Leaderboard

This is different from what you said in your original post, which was that counselors are excluded from participation as a class. If they are eligible, but simply never meet the annual allocation conditions, that changes the situation quite a bit. Going back to condition (iv) I think the word "solely" may still foul things up for you however. I think you might be misunderstanding how the otherwise excludable testing option works. You take ALL employees who have not met the minimum age and service requirements of 410(a) (1 year of service/1000 hours and age 21), and treat them as if they were a separate plan. The disaggregation group would have to satisfy testing on its own. As long as nobody in that group is an HCE (which is unlikely, as HCE status is based on prior year's compensation, and an employee who worked enough in the prior year to earn above the compensation limit has probably met the 1000 hour requirement and would not be otherwise excludable), then the disaggregation group automatically passes coverage testing. See 1.410(b)-2(b)(6). The remaining non-disaggregated population would then be only those employees who have met 1 year and 1,000 hours of service and age 21. If none of those employees are excluded under the plan then the coverage test passes.

I assume the issue is a lack of a SSN. I get an undocumented person might not feel comfortable going to the federal government to get a number but it can be done. An undocumented alien can apply for ITIN no questions asked. https://www.irs.gov/individuals/individual-taxpayer-identification-number I quote the website: They are issued regardless of immigration status, because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. ITINs do not serve any purpose other than federal tax reporting.

Under 1.410(b)-6(f)(1), there are five conditions that must be met in order to treat an employee as excludable: i. The employee does not benefit for the plan year, ii. The employee is eligible to participate in the plan, iii. The plan has an hours of service or last day requirement in order to accrue a benefit, iv. The employee fails to accrue a benefit solely because of the failure to meet the hours of service or last day requirement, and v. The employee terminates employment during the plan year with no more than 500 hours of service. "Plan" for 410(b) purposes means after the application of the mandatory disaggregation rules, so not the entire plan, but just the matching or profit sharing portion of the plan. See 1.410(b)-7(c). Leaving condition (iv) aside, the counselors in your example satisfy condition (i) and (v) but not condition (ii), and condition (iii) is also not satisfied. Therefore the counselors cannot be treated as excludable for purposes of the coverage test. However, the plan will likely satisfy the coverage test by disaggregating the portion of the plan covering otherwise excludable employees, that is, the employees who have not satisfied the maximum age and service conditions under 410(a)(1). That will include the counselors and presumably some of the FTEs, however as long as that group does not contain any HCEs it will automatically satisfy the coverage test. For that matter, you haven't said anything regarding the relative number of HCEs and NHCEs in the employee population. You said it is a school, so presumably there are not a lot of HCEs. Would the plan pass the ratio percentage test, even without disaggregation? How about the average benefits test?

The business owner might want her lawyers’ and accountants’ help to evaluate bilateral and multilateral tax treaties regarding her current domicile, current part-year residences, and current sources of income, and, if different, older-age domicile, residences, and sources of income. While many treaties have provisions meant to limit double taxation, not all do. And timing and accounting differences can result in imperfect application of the treaties’ provisions. Further, the owner/participant might consider current and potential currency restrictions and other difficulties.

He may want to write a letter to the bank requesting that they fix the title to his inherited IRA - {Brother}, beneficiary of IRA of {father} , deceased - and to fix the 2020 5498 to reflect the corrected title and not show the amount transferred as a 2020 contribution. This way, he will have documented the problem and if IRS follows up on the 5498 reporting (that makes it look like he contributed too much to his IRA), providing a copy of this letter this can help explain what happened if it is not resolved by then. Also, needless to say, he should continue to take the RMDs required for an inherited IRA account. IRS does look at the distribution code on the 1099-R (not just the distribution amount). If the wrong distribution code is listed in box 7 of 1099-R, you can ask the issuer of the 1099-R to correct it. If they do not issue a corrected 1099-R by the time your brother files his taxes, he may want to file 5329 with his return to let IRS know the 1099-R was issued with the wrong code and that the correct code is 4 (death) so that they will not assess the 10% additional tax for premature distributions. If the bank won't do what he asks to correct the IRS filings they made erroneously, consider looking for a better IRA custodian. (He may want to wait for the CD to mature to avoid a penalty for withdrawing from the CD before then). Good luck.