Controlled group: 2 employers with their own 401(k) plans. No Profit Sharing. 401(k) coverage for 2017 fails.

Plan 1 is safe harbor match, covers only 1 HCE and a lot of NHCEs.

Plan 2 is not safe harbor, has no match, no PS, but covers 5 HCE owners and 1 NHCE, prior-year tested.

The plans fail ratio percent test (result is under 10%). The plans cannot be aggregated for coverage testing. Seem that plan 2 needs to open up coverage to some of the plan 1 NHCEs by providing QNECs to until enough NHCEs are above the safe harbor percent and then run ABT. That QNEC is based on the 2017 ADP for the NHCEs in plan 2.

The problem is that the NHCE in plan 2 did not defer in 2017, so the NHCE ADP for 2017 for plan 2 is 0% and thus the QNEC is 0%. Therefore, is there a reasonable argument that no action is needed for plan 2 to pass coverage for 2017?

Note: the NHCE ADP in 2016 was also zero.

A 100% owner of the business has a 401K with less than $250K in assets.

She also has an employee that does not work and has never worked over 1,000 hours.

Under plan characteristics code, there is an item 3(e) - one participant plan that passes minimum coverage, which seems to apply here.

Payroll company seems to think Form 5500-EZ must be filed.

ADP test failed, and the HCE does not have enough in his 401(k) account to cover the required distribution (plus earnings) because he recently took a sizable loan, all from 401(k).  

I can't find anything that references a distribution hierarchy if a portion of the proceeds needs to be pulled from another source, but it seems to me that he must remove the required amount from his account, even if it means pulling from Rollover or another source.

Help!

Suppose you have a sole proprietor who came up with an Engineering process and had significant schedule C profit for the first two years. The third year he spent all of his time making the idea / process better but had no income for that year and did not even file a Schedule C. In the fourth year, he adopts a defined benefit plan but has not been quite as successful as he was in years 1 and 2.

Per the document, the plan can count past compensation if elected. Can the plan count his first 3 years as his average compensation even though he filed no schedule C the third year? He claims he worked harder and longer in year 3 than any other year. 

Thanks.

I was given a new 401(k) plan to administer for a small business consisting of only a few employees.  Immediately after the plan was made "active", the owner rolled over some money into the plan. She has since taken 2 loans out against this rollover money. She is not making any contributions and no one else has signed up for the plan.

This is the 2nd plan that I have where the owner rolls money into it for the sake of being able to take out a loan. Again, no other employees are contributing to it.

Is this legal?

Does anyone know where I can find a guide to understanding what items are included in the different definitions of compensation (W-2, withholding, safe harbor, etc.) for S-Corp. shareholders?

I have a number of clients who are getting very close to being able to terminate, but they are reluctant to do so because they don't want to recognize the large unrecognized loss as a Settlement Charge.  These are typically banks where they have always been more concerned about "expense" and less concerned about actual cash.

Is there any way to recognize the unrecognized loss sooner than the 10% corridor would permit?  In other words, is there any way to avoid recognizing the Settlement Charge all in one year?

I'm following through the information in Chapter 11 Section XIV of the EOB to determine if a plan can make use of disaggregation to avoid giving the gateway contribution to employees subject to statutory exclusion.

The plan I'm working on has 6 month eligibility for all parts of the plan, quarterly entry. There is a 1000-hour requirement for profit sharing, but no last day rule. The plan provides the 3% Safe Harbor non-elective and seeks to fund additional discretionary contributions beyond this. All employees are in their own allocation group for profit sharing.

The examples presented in the EOB incorporate the last day rule and seem to imply that even though there are employees that have not met statutory eligibility requirements, because they are employed on the last day they must receive an additional gateway contribution. However the EOB does not state this explicitly in explaining the process, only implying that the whole otherwise excludable employee group does not have to be Gateway tested.

Can anyone clear up whether the last day rule is critical to being able to take advantage of this disaggregation to avoid giving Gateway to otherwise excludable employees? Can both active and terminated employees be excluded from receiving Gateway if they haven't satisfied statutory eligibility? Can my plan that does not have the last day rule exclude all otherwise excludable employees from the Gateway Test?

A Participant went on line and changed from 10% to 2%.  

Should the excess be forfeited as a mistake of fact and the Participant made whole outside the plan?

Should it be distributed to the Participant as an excess with the Plan issuing a 1099?

if terminating due to acquisition/plan termination do you need to provide 30 days notice?  i don't think so but wanted to confirm. 

Plan has this elgibility:

Age 20 1/2

1 YOS (1,000 hrs)

Entry date:  First day of plan year following.  That's it.

Ont he surface it seems it violated the 18 months rule, but I am half-remembering (probably incorrectly) that the age 20 1/2 somehow buys me an extra 6 months, but I can figure it out.

I know there are different rules, since it's similar to a Defined Benefit Plan, but can Plan expenses be paid out of a Cash Balance's Forfeiture Account (similar to a 401(k))?  For instance, TPA Fees?

Thanks!

We have two companies that are only a little bit related -- in the 10-20% range.  So they definitely wouldn't be considered a single employer under 409A.  However, when certain employees leave company A to go to company B, they continue to participate in company A's nonqualified plan.  I can't find any reason why this is a problem -- is there anything I might be missing?

Plan is safe harbor non elective with a 100% of 2% non safe harbor match.

A rehired employee was not giving the opportunity to defer for 2017.

I know that the fix for the deferral piece is 50% of the 3% plus the 3% safe harbor.

My dilemma is the match piece.  If my brain is working correctly, I understand the regs to be... 2% match.  The employee's missed deferral was 3% (because of safe harbor non elective) so the match is 100% of 2%.

Can I get a confirmation or denial?

Thanks

The ACP test fails.  Corrective distributions will apply.  If the match is made after the plan year end, is it acceptable to say the earnings for the corrective distributions are zero?  

Let's say husband and wife own 50% each of Company A. They also have some ownership in other companies, which could form a potential Brother-Sister Controlled Group. Would you consider them both as 100% owners when determining the if the controlled group relationship exists for a Brother-Sister Controlled Group, because of attribution, or would they just be considered 50% owners?

Thanks.

We have a 401(k) plan with a participant who died last year.  She has a sizeable amount in the plan (over $200k), and as far as the sponsor knows, she had no will and both her husband and daughter predeceased her.  They believe she has some adult grandchildren, but so far none has contacted them.

I suggested they contact one of the grandchildren to find out the status of her estate.  But the question arose as to what we do if no one asks for the money.  And also, what happens in a couple years when the participant would have turned 70 1/2 (RMD)?

Ideas??

Three dentists share office space as well as a few employees.

Clearly this is a controlled group.

One of the dentists split - moved his practice to another location and is now totally unrelated to the others

One or two of the employees now work for this dentist part-time as well for two of the three remaining tests part-time as well.

Since this is not a controlled group situation - common control is 33.33% - must the part-time employee still be counted and receive a contribution from either plan?

I might be overthinking this.  John Doe worked for company A.  They have a match with a last day (12/31) and 1,000 hr requirement.  John quits A in June and goes to work for B.  A and B sponsor the same multiple employer plan.  They are not related employers.  John did work 1,000 hours at A and did not work 1,000 hours at B.  John is a participant and deferred at both companies, since all his service counts for eligibility.  

Does he get the match?  He was not at A on the last day and did not have 1,000 hours with B.

I do not think there is clear guidance for amending a QACA. Sponsor set up QACA in 2014 with initial rate at 3% and escalator of 1% after the end of the uniform period. Now sponsor wants to amend the plan 1/1/19 to set a 6% deferral rate to only the new hires on or after 1/1/19. I do not think this will result in a uniform QACA or it sets up 2 QACA designs in one plan. I think it blows the safeharbor.

Any comments?