How do you calculate the owner's comp in a short plan year?

Doctor gets Schedule C, but is terminating Safe Harbor plan on 10/31 and wants to close up the small plan before EOY 2020..

How is her compensation calculated?  Is it zero b/c it's not determined until 12/31?  Or do they have to wait until next year and take 5/6 of the net income?

Hello I just had a quick question in reference to 457 Plans or 401(a) plans. Is the plan's fund lineup required to provide a Stable Value Fund or Money Market Account as one of the options?

Client has a side company - one person S Corp.  He works full-time for another employer where he contributes $10,500 to his 401k plan.  He wants to set up  a 401k PSP  for 2020 if possible for his S Corp.  Would it have to be effective 11/1 or could it be 1/1/2020 but  only defer on compensation paid after 11/1?  I assume he would be limited to $15,500 (he's over 50) ....Does the plan have to be adopted by 12/31 or before in order for him to defer on his w-2 wages from 11/1?   

Defined Benefit Pension Plan non-owner participant is age 75 and terminates on 12/31

Suddenly I'm confused if there is an RMD requirement for year of termination (due by 4/1 of next yr) or if pension payments can simply begin 1/1 of subsequent yr?

Since Code M was recently implemented, what if the TPA did not use code M for loan offsets (the regular codes 1, 2, and 7 were used instead). Should these 1099-Rs be amended to include Code M?

Thank you.

I am a software consultant. I work through my LLC. My LLC has a 2 Solo 401K plans. One Roth and another one traditional. I contribute $19500 to the Roth account and 25% profit to the traditional account. My wife is a housewife and doesn't work. Can she also contribute to any Solo 401K (I will give her money to contribute) ? Do we have any options ?

Please advise.

Claims Admin Caused Breach that affected multiple Covered Entities, including over 500 individuals in totality.

client is one Covered Entity but the breach only affects 20 of its employees.

Does my client need to send out a public notice for the 500+ individual breach? I.e. is the 500 individual notification requirement aggregate all individual affected, even if they are from separate covered entities? 

My ex and I divorced 8 years ago. He never would file QDRO paperwork so I, as alternate payee, could receive my portion of benefit set out by law in divorce decree from Ford directly. Instead he pays me every month for 8 years.  His benefit is reduced when he reaches 62. Finally he begins the process and files paperwork with Ford.  QDRO department tells me my portion is being held aside every month it takes during approval process.  They tell me twice that my funds are there for me.  It's been a year.  Ex stopped paying me when paperwork filed and said my amount was being held aside for me, as QDRO department says.  It finally gets to pension department for the payment and they see employee amount has been reduced since 2019 and it shouldn't have  been and send check to him.  His amount was reduced by virtue of the QDRO process.  Why would pension department change what QDRO department set in motion.  I believe they got dates mixed up.  My amount started accruing for me in Oct 2019 and it's been a year and finally it went through all departments and pension sends MY accrued benefit to my ex...WHAT?  It's like the departments do not talk, but to straighten this out, QDRO needs to communicate with Pension.  Can anyone PLEASE HELP ME???

I know the general rabbi trust template (and many others based on it that I have seen from trust companies) says the trustee will make all distributions to participants and report/withhold. Others say (and in my experience this is what the sponsors often do, regardless of the trust terms) the sponsor may pay the benefits directly and request reimbursement from the trust. 

Sponsors paying directly and requesting reimbursement usually cite the inability for the payroll systems to accurately record a direct payment from the trustee for W-2 reporting.

In the former case, where the trust makes the payment directly, what exactly do they report to the IRS and how does that information get reconciled with the sponsor's payroll system?

Thanks in advance for any insight.

Interesting question - suppose a plan has an eligibility requirement of (x) hours in the first 6 months of employment, and if not met in the first 6 months, the employee becomes subject to the 1 Year of Service requirement.

Now assume the employee works 5 months, then due to Covid economic issues, the employer furloughs this employee (and others) for a period of time - let's say 3 months.

What's your opinion on an employer granting eligibility service while furloughed due to Covid, operationally, and allowing them to enter as soon as reemployed?

P.S. - my point in all this is to see if there is a way around amending plan to use elapsed time. I don't see that the pre-approved document language is flexible enough to handle an amendment to credit hours of service service while furloughed, other than sideways through elapsed time if they aren't furloughed too long. And FWIW, just doing it operationally without appropriate document language, while "nice" of the employer, doesn't seem like an acceptable option.  I suppose it could be submitted under a 5307, and I'd be surprised if the IRS would reject it, but it's a pain, costs more money, and hard to know how long it would take.

I forget if I asked this before, but are Top Heavy contributions subject to coverage if that's the only ER contribution?

Hypotheical:

Plan is 401(k) only.  Does not allow for match or ER discretionary contributions

1 owner, 10 NHCE/non-keys.  Everyone eligible for 401(k) BOY.

4 NHCE quit in summer.

Plan is Top Heavy. 

So, only 6/10 EE's get Top Heavy.

Do I have a coverage issue?  How do you get around that if I do?

Ran across a situation where in order to avoid a 410(b) failure, must make a profit sharing contribution for a terminated participant who is 0% vested.  The plan is top heavy and has never made a profit sharing situation before.  The required contribution is over the $5k involuntary cash-out threshold.  What are the options for how should the plan handle this circumstance?    Hope that the balance falls below $5k so they can force the participant out?  Wait until the plan someday terminates and the funds become 100% vested?  Any ideas are much appreciated. Thanks.

Scenario #1

MEP adopter terminates services with MEP effective 1/1/2020.  Per agreement, once termination occurs, they immediately are no longer eligible to contribute to MEP.  New plan is not effective until 5/1/2020. It is established as a new plan with a short plan year in the document.

Can the employer withhold contributions from 1/1/-5/1/2020?  I am assuming no since there was not a "plan" in place.

If the answer is no, if the employer withheld contributions, what should the ER do with them?

Since there is a gap in the time from leaving the MEP to the new SEP, how does this impact testing?  Would HCE determination be from 5/1/18-4/30/20?  What about prorating the compensation limit?  For top heavy, would the 12/31/20 balance be used for 20 &21?

Scenario #2 

MEP adopter leaves the plan effective 4/30/2020, New Plan is established 5/1/2020.  Document indicates it is a short plan year for the first year.  How does impact testing? HCE determination.

Do we test contributions from 1/1-4/30 under the MEP and only test contributions from 5/1/2020 through 12/31/20? 

If one spouse is eligible for a Retiree HRA and the other spouse for herself or both of them has access to a HDHP with a HSA, if one or both of them uses the HDHP/HSA, must participation in the Retiree HRA be suspended for one of both until such time as neither is participating in the HDHP/HSA or in any HDHP plan year only until such time as the deductible and all required first dollar payments for the HDHP are made through the HSA or other resources?  

Retiree HRA document is being drafted and the drafters are not clear on what is required so your thoughts are eagerly solicited. Thank you!

In September, I did a lost earnings calc on the VFCP site with these figures (among several other entries):

Principal: 12,132.67

Loss Date:  4/29/2019

Recovery Date:  5/2/2019

Final Payment:  9/28/20

Amount Due:  $6.40

But, they never made the correction, so I'm re-calcing the interest with a Final Payment of 10/28/20 this time.  I entered:

Principal: 12,132.67

Loss Date:  4/29/2019

Recovery Date:  5/5/2019

Final Payment:  9/28/20

Amount Due:  $12.83

Notice I made a small mistake.  The Recovery Date is 3 days later.  And the amount due is MORE THAN TWICE AS MUCH!

When I run the original figures again with 10/28/2020 Final, it gives me the $6.40 again.

Does it make sense that a Recover Date merely 3 days later would result in a 100% higher result?

Non-profit has a 457(b) plan and 401(k) plan. They want to terminate the 457(b) plan and have the assets distributed to the participants (2 executives). One of the executives would like to contribute pre-tax salary deferrals to the 401(k) plan from the 457(b) distribution. The definition of compensation in the 401(k) plan is W-2 plus pre-tax deferrals. The executive is arguing that the 457(b) distribution is reported as W-2 wages and I can't find anything that says it can't be done - it just feels wrong. Does anyone out there have something that either supports or opposes the executive's position? 

Employer wants to reduce the deferred compensation benefit paid at termination of employment from $2.5M to $2M?  Is this permissible if we keep the same time and form of payment and the parties agree?  The 409A regulations (26 CFR 1.409A-1(c)(3)(vi)) envision that it is permissible to increase the benefit but I do not see any express approval of reducing the benefit.   

I have a staffing firm that has internal employees (work in the office) and around 200 external employees that work on jobs about 9 months out of the year, work over 1000 hours.  They all get W-2 wages and health insurance.  They want to start a 401k plan but want to exclude the external employees (known as contractors) and only have the  internal employees be part of the plan.  I am thinking they cannot do that since the "contractors" are getting W-2 wages and work over 1000 hours and some may work 12 months within a 12 month period.  The staffing firm says other staffing firms are able to have a 401k plan and not include their external employees (insist they are W-2 waged as well).  Am I missing something?  Wouldnt they have to be included if they worked 12 months, 1000 hours (some leave and come back within 12 months)?

They would not pass coverage testing if they exclude the so called "contractors".  There are about 20 eligible and there are only 6 internal employees.

I keep reading that contractors can be excluded - but arent most 1099 waged not W2?  How are staffing companies excluded contractors that are W2 waged?

Thanks

We have a new client who has come to us to establish a 401(k) plan.  The entity is a Community Land Trust.  I have not encountered this type of entity before.  Can they establish a plan?  Thanks in advance for your input.

So, a profit sharing plan needs to define a "Contribution Formula" and an "Allocation Formula" in order for the plan's contribution to be definitely determinable. In many plan documents when you select a new comparability - each employee is own group formula, no additional "method" on how to allocate the contribution formula is required. For example, no additional input is required to establish if each group will receive a flat dollar, % or the greater of the two.

However, its different when we select new comparability - groups, documents tend to make you establish in the plan document whether the contribution formula will be allocated via flat dollar, % or the greater of the two.

I can reason why this may not be required for new comp - each employee is own group. But my question is this, is it actually required that the plan document define in new comp - groups that each group will be allocated the contribution based on flat dollar, % of comp or the greater of the two? Couldn't that simply be provided in writing to the plan administrator to satisfy the definitely determinable requirement?