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Sorry I'm coming so late to the party, so to speak, on this one. I agree with pretty much all of the comments above. Individuals who are no longer practicing with a firm or authorized to do so may, generally, receive two types of payments, return of capital, which are generally not taxable, and amounts they are owed as their share in receivables when they leave, if the partnership has a provision for the latter. The latter can be formulaic based on aggregate receivables and/or represent an interest in specific matters, e.g. contingent fees. Amounts paid to the departing partner for their share of the receivables on the books as of the date they ceased to work for the firm , which may occur over a multi-year period, are generally fully taxable as self-employment income. Furthermore, they are, generally, payment for services performed. Before the 2007 changes to the 415 regs, I thought that it was probably permissible, if the plan did not have a last day of the year rule for receiving an allocation, to make an allocation for the departing partner based on all of the self-employment income they received during the year of their departure. And even if the plan did have a last day of the plan year condition for receiving allocations, it's usually not completely clear that a departed partner is not "employed" on the last day of the year, when you look at the plan's wording of the self-employment provisions, which usually just say that partners are treated as employees and their self-employment income is treated as W-2 compensation. They are, after all, still receiving self-employment income all the way through the end of the year, and probably in future years as well. I even concluded that, as odd as this sounds, you arguably could make a contribution for a departed partner in the plan year after they had left, as long as they still had self-employment income from the partnership and the allocation was not inconsistent with the plan terms. With the 2007 changes to the 415 regs, the partner's ceasing to be actively involved in the partnership's provision of services should probably be treated as a "severance from employment" under Treas. Reg. 1.415(a)-1(f)(5) for purposes of the Treas. Reg. 1.415(c)-2(e) rules regarding post-employment compensation. However, the regs are not completely clear on this point, since they do not specifically address the special issues of self-employed individuals and merely use the term "severance from employment" and then say that when that occurs is based on "facts and circumstances." To the best of my knowledge, the issue has not been specifically addressed in any guidance interpreting the regs. Probably the best course of action is to specifically treat a departing partner as having had a "severance from employment" on the date they stopped working for the partnership, and apply the plan's rules for post-employment compensation. But the specifics of how you should address this should probably be written into the plan document, or if that is not practical, then adopted by the firm as the plan administrator as its interpretation of the plan's provisions on this point.

Ditto on the new CPA. Although he may be entirely wrong, that link includes the remark, "The S corporation also can’t deduct any plan contributions for these participants that are based on accrued compensation." So is the CPA also not disclosing that he incorrectly calculated the compensation using accrued income??? You could also recommend seeking mediation through the AICPA: Ethics hotline: 1-888-777-7077 Typically the contributions on the SB are going to be matched to the deductibles for the year; but in this case the actuary may be another accredited opinion to influence the CPA; he could also threaten to match the SB to the undetected amounts, but include a dissenting opinion naming the CPA as being at fault.(as long as there wasn't a funding deficiency as a result) But regardless the Employer has final say on his own tax return, all efforts should be shown towards influencing him to get it prepared properly.

FIS Relius' governmental 401(a) document has the following: Elective deferrals taken into account. For purposes of applying the matching contribution provisions below, elective deferrals include elective deferral (pre-tax and Roth) contributions to the following Employer plan(s) (insert name of Plan(s) to which the elective deferral contributions being matched will be made): a. [ ] 457 plan(s). Enter Plan name: b. [ ] 403(b) plan(s). Enter Plan name:

To clarify rocknrolls2 response, you don't need to do any interim amendments to the money purchase pension plan before it is merged into the profit sharing plan. The updated language in the profit sharing plan will also apply to the money purchase pension subaccounts in the merged plan as applicable. You don't say if you're talking about a pre-approved plan merging into another pre-approved plan but I'm assuming that since you refer to the Cycle 3 restatement deadline. Since the Required Amendment lists apply to individually designed plans, I don't think you need to worry about checking those if you're talking about pre-approved plans. We also did a number of these mergers years ago when MPPPs were no longer needed to increase annual contribution amounts.

FWIW ours is in the the master text under the definition of Forfeiture. Says something to the effect of "if Terminated and 0% vested is deemed to have received a distribution in year of termination"

Our document contains this language:

If this CPA really thinks that it cannot be deducted for 2021, your client may need another CPA.

For purposes such as whether a corrective distribution was made by March 15 or April 15 (or such a date as adjusted under a holidays rule), I’ve heard some providers reason that a distribution is made on the day the instruction is processed such that mutual fund shares are redeemed, or collective trust fund units are withdrawn, as of that day. Do BenefitsLink mavens concur?

Can't you just do an in-service distribution to get most if not all of their balance in the qualified plan into the IRA? Starting the next year they can have at it. The current year RMD out of the qualified plan has to be paid obviously. Sure, you might have to amend the plan to allow in-service distributions and you will have to allow anyone besides the owners who meet the requirements of the in-service. I would only open the in-service to anyone who is 65 or older if I was going to do this. Short of that I am not aware of away around it.

FWIW - I love these message boards! I try to guess at the answer before clicking on the links in the email - and my memory served me well today. A big thank you to everyone who contributes!

Yes. Receiving an IRS letter does not disqualify an employer from using DFVC. But don't wait around too long.