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I believe that you don't have a BRF issue even if the definition of compensation used to determine matching contributions does not satisfy Code Section 414(s). This is consistent with the ERISA Outline Book, Chapter 11, Section XII, Part E, Section 3, last sentence Unfortunately, the regulation is somewhat ambiguous. Compare Treas. Reg. §1.401(a)(4)-4(e)(3)(iii)(D) and (F) (for which the regulations expressly state that the plan's definition of compensation need not satisfy 414(s)) and (G) (which is silent on the matter).

chc93, maybe that's right, but in the end the guy (or gal) got $100k in comp on his/her W-2, and it sounds like even though for 2019 the sole proprietor was an adopting employer, along with the S corp, all of the non-owner employees were paid through the S Corp. Unless the plan document provides explicitly that in this case you net the Schedule C against the S corp W-2, it seems to me he or she still has $100 k comp. Unlike an unincorporated business, a corporation can pay comp to its owner even if the business is losing money, because it can pay from capital or borrowed funds. The usual comp definition says that comp = W-2, and in the case of a self-employed person you look at SE income. I guess you can interpret that as saying that if you have both, you add or, if a loss, net, but I don't know that you would have to interpret it that way. Of course, we do not know what the plan language here says. I just checked (pretty quickly, so maybe I missed something and if so I hope someone points it out), but 1.415(c)-2(b) does not seem to require netting where the participant has both types of comp and the SE is a loss, while it would support adding where both were positive.

Well, I can answer that question! Because the IRS said so in their opinion letter!

The big players are absolutely going to have them, but they will wait until all the questions have been answered before they start marketing. At this point, Id expect marketing from the smaller shops since they dont have small army of attorneys telling them to hold off until the have crossed every t. There is a market for it, but I dont think it is going to drastically change the industry.

It is a glitch/processing issue at IRS. If you contact the IRS they will get it corrected. Phone wait times are probably going to be long, but it is your quickest option. Fax is second best, I would not send regular mail at this time. Good luck!

Sorry, but your merge idea doesn't work. Only an ESOP can have the unallocated share and the related loan. At this point unless they simply want to get rid of one of the plans there isn't much value in a merge that I am seeing. I just thought merging to a KSOP would be simpler because you wouldn't have to deal with the unallocated shares. You could keep the loan and the suspense share in place. Since the goal doesn't focus mostly on getting rid of a plan as much as changing who owns the company a KSOP doesn't make difference. As for the goal of the minority owners slowly taking a majority of the stock by distributing the share from the ESOP and I assume making the shares treasury stock is an interesting one. It would slowly result in the ESOP owning a smaller percentage of the over all stock and the outside owners a larger percentage. You seem to understand this but currently the ESOP being the majority owner gets in effect a premium on the stock price for being the majority owner. When the ESOP's ownership fell to a minority the stock price would get hit with a discount for being a minority owner and all the remaining shares would lose value. I would research if the fiduciaries have to account for that and make some kind of adjustment. I mean this plan would result in loss of value to participants in a plan and it was because of the direct actions of the Plan Administrator and Trustee. They have a duty to not lose the participant's value. I see a possible big fiduciary problem here. Maybe one of the attorneys who come around here who knows ESOPs will opine on that issue. This is going to be complex enough you need a good ERISA attorney who knows ESOPs and doesn't merely dabble in ESOPs. If the current trustee is an inside trustee, and especially if the inside trustee is one of the 2nd generation people who could be seen as having a conflict of interest regarding this, I would look to getting an outside trustee. If they have the ability to simply buy all the shares from the ESOP that would make thing easier but that could take more cash than anyone has at this point.

That's not how I read Mike's answer and I disagree with your conclusion. I believe when he said "combine the amounts" he was referring to compensation. If you are calculating contributions separately and combining contributions, when there is a $0 contribution for the sole prop due to a loss, it would be very easy to manipulate losses and W-2 to generate a deduction when there shouldn't be. For example, let's say someone owns two businesses that combined have $0 net revenue - the corp has $100K of W-2 for the owner and the sole prop has a loss of $100K. (IMO) you can't say "oh the corp can make a $25K contribution, the sole prop has a loss so $0 contribution, add them together and do $25K." If the sole prop has a profit, then I think, in a scenario with no employees, that calculating contributions separately and adding them will give the same results as adding compensation before calculating contributions, but with employees, and/or a loss in the sole prop, I think there are a bunch of reasons you need to add comp and then calculate contributions - 415 and various non-discrimination tests. Of course calculating comp for the sole prop could be (more than) tricky but so be it. Simplicity is not a valid reason to do something incorrectly.

It would be a controlled group, so the 415 limit applies across both plans.

Does the definition of compensation used for allocating the match satisfy 414(s)? If it does, then my understanding is that you have no BRF issue. If it does not satisfy 414(s), then you can’t test ACP under that definition. And when you look at the rates of match using a definition of compensation that passes 414(s), you will notice that you have differing rates of match for the deferrals that were made.

If the Internal Revenue Service’s levy is legally and procedurally proper, that the property the levy reaches is a right under an annuity contract or custodial account held under an IRC § 403(b) plan does not impair the levy. For some background information, read these two parts of the Internal Revenue Manual: IRM 5.11.5 Levy on Wages, Salary, and Other Income https://www.irs.gov/irm/part5/irm_05-011-005 IRM 5.11.6.2 Retirement Income https://www.irs.gov/irm/part5/irm_05-011-006 When income other than “salary or wages” is levied, “the levy reaches a payment the taxpayer has a fixed and determinable right to.” That’s so even if the payment will be in the future. If a proper levy is made when the taxpayer has no right to an immediate distribution, the levy can remain in effect (unless released) while the IRS waits for the taxpayer’s entitlement.

According to the facts, the participant is no longer an employee. To the extent the plan provides for an immediate distribution upon termination, then the plan should act upon the distribution request. If the participant is later re-employed, then they will be subject to the re-hire rules.

I'll vote for 100k.

Assuming your description is accurate I don't see how they are stopping the payment. Your payment last year was a distribution and not a DIVERSIFICATION payment correct? The way to tell is the payment was because you left the firm not because you turned age 55 and have 10 Years of Participation- and was most likely for 25% of your shares. Correct terms matter here. If it was a diversification payment we need to know that as the advice below would change. I ask because you said they paid you 1/4th and not 1/5th. A distribution installments tend to be over 5 years. So once again was it a diversification or termination payment? Not getting another payment in 2020 could be correct if a diversification payment. I would start by asking for the following documents if you don't have them already: 1) Summary Plan Description. (SPD) 2) Copy of their distribution policy. ESOPs have more discretion when it comes to distributions than just about any other type of retirement plan in terms of making people wait, take installments.... but no they can't just decide to pay or not pay a person on an ad hoc basis. Once you get those forms read how they describe distributions ought to work and see if they are following the terms as spelled out in those documents or not. If you think they aren't doing so I would go back to the company. They aren't allowed to simply dump all the decisions on the "company running the plan" as most likely the company running the plan is merely following the instructions of the company. If that doesn't work come back here and we can start to give you guidance now how to start the press the issue. I would not run off and lawyer up as your first choice. That will cause the plan and the company to lawyer up. It will simply slow things down and increase your costs. The are other steps like making a formal claim for benefits- the process is outlined in the SPD which is another good reason to get a copy. And ways to have the DOL make inquires on your behalf that are less inflammatory than a lawyer. Remember the point is to get paid not get revenge or hurt them with a lawyer.

SAR is a Title 1 requirement. It is not required for plans that are eligible to file an EZ.