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That's an odd way to phrase an answer. It kind of sounds like whoever asked the question internally at the investment company didn't completely understand the response they got from their systems people. I have not seen anything like this. At the very least I would look for a bit more info on what they're doing with the amounts they "removed from the system". If these tiny amounts are being returned to the investment company as a service fee, hopefully that's described in their service agreement with the plan and disclosed appropriately.

Bill, first, I hope it's not me and second, do I get 3 guesses? Just reading some intolerable postings by someone whose handle would come very late alphabetically.

Real estate agents are almost always independent contractors. That's the way that world works. Keep in mind that the SEP sponsor is the Real Estate Firm and not the 40 year old. So the contribution eligibility and contributions apply to anyone that is receiving earned income from the firm. Also, I'm always nervous when someone says "no qualified plan to speak of." They either do or they don't.

Kind of in Belgarath's court here, the only possible damages incurred would be related to being under withheld on state taxes. I think they would have to have had substantial distributions for that to be the case. The obvious question/issue - and one I would make were I the carrier (not that I excuse them for poor service) - is how/why did the recipients only "discover" this only when getting their 1099? That is total BS. If I'm expecting a $10,000 payout and I know that 20% must be withheld for Federal taxes AND I ELECTED ANOTHER 10% (hello, McFly), then I'm also smart enough (I hope) to know that I should be getting a check for $7,000 and realize that something isn't quite right when they send me $8,000. This lack of personal responsibility drives me nuts - like when a person elects a salary REDUCTION contribution but then doesn't notice (for a whole year even - c'mon McFly!) that their weekly (or whatever) pay did not go down. Anyway, done pontificating, go 'Cuse, in the Sweet 16 baby!

Sounds like Peter Gibbons explaining what is happening.

He's the new "Lance".

I doubt there are any pre-approved Cycle 3 documents that specifically reference age 72 since the Secure Act passed long after the submission deadline of the Cycle 3 documents for IRS approval. I can't speak for all pre-approved documents but our Cycle 3 Master Text still references 70 1/2 in a number of places.

The final plan year ends on the date of the final distribution. That is the date you should use on the 5500. The 5500 is due on the last day of the month 7 months after the final distribution.

Real estate agents are generally independent contractors. Look at from the flip side - I'm an agent working with that agency and all my income is 1099 self-employment income, can I set up my own "solo" plan? I would say yes. It's more a question about parents and that the other 15% owner(s) and if there are any employees (W-2) of the agency, like administrative support.

And this is a strategy that you should review with your accountant or financial advisor, if you have either, for any unforeseen "gotchas" or missed pieces as Lou noted. If you are using this strategy to help delay taking SS, then that piece won't yet be an issue. Minimizing taxes is good but can you live on $100k per year (and pay for all you need, like healthcare, and all you want, like vacations) and how will that depletion compare to your joint life expectancies? Will you run out of money early or have large RMDs at age 72 that trigger large tax bills? You shouldn't view retirement income in the tax vacuum. If I could take $200k in retirement income less $40k in taxes, knowing it would last my retirement and I could live the life I wanted, or opt to take $100k in annual income, outsmarting the government paying zero taxes as long as possible, but having to scrimp and sacrifice throughout the earliest and healthiest years of my retirement, I choose the former every time. Sounds like your retirement funds are well diversified from a tax perspective. I would recommend, if you don't already have an advisor, find a reputable fee for service provider and pay for qualified advice that will help you map out a long term retirement income strategy that efficiently minimizes taxes (does not mean eliminate) throughout your joint life expectancies. There are very smart people on this forum but I would not seek free advice and confirmation of my complex retirement income situation here or any other on-line forum.

The following is just some general blathering as random thoughts occur to me. What recourse might you be talking about? Unless I'm misunderstanding, the participants just have to pay what they are otherwise required to pay, right? Granted that they might not be EXPECTING it at this time and it may be inconvenient, etc. - but they received the full distribution, so the state withholding that they WANTED withheld is still in their pockets, or is part of their new living room set that they are sitting on, etc. They probably don't owe any interest, but if they did ('cause they didn't make any quarterly estimated payments if required by the State, or something like that) then perhaps they would have an argument, and I suppose other scenarios could be created. But I suspect that any recourse requiring legal action would likely be either unwarranted or far more expensive than the "damages."