Has anyone found a good comparative chart that is a resource/tool for comparing the various aspects of MEPs, PEPs, and various group plans that providers might define as an exchange or a MEAP? 

Per CPA of a married couple's plan, for self-employed, 415 contribution limit is apparently based on 'Total Income'. Total Income includes Wages and items on Schedule E such as rental and passthrough, as well as Schedule D for cap gains. The amount that was contributed for the plan exceeded what was determined to be Wages. Self-Employment tax was based on the full Total Income, can contributions as well? I hadn't seen that before. In this case it exceeds what was assigned as Wages.

Doctors' group has one main 401(k) plan for staff and each doctor has separate plan (due to historically having separate plans even though plan provisions and investment opportunities presently mimic the main plan).

Eligibility requires 1 yr of svc.

I'm wondering -  can a doctor start their own plan in the year of hire and make contributions to that plan even though they would not have been eligible to make contributions in the main plan?

Establishing new safe harbor 401(k) plan. Have established 401(k) effective for October 1st, using 3% QNEC.  Effective date of Plan January 1, 2020.

Employer mistook when the first payroll would be in October.  Instead of being October 8th it is October 1st (actual payroll date).  The enrollment meeting scheduled for September 30th, after when the October 1st payroll will be called in.  Next payroll to be paid October 15th (bi-weekly).

I see nothing except the "3 month rule".  And find no exceptions.

As we are using the QNEC for the safe harbor does anyone have an opinion on delaying until October 15th the first 401(k) deferral from employee's pay?

Any assistance or thoughts greatly appreciated.

I am curious to hear the group’s thoughts on what to do about UBIT shares (that is, shares in an S-corp that were long ago transferred from an ESOP to a non-ESOP portion of the plan in order to avoid a failing 409(p)).

Here are the ideas we've come up with so far:

1.       Have the trustee sell the UBIT shares to the employer.

2.       Provide NHCEs with a one-time, voluntary election to use cash allocated to their accounts in the ESOP portion of the plan to purchase UBIT shares, with purchased shares returning to the ESOP portion of the plan, and tracked so that they are not re-allocated to disqualified persons. 

3.       Add an in-service distribution option to the non-ESOP portion of the plan.

I am curious to hear thoughts on the following:

•        Do you read CCA 201747007 as precluding option 2?  We had a client do something similar years ago and get a determination letter on it, but that occurred before the CCA came out.

•        If all of the participants in the non-ESOP portion of the plan are HCEs, we think there’s a 401(a)(4) problem with option 3, since the ESOP portion of the plan will not offer the same in-service distributions.  We do not think Treas. Reg. § 1.409(p)-1(b)(2)(v)(B) addresses the problem. Other than adding the same in-service distribution to the ESOP portion of the plan, do you see a way out of the 401(a)(4) problem?

•        Any other ideas? If so, have you gotten a determination letter on them? 

Lifestyle spending accounts are a trending after-tax benefit consisting of employer after-tax reimbursement of lifestyle products and services such as personal coaching, fitness wear and gear,  pet boarding, personal training, etc. Employers choose a yearly maximum and only pay out documented reimbursement requests, up to the maximum limit.  Employer deducts reimbursed amounts as taxable compensation to employees.  Just wondering if anyone out there has formally classified this "benefit" as either a payroll practice, benefit plan, or addressed potential constructive receipt issues.  

I am a S Corp owner planning to set  up Defined Benefit plan. I do my own taxes. Any recommendations for a plan setup and  administrator ? I found  Charles Schwab to be expensive. Does TD Ameritrade offer full service like Schwab ? Any recommendations on Emparion? 
 

Good afternoon,

This is a "what is your shop doing?" question.  Some years back, before each participant could be in his or her own group for new comparability contribution allocations, groups were specified in the plan document.  For example "partners, family members of partners, supervisors, clerical staff, the office manager, and Top Heavy minimum participants".  Each year, we (where I worked at that time) did a document something like a resolution of the board of directors approving a specific dollar amount of contributions per group for the year in question.  We got it signed by the employer and provided them with a copy for their records.

With the advent of each person being in his or her own group, those resolutions of the board of directors went by the wayside.  The employers I worked for stopped doing them.

My current employer was wondering if that's really okay and wants to know what the rest of you are doing.  

I did look it up in Sal Tripodi's bible, and found "Written direction could take the form of a separate letter, the acceptance of a proposed allocation report that shows how the nondiscrimination test would be satisfied, or an entry in the memo section of the contribution check."  I believe my predecessor in my current position was using the part in italics above to justify not doing the resolution anymore.  We run the numbers, we test, we send the employer a proposed contribution allocation, he accepts it and makes the deposit, say, at John Hancock in accordance with the contribution report.  Later the employer gets that contribution report and the accompanying testing in the annual report for his archives.  With that, my predecessor said that was enough, and there was no longer any need for further documentation.

What are the rest of you doing?  Thank you as always.

We are looking to acquire a TPA, but want to know more about how these are priced by looking at comparable transactions. There aren't many comps with data around profitability, and so its hard to figure out what is a good price to offer. Would anyone have direct experience with M&A in TPAs that we can speak with? Thank you.

Paychex set up a non profit 401k plan.  No employer money, no loans etc.  Can they terminate the 401k and start a Non ERISA 403b?

Dr Doogie Howser (age 47) and Dr John Trapper (age 51)  are eye doctors who both own 50% each of Lazy Eye, Inc (an S-Corp).  They have 7 employees and don't own any other businesses.

They currently in 2020 sponsor a 401(k) Safe Harbor with a Basic Match.  In 2021, they will be selling their business (it's a stock sale) to another entity and the expected proceeds from the sale will be $5 Million.  The doctors are expected to stay on as employees for the forseeable future.

They want to add a Cash Balance (CB) for 2020 (before the stock sale), so that will be Year 1 of the CB.  For 2021, they will amend the Safe Harbor 401(k) to the 3% Non-Elective and it will be year 2 of the CB.  In 2021, they expect the Stock Sale to go through.  

They would like to take advantage of the transition rule under 410(b)(6)(C) for the 401(k) and to let the CB run through 2021 and 2022.  At the end of 2022, they would like to terminate the CB.  

Of course, in the negotiations, the Buyer would most likely have to agree to all of this and it would most likely effect the $5 Million purchase price of the business.  For example, lets say it's sold for $4.2 Million instead.  By doing this, the doctors would be able to shelter some money away and not have to pay taxes right away on the sale of the business.

What challenges or issues do you see with this strategy of adding the CB (assuming the Buyers are ok with this format)?  In regards to the CB, do you think the IRS would disapprove of it being used in this fashion?  This seems like a great strategy and way to take advantage of the transition rule.  Am I missing something?

Hi.  Company started 3 new welfare plans effective 1/1/2019.  Extensions were filed timely, but it was just discovered that the wrong sponsor/EIN was used on all three.  The Sponsor/EIN of our existing plan (501) was copied over and not corrected when the extensions were filed.  The correct plan numbers were used on the extensions (502/503/504).

I am ready to file the 5500SFs, but unsure how to fix this error.  Should I go ahead and file with the wrong EIN and then amend with the correct EIN?  Or should I file with the correct EIN and wait for the late filing letter?  I hesitate to use line 4 since there are no previous returns/reports filed.  Other options?

Thank you!

Is a sole-proprietorship or partnership who wants to establish a 401(k) considered a Keogh plan? My understanding is there is no longer a distinction as they are now qualified plans that include a self-employed individual. If that is the case, I would like to confirm that SEC rule 144A does not apply then to restrictions regarding the use of CIT's for these plans.

Good afternoon. Just when I think I understand the CARES Act . . .

I cannot find a thread that discusses a loan offset under the following situation, though I was sure I had read one. Please advise me of the thread if one already exists.

• The participant had an outstanding loan and was up-to-date with his loan repayments at March 27, 2020.
• The Plan implemented the CRD and CARES Act loan provisions.   Loan repayments were suspended until January 1, 2021, at which time they are re-amortized and resumed.
• The participant is a qualified individual and stopped making loan payments when the Plan offered the loan suspension. 
• The Plan permits participants to continue making loan repayments after termination of employment.
• The Plan provides that a loan is in default if payment is not made the end of the maximum cure period
• On June 1, 2020, the participant, while still a qualified individual, terminated employment and took a CRD of all his vested account, except for the outstanding loan.  

When does his outstanding loan become a loan offset:

• June 1, 2020, when he took the CRD distribution?

             No--because the Plan permits him to continue making loan repayments after termination of employment. And, the IRS has suspended loan repayments until July 15, 2020.  OR

             Yes--because he took distribution.  He can treat the entire amount, including the loan offset, as a CRD distribution. (The sum of the CRD and loan offset are less than $100,000.)

• July 15, 2020, when he failed to resume loan repayments?

              No, because he is a qualified individual and has until January 1, 2021 to resume loan repayments.   OR

             Yes, because he had 30 days after termination of employment to repay the loan and he did not.  He can treat the entire amount, including the loan offset, as a CRD distribution.       

• January 1, 2021 if he fails to resume loan repayments?

            If so, this cannot be treated as a CRD because it occurs after December 31, 2020.           

Thanks for your help.

Haven't been able to find an answer to this question anywhere:

A 50 year old client has a ROTH IRA that only has the funds that were converted from a traditional IRA (including earnings) a year ago.  The owner wants to take a distribution (no earnings) and he would owe 10% early withdrawal penalty for breaking the 5 year rule on conversion funds. 

No problem here, however, he meets the qualifications for a covid-19 distribution which are not subject to the 10% early withdrawal penalty.  Would this exemption for a CRD override the 10% early withdrawal penalty for breaking the 5 year rule?  I've been unable to find any clarification on this.  Anyone have any thoughts or cites on this?  Thanks

The 409A default rule for determining specified employee compensation uses 1.415(c)-(2)(a) compensation, items in 1.415(c)-(2)(b) and excluding those in 1.415(c)-(2)(c).

The default definition says the special timing rules of 1.415(c)-(2)(e) are not to be used. The special timing rules of 1.415(c)-(2)(e) are of two types: one type is elective, i.e. post termination regular compensation can be included if paid within 2 &1/2 months. That's clearly excluded for the default. The other type is mandatory (exclusion of severance and post-term NQ payouts triggered by termination). 

Issue: do severance and NQ payouts triggered by termination count as compensation under the default rule of 1.415(c)-(2)(a) for measuring specified employee compensation.

Example: Administrative officer terminates in January of a calendar testing year with small compensation that would not put him in the top 50. If large severance is included , he would be in the top 50 (and the result is that an administrative officer ranked #51 by compensation does not get on the list).

I have a client who began a business this year. It is an S corporation and he is the only employee. He does not plan to have other employees.

This year his salary will be $2 million. His profit after his salary will be $5 million.

He is age 55 and he plans to work for this business for 10 more years.

He does not have a retirement plan for this business or from any other employment or business. He would like to set up a defined benefit plan this year. 

He would like to know what the maximum amount is that he can fund and deduct this year. 

He feels certain that he will participate in the plan for 10 years and that his salary from this business will exceed $300,000 for 3 consecutive years.

Could anyone tell me what provision in the Code or regulations would limit him from funding his entire life-time benefit in the first year?

I am aware that under Code section 404(o), the deduction is limited to his “target normal cost”.

To my reading, Code section 430(b) and Regulation section 1.430(b)(1) define target normal cost based on the benefits provided in the plan.

Is my reading correct? If a plan provides that the entire life-time benefit is earned in the first year of participation, can the present value of that amount be deducted in the first year?

Owner owns 100% of Companies A and B; A has employees but B does not.  Company A sponsors a 401k plan in which only the owner and her spouse have account balances (yeah, I know...), comprised entirely of pre-tax elective deferrals and safe harbor matching contributions.  She wants to sell A and have B become the new Employer/Sponsor.  The FT William document that the plan has permits a participant to receive their benefit following their 'Termination of Employment', which is defined as 'any absence from service that ends the employment of the Employee with the Employer'.  

The owner would like to take advantage of her upcoming 'employment termination' by taking a distribution from the plan and rolling it into her IRA.  Company B does a different type of work than company A did, but they are in the same general industry.  I mention this because I recall something about a  'same desk rule' and am not sure if it still applies here.  Can she receive a distribution like a terminated participant based on the above information?

Good afternoon!  A client just asked for something I have not heard about before (not that this is unusual)!

They don't like failing the ADP test and making refunds to the owner of the business.  They won't adopt a Safe Harbor contribution formula.  Instead, they want to know if an ADP test refund can automatically become a non-deductible contribution and remain in the plan instead of being refunded to the owner.

I have never heard of such an arrangement but that doesn't mean it doesn't exist.  Does anyone have some insight on this?  Thanks in advance.

A Terminated Participant would like to request a CRD in lieu of the Terminated Participant Distribution, I suppose to waive tax withholding.  The Plan permits CRDs.

Are Terminated Participants who terminated prior to 2020 permitted to request a CRD? Thank you