401k plan with 3% SHNE + Integrated Profit Sharing

Has a last day and 1000 hour requirement - Two out of the three NHCE's terminated with over 1000 hours worked in 2021.

Two HCE's - both max 401k and get 3% SHNE and then and integrated PS - one HCE above wage base so slightly higher percentage on the PS cont.

HCE 1 non-elective = 3% + 10.28% = 13.28%

HCE 2 non-elective = 3% + 7.38% = 10.38%

NHCE 1 non-elective = 3% + 7.38% = 10.38%

NHCE 2 non-elective = 3% + 0.00% = 3.00%

NHCE 1 non-elective = 3% + 0.00% = 3.00%

Plan passes 410(b) ratio at 100% because all are getting a non-elective.  But my question is do I have to now test the plan for general non-discrimination because two of the three NHCE's are only getting the 3% SHNE and no profit sharing?  

It will not pass average benefit percentage part of non-discrimination because HCE 2 is a spouse of HCE 1 and defers at a rate of 70% 

I was thinking there is a multiple formula rule that exists when something like this presents itself - even in what is otherwise a "safe harbor" allocation of the profit sharing which integrated with SS would fall into.  

Hi

I have a confusing situation I have never seen it before.

John, LLC (filing as a single member) provided me with the 2021 schedule. This is the entity sponsoring the pension plan.

I was just informed that, the LLC is a 16% partner in a totally unrelated entity (assume no CG and ASG issues at this time). 

Net C amount was 150k but the K-1 received from the partnership show loss of 50k income. This loss was not reflected on the schedule c.

When I was provided the SE tax form, the SE calculations were based on 100k.

Has anyone seen a situation like this?

Currently I have no other information and asked about the nature of the partnership income.

What am I missing here and what should the income be for pension purposes?

Thank you

A Partnership sponsors a 401(k) plan. There are 3 physicians who are partners and they have about 10 employees who are also participants.

There is a new physician who is also now a partner, except rather than him, his partnership interest is owned by his S-Corporation. His S-Corporation is now a participating employer in the plan.

The 404(a) deduction for employer contributions to the plan is 25% of the compensation of all eligible participants.

Question:  Is the S-corporation subject to its own 404(a) deduction limit of 25% of its employees? In other words, suppose the new physician is the only S-corporation employee and he has W-2 salary of $100,000. Is his deduction limited to $100,000 X 25% = $25,000 or is his $100,000 salary added with all other participants of the plan and that total is subject to the 25% limit?

Thanks.

Insurance company has agents that are 1099 contract employees..  These 1099Agents are not covered by the Insurance Agency's 401k plan nor other benefits of the insurance company and want to start their own 401k plans.  The 1099agents also lease employees from the Insurance Agency that are licensed employees.  The agent has control over these employees daily activities but ultimately the right to fire or hire the actual employees is really up to the larger insurance company. 

Trying to determine if the employees that are leased to the agents should or should not be included in the plan and what questions I'm forgetting to ask!   

Here's a 401k- safe harbor- profit sharing plan where every eligible participant can defer and also receives 3% safe harbor non-elective contribution.  The doctor wants to give himself and spouse up to 6% profit sharing non-elective contribution and 0% to staff.  This formula passes 410(b) Ratio Percentage Test, Rate Group Testing and General Test Average Benefits Test by aggregating non-elective and SHNEC.  And Gateway is met with 3% to NHCE and 9% to HCE - 1/3 test.  Seems discriminatory, testing says otherwise.  Anyone have experience with this?  Thanks!

Is spousal consent required to process an RMD?  I have one being held up by the custodian, due to needing spousal consent. 

Thanks in advance, and if you could let me know where in the regs I can pull the info I'd appreciate it!

Purchaser wants seller's 401(k) Plan to be included as party to an asset purchase agreement. The 401(k) holds a significant amount of seller's stock and purchaser wants the 401(k) plan (or trust I presume) to be party the the agreement as a shareholder. This would include the Plan making reps and warranties related to seller's business.

Is this allowed? I have significant concerns with this - first from a fiduciary duty standpoint, but also because the plan cannot make reps and warranties related to the business as the Plan has no knowledge. But purchaser's counsel is pushing back. 

Has anyone seen this before? Am I off base? 

Hi. For 2021, What is the Max PS contribution in these circumstances. 1 person plan, S Corp, age 38, maxed out 401(k) deferrals of $19,500, W2 of $25,500.  I thought 20% X  $25,500 = $5,100.  This Contribution Calculator at https://www.calcxml.com/calculators/qua12 says max PS is $4740.  (If anyone tries out the online calculator, select self-employed, not Corporation, to get the S Corp quote)

So I have a client where the owner earns wages/self employment income from all 3 companies (a construction company, an architectural firm, and a real estate firm) in a controlled group.  This is the first year that all 3 companies have adopted and become participating employers in the SHNEC 401(k) Plan.  The construction company was the original plan sponsor and where the owner has always (and did this year) taken his deferrals.  

My question then is whether the owner will end up with a SHNEC in each company since he has income from each company and is a participant per the document and participating employer agreement for each company?  I know for testing purposes he wouldn't have to but to comply with document provisions it certainly seems as if he does.

There are also a handful of overlapping NHCEs in the 3 companies each of whom receives income from each company - I assume they would also each receive a SHNEC for each participating employer.

Am I thinking of this wrong?  I certainly don't think this is the result the owner was anticipating when he and the advisors decided to have the other companies adopt the plan (especially as it relates to the handful of NHCES).

Thank you.

There is a rumor going around that those disclosures are due by 6/30/2022.  Is that correct, and how is that even possible?  Some of those plans we don;t get census data in a timely manner, etc. so may not be in a position to issue statements until say October 14th.

Thoughts?

This post is intended to gather the groups thoughts about auto enrollment to pretax or Roth. Let's assume the document allows for either choice. 

Among our clients who auto enroll, 100% auto enroll with pretax. At the time of making the decision to auto enroll to pretax, there is no analysis done to determine if it should be pretax or Roth. The decision is always made solely based on the idea that pretax is most common and therefore must be the right decision. I feel like no one wants to be the first one sued over a Roth default. Even though pretax is the most common default and little thought goes into the decision, a decision is still being made by the sponsor to determine that pretax is better and more prudent than a Roth default. Either choice impacts the participants tax situation. 

Does anyone see auto enrollment to Roth among your clients? I think there is a valid argument to say Roth auto enrollment may be better for certain employers. Are there any publications that suggest auto enrolling to Roth is not a prudent decision?

Thanks for your thoughts.

Hi, 

I have a plan that is terminating due to asset acquisition, the sale date was 12/31/2021 however they had a transactional service agreement due to which the participants are contributing until 04/30/2022 and on 05/01/2022 there will be part of the acquiring company plan.  The termination date will be 04/30/2022, since the part are still contributing into the plan we will not be able to start the termination process.  When there is a TSA I thoughts its only for administration reason but did not know the part could contribute into the plan, can the contribution continue? 

Thanks 

Accountant is checking as to whether his client could have taken COVID distributions from his SEP as well as from his defined benefit plan.

Distributions both taken prior to 12/31/2021.

Client was talking about taking a plan loan, which we thought never materialized; I can only assume the client had taken a loan prior to September 30th and has not started repaying.

Too late to do anything about it now.

The EGTRRA volume submitter DB plan had a failsafe provision that covered both 410(b) and 401(a)(26) failures. The PPA document only addressed 410(b). I couldn't find any guidance from the IRS in the Cumulative List that addressed this change. Does anyone have any cites or guidance as to why the reference to 401(a)(26) was eliminated from the VS document?

Following Vanguard’s announcements about renaming and reorganizing Vanguard Prime Money Market Fund as Vanguard Cash Reserves Federal Money Market Fund, a recordkeeper and the custodian it works with processed the changes for their retirement plan customers—without advance notice to those plan sponsors.

A retirement plan’s sponsor/administrator received no prospectus or other fund document from any Vanguard service provider. (That happens because a fund’s duty is to deliver a document to its record shareholder. Even if a fund might volunteer to send some communications to beneficial owners, often a fund cannot do so because it might lack names and addresses for beneficial owners.)

About this reorganization of a Vanguard fund, neither the custodian nor the recordkeeper asked for their customer’s approval or acceptance, not even as an implied-assent “unless you instruct us otherwise” email. Further, neither the custodian nor the recordkeeper did anything even to inform a plan’s sponsor/administrator about the change before processing it. (Arguably, a diligent fiduciary ought to have asked a question after reading the first employer report that showed the new fund name.)

I recognize the practical needs for a recordkeeper and custodian to follow a fund’s change (if the plan’s sponsor/administrator has not delivered a different instruction).

But is it usual for a recordkeeper to process a fund’s change with no advance notice?

Is this the common practice for all or most recordkeepers? Or do some provide more service?

If a recordkeeper’s standard service does not include informing employers about fund changes, in what circumstances is it feasible to negotiate an extra service?

Section 318 attribution applies for determining ownership for ASG and HCE purposes.  Can a child be an HCE through attribution if the child is not an employee?

Example:  Company A is owned 95% by father, 5% by unrelated individual.  Company B is owned 100% by adult son.  Company A and Company B are both service organizations.  Company B receives 80% of revenue from Company A.  Child is not an employee of Company A.

Under the B-org definition of ASG, child is deemed a more-than-10% owner of Company A (the FSO) but is he deemed an HCE of Company A?  He is deemed a 5% owner for HCE purposes but he's not an employee. 

All other requirements of B-org are met.  Is there an ASG?

Thanks for your comments.

Plan is effective 1/1/21, but deferrals are effective 7/1/21.

per doc, match is cal'd on a plan year basis.

Do we calculate the match using all the comp, or just the comp after 7/1?

Quick question:  Is my understanding that the annual additions limit is a "per employer" limit such that an individual may receive contributions up to the annual additions limits in two different plans of two different, unrelated employers in the same year?  If so, does that change at all if the individual is a partner in two partnerships and so is self-employed?

Situation involves a lawyer who was a partner in one law firm for 3/4 of 2021 and had enough income there to receive a profit sharing contribution and 401(k) deferrals equal to the 2021 annual addition limit under the terms of Law Firm 1's plan.  Lawyer then moved to a second, unrelated law firm and had significant compensation there--not enough comp to receive full profit sharing under Law Firm 2's profit sharing plan but still a significant profit sharing contribution--and wants to receive profit sharing contributions across both plans.  Lawyer realizes the 401(k) elective deferral limit is per individual and so is capped across both plans (did not participate in 401(k) at Law Firm 2) but is there any similar concern with the profit sharing contributions being capped or can she receive all the Law Firm 2 profit sharing to which she is entitled even though already hit the annual additions limit at Law Firm 1?

Thanks.

PS Plan has no allocation requirements for contribution. Participant terminates in December of 2020, has eligible post-severance comp the next year (2021) so receives 2021 allocation, but has zero hours.

Would you include in coverage testing for 2021, or toss out? I'd include - I don't see how this meets the 410(b) requirements for the term w/<500 hour exclusion. A bit of discussion going on with this question.

Thanks for any opinions.

Hi

A one person employer has a 401k plan and for 2021 already put in max deferral and PS and also filed the corporate tax return by 3/15/2022.

Now wants to set up a DB plan for 2021 but take the deduction in 2022 (given the level of 2021 salary, the 31% rule will yield only 9k of DB maximum for 2021 but 2022 will have a high enough cushion to have 2021 and 2022 deduction).

If the corporate return is filed without any extension, too late to amend for 2021 and have a low DB deduction as well as adjusting any other deductions, correct?

If filed with extension, can he go back and redo the deductions (2022 will be an issue as well but easier to deal with).

Thank you