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Technically, it's an employer contribution. Move it to the forfeiture account, if recordkeeper will let you. If entitled to other employer contributions, move to another source.

Someone probably copied the prior payroll without checking the current one.

Attached is Publication 560 (2022), Retirement Plans for Small Business which gets into the details of calculating income for self-employed individuals. There is a worksheet titled Deduction Worksheet for Self-Employed with Step 1 is: Enter your net profit from Schedule C (Form 1040), line 31; Schedule F (Form 1040), line 34;* or Schedule K-1 (Form 1065),* box 14, code A.** For information on other income included in net profit from self-employment, see the Instructions for Schedule SE (Form 1040) Note that Schedule E is not listed along with the other schedules, and many of income items on Schedule have to do with passive income. It is worth looking at the Schedule SE instructions where there are long lists of what is and is not included in earnings from self-employment. If you distill all of this down, any income on Schedule E that is considered as income from self-employment for personal services would be reported on the individual's K-1. Any income reported solely on Schedule E is insufficient to determine if that income should be considered by a retirement plan. If the Schedule E income does not flow through to Schedule K-1 or to Schedule SE, then it is not income from self-employment and should not be used for retirement plan purposes. If the client believes it should be included, or the TPA believes it should be included, then the burden of proof is on them. p560.pdf

As a DATAIR user, perhaps the lost earnings allocation made in 2022 is coded as happening as of 1/1/2022. If TinaW changes the allocation date of the lost earnings to something later in 2022, I think (but cannot say for certain) that it would drop the BOY count to 99, thus getting out of the audit for 2022.

"Lost earnings" to me sounds like a late deposit from a prior year corrected in 2022. If they terminated in 2021 and took a full distribution before the end of 2021, and late deposit earnings were made after 1/1/2022, I would not count them in the 1/1/2022 beginning count.

Terminated participants in a prior year with no beginning balance as of the current year are NOT participants as of the beginning of the current year. In the situation you describe, as I understand it, 2021 terms with no balance as of 1/1/2022 are not participants as of 1/1/2022. Seems to me Datair is counting them incorrectly. The part that throws me a bit is your comment "received lost earnings within the year." I assume you are referring to 2021 activity... with no beginning balance as of 1/1/22 I don't see how they could have shared in any earnings/losses in 2022, as there is $0 basis.

I've had clients in this situation a couple of times, where the RK assumed responsibility for the underlying error and agreed to fund the missed earnings. In each case, the RK deposited the missed earnings directly into the plan.

Bird has the right number in my mind. I haven't had to compute a 401(k) loan since 2012 so I am happy to be told I am wrong but based on this IRS example this is the math. https://www.irs.gov/retirement-plans/issue-snapshot-borrowing-limits-for-participants-with-multiple-plan-loans Example 2: Calculation of the maximum amount of loan when there are prior loans. Assume that Plan B permits participant loans (including multiple loans). Mark has a vested account balance of $200,000 and took a loan for $40,000 on August 1, 2013. On December 1, 2015, when the loan balance is $25,000, Mark wants to take another loan from the plan. The loan balance on December 1, 2014, was $32,000. The maximum amount that Mark can borrow is $18,000. This is calculated by first determining the repaid loan amount for the one-year period before the loan was made. That amount is $7,000. It is the difference between the highest outstanding loan balance for the one-year period ending on December 1, 2015 ($32,000) and the outstanding balance on the day of the loan ($25,000). The $50,000 limit is reduced by the repaid loan amount to $43,000 ($50,000 - $7,000). Therefore, the maximum amount of the new loan is the reduced limit minus the outstanding balance on the day of the loan, which is $18,000 ($43,000 - $25,000). So for the original question: Step 1: The difference between the highest loan balance and current balance is $20,000. That number subtracted from the $50,000-20,000= $30,000 That is the step 1 limit. Step 2: 75,000*50%= 37,500. You take the current loan balance from that number 37,500-15,000= $22,500 Step 2 is lower so that is the max loan and the number you were expecting. Maybe the math of step 1 will always mean step 2 is lower if the balance is <$100,000 as noted above. I will allow someone who cares more to work that math out. However, the error in the original comment seems to be taking 50,000-37,500 vs the difference between the highest loan balance and the current loan balance of $20,000. I guess you might want to send the IRS link to American Funds and ask them why their system doesn't sync with the IRS' example.

The route that the corrective contribution follows into the plan is unimportant. What matters is that, from whatever source the contribution comes, it is classified as an employer nonelective contribution and is subject to the rules that apply to contributions of that type. If the recordkeeper remits funds directly to the plan, the transaction will be constructively a payment to the employer followed by the employer's contribution to the the plan. The paper trail is simpler, however, if the recordkeeper pays the employer and the employer pays the plan.

We have had several this year, for the 12/31/2022 Plan Year.

There's nothing wrong with letting the new group of employees participate immediately without regard to the normal service requirement. Eligibility requirements don't have to be uniform (with the obvious caveat that they can't result in discriminatory coverage).

Wow that's a good question. I would assume absent specific guidance the 2022 audit would be required to be attached to the 2023 return since the 2022 audit is just being deferred under the rule. That is it is still required. And the audit relief for plans under 100 accounts is applicable to 2023 and does not go back to 2022 as far as I can tell.

Ok - I'll take a crack at it. I don't think you have to apply both limits. Here is the verbiage from 72(p): (A) General ruleParagraph (1) shall not apply to any loan to the extent that such loan (when added to the outstanding balance of all other loans from such plan whether made on, before, or after August 13, 1982), does not exceed the lesser of— (i) or (ii) (i) $50,000, reduced by the excess (if any) of— (I)the highest outstanding balance of loans from the plan during the 1-year period ending on the day before the date on which such loan was made, over (II)the outstanding balance of loans from the plan on the date on which such loan was made, or (ii)the greater of (I) one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan, or (II) $10,000. For purposes of clause (ii), the present value of the nonforfeitable accrued benefit shall be determined without regard to any accumulated deductible employee contributions (as defined in subsection (o)(5)(B)). Since the starting balance is less than $100,000, then (ii) is "the lesser of". In my opinion, the $22,500 is the amount that the participant had available, not the $15,000. This would account for the additional $7,500 that was available on that second day ($15,000 plus $7,500). I was taught that you only need to examine the $50,000 limit when the participant's vested balance is over $100,000. Hope this helps!

If you're missing anything I can't find it. I think there is some funkiness to the results in certain ranges and circumstances. I think the intent of the rules would be to count the new loan as part of the "max in the last 12 months" but that's not how they read. I wouldn't mind being corrected.

These are always unfortunate situations. For a while we could rely on the Outbreak Period extensions, but the last day to enroll using those extensions for a HIPAA special enrollment period (including birth/adoption) was August 9, 2023. More details: https://www.newfront.com/blog/covid-emergency-periods-to-end-may-11 So now we're back to the general rules that applied pre-pandemic. A late enrollment exception typically will not be viable for multiple reasons. The main concerns are: The Section 125 Cafeteria Plan Rules; The Insurance Carrier (or Stop-Loss) Limitations; and The ERISA Duty to Follow Plan Terms and Plan Precedent. Sometimes employers mistakenly think just getting a carrier exception will solve all their concerns, but that would be a major mistake. More details: https://www.newfront.com/blog/health-plan-exceptions-part-1 There is a very rare situation where it might be appropriate to consider the informal IRS "doctrine of mistake" if there was truly a systems limitation that prevented the enrollment. That requires "clear and convincing evidence," which is a very high bar to meet. Typically employees are just grasping for something to facilitate the late enrollment without their actually being clear and convincing evidence of a systems error. Even if there is an argument of meeting that standard, you would still need carrier (or stop-loss approval) to permit the late enrollment. More details: https://www.newfront.com/blog/addressing-employee-health-plan-exception-requests-part-vii

I do not see how retroactive termination is possible. no paperwork in place. As Tom said, 1 year rule would not have been satisfied but it is a moot point, you do not have a resolution to terminate going back to 2021. You mentioned the plan is frozen for some years now. Let's assume hard freeze and no 401a26 issues (you mentioned not covered by PBGC so may have issues, up to the actuary to decide/test) Given no benefit accruals and severe underfunding the only cost is usually generated thru amortization of shortfall. Did they try the new 15 year amortization schedule as it would reduce the required contribution somewhat? Just my 2 cents.

That strategy seems dubious for a variety of reasons. The clearest and most straightforward objection to a 12/31/21 plan termination date is that plan assets were not distributed within one year, as required by Rev. Rul. 89-87. Even if a resolution terminating the plan had been adopted by 12/31/21, the termination would be ineffective, and the plan would remain subject to all requirements that apply to ongoing plans, including the minimum funding standards.

I bet you all can't wait until the government shutdown!

Not this year, but I've seen similar in past years. But it is usually with non-calendar year getting an extension only to the calendar year extended date. For example I often had a problem with 1/31 year end getting a reply from IRS saying that the extended due date was 10/15 instead of 11/15. But I haven't seen your example where the IRS grans and extra 6 months.

Filing a return and issuing participant statements does not make things final. Yes you can change the contribution and amend the return - if the plan allows for the type of contribution you are suggesting (everyone in their own group or at least owners in their own group).

For sole proprietors, the compensation is considered "earned" on December 31, but not technically determined until the 1040 is done. So the deferral deposits can be made up until the 1040 is filed. However, the owner must have made an election to defer on or before the prior December 31 because all 401(k) deferrals have to be elected before the compensation is earned. After-tax contributions have to be deposited by January 31 in order to be credited for the prior year. The Roth conversion typically takes place on the same day of the after tax contribution deposit. You as an employer can still make employer contributions up until your filing deadline. So, it's likely that all your deadlines have passed except for the employer contribution.

Does the IRS match up 1099-Rs with 5498? Do IRAs issue 5498's for transfers in from, say, 401(k) plans? if so, I would think then need to amend both the 1099-R and 5498.