September 24, 2015 That was the crux of the question, but an employer can sponsor more than one plan, they just cannot contribute to more than 1 plan. Austin Powers, CPA, QPA, ERPA Link to comment Share on other sites More sharing options...
Belgarath Posted September 24, 2015 Report Share Posted September 24, 2015 Right, and IRS Notice 98-4 is very clear that rollovers don't count as a "contribution" for purposes of violating the "only plan" rule. Link to comment Share on other sites More sharing options...
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