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Schedule SB is used to designate a contribution for a particular year for 430 (minimum funding) purposes. There is no indication on the SB for which year a contribution is designated for 404 (deduction) purposes. There is no requirement that the 430 and 404 years be the same for any given contribution; if the timing permits, you could count a contribution towards 2023 for minimum funding but 2024 for the deduction. If the timing of the contributions was such that they couldn't be counted as a 2024 deduction (for example, if they were made before the end of the 2023 tax year), and the amount of the contributions exceeds the 404(o) deductible limit, the sponsor may want to consider making a IRC 4972(c)(7) election to avoid the excise tax. The non-deductible amount would have to be carried forward and deducted in the next tax year.

The TPA is providing an amendment to plan sponsors with instructions (don't give this back to us NOW, wink wink) on how to circumvent the funding rules and in practice give them impermissible discretion on their funding, not to mention violating ERISA 204(h) if plans are not owner-only. How is this OK on any level? Amendment to freeze with proper notice as a "just in case" and then amend later to unfreeze, sure, I think that flies under certain business conditions as a one-off. However, I think doing those on a somewhat frequent basis in practice creates an impermissible profit sharing or cash or deferred arrangement.

Yuck. Tell him to roll his own money to an IRA and make the investment and not taint the plan.

Sounds to me like you have a good handle on the situation. Not sure there is anything "wrong" with it, depending on how it is presented. If it is truly, "sign it now but don't tell anyone", that is clearly wrong, but it is, "here is an amendment in case you need it", that might be ok. You are correct that 204(h) notices would be required, so if they weren't included, then they have a different problem. There are fines for not issuing 204(h) notices. Seems like a fairly large expense for the TPA to produce and send amendments when the sponsor didn't request it, but maybe it is all built into their pricing model. Is it better to back date an amendment, or to sign it timely without the intent to implement - both are unethical. I might feel different if it was a 1 owner plan vs. a 2 person plan with one owner and 1 staff.

For the first plan year only, the audit requirement is based on the number of participants with a balance at the end of the year.

Strictly speaking, you only get a free pass on general testing if the plan is a design-based safe harbor, meaning that the safe harbor allocation formula is required in the plan document. If the plan document says each participant is in their own group, then you do not have a safe harbor allocation formula and you need to run the general test. However, if every participant who benefits is getting the same allocation rate, then the test should pass easily on allocation rates, no cross-testing required.

The funds were distributed, which they should have been, regardless if they were an actual benefit payment, or as an ADP refund. The plan just has to do two 1099-R forms bifurcating how much counts as what, and then since the IRA has money it shouldn't in there, the IRA owner will need to get it out or face the penalty for an ineligible rollover contribution.

There are some US cities that have a fixed percent withholding, which is done at the payroll level, probably with no corresponding "tax return". Just my guess, those local statutes refer to wages, or salary, or overtime, or earned income, or W-2 compensation, or something similar. That is, it's a tax on wages. I would be surprised if any referred to payment from a qualified plan. BTW, the original question appears to assume taxation might apply to a periodic distribution from a DB plan. If that is subject to taxation, why not some taxation for distribution from a DC plan? And how would such a statute deal with amounts that are rolled over? Or made due to death or disability?

I know some but not all states have mandatory tax withholding on retirement plan distributions, and others have voluntary withholding, and I have seen where RKs may only accommodate mandatory requirements. I have never run into a situation where there is mandatory tax withholding at a local municipality (e.g., city) level. If there were any, I'd be shocked if any RK accommodated such unless maybe they were also located within such jurisdiction and had the local tax reporting infrastructure already in place.

Sign and retain? If @Effen is skeptical (rightly so), this appears even more (agreeing with his word) unethical. No, I think there are several stronger words that apply.

Maybe it's just me, but it seems Jane might want (in addition to the "due on sale" aspect discussed above) some other reward, soon, perhaps even an annual cash bonus. Perhaps Jane could engage the services of a good compensation consultant (one who is selling only his/her expertise, rather than a product), or an ERISA attorney.

There is not enough common ownership to create a controlled group. So, the question is, does there exist an affiliated service group? A, B, and C are all automatically service organizations because they are in the field of health. There is common ownership between A and C and between B and C. The questions you need to ask are: Does A regularly perform services for C (or does C regularly perform services for A)? Are A and C regularly associated in providing services to third parties? If the answer to either question is yes, then you have an affiliated service group. There are no quantitative tests to answer these, they are facts-and-circumstances determinations. If your client is unsure, they should hire a qualified ERISA attorney to provide an opinion. Even if an affiliated service group does exist, that does not necessarily mean that A's plan needs to cover the employees of C (or B), it just means that those employees need to be included in testing. If A's plan could pass testing without benefiting those employees then they do not need to be covered.

No. The 4 percent rate is only available to electing large employers. [I.R.C. 408(p)(2)(C)(IV)] Otherwise the "applicable percentage" rate is 3 percent. [See I.R.C. 408(p)(2)(C)(ii)(I), therein lies the answer. go no further.] Hope this helps.~~Gary Pretty dog.

I don't think the SB makes a distinction between deductible or non-deductible. I believe you would report them as contributions, assuming they are in the Plan Year and not post year end which could be dealt with in the following plan year. Then you either have carry forward balances to maintain or a plan that likely has a very small MRC until you eat up the excess in future years. Then you would report the nondeductible contributions on Form 5330.