austin3515

No way. This is the most classic example of a PT you could ask for. The only way is to not charge the Plan for a commission. He cannot receive anything on account of this transaction.

try googling "safe harbor notice." P.S. I don't know if this is any good or not. http://www.lfg.com/lfg/rfs/docs/doc/3percentNotice.doc

So we're saying that even if it is not a maybe SHNEC, the notice can still be given today as long as we're still talking about the 3% SHNEC? The only ramification is not meeting the safe harbor notice requirement?

I agree that there s no point in a match with no employees. In order to max you both out at $44,000 (41K + 3K, as it sounds your both >50), you need at least $112,000 in compensation for each of you, calculated as: $44,000 minus $16,000 = $28,000 in profit sharing contributions. $28,000 divided by 25% = $112,000. BTW, just open a money market account at any bank if you have trouble getting the account open before your due date. As long as the account is in the name of the Plan you're fine. The money doesn't HAVE to be in a brokerage account right away.

Your deferral election can be to defer the maximum allowable (i.e., 13,000, or $16,000 if >50). If you use a percentage of earnings (as typical for a regular employee) you will never know what your deferral is until you figure out your income. That makes trying to max out harder (i.e., if you don't max out on deferrals, your limited to 25% of earned income on the profit sharing side, which may or may not give you enough room to max out). All of this is assuming your a schedule C by the way. IF you're incorporated, or an LLC taxed as a corp. (and therefore are paid as a W-2 employee), you would neeed to have deferrals withheld in December, and deposited shortly after year-end.

Researching something else, I stumbled upon the requirement that if loan payments are suspended during an LOA, you still need to accrue interest during that time frame, which is a recordkeeping pain the in backside.

As long as all participants have the option of going into all 3 platforms, you wouldn't have any issues from a nondiscimination perspective (i.e., for benefits rights and features). As far as 404© goes, your educational requirements are now 3x as difficult because you have 3 platforms now. That makes it easier for a savvy attorney to burst your 404© bubble. Not to mention the administrative headache! I would not go there, if I were you...

The IRS would take issue because you're creating fictitious income (in my opinion) so that you can take a tax deduction for the retirement plan contribution. Without this scheme, the retirement plan contriubtion and related deduction would be zero. Also, those contributions will grow tax deferred inside a qualified plan. So the government is indeed getting screwed by this scheme, in my opinion... Can anyone site the defintion of trade or business?

Can anyone define trade or business? Isn't this one trade or business? There must be some functional test and I can't believe this arrangement would ever be considered two separate trades or businesses. With that being said, I don't really know. Jquazza, I definitely need to get out more... Although this is an all volunteer sight, so I doubt if I'm alone!

It does because now not all of the contributions will be catch-ups - some of them will be true deferrals, which means that the key employee did benefit as far as top heavy is concerned. Therefore, (TOTAL key deferrals minus deferrals reclassified as catch-ups) divided by key's compensation = top heavy minimum contribution (as a % of pay) for all NHCE's who are employed on the last day of the Plan Year (assuming they met the Plan's eligibility requirements). No 1,000 hour requirement can be imposed.

Are you saying that all MEP's will say that the assets of one Adopting Employer can be used to pay the benefits of all other Adopting Employers? You gave the example of one employer ducking out before funding a SHNEC. Are you saying that all other employers would then be on the hook for that? Finally then, it seems your position is that there is only one 5500 for the entire MEP? For example, a PEO sponsoring an MEP with 100 unrelated employers will file on separate 5500 with 100 Schedule T's?

So Blinky, does the following work: Old Plan has a 4 year graded vesting schedule (25% a year). New Plan is started for new contributions only, and can exclude years of service from before the effective date of the Plan? Furthermore, New Plan can have a 7 year graded vesting schedule, and even 100% vested employees in the old plan will be zero percent vested when New Plan is started? Let's assume Old Plan continues to have a 401k, so partial termination won't be an issue in Old Plan.

First of all I can assure that I think it's stupid . The sponsor can just terminate the plan if they want. So if they can terminate the plan altogether (much more detrimental to the financial well being of the participants) then why not allow them to slightly decrease the level of FUTURE benefits.

I'm starting to come around to ya now after reading the ERISA Outline Book. It sounds like Congress is actually on my side, but the treasury has decided to ignore congress' intent (see page 4.20something of the 2004 ERISA Outline Book). I still think it's stupid. Not that that means anything...

But I could start a new plan, and start making new employer contributions, under a new more restrictive vesting schedule, right? Does anyone disagree with that statement?

Right, but those are things that the IRS has said specifically that just having two plans won't solve the problem?

Sure, but gosh it's fun to talk about this stuff...

And I read that too... Thanks!

None that I can think of except politically; if you told your ee's they might be pretty peeved. You can terminate/amend a plan at any time you want, so before it even exists oughta be okay...

Does the use of the term "trade or business" put the kabash on any of this? We can all see right through what's really happening. The "business" includes the management company because every business must have management. I could see if they were paying an unrelated 3rd party, but everything here is coming back to the same guy... The additional tax deduction generated from this scheme (thereby making it possibly subject to the avoidance penalties) would be the PS contribution itself.

To make slightly more clear, there is no such thing as a "solo 401(k)"- that is to say the Code and the regulations do not define such a plan. They do define, for example an ESOP, or a SEP. The only distinguishing characteristic between a solo 401(k) and any other 401(k) is the number of employees covered under the plan. The terms solo-401(k), individual(k) plan, are all marketing names.

Although I'm sure it happens, why would they? The employer should be able to change the vesting schedule however they see fit at any time (assuming the vested benefits are not decreased of course, and all other rules related to changing vesting). How can you protect a benefit that doesn't exist??? I think an overriding concept that most of the IRS espouses is that if you can do it in 2 plans, why not let them do it in one plan (i.e., restructuring for nondiscrim, or testing based on otherwise excludables, or new comp plans for that matter with separate allocation groups)? So if you could start a new plan and accomplish your goal (which I can't believe anyone would dispute), why not let them do it in the current plan?

Tom (or anyone) - Why can't you exclude terminees with < 500 hours? I hadn't heard that before. I'm assuming this applies exclusively to the employees not covered by the Plan?

Are the safe harbor requirements still met? We already know the answer is yes, so amend away! Let's hear what the others have to say though...

Although it's true that your key could leave catch-ups the Plan w/o triggering a THM, you better make sure that you don't have a THM because the key made contriubtions in the first place in excess of the catch-up limit, even though they were refunded. I just went through the top heavy regs and didn't find the answer. Maybe the ERISA Outline Book?