austin3515

Appleby, I think as Earl implied you turn to the eligibility requirements. IF employees meet the requirements they are in, no amendments necessary. I'm not sure why they'd be ineligible to maintain it when they have employees. Remember, this is just a 401(k) like any other (except that it has no employees, which is really not much of a difference).

You can set up one plan for each them. But beware if you ever hire any employees as this will totally mess everything up. Why not set up one new comparability plan, with each owner as their own allocation group? As there are no NHCE's you never worry about nondiscrimination and each owner does whatever the heck they want. Just make sure that when you declare the annual employer contributions it is a corporate action - not an individual election - if it is an individual election you have a "deemed CODA" which is very very bad. For example, all three owners should annually sign a Corporate Resolution indicating what each partners employer contriubtion would be. Of course the 401(k) portion of the Plan would be based on the owners election.

I change my answer based on what's below. The ADP failure came first, and you have yourself a genuine 402(g) excess (I think, anyway). This is from the 414(v) regulations. Everything I read in the ERISA Outline Book "deferrals as of Plan Year End" and never mentioned your scenario, which I think supports my revised conclusion. (3) Timing rules. For purposes of determining the maximum amount of permitted catch-up contributions for a catch-up eligible participant, the determination of whether an elective deferral is a catch-up contribution is made as of the last day of the plan year (or in the case of section 415, as of the last day of the limitation year), except that, with respect to elective deferrals in excess of an applicable limit that is tested on the basis of the taxable year or calendar year (e.g., the section 401(a)(30) limit on elective deferrals), the determination of whether such elective deferrals are treated as catch-up contributions is made at the time they are deferred.

The $16,000 came first, so you got nothing left to reclass. You need to send a check for the ADP refund. My understanding is that even if there were catc-ups left on the table for calendar 03, you couldn't use them, because 2003 is over and done with (despite the fact that this plan year covers part of 03).

It must be deducted from wages. They cannot write a check to the Plan. OF course, you still have a week to process one more check if it's really that important (assuming the Plan will allow up to a 100% w/holding-don't forget to gross up for SS Taxes)....

Just make sure that no matter what, they will come if they complete a 12 month period with at least 1,000 hours (generally 1st 12 months of employment or any subsequent plan year).

You're kidding! I wonder if this is more that they are trying to encourage people to use the program, because no one uses the VOLUNTARY program. Was there anything unusual about the filing? Was it several PT's for a large amount of money? I agree that it's tough to turn down the "suggestion" unless the letter makes it clear that it won't impact the audit selection process.

415 limits annual additions (including deferrals this time) to 100% of comp or $44K, whichever is less. In this case 100% of comp is less, so the total allowable annual additions is 17,500 (minus $16,000 equals PS of $1,500 or 8.571%). Or is the limit $20,500? (100% of comp plus $3,000)?

What's the 20% limit? Not something I've heard of before...

The match is till subject to the 25% of comp deduction limit. If you don't have the $112k of comp calculated above, there is no way to max out, whether you use match or PS.

It sounded like Poje was relying on 98-52 for his comments?

The main reason to use a match to max out is because if you have employees that don't defer, you don't have to make a contribution for them. Absent that motivating factor, there is no difference to you how you get to the $41,000.

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.