Leaderboard

Restatement of terminating plan is not required but plan must be up to date for all laws (including SECURES, CARES et al) - so best way to ensure that would be a cycle 3 restatement. Not sure on timing, if you do before you distribute assets I think you're safe. Do not think stock or asset sale matters.

I'm not Mike, but.... 1. No penalty, it's a corrective distribution with no "adverse" consequences other than not being able to keep the funds sheltered. 2. The associated earnings on the contributions through 12-31 must come out, too. (Or, investment losses would reduce the amount to refund.) 3. It can't stay as a 401(k) contribution - there were no wages to defer from. So if it's going to stay as a contribution to the plan it would be a nondeductible employer contribution, subject to a 10% excise tax to pay and remit via Form 5330. And it will continue to be subject to the tax every year until it can be absorbed under a future year's deduction limit. (If he ends up with a loss in 2022 he'll owe the penalty again.) --bri

2 years is the minimum under AICPA auditing standards isn't it? I have seen plenty of 3 year requests as well...

Our firm looks at the current year and the past 2 years, when a small plan becomes a large plan.

That's what I meant...

Notwithstanding the fact that you can use compensation only earned by those who have adopted the plan, you must use all three for section 415 purposes.

No.