100% owner of an LLC business that has a 401k plan also has two household services employees (W-2).  Do the two household employees count as employees under the control group rules, or is there an exception where their employment is not in the pursuit of a profit? 

Facts:

Single member LLC with no employees other than the single member.

Properly formed pension plan, and properly formed 401k/profit sharing plan.

IRS opinion letters issued with respect to both.

Plan contributions made timely and in allowable amounts.

The Single member LLC has filed for bankruptcy

Issue:

The trustee in the bankruptcy case has said that (i) under the US Supreme Court decision of Raymond B. Yates, MD, PC Profit Sharing Plan v. Hendon, a single member LLC having no employees other than the member cannot have a plan that is ERISA qualified, and (ii) if the plan is not ERISA qualified, then the plan cannot be tax-exempt under IRC sections 401 and 501 (and as a result cannot be claimed as exempt in bankruptcy).

Question:

I agree that a qualified plan that does not cover any employees (just the owner) is not subject to ERISA.  However I think the logic is flawed that if they are not covered by ERISA then they cannot be tax-exempt under IRC 401.

Does anyone have an opinion on this? 

Participant had 20% withheld on full distribution.  However - part of the distribution was for Roth money which was not taken into account and the full distribution was treated as pre-tax money.  Need to issue amended 1099-R.  Original withholding was done for $5,000 but upon revision the withholding should only have been $3,000.  When issuing the amended 1099-R how do you show the withholding amount - what it actually was or what it should have been?  Also - what is best way to get the over withholding back?

Plan sponsor has an ownership interest in an IRA provider. Can they force out (terminated <$5k) participants into IRAs with that provider, or would that be a PT?

I remember reading about a PTE that would allow banks to force out participants in their plans into IRAs held by the bank, but my search skills are failing me at the moment and I can't find it again. If I'm remembering correctly it would seem to be relevant guidance.

Is there any reason why the ASG rules wouldn't apply? Never happened to see a situation where a non-profit member of an ASG sponsors a 457(b) plan, but I wouldn't think it is unheard of.

Does anyone know when an employee on layoff with recall rights under a CBA is treated as terminated for purposes of a qualified retirement plan?  Neither the plan nor the CBA appears to covers this issue. 

Appreciate any input or sources.  Thanks!!

PEO takes on the W-2 pay, benefits etc. for employees who work at multiple different companies.

For Health & Welfare benefits, they file one 5500 as a Single Employer Plan. Is this possible?

A plan accepts rollover contributions of participant loans. The plan permits only one loan outstanding at a time. A participant has two participant loans with his former employer. Is he permitted to rollover the two loans or only one of the loans? Is the treatment of the two loans determined with respect to the plan's loan policy or rollover contribution provisions?

An employer can deduct from wages the cost of a health insurance premium that an employee agrees to.  When an employee is on an unpaid leave of absence pursuant to the Family and Medical Leave Act, the employer must maintain the employee’s health insurance coverage but can require the employee to continue paying his share of premiums.  Since the leave is unpaid, the payment cannot be made via payroll deduction.  Typically, the employer will require the employee to submit checks for payment.  Are there any other options available to the employees for the payment of premiums? For example, can the company permit the employee to catch up on premiums when they return to work via extra payroll deductions?  Would that be a permitted payroll deduction?  Maybe do it as a loan from the Company to the employee? Is it still considered to be a health insurance premium, or has it become a loan that must be repaid to the employer?  Thanks

Can a plan be set up that the eligibility for Deferrals is greater than the eligibility for Safe Harbor non-elective?    

Deferral eligibility is one year of service and semi annual entry dates. 

SHNEC eligibility is one year, but immediate entry after one year.   

So someone hired on 8/17/2017 is eligible for the SHNEC on 8/17/2018 but not eligible for the deferral until 1/1/2019.   Is that allowed?   

We have a potential client that employs people in several different unions.  They want to start a plan for those union ee's only.  But there are different requirements for eligibility for each union.

The ER wants to put in "as specified in applicable CBA"

Is that kosher?

Hi,

My spouse covers me and my son under his employer's insurance. We did not enroll in flex spending, either medical or dependent care with either of our employers for 2019. My spouse is quitting his job and we will lose coverage as of 8/31. My employer is allowing us to enroll in all plans we lost under my husband's plan (medical, dental, vision) but has told us we are unable to elect medical or dependent flexible spending. Is this correct? They sent me the SPD(?) and I read through it but couldn't find anything saying I could or couldn't enroll. I'm in NJ, if that matters.

Thanks!

Never dealt with the following as always use 3% non-elective SH.

Existing DC plan with 401k+ADP safe harbor match+PS options (no ps contributions ever made) 10 eligible, only 4 deferring thus only 4 getting SH. Passes top heavy on its own.

Want to add a DB plan and need to combine for all testing and top heavy.

If a participant is in both plans and not getting any allocation under the DC plan because not referring, how is the top heavy allocation determined?

If a participant is excluded from the DB plan and also not getting a SH because not deferring, how is the top heavy allocation determined?

Thank you for your input.

Plan sponsor has both a DC and a cash balance plan.  I know that DB plans have to be funded within 8 1/2 months after the end if the plan year.  Does the plan sponsor still have until the extended date of the tax return (10/15 in this case) to make the DC contributions?

Thanks for  any guidance. 

Can a bank holding company make an "exempt loan" (i.e., a loan that will be used by the ESOP to acquire newly issued stock from the bank holding company) to its own ESOP?  

Cross tested plan is not set up with individual rate groups for each participant, but rather rate designations (ie 5%, 10%, 15%).

Rate group fails for one HCE. We see two options for correcting, but neither one fits cleanly into the rate group designated percents, is it still okay?

1. Reduce failing HCE from 15% to 14% (preferably than to 10% since 14% passes)

2. Increase 1 NHCE from 10% to 12.35%

I know if a plan fails the 414(s) test, we have to use compensation that satisfies the test.

Say that plan excludes bonuses and the 4149s) test is failing.

Instead of just including the bonus and move on, could I perhaps exclude HALF of the bonus if that would then pass the 414(s) test?

For example, only NHCEs get a bonus.  This year, they all got a 6% bonus.  test fails; difference is 6%.  Could I exclude only half the bonus, so now my difference is the widely-accepted 3%?

Since I see DB plans so infrequently, I want see if I've got this straight...

DB plans using pre-approved docs need to be restated by the deadline next year.

DB plans using IDP documents, that already have a prior D-letter from the IRS, are not required to restate, (and generally can't apply for a D-letter) but do need to keep up their amendments required by the IRS annual list within the appropriate timeframes.

I realize that D-letters are now available in certain situations where they weren't previously, but I'm just confirming what MUST be restated. Thanks.

If a plan sponsor has already paid the CPA for their 401K Plan audit, can the plan reimburse the plan sponsor for those costs from the forfeiture account?

Or must the fees be paid from the plan's forfeiture account directly to the CPA firm that audited the plan.

A participant has an Employee (Voluntary) After Tax Account in a qualified 401(k) retirement plan of $100,000, which represents $10,000 of Post-1986 after-tax contributions (basis) and $90,000 of investment earnings. This $100,000 After-Tax Account was attributable to After-Tax Contributions he made to the Plan in the 1990's and he has not made any After-Tax Contributions since then. Generally, if he takes a distribution of a portion of this $100,000 After-Tax Account, it is my understanding that 90% of such distribution will be taxable under the basis recovery rules of IRC 72(e)(8).

He makes $500 of new After-Tax Contributions on January 15, 2019 which he intends on converting to a Roth Account inside the plan pursuant to the In Plan Roth Rollover provisions of IRC 402A(c)(4). Assuming he makes the election on January 16, 2019 to convert $500 of his After-Tax Account to a Roth Account under the Plan, what is the taxable amount  (if any) of the conversion? In other words, can he elect to convert just the $500 of After-Tax Contributions deposited into the plan the day before, or must the In Plan Roth Rollover take into account his entire (previous) After-Tax Account, in which case about 90% of the $500 converted would be taxable?

My understanding is that the after-tax "contract" under 72(d)(2) applies to all amounts under the Plan (the sum of the old After-Tax Contributions from the 1990's and new After-Tax Contributions made in 2019) and thus he would not be able to designate just the new $500 After-Tax Contribution as the portion subject to the In Plan Roth Rollover (and thus approximately 90% of the $500 converted would be taxable). I hope I am wrong, though....