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We have a small law firm that is being sold to a larger firm.  The small firms has a calendar year 3% safe harbor 401k Plan.  Lets say the sale date is April 1st, about 85 days away.

(1) can the plan set a termination date before April 1st?

(2) If we can set that date earlier, (say March 1st) the 3% safe harbor contributions can stop as of Match 1st, even though individuals are on payroll through April 1st?

Thank you

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Business owner has a spouse that has FICA less than the $150K threshold.  It is my understanding that the spouse would not be considered a Highly Paid Individual for Roth catch up rules.  Do you agree?

A participating employer in my client's 401(k) plan is being purchased in less than a month, and the agreement says they must be removed as a participating employer of the 401(k) plan and the employees must be removed from the plan as of the transaction date. The employees are to be moved to another plan, but it is not feasible for the recordkeeper to set up a new plan until at least March 1st. 

Any ideas on how to make sure the agreement is followed with this administrative restriction?

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I have a client with 120 employees (All Full-time) who is currently ACA-compliant with their offer of coverage. They are creating a new entity with only one employee (Full-Time), but with identical ownership to the existing business, so this new entity will be considered an ALE Member within the same controlled group. I’m trying to confirm what their ACA penalty exposure would be if they decide not to offer benefits under this new entity.

For Penalty A, my understanding is that the new entity would be exempt due to the allocated reduction of 30 full-time employees. The allocation for the new entity’s share of the 30-employee reduction would be:
(1 / 121) × 30 = 0.24. Based on the guidance below, this would round up to 1, and since the new entity has only 1 employee, Penalty A wouldn’t apply?

“If an applicable large employer member's total allocation is not a whole number, the allocation is rounded to the next highest whole number. This rounding rule may result in the aggregate reduction for the entire controlled group exceeding 30.”

My next question is, Would Penalty B also not apply since no offer of coverage is made ? It appears that a requirement for penalty B to apply is an offer of coverage:

an applicable large employer offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee,

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Hi

A Happy New Year to All. Is there anywhere on line that one can download a fillable pdf of a schedule SB? Thank you!

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A client has a new employee who needs some training on a few aspects of benefits administration, including both retirement and welfare plans. Any suggestions?

Based on my google search it appears that I have until 12/31/2025 to amend a 401(k) Plan for the 2026 Plan Year regarding the Safe Harbor Match.  However, I cannot find anything that specifically states that the Amendment can change the Safe Harbor Method from a SH Match to the SH Nonelective.  Is this allowed?  The client has already distributed the SH Notice to the Participants stating that the Plan will provide the basic SH Match for 2026.

If the 401(k) gurus out there believe I can amend the Plan, then I will prepare a new Notice stating that the Plan will be providing the SH Nonelective rather than the Match.

Thanks for any input.

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Please help to settle a disagreement in the office - is state withholding calculated using the gross distribution amount or the federal amount?

Winner gets a cookie.

A 73 year old has their first RMD this year of $8,000. After reading an article on Roth conversions, the IRA owner elects a $30,000 Roth conversion before withdrawing their RMD. It seems the IRA custodian allows this as the IRA owner's intent was to do a rollover, taking possession of the $30,000 withdrawal and within 60 days, deposit it in a Roth IRA (his first) as a Roth conversion. But the $8,000 will be considered the RMD withdrawal, not a Roth conversion while the remaining $22,000 will be considered a Roth conversion. So under these circumstances, assuming this 73 year old or his spouse has no earned income, that an $8,000 excess contribution has been made to his Roth IRA? If so, the IRA owner has until Oct 31, 2026 to withdraw the excess Roth contribution and its associated earnings. 

Is this correct?

We started a new plan for Company R in 2025, and we just found out that the plan's financial advisor (through a shell company he owns 100% of) purchased 10% of Company R's stock sometime in 2025.  The plan is on a recordkeeping platform that pays the advisory form some amount of bp (50, I think).

This seems to be a prohibited transaction; I don't see any way for the FA to keep getting paid on this.  And he should return all the fees paid to him since the purchase (with earnings) to restore the plan.

Anything else I'm missing?  Thanks.

Received a call from an Advisor.  He has a prospect with 2 Partners, no employees.  It is an LLC taxed as an S Corp and the 2 partners receive W-2 income.  The Advisor and CPA want to set up the plan for 2025 and have the partners make the maximum deferrals before year end from a bonus check.  The plan can be set up for 2025 but can they make the employee deferral contributions at this late date for the 2025 year?  I question it because they take W-2 comp and not Schedule C or K-1.