Does anyone know of a good resource for how to apply the 409(p) test when the S-Corporation has subsidiaries and certain participants own stock in the subsidiaries?

The guidance is clear that an option to purchase the stock of a related entity should be counted as synthetic equity. But what if the participant owns the stock outright, rather than an option to purchase the stock? Is that included in the test? If so, is all of the stock in the subsidiary included in the denominator when determining a nonallocation year? I don't necessarily need someone to answer these questions, but if anyone knows of a good 409(p) resource that includes guidance on these kind of questions (even if it costs money), I'd be incredibly grateful.

Thanks everyone.

Hey - just wanted to say that if any of you are in the path, or on the fringes, best of luck. Not much to do except hope for the best, I guess.

Safe Harbor 401(k) Plan using 3% QNEC. Currently the only contribution sources are employee deferral (pre tax AND Roth) and Safe Harbor. (The plan document does permit discretionary profit sharing contributions, but thus far there have been no profit sharing contributions.)

Problem: There were partners that “deferred” and received safe harbor contributions on their “distributions” (as noted in Box 19 of K1) during the year. However, their SE earnings for 2015 were actually 0. This created excess annual additions for 2015.

It is my understanding that in order to correct excess annual additions: First the employee deferrals (adjusted for earnings) must be distributed to the participants. Then employer contribution (adjusted for earnings) must be forfeited and placed in an unallocated suspense account and used to reduce future employer contributions. No employer contributions may be made until the “suspense” account is used up.

First question: Does this mean that until the suspense account is used up, the employer may not make safe contribution to any participant? (non partner/staff)

Second question: Since we are not permitted to use forfeitures to reduce safe harbor contributions, what do we do with the amount in the suspense account? Since the contributions were fully vested when originally deposited are they technically considered a forfeiture? Can we still use them to “fund” future safe harbor contributions?

Or, should the plan sponsor declare a profit sharing contribution for 2016 and then use the suspense account to reduce the p/s contribution?

Thank you.

We have a plan that converted in 2015, so obviously this is time sensitive. The prior recordkeeper reported the 457 tax exempt plan assets with the 403(b) plan assets. Except by amending all prior filings (we don't have the asset breakdown for prior years), how can we correct this issue? Can the assets be shown as a transfer out? I also cannot find a plan number for the 457 plan.

The participant count for a newly established plan at the beginning of the year was 119.

The independent auditor who was hired to perform the financial statement audit for the plan insisted that this new plan must file as a small plan and doesn't need audit.

My understanding is that the 80/120 rule is not applicable to a new plan if the the number of participants is over 99 for the 1st year of the plan.

The 2014 Edition ERISA Outline Book page 13A.76 states:

"Must have at least one year where participant count is below 100. This exception is not applicable to a new plan which starts with a participant count above 99. A plan must have at least one year with a participant count below 100, where it is eligible to file as a small plan filer, before it can use this exception when the participant count rises above 99."

Have a new client that established a 401(k) plan in 2015. There were no contributions for 2015 (no idea why)(no deferrals) and to date in October 2016 still no assets.

I cannot find guidance on this. Presume that there is a filing requirement for 2015. Any thoughts?

We are working on a proposal for a New Plan. There are four employees (Owner, Spouse, and two NHCEs). The owner sold some assets of their business 6/30/2016 and terminated the two employees. They went to work for the firm who purchased the assets. The owners now would like to set up a plan effective 7/1/2016, covering only them. (They will have sufficient income in the short year to maximize their contributions). They are restricted from doing that because of 401(a)(4)-5 correct? or does that only apply to DB plans.

Trying to figure out if unvested RSUs and/or unvested options are included in ownership percentage when trying to figure out who is an HCE? I can't find any info on it but my guess is no.

Can someone also confirm that vested options are treated as owning that stock... Thanks!!

This Notice seems to me to lack some clarity. My question is this:

Suppose you have a plan where the owner is over 70-1/2, and has therefore been taking his benefit as required under the RMD rules. Now the plan is being terminated.

Can he now receive his remaining benefit as a lump sum? The Notice doesn't seem to address this squarely, and it seems like it could be read t prohibit it, which is ridiculous. It also appears that the proposed regulations haven't even been issued? If not, can this notice trump existing regulations retroactively to 2015?

The instructions for Form 5500 Schedule C Part III state: “Complete Part III if there was a termination in the appointment of an accountant . . . during the 2015 plan year. This information must be provided on the Form 5500 for the plan year during which the termination occurred.”

Consider the following typical situation. A plan’s administrator and an accounting firm make engagement letters for only one year at a time. The accounting firm (which writes the engagement letter for the client’s adoption) never obligated itself to be available for anything more than one pending audit. The administrator never obligated itself to the accounting firm for anything more than one pending audit. During 2014, the accounting firm completed its work in auditing the plan’s 2013 financial statements and issued its report; and the administrator accepted the report as a satisfaction of the engagement. In 2015, the administrator invited several accounting firms, including the one that in 2014 audited the 2013 statements, to submit proposals. The administrator selected another accounting firm.

On those facts, was there “a termination in the appointment of an accountant”?

Which facts are significant in deciding whether there was or was not a termination?

Has EBSA published any guidance on this?

Has the AICPA published any professional literature on this?

We are reviewing a plan for possible take over. There are no HCEs and only three of the about 40 NHCE participants are receiving an employer base allocation where each participant is their own allocation group. If there are no HCEs, is that kosher? Thanks.

Trying to set up a 401k Safe Harbor plan. I know that a plan passes the top-heavy test as long as no other contributions are made during the year except for Elective Deferrals and the Safe Harbor Non-Elective/Match.

Question is, will it still pass the Top Heavy test if their are After-Tax contributions. In other words are After-Tax Contributions considered elective deferrals?

Everything I'm ready only states elective deferrals and nothing about after-tax.

Thanks

Let's say a plan has autoenrollment, and someone decides to opt out after $20 is taken from one paycheck.

What are the mechanics of his refund, is it a normal distribution or is payroll reversed?

I have never seen this before. I have seen comp before Participation being excluded. If the plan has a 1,000 hour requirement for discretionary non-elective, is it legal to exclude hours before Plan Entry?

A participant who has been taking required minimum distributions dies, her beneficiary takes one RMD on the deceased participant's benefit the following year and is then paid the remainder of the benefit the year after that - would that last payment be considered a lump sum distribution for purposes of line 3?

Question if a plan chooses to amend their safe harbor to have a 1 year wait, but leave the deferral portion with immediate entry, do we need to test those individuals in the ADP/ACP because they didn't receive a safe harbor for not meeting the service requirement yet?

What other pitfalls are there for putting a one year wait on the safe harbor other than the top heavy concern which would negate the 1 year wait we are aware of.

Suppose a plan sponsor had been issuing company stock as a form of match contributions to employees who deferred into their 401k plan. Now suppose the plan document provisions do NOT list this type of match, and the stock certificates were not listed in the name of the plan. Keep in mind that while these WERE match contributions, they were also NOT officially part of the plan.

By offering these employer stocks, has the plan sponsor violated the Contingent Benefits Rule? If so, how can this be corrected, as this type of violation is not listed under the VCP covered transactions?

We have a 401k Plan where the owner of the company has never received a payroll check or been listed as an employee in any census records. He has owned the company for over 10 years.

They always fail ADP testing. They want to know if he starts getting a payroll check in the last quarter of 2016 and does not defer, can his compensation for 2016 be counted in the HCE group to help with passing the ADP testing.

My first question is what is his real hire date? Their plan has a six month wait; no age requirement, and monthly entry. Second question, is when is he really eligible to participate in the plan? 2016 or 2017 after he meets 6 month eligibility.?

Any comments would be welcome.

We have a company that offers a wellness incentive, which is a dollar amount based on years of service to be used towards medical premiums or reimburse certain wellness items such as gym memberships.

This incentive is reported on W-2 and their plan document states to use W-2 income and does not exclude any type of compensation. They would like to amend document to exclude this wellness incentive from compensation. Could this type of amendment be done retroactively to beginning of current or prior year? (This is not a Safe Harbor plan).

Assume a corporation has a fiscal 9/30 year end, but it sponsors a DB pension plan with an 11/30 year end. And the contribution for the 11/30 plan year is $120,000, which is deposited before the due date of the 9/30 tax return.

How much is deductible on the 9/30 tax return? The full $120,000, or 10/12 x $120,000?

And does the answer change if the owner (who has most of the income) took the bulk of his income during November (after the corporate year end)?

Any help is appreciated. Thanks, Greg