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514(c)(9).

If I understand your specific fact you have 10 ees so TPG is 2 employees and piggy packing on Bill Preston and BG5150 for the OPs case The Two that have the highest compensation out of 1, 2, 3, 4 are HCE because they are in the TPG Then look at owners 1 and 2 if they are both of the employees in your TPG then you are done and have 2 HCEs, if they are not in your TPG group add them to the HCE pool because 5% owners are always HCEs and you will have 3 or 4 HCEs even though are using the TPG group.

If I'm understanding the question correctly, I think you are asking if you are required to use any particular definition of compensation when determining if QNECs are disproportionate under 1.401(k)-2(a)(6)(iv)? The section only refers to "compensation" which in the context of that reg means testing compensation. I would think you would use whatever definition of compensation you are using to perform the ADP test.

coleboy, of course a review of the documents and other facts would be necessary to provide actual assistance, but based on what you have briefly stated above and treating it superficially as a hypothetical, it would appear that the company in which the Dr. has only 50% ownership is not a member of the CG. Bill Presson's response only addresses the CG.

Perhaps incorporation breaks what you perceive to be continuity of existence.

Individually designed ESOPs must be amended to allow the plan sponsor to wait until the value is known. As provided in the LRM-5: Definitions (a) "Annual Election Period" means the 90-day period following the end of each Plan Year in the Qualified Election Period. [Note to Reviewer: The Annual Election Period must begin on the first day following the end of each plan year in the Qualified Election Period, but the plan may provide that the Annual Election Period ends later than the 90th day following the end of each plan year in the Qualified Election Period. For example, a plan may provide that the Annual Election Period begins the day after the end of each plan year in the Qualified Election Period and ends 90 days after the date that the value of the shares subject to the diversification election is provided to the participant.] Without this language, or something similar to this, it is my understanding those preliminary notices are still required to be provided to participants eligible to diversify.

SECURE act allows a 401(k) to choose to be a safe harbor plan until the end of the year following the year that you want. So 12/31/21 for 2020 year. Hopefully your document wouldn't override that.

Plans can borrow to purchase real estate assuming the trust language in the document authorizes it (typically it does). This could create UBTI unless the loan meets the acquisition indebtedness exeception in IRC 514 (I forget the subsection at the moment). But good luck getting a conventional lender to loan to a plan. Lenders can't qualify plans using standard metrics, and they pretty much all want to use standard metrics so their loans can be sold. They will make suggestions such as telling the client to buy the property personally and then quit claim it to the plan after the financing is in place, or that they want the client to guarantee the loan. These sorts of lender workarounds typically create PTs.

You'll also need to grant service to any other employee that was employed with that other practice.

My name is S. Derrin Watson and I approve of Ilene's message. I add that controlled group status unites two employers for all purposes of Code 401. That includes 401(b), where we find the new statute. And, for what it's worth, I don't take off my controlled group hat except when I go to church. 😀

Bill Presson asked me to weigh in on this, Derrin and I are being cited quite a bit. Nice to hear you all thinks so well of us. We appreciate it. So, the starting point is the language of the law (imagine that! Ain't that just like a lawyer?): This is a new paragraph under Section 401(b): 2) Adoption of plan.--If an employer adopts a stock bonus, pension, profit-sharing, or annuity plan after the close of a taxable year but before the time prescribed by law for filing the return of the employer for the taxable year (including extensions thereof), the employer may elect to treat the plan as having been adopted as of the last day of the taxable year.''. So, when I read that, I thought, "Well, all it talks about is the employer adopting a plan. Whether it is a multiple employer plan or a single employer plan, all the company is doing is adopting a plan. So, I think adoption by the tax return due date is fine." Derrin, however, put on his "Controlled Group" hat and pointed out that, if the Husband company and the Wife company are part of a controlled group, then the Husband company (on behalf of the "employer," which is both companies combined) already adopted the plan. The problem here is that the Wife company failed to adopt a participating employer agreement under the plan. This potentially falls out of the language above and becomes a different situation - not a nonadoption at all, but a failure of the plan to be drafted to include the employees of the Wife's company. That arguably is a required AMENDMENT of an existing plan, not an adoption of a new plan, and is required to be adopted by the end of the year. And, as the amendment will not benefit all employees, it is likely ineligible for self-correction and must go through VCP. Remember that the Husband's company and the Wife's company are not necessarily part of a controlled group. The "noninvolvement exception" can break a controlled group if the spouses each own their own companies and (a) neither spouse has ownership in the entity owned by the other spouse; (b) neither spouse is a director or employee or participates in the management of the other spouse's company; (c) the spouses have no involvement in the other's company; (c) no more than 50% of the company's gross income is from passive investments, such as royalties, rents, interest, dividends, and annuities; and (d there are no restrictions limiting the spouse's ability to dispose of his/her ownership in favor of the other spouse or their minor children. The noninvolvement exception does not help break the controlled group if you are in a community property state and the business is community property (so that each spouse under state law actually owns 50% of the other's company, thus overriding the noninvolvement exception) or if the couple has any minor children (in which case each spouse's ownership attributes to the minor child and the bambino is deemed to own 100% of both companies). So, when all is said and done, if you are dealing with spouses, you might be better off doing the "separate adoption and later merge" method, distasteful as such a "form over substance" approach is. If we know anything after our collective years practicing in this area, the IRS tends to be very detailed in the way it applies statutory and regulatory language, thereby commonly promoting form over substance. Thanks again for letting me weigh in on Derrin's and my behalf. Best to all -- Ilene

If you are concerned about it you can file IRS Form 8822-B but like others have said this has never really crossed my mind.

Thanks. With a little (unscientific) web-surfing, I found these: BlackRock Disclaimer for Community and Marital Property States: The Participant’s spouse may have a property interest in the account and the right to dispose of the interest by will. Therefore, any sponsors, issuers, depositories and other persons or entities associated with the investments and the Custodian specifically disclaim any warranty as to the effectiveness of the Participant’s beneficiary designation or as to the ownership of the account after the death of the Participant’s spouse. For additional information, please consult your legal advisor. I consent to the Beneficiary Designation. {block on the form for a spouse’s consent} https://www.blackrock.com/us/individual/literature/forms/ira-application-fillable-version.pdf Capital Group (American Funds) We encourage you to consult an advisor regarding the tax-law and estate planning implications of your beneficiary designation. . . . . Your spouse may need to sign in Section 9. If you wish to customize your designation or need more space, attach a separate page. Spousal consent to beneficiary designation — if required If you are married to the IRA owner and he or she designated a Primary Beneficiary(ies) other than you, please consult your financial advisor about the state-law and tax-law implications of this beneficiary designation, including the need for your consent. I am the spouse of the IRA owner named in Section 2, and I expressly consent to the beneficiary(ies) designated in Section 6 or attached. {signature block} Fidelity Advisor If your IRA contains community property and you do not designate your spouse as primary beneficiary for at least 50% of your IRA, you may want to contact an attorney for further information on the designation. https://institutional.fidelity.com/app/literature/view?itemCode=B-IRAFORMS&renditionType=pdf&pos=contentItem&selectedActivities[0].selectedActivityCode=TBNM&selectedActivities[0].selectedActivityTx=formsandapplications&selectedActivities[1].selectedActivityCode=DEPT&selectedActivities[1].selectedActivityTx=FAPP Franklin Templeton If you are married and designate someone other than your spouse as your primary beneficiary, you may need to obtain your spouse’s consent. You should consult with a legal advisor regarding your beneficiary designation and whether your spouse’s consent is necessary. The Custodian is not responsible for determining whether your spouse’s consent is necessary. https://www.franklintempleton.com/forms-literature/download/RIRA-APP {No block on the form for a spouse’s signature} Invesco {warning, and block on the form for a spouse’s consent} https://www.invesco.com/us-rest/contentdetail?contentId=3868e01e98630410VgnVCM10000046f1bf0aRCRD Schwab If I live in a state with community property statutes and do not designate my spouse as the sole Primary Beneficiary, I represent and warrant that my spouse has consented to such designation. https://www.schwab.com/public/file/P-1770982 TD Ameritrade {IRA applicant “represents and warrants” to the custodian that the spouse consents.} https://www.tdameritrade.com/retail-en_us/resources/pdf/TDA586.pdf Wells Fargo warning, and permits opportunity for a spouse’s signature https://www.wellsfargofunds.com/assets/edocs/form/ira-application-ip.pdf Any BenefitsLink neighbors with a different experience or observation?

I have NEVER seen a SARSEP that was done properly. And I do mean NEVER. They were advertised like the text book: BRAIN SURGERY: SELF TAUGHT!

Probably fine for a small non-profit, but you specifically referenced an engineering firm. They are fairly easy, but there are pitfalls for the unwary. The last one I saw was probably not atypical - owner contributing the max, and when I discussed the SARSEP DP test I was told that another employee was contributing the max on very low income. Fantastic! Except that the other employee was his wife. And 3% minimum top heavy - "what's that?" Sorry but I've been doing this too long to be anything other than jaded and cynical.