For a solo 401(k) plan with no deferrals or match , I believe the following expression is correct for the determination of the maximum deductible profit sharing contribution :

Net Sch. C Profit - 1/2SETax - (.25)(Earned Income) = Earned Income  and so the max profit sharing contribution is 20% (i.e. 25/125 ) of (Net Sch. C Profit -1/2Se Tax ) .

Now , if there are deferrals and match , are they both , or only one , or neither subtracted from the left side of the equality shown above ?

Thanks , in advance , for any replies .

I just came across this article in today's Benefitslink newsletter.  I'd be curious to know if others agree that it is factually inaccurate, and significantly so. The author purports that merely because the loan repayments are made with after tax dollars that the comp needed to repay the loan represents a double taxation (i.e., because of every dollar of loan payments = $1.33 of comp).  But the analysis does not take into account that the $10,000 of pre-tax money was received without paying any taxes.

So if I take a $10,000 loan and put $10,000 in my checking account, and then pay it back the next day, it does not cost me $13,000. that transaction is 100% tax neutral.  The fact that principal might be repaid through payroll deductions does not change the fact that $10,000 came out tax free and $10,000 goes back in without a deduction. 

I have heard many people suggest (and I think it is true) that the interest is in fact taxed twice (I think others have "proven" this is mitigated by other considerations).  But that's a lot different than what this article is saying.  But who knows, maybe I am missing something...

http://lawtonrpc.com/401k-loans-double-taxed/

We have a plan where a participant took out a $50,000 loan many moons ago, and it's set up as only interest payments are due (while he's employed).  Evidently this set up was, at one time, acceptable.

Really?

What is the corrective procedure when for when someone did a direct rollover of all of their IRA accounts into a self-directed solo 401k, including the entire balance of an account with some after-tax basis from a nondeductible contribution? The rollover was done at the end of 2016, the original IRA account was closed. The 401k funds haven't yet been invested so have no earnings. 

401(a)(31)-1, Q&A 14 indicates that "the amount of the invalid rollover contribution, plus any earnings attributable thereto, is distributed to the employee".  But how do you complete the 1099-R for this situation, are taxes or penalties owed, and do they take the distribution as an early withdrawal, or can the funds be re-deposited into an IRA?

In light of the recent spread of 3(16) service providers in the 401k industry, I think the subject has earned another look (we haven't discussed since 2014 that I can find).  Full disclosure: I have recently switched from a TPA shop to a national 3(16) provider, so I may be a bit biased!  

I always had a similar view to those expressed in the 2014 thread linked below, but since joining the 3(16) space I've really been surprised by just how much we take out of the Sponsor's task list & the amount of thanks we constantly receive from clients.   

I'm sure plenty of you have run across 3(16) providers in various capacities over the last 3 years, so have any of your opinions changed?  Do you have any questions about the blurry line that exists between us, the TPA & the client?    

A controlled group has maintained a PS plan for several years. They recently opened a location that they want to exclude the few employees from the PS plan. The owners no longer benefit in the PS plan either.   They recently established a DB plan where the excluded location is benefiting. The sponsor was advised of controlled group/participating employer issues. Question is...is it permissible to exclude a location(a few employees) in this situation?

Lest I forget to post:

22 years on April 20

I can never say it enough, I am very appreciative to those who have shared (including those who merely asked questions) for in either case it has helped me learn more, either by providing answers I didn't know or rousing my curiosity to research a question that was posed.

my apologies to Dave over the years for all the bad dry humor that he wasn't able to stop me from posting. Having met him once, in regards to the Links I can say "Good Job, Walt, good job!" keep up the good work! 

my apologies to others if I unintentionally provided misinformation or in any way offended or stepped on someone's toes along the way.

Hello all!

I have a participant, who also happens to be the president of the company, (we are the trustee) who is considering a hardship. He is past due on his mortgage and has the past due notice for proof. It is not in a foreclosure status yet. But he knows it will get to that point and he is being proactive. He is requesting a hardship amount that equals about 6 months of mortgage payments to prevent any foreclosure to happen. He is putting the house on the market and hoping it sells before then.

I read somewhere that the hardship event doesn't have to be unforeseeable and he is deeming this as necessary to not lose his home.

In someone's expert opinion - Would the 6 months worth of mortgage payments be allowed? OR - his other option is to request a hardship every month when he is past due? With that second option he will be prolonging his ability to contribute to the plan for a long time.

Thank you in advance!

Contributing employer to a multiemployer pension plan received notice of the plan's election to elect red zone status early, coupled with the rehabilitation plan.  The rehabilitation plan's default schedule calls for NO increase in contributions, just reduction in some benefit distribution options and a few bells and whistles.  In order to avoid the employer surcharge under the IRC, the employer and union must amend their CBA to reflect the rehab plan.  The plan has produced a template of a MUA for bargaining parties to sign, in counterparts.  As far as I can tell from reading the rehab plan, the employer has no incentive NOT to do this, but what incentive does the union have?  If the employer signs but the union doesn't, does the surcharge apply?  

I am new to this forum but I am hoping that someone on here can help.

Under 4219(c)(1)(C), the annual payment for withdrawal liability is the product of:

(i) average annual CBUs for the 3 consecutive plan years during the 10 consecutive plan years ending before the plan year in which the withdrawal occurs, in which the number of CBUs for which the employer had an obligation to contribute under the plan is the highest; and 

Newbie here, hoping for some help on ineligible deferrals. Our company issued ineligible deferral refunds this year. The explanation we were given is that "one or more plan participants made ineligible ROTH salary deferrals under the profit sharing plan." Refund checks issued April 13, 2017.

Our company is owned by two individuals. Both are at least age 62, for what that's worth. 

The majority of our employees do not participate in the plan. The few rank and file employees who do participate received checks for matching contributions. The 402(g) violation return summary shows a few different numbers: excess deferrals, gain on excess deferrals, return of gap period interest; total amount return gain; and total amount to be paid.

Might anyone be able to advise on what likely happened here? Is this an HCE type violation? Or could it be from not matching by the safe harbor deadline?

Thank you.

How long do you retain plan records for terminated clients?  We have no contractual obligation to our clients to retain any records, but we do feel it is prudent to keep the records for a period of time.  If there's an audit, we want to be able to defend anything we've done.

I am so sick of the boxes of paper from these former clients and I want to get rid of as much of it as possible.

So, how long are you keeping these records?

Is it April 15, 17 or 18?

Thanks

Can a 401(k) plan with an eligibility service requirement of 30 days of service (elapsed time), exclude employees who work less than 20 hours per week? 

Person made $120,000.40.

it is over $120,000 but would the pennies count?

thanks

What are your thoughts on COBRA notice failures that are not willful and are corrected within 30 days, so no excise tax, and still reporting $0.00 excise tax on Form 8928?  

I am concerned because if we do not file one then no statute of limitations will apply.  So I am considering filing the Form with $0.00, but have multiple (many, many) failures.  Do you file a separate Form 8928 for EVERY participant that had a failure?

Thank you for your help!

A nonelecting church plan sponsors a 403(b) Plan.  All employees are eligible and there is one platform provider.  Much nicer and cleaner than most 403(b)s!  Oone of the pastors would like to have the church start a separate plan with a company dedicated to retirement advice specific to clergy, which appears to have a MEP for church plans.  The only reason for this change seems to be that the pastor has personal investments with this company already.

The church would like all employees to be able to choose between the new plan and the existing plan.  I understand that 410(b) does not apply, but there are still pre-ERISA coverage requirements.

Questions:

1) Can each plan exclude employees covered under another plan sponsored by the church?  Would it need to be specific as to who is covered under each plan or is it okay to allow participants to choose?

2) If the new plan is set-up, can this pastor move his existing 403(b) Plan assets?  There is no distributable event that I can see, but is there a way to do a 403(b) plan to plan transfer?

Thanks,

Kathryn

I work at a TPA firm and one of the recordkeepers that we use is having their clients amend their plans to use elasped time vesting, employment anniversary to anniversary. .   Current adoption agreement says vesting is based on 1,000 hours in a plan year.   The problem with the 1,000 hours in a plan year they say, is that if a participant works 2,080 hours in a plan year, they will receive 2  years of vesting for that plan year, so this plan has a 3 year cliff schedule, the recordkeeper is saying a participant will 100% vest in 1 1/2 years.   Is this something new that I missed?        

Calendar year plan requires employment on last day of the plan year.  The employee works on December 30, 2016--a Friday.  Was the Participant actively employed on the last day of the plan year?  Seems we can go either way with this one...