austin3515

Though it was tempting to respond, I've decided to just ignore your invocation of nuclear war. There is just absolutely nothing stopping them from taking a hard-line "8 week expenses only" approach when they issue more guidance. I'm old enough to remember when the IRS concluded that expenses funded by forgivable loans were non-deductible to the shock of many on-lookers who expressed disbelief they could take such an outrageous position. I am among those who considered that position by the IRS to be outrageous. Counting 2019's profit sharing as a "payroll related expense" for the 8 week window seems, to say the least, "aggressive." And it would not seem outrageous to me if they said it did not work, depsite the open ended language in their 2 pages of instructions. I am hoping for some enormous Q&A that covers this and other questions that badly need answering. Not least of which is this owner-employee nonsense. Guidance just has to be forthcoming. I'm advising clients to be ultra-conservative until the SBA says we can use your interpretation.

I dont understand this. The downside is terrible. If they relied on this interpretation and the SBA later comes out and says "Seriously? You know thats not what we meant. The whole law is based entirely on the 8 weeks, and that was so clear that to take any other position was not in good faith." You don;t know for sure they won;t say that (heck I would say that if it were me, because it kind of is that obvious). And if they did come out and say that (which I notice you do allow can happen, even though it was buried in sarcasm and included a "shiny object" to distract the reader): a) They funded the 2019 contribution which they might not have done if not forgivable because it was discretionary. Even if they prefunded all of 2020 for the same reason, again they might not have done if not eligible for the forgiveness. b) And now the have to fund something that is in line on top of that in order to get the loan forgiveness. That would be a client that I would expect to fire me if that all happened based on my recommendation. And because I don;t like to get fired, I'm not comfortable setting myself up for this one. Now mind you I do not disagree with your literal interpretation of the very limited guidance that is available. But even you have reservations as evidenced by your "hedgey" language ("it appears to" and "can be read to allow"). That's CYA language. If I asked you (in 2019 anyway) what's the maximum loan amount, you would not say "the rules can be read to allow a loan of $50,000 or 50%".

Are you not concerned that future guidance might reflect a more limited interpretation?

That is an excellent article, thnank you for sharing (and writing it!). That;s what Derrin was saying as well (of course not surprising you would say the same thing), But this is exactly the kind of language that gives me pause (from the article): If I tell a client that they can just fund their 2019 profit sharing and they'll be golden, and then that turns out to be wrong, I'm really really in deep doo doo. Don't I need somethig more concrete before giving that advice? Larry, are you currently advising your clients to take this approach based on the guidance currently available?

Thats what is so frustrating. The stakes are incredibly high. We need something more concrete. I'm not even comfortable assuming that the reference to "paid or incurred" is intended to extend so far as to include the 2019 contributions. a literal interpretation, sure. But it just seems so outside the scope of the plain intention (i.e., the plain intention is clearly focused on those 8 weeks). Is it "impossible" for them to come back at this stage and say the retirement contributions have to relate to the 8 week period? I feel like we're not at a point yet where that is out of the question. And I keep getting questions about defined benefit plan contributions. I can;t imagine they are not eligible, but some more guidance would sure be nice. Is it too much wishful thinking to assume we will get more guidance on this?

So today on Derrin Watson's Fireside Chat through ERISApedia he said that the 2019 contributions can be funded in the 8 week window and count towards the loan forgiveness. Has anyone seen an article that goes through these rules in detail? He also said you could fund the 2020 profit sharing to a suspense account for allocation after year-end. I'd love an article from an FIS or a Groom Law or Sal Tripodi, etc. that can give us something reliable in writing that we can then use to counsel people and have it as comfort that the premiere experts have opined.

If you read the applicable sections of the ERISA Outline Book that would be a good start. There actually is not nearly as much to know as in the 401k space, but if you don't know even one of the important things to know, then you can really cause trouble. Who can be eligible and the taxation rules just to name two that come to mind.

Got an interesting question just now. Can we have a policy that says if you are ever an HCE then you will always be part of the 403b and you will never go back to the 401k. The purpose would be to avoid people flipping back and forth between the two plans. I can't think of anything that would prevent it. I guess the only issue would be coverage. So if I have NHCE's not covered by the 401k plan, I need to pass a coverage test. But if we're talking about a larger organization where the NHCEs dramatically outnumber the HCE's (as happens to be the case on the inquiring client) that should be a non-issue.

As the saying goes, it doesn't matter till it matters. Meaning when you get sued the first and obvious conclusion is that the problem was you wore both hats. In other words if your moral compass doesn't rule it out, your fear of giving your legal adversary low hanging fruit should do the trick.

People can often find a way to justify why its ok for them make more money :).

Just to be clear for the casual reader ".03" does not apply to this question. An audit is by definition an "attest" service. Basically what it means is the auditor is "attesting" to the fact that the financial statements are free of material misstatement. Anything with an "opinion" page is the result of an "attest" service.

that's exceedingly stupid. Sounds like maybe a technical correction bill should address it either way. To penalize someone for being unincorporated is nonsensical.

I honestly find it extremely hard to believe that is happening. It is as bad as it gets for an auditor to do the TPA work. Completely and utterly forbidden. Auditors require ethics training etc every year where they drill into the fiber of their being "thou shalt not audit thine own work." Independence is the WHOLE POINT of auditing. I suppose some small shop that audits 3 plans and does no other audit work might be making this stupid mistake, but not even a regional firm would be so... well, stupid. They would lose their license in a heartbeat if that ever came to light.

I can say that actually. [I'm not talking about some nuanced thing about a Schedule C. That's a tiny sliver of what matters here]

My point of course is that what I described would fit into anyone's definition of eligible retirement contributions. There is nothing aggressive about funding the same safe harbor match you have always funded just for the 8 week period. It is clearly what was intended.

I described it on the phone today that it is essentially like Brewster's Millions, where he had to spend the $30 Million to get $300 Million. Pretty much the same concept.

Something doesn;t feel quite right about jacking up a cash blance allocation 95% allocated to the owners in that 8 week window and applying it towards uncle sam forgiving a 6 or 7 figure loan. I just don;t think I could sleep at night taking such a position. Becuase things that seem to good to be true often turn out to be untrue, and because the PPP is already too good to be true (except of course it is) I have been advising to just fund what is customary for that business. If you always fund 10%, of pay, then fund 10% of the 8 weeks during the window. If you just do 3% Safe Harbor Nonelective, for several years running, then funding 10% during the 8 week window just feels a bit too aggressive for my blood. But I always tell my clients "if someone is adviing you an employer contribution is eligible, then I will run the calculation." Of all the things I am responsible for, determining eligiblity for a ppp loan forgiveness just is not one of them.

One of the most important lessons I ever learned was don;'t fight the system. No good will ever come of it.

Well Empower was one, and it was more closely related to their desire to be the first to market. Not sure what Fidelity did. Maybe Empower will add that enhancement, I definitely have clients who have been asking for it.

Word of caution - not all providers took the time to program in all that flexibility. And who can blame them they are going to hit the delete key on all this programming in 8 months. There are more than one where if your option is to add these full tilt or not at all and that's that.

There is no maximum auto escalate number on an EACA like there is on a QACA, is that right? So I could auto escalate to 20% if I wanted to?

A point of context here is that many providers did not even require the administrator to sign the form. So if the participant was lying they would never have known. Surely that has to change now.

We were all on the same page based on the law. But there have been "developments" in the form of published IRS guidance.

OK I give up. For those clients who say they know I'll tell them Larry Starr and Mike Preston say you're mistaken ?.

Well golly gee willikers that's my whole darn point. They know they;re lying! They know the person and they know none of these things has happened to them. Remember I am talking small business here. We know when someone has a cold for crying out loud. We would know if their wife had COVID.