Leaderboard

remember that once you add a discretionary profit share you lose the top heavy free pass. If the safe harbor is the 3% non elective (as opposed to the safe harbor match) then that should cover the top heavy requirement anyway but thought it worth mentioning.

Following and also adding that we are seeing approval and denials for Form 5558s that were mailed in the same envelope.

Did they have a valid election to make a 2021 elective deferral. If so I think you have a late deposit and all that entails but you still need to make it. Timing will determine the year of deduction and 415 limitation year that it is applied to. If no election you're too late.

Assuming they made a timely election as your response to Lou S. indicates they did, they would have made the contribution either by the partnership's withholding the amount from year-end or later distributions, or by the partner's writing a check back to the partnership for the amount. In theory, the election created a legal obligation for the partnership to fund the contribution(s) to the plan. The partnership as the plan sponsor needs to make the contribution and then the partner's obligation to the partnership for the cash is a matter determined under the partnership agreement, which probably specially allocates it to the partner. If the individual has enough in their capital account, the partnership could pay the cash to fund the contribution and charge it against the partner's(s') capital account(s). Most partnership agreements would then require that the capital account reduction be made up from available cash distributions going forward or by the partner's writing a check.

There is no same desk rule, at least for last 20 years. For any participants who were terminated by seller, regardless of whether they are hired by buyer, they terminated employment so can take distributions.

You need to start with the premise that there never was a "loan". A loan is where you go to the bank and they give your the bank's money and you pay it back to the bank with interest. A 401(k) loan is where to go to your plan administrator and they give you your own money and your pay it back to yourself with interest. Once he left the company and they deducted the "loan" balance from his distribution and withheld taxes there was no "loan" left for him to repay....ever. It ceased to exist. What benefit would he accrue from paying back the loan. He cannot deduct it from his income. Tell him to make maximum contributions to the 401(k).

If your plan document allows, yes. It's quite common.

Does your document automatically cover members of a controlled group? If no then employees are not cover by Plan A and are not entitled to any benefits. Of course for testing the employees of Company B are all not benefiting in your controlled group. If you pass all non-discrimimation tests with them excluded, sounds like you are fine. Does Company B sponsor their own plan? If so it may or may not be part of a required aggregation group for 416 which might kick in a required TH minimum.

Unless it is a fully-insured plan, all employees and former employees are considered "affected employees" for plan termination purposes. Since the resolution to terminate the plan was executed, this participant should be 100% vested. There is a section on the PBGC web site that gives examples of common errors in standard termination audits and this is one of them. "Not fully vesting terminated vested participants with less than a 5-year break-in-service." https://www.pbgc.gov/prac/terminations/standard-terminations

Consider too that whatever the Internal Revenue Service allows under an IRS-preapproved documents regime answers no question under title I of the Employee Retirement Income Security Act of 1974. A plan’s administrator might want its lawyer’s advice about whether a plan sponsor’s or employer’s declaration of a contribution and its “instructions” about how to allocate the contribution (if the allocation was not already specified) is, within the meaning of ERISA § 104(b)(1), “a modification or change described in [ERISA] section 102(a)” such that the administrator must furnish “a summary description of such modification or change[.]” If it is, an administrator might carefully write the “communication” the plan’s governing documents require to meet also ERISA’s call for a summary of material modifications. A plan administrator’s duties under ERISA sections 102, 104, and 404(a) could include writing the summary “to be understood by the average plan participant, and [to] be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights . . . under the plan.” ERISA § 102(a).

To add a little more context, after decades of IRS not having an issue with the discretionary match language in these documents, they suddenly brought this up in the review stages of the C3 document. Their objection is that the fully discretionary matching contributions do not meet the requirements for definitely determinable benefits. Since it was brought up late in the C3 process, the new notice was a compromise to not have to scramble to redesign plans. My understanding is that the IRS will not make this compromise for the C4 document.

We've been doing it this way from the beginning. It gives clients max flexibility. We do* issue a notice that says "no we're not" if that is the case, but I agree that it is probably not necessary. *Did. Under the new law, we have all of our SHNE plans as NOT SH and simply amend them in November; no maybe notice needed.

Pooled non-calendar year profit sharing plans are often valued annually on the last day of the plan year. The 401(a)(9) regs address this. You take the balance on the valuation date, add in in contributions from the valuation date to 12/31, subtract distributions from the valuation date to 12/31 and that is your adjusted 12/31 balance for figuring out next year's RMD.

Those penalties were magnified so additional revenue could be manufactured, real or imagined, to offset the cost of SECURE (or maybe CARES). I wonder if the government tracks the actual revenue raised from these changes during the 10-year budget period versus their projections used to get the law passed. Like pension contribution relief, which was supposed to reduce pension contributions and deductions to increase tax revenue. Who is most likely to cut back on their pension contributions? Companies losing money (so paying little or no taxes) that don't need deductions and tax-exempt NFPs that don't pay taxes - so all that did was further weaken already under funded plans which further stressed the PBGC and likely raised very little of the projected additional revenue. Sorry, didn't mean to go off on a rant, talk about tangents, or as my wife and I say to each other in such instance - squirrel!

Thanks Bill!!! I'll be on the lookout for your bow tie!😁

Bill, when I saw you had replied to this question, I was expecting an announcement that bow ties are now mandatory for all attendees 😄