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From the 5500-SF instructions:

Yes. But administrators and recordkeepers have good reason to insist on percentages. If the designation is "$100K to A, $100K to B, and the rest to C" but there is only, say, $50K in the account, nobody wants to be stuck trying to interpret that.

If you have access to "Who's the Employer" by Derrin Watson, I have found it to be a very valuable and accessible resource for researching these kinds of questions. The original question was about attribution of ownership for HCE determination purposes; keep in mind that HCE determination uses attribution under section 318. IRC 318(a)(2)(B) contains rules about attribution of ownership from trusts.

As a Florida based practitioner, I have been through this many times. While then IRS is supposed make the determination based on zipcode, they still sent proposed penalties to many in the disaster area. It has been hit or miss for years. Sometimes the IRS love letters show up before the extended due date, some times they show up after you file. You can send the IRS a flash drive with a list of clients affected by the disaster, but I have found that this doesn't help much. Things that work more often than not: Put the FEMA disaster declaration in the "Special Extension" description. This will be disaster and state specific. For example, DR-2848-FL is the Florida disaster declaration for Helene. Add an "other attachment" to your filing and attach he IRS disaster notice to your return. You won't find this in the instructions or any of the communications, but I have been told by both IRS and DOL staff that this will reduce the chances of an agency follow up. If you are using YOUR location as a reason for the extension, use an "other attachment" to add the explanation that while the client was not in the disaster area, the practioner was, and that is why this client is entitled to the extension. I hope this helps.

Subject to the terms of the plan document, beneficiary designation and allocation details are usually left to administrative procedures. While on the one hand, that means that amendment is less cumbersome if administration is friendly to participants. On the other, in these days of computer administration, the system might be rather limited and inflexible about what it will accept. Thank the provider for its self-interested off the shelf arrangements. That said, an accommodating human administrator might dread the confusing, inept, and ambiguous designations and allocations that inexperienced drafters come up with. A retirement plan is not meant to be a vehicle for fine-tuned estate planning. Who wants to struggle through difficult interpretation?

It's probably merely a warning, not an actual error. If you have read the instructions and you are confident that you are eligible to file Form 5500 (and not required to file Form 5500-EZ) then I would say proceed.

About your description of the facts: You mention that the corporation’s president and secretary are trust beneficiaries. But are they the only trust beneficiaries? Are the two beneficiaries spouses? Are the two beneficiaries otherwise related? Is either of the two beneficiaries also a creator or grantor of the trust? Are both? Is the trust irrevocable or revocable? What rights (if any) does the trust’s creator or grantor have? Is the trust a grantor trust for Federal income tax purposes? Does a beneficiary have a withdrawal right? Does a beneficiary have a right to a current distribution from any portion of the trust’s income? Does a beneficiary have a right to a current distribution from any portion of the trust’s principal? Does a trustee have a discretionary power to distribute any income, or any principal, to a beneficiary? Do any of the trustee’s powers differ regarding the S corporation shares and the trust’s other investments? Do any of a beneficiary’s rights or beneficial interests differ regarding the S corporation shares and the trust’s other investments? Those and other facts might matter in how one translates trust powers and beneficial interests into deemed ownership of the corporation the trust holds. Consider 26 C.F.R. § 1.1563-3(b)(3)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.1563-3#p-1.1563-3(b)(3)(i). This is not advice to anyone.

Whether a plan’s administrator would follow such a beneficiary designation might turn on the plan’s governing documents and the administrator’s application or interpretation of the plan’s governing documents. Some plans state that a beneficiary designation must specify shares of beneficiaries only by percentages. Other plans might let a participant specify her beneficiaries’ shares by a formula, if it can be applied using only simple arithmetic and without using information beyond the plan’s records. Many plans’ documents are ambiguous about what is allowed or precluded. Some plans’ document call for the plan’s administrator to set a procedure. If your client is the plan’s sponsor or administrator, discuss with it what it prefers to allow or preclude. Further, if the plan’s administration makes and keeps beneficiary-designation records in a service provider’s system, consider that the software might constrain an entry to a percentage. If your client is the participant who would make the beneficiary designation, consider suggesting that the participant ask the administrator whether it would follow the beneficiary designation. If an employment-based plan doesn’t support what the individual wants, consider a rollover to an Individual Retirement Account trust (not a custodial account) with a trust company that regularly works with estate-planning and other not-simple beneficiary designations. This is not advice to anyone.

Evaluate the trust’s governing documents and relevant law to discern each individual’s beneficial interests (and creator’s rights, if any) under the trust. Assume the trustee and each other fiduciary would exercise its discretion in the beneficiary’s favor. Consider whether the trust is a grantor trust. Consider at least Internal Revenue Code sections 671-678, 1563, and 2031, and the Treasury’s rules and the IRS’s guidance interpreting those sections. Consider rules for a trust that can be an eligible shareholder of subchapter S corporation. Consider how the trust’s income tax returns have described and will describe each beneficiary’s proportionate share of the trust’s income. This is not advice to anyone.

If they are not >5% owners they are not consdidered HCEs based on the salaries you mention. The officer test only applies to determining who is a key employee.

This is an easy fix. If you talk to someone at the bank that works with IRAs, they should be able to fix it quickly and easily. Depending on who you connect with, it can get hairy- but it shouldn't if you get to the right person.

Part of the confusion might be that there are two different 5 year rules. The one used to determine if there is qualified Roth distribution is one clock per Roth account, even if the Roth account has separate sub-accounting (which is one of your Qs: it’s just an accounting). The clock starts with the first deferrals, in-plan Roth rollover or designated Roth employer contribution. Whichever is first starts the clock for determining if the earnings can be distributed tax-free. Separate accounting is used to determine when an amount can be distributed. For example, Roth deferrals generally can’t be distributed prior to 59 1/2 but an in-plan rollover might be distributable sooner, depending on the plan and the source of the rollover. The second 5 year rule is an anti-abuse rule relating to the 10% early tax. It’s referred to as a recapture rule. The rule only applies to in-plan Roth rollovers. Normally the 10% tax is based on the amount includible in income. Roth is after-tax so the 10% tax would only apply to earnings, if it’s not a qualified distribution. But suppose I have a pre-tax account, I want an early distribution and don’t want to owe the penalty tax. I do a Roth rollover and pay normal taxes. At a later date, I then take a distribution from that account. I don’t owe the 10% penalty on the basis. Or maybe I do. Congress plugged the possible abuse by imposing the 10% penalty on the basis if the rollover was done within a 5 year period prior to the distribution. For that rule, each in-plan Roth rollover has its own 5 year period. 2010-84 Q&A 12. I don’t see anything in SECURE 2.0 indicating that the recapture rule applies to Roth employer contributions.

The answer is no, can't have a YOP for 415 when a plan is frozen. There are many work arounds to your situation but the devil is in the details of what your document says on 436 restrictions and the timing things are done. But you can easily amend at some point to pick up the lost 415 years, something like .50% x YOP up to 10 which won't even have an impact on the accrued benefit. Can do it differently if you want an increase, but need to satisfy any 436 rules on amendments. If you intentionally freeze an owner only plan best practice is to instead use .50% of pay formula x 10 YOP to continue to pick up 415 YOP. Or amend when you terminate.

Hi there. We are a TPA in CA, and we have just one client in Clearwater, FL. I haven't been able to reach them to sign their 5500, likely because they don't have power yet. I read an article here on BL about the IRS Hurricane relief for federal returns that the IRS announced yesterday. It is true that most counties in FL are being granted Milton relief to May of 2025, but only int he following stated counties so far: Broward, Indian River, Martin, Miami-Dade, Palm Beach, St. Lucie, Brevard, Clay, DeSoto, Duval, Flagler, Glades, Hardee, Hendry, Highlands, Lake, Nassau, Okeechobee, Orange, Osceola, Polk, Putnam, Seminole, St. Johns and Volusia. It is my hope that they can sign and send back to me soon, but if they can’t then I think they will likely get an automatic notice from the IRS in a few weeks to months saying their 5500 was late / delinquent. In that event we will have to respond to that notice with an explanation of why they were without power and couldn’t sign on time; and hopefully the IRS is understanding. That's how this California TPA is handling it. Stay safe!

I don't think unlawful is the right word. You won't get arrested for this... just lose tax status.

IRC 401(k)(2)(B) Also, paragraph 1.401(k)-1(d) of the regulations.

It's odd, it actually says they can file by paper for the 2024 taxable year. It doesn't say that filers can do so for the 2023 taxable year!

The deadline to make voluntary after-tax contributions is 30 days after the end of the limitation year. 1.415(c)-1(b)(6)(i)(C) Assuming limitation year = plan year = calendar year, your client missed it by a couple of days.