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the last time I bought a widget from you also charged me for taxes. the widget was broken and I returned it and you refunded everything but the taxes I paid claiming it was non-refundable. so I ordered a replacement and you charged me taxes again, thus I really did end up with being taxed twice. I'm leaving you 'alone' before I would order again from you.

JustMe I think what you describe in first paragraph is only correction IRS will give you. Since problem goes back more than two years, apparently, should include this in VCP unless you believe number of participants and dollar amounts sufficiently small that error "insignificant."

I have some widgets for sale. Price negotiable.

I wish we could waive a magic wand and make you see the mathematical error you are making. I wish you could just trust us that you ARE making an error. But that probably won't happen. This reminds me of the Monty Hall problem; there are still people who argue that you are NOT better off by switching doors (that it is just a 50/50 chance when really your odds are increasing to a 67% chance of winning). https://en.wikipedia.org/wiki/Monty_Hall_problem So, maybe (just maybe) this will work. Let's have a loan with a 0% interest (if that was legal). Now, borrow $10,000. Now, pay it back at the rate of $100/week. When you took out the $10k, you didn't pay tax on it (because it isn't a distribution, it's a loan just like you would get from the bank: the plan IS the bank!). Now, when you pay it back, you are just giving the plan back the $10k you borrowed. Assume you stuck it in your mattress because you ended up not needing it (the $10k "need" feel through). After you have paid back the loan with the money you took out as a loan, how are you in any different tax situation than if you hadn't borrowed anything? Is that any help? Probably not I guess. Monty Hall! :-)

ok - I did not mention that the eligibility in the plan is 12 months, 1 year of service (defined as 1000 hours in the 12 month period). Entry dates are normally quarterly. If I understand what ETA is saying, then because those with the prior practice who already had 12 month over 1000 hours are being allowed into the Plan as eligible, then they are considered nonexcludable? However I see Tom's point as well because if the plan did not recognize the prior service then these folks would have had to wait 12 months and work over 1000 hours before they entered the plan. In essence, they did enter the plan earlier than they needed to due to the acquisition.

I would say the RMD would need to be paid from the plan, but the Alternate Payee will receive it. The rules on when a distribution is paid is still tied to the participant in this case. Now, after that RMD requirement is met, the Alternate Payee (presumably the spouse) will be able to take a full distribution and roll it over. While it's in QDRO status, RMDs will need to continue (and calculated as if the amounts were still owned by the participant). Good Luck!

Let me give you an example that proves you wrong (and it's because money is "fungible.") Day 1, you borrow $10,000, and you spend it. You pay no tax on this money - because it is a loan. Day 2, you repay the loan with $10,000 you had in a savings account, plus $0.01 interest. Your "tax situation" is EXACTLY the same if you take the loan and spend it, repaying with other money you had, or if you DON'T TAKE THE LOAN, and use the $10,000 in savings for your purchase. Your "tax consequences" do NOT CHANGE because you take the loan, and the TOTAL TAX you pay is exactly the same either way.

Depends what you mean by "not active." Does the 3rd partner have comp that is eligible for deferral and simply elected not to defer? Then include him in the test. Is he a limited partner that contributes capital to the partnership but not any personal services? Then he would not be included.