If a doctor is a 79% partner at a surgery center and regularly performs service there as a sub-contractor, he is an affiliated service group and can't have a 1-man plan on the side.

If an accountant is a 79% partner of a manufacturing firm and regularly performs services there as a sub-contractor, he can have a 1-man plan on the side since the manufacturing company is not a service organization. 

Seems unfair but legitimate.  Am I misinterpreting?

Client was self-administering his solo-401(k) from 1/1/2015 (effective date) through 9/1/2017 (when employees became eligible). Since then, my company has been administering the 401k. Based on my conversations, I was under the impression that he was under the $250k threshold prior to this year (lesson learned - don't rely on client's assumptions). 

Assets on 12/31/2015 were <$80,000; assets on 12/31/2016 were >$250,000 but no Form 5500 was filed. I am now starting to work on the 5500 via DFVC but I have a few questions.

1. We do not need to file a 2015 5500, correct? (Nothing about DFVC will require a 2015 & 2016 5500?)

2. Should the delinquent 2016 5500 be filed on a 2016 Form, or 2017 Form?

3. This will be the first filing for a Plan effective 1/1/2015. Will my 2016 Plan Year be 1/1/2016 - 12/31/2016, or 1/1/2015 - 12/31/2016? (Including all contributions made for all years in this first 5500.)

4. The client should first file the late Form 5500 and subsequently (immediately) file and pay for the DFVC, correct?

Thanks!

I  am trying to understand the contribution limits to a solo 401K plan and the interaction with deduction limits for self- employed (SE) health insurance. Per IRS instructions health insurance deduction is limited to net schedule C income less 1/2 SE tax,  less retirement plan contribution. link https://taxmap.irs.gov/taxmap/instr/i1040gi-010.htm#w24811v09 The main issue is if the retirement plan contribution is too high you lose/reduce the health insurance deduction, which I want to avoid.  Here is my example and understanding:

Net Schedule C profit $20,000,     Health Insurance premium $8,108,    1/2 SE tax $1,413

Maximum total contribution to solo 401K without loss of insurance deduction is $10,479 ( 20,000 -1,413 -8,108 = 14,479) and contribution to 401K plan is made up of either $10,479 employee contribution or $6,762 employee contributions plus 20% employer  contribution  of $3,717 (20,000 - 1,413 = 18,587 x 20% = 3,717)

Is my understanding & computations correct?

What about the over age 50 catch up contribution of $6,000? Not sure if this is permitted in excess of above contribution without limitations. (so total contribution to solo 401K of $16,479 ---- 10,479 +6,000)

Thanks,

T

Is it permissible to use Safe Harbor money as a source for paying insurance premiums? Participant is under 59 1/2. If so, what are limitations?  Thanks for any input or cites. 

Plan is 3% nonelective Safe Harbor plan.  Only SH & deferrals.  TH ratio is 80%.

Is this plan exempt from Top Heavy?

I have a plan that needs to correct for 5 loans that were previously defaulted, with 1099's issues, but it's been discovered that the error was caused by the Employer.  I want to make sure I'm completing all the necessary forms to have the defaults reversed and allow these participants to begin making repayments as they desire to.  Can someone please let me know which are the required forms?

Thanks in advance!

We have a plan that has allowed all participants into the plan early for more than 20 years.  Both HCEs and NHCEs were allowed in early.  If the early inclusion of participants is significant (or assumed to be significant), can we adopt the retroactive amendment under SCP?  Does the requirement that significant operational failures be corrected within two years apply to corrections by plan amendments?  Assume there is no discrimination issue.    

A & B are equal partners and both get a K-1s (traditionally identical)

A makes pretax contributions (which are included in box 13 (a deduction)

B makes Roth contributions which are included in Box 4 (guaranteed payment) 
thus A & B end up with different box 14 numbers and thus higher net earnings.

When allocating profit sharing, does B have higher compensation then A and thus receive a larger profit sharing allocation?

Is there a way not to reach this result?

Quick question on some confusion with the code. 1.410(b)-5(a-c) & (d)(2)

When determining the actual benefit percentage, the code states that in (d)(2)"Employee contributions and employee-provided benefits disregarded" and clearly states "Therefore, employee contributions (...), and benefits derived from such contributions, are not taken into account in determining employee benefit percentages."

However, literature, ASPPA presentations, and the Relius program include employee 401k contributions into the test. Applying to both contribution or benefit basis...

Is this due to code 1.401(k)-1a(4)(ii) "Treatment of elective contributions as employer contributions"...? Basically saying that 401k & Roth are considered employer contributions in 1.410(b)-5

Just trying to get some clarification on the confusing wording

Thank you

I have a plan with several hundred people that allows Voluntary After-tax.  I am trying to write a procedure for fixing payroll errors involving Voluntary After-tax Contributions.  I have found good guidance for fixing when an election form is misplaced.  But I cannot find any written guidance on what to do when an eligible employee was not given the opportunity to have Voluntary After-Tax contributions deducted from his check.

What do you all think?

Use the average of the NCE/NHCE group for the year?

I have questions about updating our prototype 401(k) plan disability benefit claims procedures for the new rules that start 4/1.

1. Does the plan document for the prototype 401(k) plan need to be amended?

2. If it does need to be amended, is the deadline 4/1 or the end of the plan year?

3. Should the prototype document provider be preparing this amendment?

4. If we prepare our own amendment to our prototype 401(k) plan, will it still be a prototype plan?

5. Which of the new rules have to be spelled out in the SPD we give to participants and which ones don't?

New Jersey established more that a half century ago a Supplemental Annuity Collective (SACT).  During this period SACT has offered two plans:  A 403(b) arrangement for qualified employees and an after-tax arrangement for all employees, including qualifiers for the pre-tax 403(b).  The investment menu is the same for each plan.

Q.:  A retiree has contributed to the after-tax plan for 35 years and wants to effectuate a rollover of his entire balance to a Roth IRA----is this a permissible transaction.

Seems like a simple question/answer but I'm not finding the citation I want to back it.

For purposes of this question, let's ignore proper loan limitations. So, you have a 50,000 account balance, and you take a 50,000 loan. Now you want to rollover 50,000 from your IRA to the plan to repay the loan. All money is pre-tax.

Problem with this is you just got 50,000 without ever paying tax on it, nor will you, since the loan is now repaid.

Must be post-Super Bowl/Monday fog, but I'm not finding the correct citation. Any bright ideas?

I was curious as to what 6 digit IRS Business Activity Code non-producing TPA firms are using. I have seen both 541219 and 541990.

Thanks.

Imagine a profit-sharing plan that allows § 401(k) elective deferrals, and allows a matching contribution.

A participant shares in a year’s matching contribution only if the participant is the Company’s employee on the last day of the year.

The plan narrowly defines the Company by naming only one organization, and ignoring its dozens of affiliates.  (The volume-submitter document states a “member” of a “controlled group” or an “affiliated service group” does not participate unless it adopts the plan with the plan sponsor’s approval.)

A worker who was the named Company’s employee for the first three quarter-years of 2017 became, on October 1, an employee of a non-U.S. organization that is the Company’s 100% wholly-owned subsidiary.  This worker is a citizen only of the USA.

Under a surface reading of the plan’s document, it seems this worker is not entitled to share in the matching contribution for the year ended December 31, 2017.

But is there something I should look for in the 128 pages that might support treating an employee of the subsidiary as an employee of the Company?

And if there isn’t, is it feasible now to amend the plan (without unraveling any tax-qualified treatment) to allow the transferred employee to share in 2017’s matching contribution?

Hi all. A new client has a 1 participant MP Plan since 1999 but has treated it like a PS Plan.  The MP Plan Adoption Agreement is marked 25% of pay, but he has always varied contributions and skipped years sometimes making no contribution.  He self-administered and thought he was doing things correctly.  There's a signed PS Plan Adoption Agreement in his filed but it's marked "not used" which I know matters not.  I think whoever was advising him screwed up and got things backwards.

He has never had any employees.

Then I discovered a section of the Adoption Agreement  which says:

Benefit Adjustments(Optional)

_X_ Notwithstanding the above, $0.00 is the minimum contribution for any

Participant. (If Forfeitures are reallocated, any such reallocation shall be in addition to this amount.)

____Notwithstanding the above,$________ is the maximum allocation (including the allocation of any Forfeitures) for any Participant.

Any ideas on what should be done now?  Or if anything should be done about the past?

Thanks,

RayJ

An employee was a nonresident alien receiving non-US source income for a few years.  He comes to the United States, and is no longer a statutory exclusion for plan purposes.

Does his service during the period prior to his change from a statutory exclusion to an eligible employee class count toward determining his plan entry date and determining his vesting service?

Thanks!

I have a client that wants to excluded commission only sales people from benefiting.  The plan passes coverage as some of these sales guys are HCE's.   The plan also passes the average benefits tests and the rate group tests.  The only test that is failing is the gateway test.   My question is do we need to benefit the lower income sales people at 5% to meet our gateway requirements?

This is the 72(t)(2)(A)(v) exception. Any reason this wouldn't apply to a loan offset distribution (not a prior deemed distribution) upon termination of employment? I don't see any basis for saying this wouldn't apply, but we have a State tax department giving someone a hard time, so I thought I'd see if I'm missing something...

Thanks.

I am working with a plan that defines plan compensation as 3401(a) compensation. The plan covers a couple of Puerto Rican residents/participants. Their compensation is reported to Hacienda. Does this compensation constitute 3401(a) compensation? We're trying to do some clean-up and want to determine if we have an issue on the U.S. side.

Thanks to any who can help!

Dog