If an eligible NHCE in a non-top heavy plan receives a 0% allocation for the year (the participant is not excluded, just receives 0%), is that person still included in the Gateway Minimum testing, which would therefore cause plan to fail test?

We use Datair, and when I give such a person 0%, the Gateway test still passes because the lowest allocation (to anyone receiving $) is 5%.

I know that profit sharing contributions deposited after the end of the year but before the due date of the tax return can be deducted in the year of allocation. I think I also remember that they could be deducted in the year of deposit. If you choose to deduct them in the year they are deposited, do you use the allocation year or deposit year to calculate the 25% of pay limit?

Multiemployer health plan is terminating. Plan has already notified participants and Plan amendment has been approved terminating the Plan. Plan's Trust Document gives Trustees authority to terminate.

Does anyone have any experience with this, specifically as to what governmental filings are required? Are there government agencies that must be notified? I know the Plan will need to file a proper tax return (Plan's auditor taking care of that).

But is there anything more? I just want to make sure the Plan isn't missing anything.

Thanks.

New plan put into place late in 2015 (november) with 401k provisions effective starting 1/1/2016. The owners deferred in 2015. is there a way to return the deferrals since that provision was not yet effective? I don't like simply doing that since it involves HCEs.

We are still trying to determine if any of the NHCEs were given an opportunity to defer during the last month of 2015, but declined.

NQDC Plan states that a change in control is a distribution event.

Employer is 100% owned by X.

X dies and all the stock in employer passes to X's Estate, then to his Revocable Trust and then to Marital Trust for X's spouse.

318(a)(2)(A) attributes stock owned by an estate to its beneficiaries and 318(a)(3)(A) attributes stock owned by a beneficiary to an estate.

However, I do not see a way to attribute X's stock from X to his estate.

So, did a change in control occur upon X's death?

Any thoughts?

I think I know the answer to these questions, but I'm having a hard time finding specific citations.

Facts: Employer has a defined benefit plan. It has a number of people whom it has classified as independent contractors, and thus has not included in the plan. A judgment is entered against it saying that these people are employees, and thus need to be retroactively included in the plan. (The plan specifically states that individuals who are employees but have been characterized as independent contractors by the employer are not to be included, but the judgment just blew by that argument.)

Question 1: In calculating the 415(b) limit, should an individual's years of participation in the plan include the years the individual should have been included under the court's theory, or only those years in which the individual participated after the court's judgment? For example, suppose that the individual worked for 10 years before the judgment, but terminates employment a year after the judgment. Is the 415(b) limit $210,000 (reflecting the years worked for which s/he receives credit), or $21,000 (reflecting only the year following the time the individual began participation in the plan)?

Common sense would appear to say that all years should be counted. This would reflect the rule for annual additions, which are counted for the year for which they are made rather than the year in which they are made. Treas. Reg. § 1.415©-1(b)(6)(ii)(A). It would also reflect the rule for back pay, that:

Back pay is treated as compensation for the limitation year to which the back pay relates to the extent the back pay represents wages and other compensation that would be includible in compensation for purposes of § 415.

Publication 7001, page 3. And it would be consistent with the rule of ERISA Reg. § 2530.200b-2, which treats back pay as giving rise to hours of service for the year to which it relates, not the year in which it is paid.

However, I have been unable to find any direct authority dealing with the calculation of the 415(b) limit in our situation, which does not involve back pay.

Question 2: Is there any obligation to go in under VCP in this situation? I can think of two arguments that VCP might be necessary: either that the plan is now being operated in a way inconsistent with its terms (because the plan terms say that the plan is not to include people characterized by the employer as independent contractors, even if they are later found to be employees) or that these individuals were erroneously excluded from the plan in prior years. However, this seems unnecessarily harsh if the failure to abide by the plan terms comes due to a judgment, and if the employer corrects the exclusion for prior years promptly after issuance of the judgment.

Key employee has accrual and account addition in both plans.

New employee is eligible for DC Plan only.

Does he get 3% or 5% of pay TH Min?

Thank you

Have a small defined benefit plan and 401(k) plan covering only the owner.

He started as a sole proprietor and adopted both plans as such effective 1/1/2014. Without any communication, he incorporated effective 1/1/2015. We just found out about it now.

Would it be possible to have the corporation adopt both plans as a successor employer and plan sponsor effective for the 2015 year now in late February 2016?

I wonder what happens as he would have no sole proprietor income in 2015 but has W-2 salary.

Corporation sponsors a DB and PSP that are aggregated for testing purposes. Plan was effective 01/01/12 . The DB accrual formula was 5% per year of service for owners and 0.5% per year of service for all other eligible participants

• ​Plan is to be terminated in 2016 and was frozen effective 1/1/15 with no further accruals
• For 2015 the owners made a substantial contribution in order to bring plan assets as close as possible to the 417 termination liability.

Is there any problem with the above?

Can the IRS challenge if the average annual accrual rate in the DB is not at least 0.5% per year of service: in our case it is a little bit lower if no accrual are allowed for 2015.

Thank you for your help

When are the employer match contributions subject to FICA taxes? Is it when distributed or when contributed to the plan? This plan has a 2/20 vesting schedule.

Thank you!

A profit sharing plan currently being restated for PPA has "participant directed investments" language in the plan document. However, none of the participants have elected to direct their own accounts, so the funds are all in a pooled investment account, presumably managed by the trustee.

Can this feature be removed from the plan with the PPA restatement?

If so, does the effective date of the restatement need a prospective date? Or can it still be the first day of this plan year (1/1/16)?

PS/401k is immediate and DB is 1 year of service.

Participant is in the DC but not the DB Plan.

Owner benefits under both plans.

Does the DC only participant

1. Get a 3% TH min or

2. Get a 5% TH min or

2. 7.5% gateway

Thank you!

(Answer is probably on here somewhere but I sure can't find it.)

We are a CPA firm & a new client provided a copy of her business' SEP prototype document. We discovered the plan has the following noncompliance issues:

1. The document was adopted by the business when it was a sole proprietorship & wasn't restated when the business converted to an S-corp. SEP contributions continued to be taken after becoming an S-corp. All SEP contributions were made on behalf of the owner only.
2. The document indicated "no age or service" requirement, however, the client applied the 3 out of 5 year statutory eligibility requirement. There were 3 eligible employees that were excluded.

To correct the document failure, we would file under the IRS VCP.

We would also correct the excluded employees under the VCP, however, regarding the method to correct; can the deductions for the excluded years be allocated prorata among the owner & the employees & have the employees' shares transferred from the owner's SEP-IRA to newly created SEP-IRA for the employees? I know the regulations forbid reducing an employee's original SEP allocation as a means to correct, but does it matter if the employee is an owner?

Any advise would be appreciated.

Safe Harbor Match Plan (100% on the first 3%, 50% on the next 2%) gives an additional Discretionary Mach of 50% of deferrals up to 12% of Compensation.

I am pretty sure means that the ACP test must be run.

Can you tell me what Matching contributions are included in the ACP test? Do I include the Safe Harbor Match plus the Discretionary Match, or only just the Discretionary Match?

Does the answer change if the Discretionary Match has a Last Day rule?

Any guidance is greatly appreciated.

Alex

I know this has been discussed a few times, but anyway:

Suppose a profit sharing only plan, not top heavy, has the profit sharing allocations with each participant in their own rate class.

Assume 6 NHCEs and 1 HCE - all eligible for the plan. Also assume the plan has a last day requirement in order to receive an allocation.

2 NHCEs quit - both worked over 1000 hours. The document does not show an election to apply any "automatic fix" provisions for a ratio percent coverage test failure.

Running an average benefits percentage test for coverage essentially requires a classification that is reasonable and is established under objective business criteria.

Would this plan be allowed to run the average benefits percentage test for coverage purposes?

Or, must the plan resort to a 1.401(a)(4)-11(g) amendment to make the plan pass the ratio percent test for coverage?

Would the answer be any different if the plan had no allocation condition (no last day requirement)?

I think I have heard the answer to this before, but is it acceptable for a participant to request a hardship AFTER the closing on a residence when he finds he put himself in a financial bind by using available money for a down payment? Closed in December, 2015.

We have a public school that has a 457 plan paired with a 401(a) plan. They are asking if the 2 plans can be merged together. Is this permissible?

if a client files an extension on their corporate return for 2015, (they are an S Corp) - do they have until the extended due date to fund the profit sharing contribution to be able to deduct it for 2015? I think so, but want some back up. Thanks..

For a due date on an IRS inquiry, is that satisfied by mailing an item on the date or does it need to be received by the IRS by the response date? Can you tell me your support for this?

Can a VEBA be set up with an omnibus account? If it can't, can you provide me with a cite?