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To add to Alonzo's answer, generally a sole proprietor has to make the deferral election prior to 12/31, but the deposit can be made as late as the tax filing deadline or as soon as the schedule c is finalized.

What you described is correct. A SIMPLE IRA is effectively a regular IRA after the 2 year period.

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-investments It is a taxable distribution in the year the collectable is purchased with the IRA funds. I am not aware of any additional PT issues since it is considered a distribution at the time of purchase and not held by the IRA. A 1099-R is required to be issued for the distribution which I believe is equal to the purchase price of the collectable. It appears to be treated the same as if the the IRA owner took an cash distribution form the IRA and then purchased the collectable with the funds received.

Assuming the wife is the sole beneficiary wouldn't it be processed like any other death benefit of the plan through the Plan's administrative procedures? The issue than becomes one of withholding to a payee outside the US and what withholding rules may or may not apply.

Well maybe someday someone will let us know! Something tells me the answer is "the answer is not clear."

Absolutely permissible.

Prohibited cut back to add a last day requirement for 2020 for anyone who statisfied the current allocation requirement.

No way. DB plans are subject to the minimum participation rules of 401(a)(26). At least 40% of the employees (or 50, if less) have to get a meaningful benefit in the plan.

Hi Bill, 2.6m is correct. Participant 415 max life annuity is the lesser of the dollar limit or comp limit. Maximum lump sum is based on the max life annuity. Participant would be limited to 2.6m in your second example. Also agree with Calavera about the suspension of benefits issue at age 68.5ish. The dollar limit exceeds the max comp limit (based on 401a17 limits) somewhere between 68-69, we try to hit that sweet spot with owners to get them the biggest LS possible before their max LS begins decreasing. Have a great weekend!

Cate, I may be a little confused so I apologize ahead of time. Is this a situation where a parent/subscriber has dependent coverage (an adult child) and the subscriber does not know if the dependent is on their plan? If so, how can the parent/subscriber not know who is on their plan? Thanks.

@Cate I'm assuming you're a business associate for an employer plan sponsor of a covered entity (i.e., a self-insured group health plan). The point of confusion here probably stems from the fact the enrollment/disenrollment information (that does not include any substantial clinical information) is not PHI if it is maintained by the employer. That information is considered an employment record held by the plan sponsor (not a covered entity) rather than PHI held by the plan (covered entity). In this case, you are not the employer. You are the TPA acting as a business associate to the employer's covered entity health plan. Therefore, I agree with you that the enrollment information is PHI and cannot be disclosed absent an authorization from the adult child. Note that there are exceptions where a CE/BA can disclose PHI to a family member. The details depend on the capacity of the individual. Overview here: https://www.theabdteam.com/blog/disclosing-phi-to-family-members-under-hipaa/ Relevant cites below-- 45 CFR §160.103: (2) Protected health information excludes individually identifiable health information: (i) In education records covered by the Family Educational Rights and Privacy Act, as amended, 20 U.S.C. 1232g; (ii) In records described at 20 U.S.C. 1232g(a)(4)(B)(iv); (iii) In employment records held by a covered entity in its role as employer; and (iv) Regarding a person who has been deceased for more than 50 years. 67 Fed. Reg. 53181, 53208 (Aug. 14, 2002): While the standard enrollment and disenrollment transaction does not include any substantial clinical information, the information provided as part of the transaction may indicate whether or not tobacco use, substance abuse, or short, long-term, permanent, or total disability is relevant, when such information is available. However, the Department clarifies that, in disclosing or maintaining information about an individual’s enrollment in, or disenrollment from, a health insurer or HMO offered by the group health plan, the group health plan may not include medical information about the individual above and beyond that which is required or situationally required by the standard transaction and still qualify for the exceptions for enrollment and disenrollment information allowed under the Rule. 65 Fed. Reg. 82461, 82496 (Dec. 28, 2000): The preamble to the Transactions Rule noted that plan sponsors of group health plans are not covered entities and, therefore, are not required to use the standards established in that regulation to perform electronic transactions, including enrollment and disenrollment transactions. We do not change that policy through this rule. Plan sponsors that perform enrollment functions are doing so on behalf of the participants and beneficiaries of the group health plan and not on behalf of the group health plan itself. For purposes of this rule, plan sponsors are not subject to the requirements of § 164.504 regarding group health plans when conducting enrollment activities.

It's a combo plan so the gateway is higher.

No. The deferrals have to be allowed for 3 months.

Yes. The employee would need to get a sufficient amount to pass the gateway. The conundrum with a cross tested plan with 3% safe harbor is that the allocation conditions really go out the window because they are receiving 401a dollars at the 3% safe harbor level, causing them to be in the gateway. 401a dollars have to pass gateway before you get to nondiscrim testing. Contrast that with a plan with no safe harbor dollars 3%. the terminated employee would have no 401a dollars and would not be in the gateway. My curiousity is getting the best of me.... the plan doesn't pass nondiscrim unless the employees are receiving a 7.5% total? Normally, the gateway will pass with 1/3 or 5%. but you may have to bump up the employees to total of 7.5% to get nondiscrim to pass. Is there mostly young HCEs?

If they can get to where neither is an employee of the other's business(es) nor provides services to the other's business(es) and they have no minor children and they are not in a community property state, then they are golden and Betty can do a solo plan to her heart's content. But it sounds like Betty's business is serving Bob's businesses, so in breaking that chain does she even have a business any more?

The lump sum will be $2.9m. In addition, note that the owner should have received a suspension of benefits notice, since somewhere around age 68 he would reach the 415 salary limit and his accrued benefit will not increase. And if he didn't receive the notice, you have a qualification issue.

Correct. We had a long discussion about this a few years ago, and there were plenty of folks on both sides. To make it even more fun, there is support for both arguments in the Code. I posed a question with a similar fact pattern to ASPPA annual's "ask the experts" panel a few years ago (knowing that two of the people on the panel had different opinions), and in the end the answer was that absent specific guidance, either one could be a reasonable approach if you stay consistent.

I think you'll find people taking both sides on the more general question of overlapping groups, with some saying E's affiliation with B would require A/B/C's testing to include E and all of its related entities, and with others saying you test A/B/C/E as one group and D/E/F/B as another.

They're just giving you their operational requirements. There's nothing in the regs requiring that. Pretty sure providing the notice on date of hire for immediate eligibility plans is deemed timely.

You could name them the same names but like you said seems awkward...when talking about them you would need to add the word trust to the one that is the trust so that everyone knows which one you are referring to. We tend to name them ABC 401(k) Plan and ABC 401(k) Trust, omitting the word "Plan" in the name of the trust.

Treas. Reg. 1.411(a)-11 is what you are recalling. If the plan document so provides, no consent needed for distributions made after the later of age 62 or normal retirement age. It's been a long time since I've seen a plan designed that way.

Also, if Bob and Betty have any minor children i.e. under 21, they can be controlled group as well.

1.414(c)-4(b)(5)(ii) An individual shall not be considered to own an interest in an organization owned, directly or indirectly, by or for his or her spouse on any day of a taxable year of such organization, provided that each of the following conditions are satisfied with respect to such taxable year: (A) Such individual does not, at any time during such taxable year, own directly any interest in such organization; (B) Such individual is not a member of the board of directors, a fiduciary, or an employee of such organization and does not participate in the management of such organization at any time during such taxable year; (C) Not more than 50 percent of such organization's gross income for such taxable year was derived from royalties, rents, dividends, interest, and annuities; and (D) Such interest in such organization is not, at any time during such taxable year, subject to conditions which substantially restrict or limit the spouse's right to dispose of such interest and which run in favor of the individual or the individual's children who have not attained the age of 21 years. The principles of §1.414(c)-3(d)(6)(i) shall apply in determining whether a condition is a condition described in the preceding sentence. Since Bob is an employee of Betty's Enterprises, the exception to spousal attribution does not apply and Bob is deemed to own 100% of his wife's ownership interest. Therefore all 4 businesses are part of the same group under common control.

Well, I guess technically it is a group under common control, since Betty is a sole prop (IRC 414(c)) but the effect is the same. All 4 are considered one employer, and I agree, Betty can not set up a Simple-IRA just for Betty and Bob.

https://www.irs.gov/pub/irs-drop/n-05-05.pdf

Actually since everyone has presumably been paid out, unless you want your client having to deal with a plethora of inquires down the road your final 8955-SSA should be reporting under Code D any previously reported Code A's due a benefit.

Your "solo 401k" is a just a 401k plan without employees, and your "regular 401k", is just a 401k plan without employees. They both file the same 5500-EZ, answering the same questions the same way. There may be some differences in the plan document, but none that would prevent you from adding the same "new" features to the Vanguard plan. Based on what you describe above, a new plan was not required. It is possible that your TPA will only work with their own products, but hopefully it wasn't sold to you as something you were required to do to get this type of a set up (especially when you describe features you don't even know if you will use), and hopefully they did not charge you for things you did not need. I'm not saying the TPA did anything wrong, there are lots of details we are not aware of, but something feels off to me.

You do not state this but your question presumes that your CB plan deduction is using up your 25% deduction limit. If your CB deduction is only 10% of comp, you may not have an issue. Also, you may be able to amend the CB plan for 2020 in order to reduce the required contribution for 2020. Finally, why would you need a second 401k? You already had one, why pay someone to set up a second one?

If they are planning to keep the SH going forward I would just include that in the amendment. Otherwise, you'll be doing amendment every year they want to use a SH and you'll need to get the amendment and notices out timely in order to utilize the 3% SH.

If your pensionable income is equal to or higher than $266,667 your 401(k) should be fine as the $19,500 401(k) contribution does not go into the 6% calculation for deduction purposes and $16,000 is 6% of $266,667. If you are a corp that will mean your W-2 is $266,667 or higher 2020. If you are schedule C, talk to your TPA about what your earnings for pension purpose are as it can be a bit complicated and circular as every dollar of employer retirement plan contributions will reduce your income by $1. But you'll probably want to run through all the numbers with your TPA/actuary and possibly your CPA who probably has a better handle on it with full information.

You obviously did not get, or did not take, qualified advice from your TPA or failed to disclose all the facts to such party (already funded max PS) before going forward with this arrangement. This is a tax issue and now you need advice from a qualified tax advisor - i.e., your accountant. If you have already contributed more than 6% PS for 2020 then you essentially have a 31% deduction limit for 2020 between the two plans. Again, you need accounting advice, but my non-accountant opinion is that you'll be able to deduct only a portion of your 2020 cash balance contribution for 2020 (which hopefully you haven't deposited yet) and then will need to deduct rest on 2021 return along with as much as legally/actuarially possible of the 2021 cash balance contribution, AND limit your 2021 PS to 6% or less of your eligible compensation, depositing such AFTER year-end and your eligible compensation is known with certainty. Note, the creation/existence of the CB plan does not make your PS plan deduction limit 6%. How much you already contributed for 2020 PS drives what your total deduction limit will be. Maybe others will opine differently, but again, this is a tax issue to discuss with your accountant as they are the ones opining on your tax return deduction.