Cephas

Thanks, Lou S - very helpful.

Client came to us with a solo 401(k). The client's annual additions to the 401(k) were, in reality, less than the maximum 415(c) limit for years 2019-2023. Unfortunately, the client understated his income on his federal income tax returns during those years. The client's new accountant is planning to file amended returns for those years to accurately report the client's income. Without the amended returns, the client "appears" to have exceeded the limitation in 415(c)(1)(B) (i.e., 100 percent of the participant's compensation) due to the understated amounts on his original tax returns. With the amended returns (which, again, accurately reflect the client's income during the years in question), the client was below the 415(c) limit each year. Can this issue be resolved by filing amended returns, or does the client need to use EPCRS to address anything? Because the client did not exceed the 415(c) limit in any year (after giving effect to the amended returns), my initial impression is that there is no need to distribute any excess annual additions. Am I thinking about this correctly? Happy to consider any other issues you may see. Thank you for your time.

I am looking for some insight into a QSLOB issue. My client has two business entities that are commonly controlled. One entity conducts the business operations ("Entity 1"). The other entity ("Entity 2") provides administrative support (e.g., payroll, HR, etc.) for both entities. Ideally, my client would like to offer a 401(k) plan for the employees of Entity 2. However, due to the demographics of Entity 1 and Entity 2's employees, and due to the fact they are commonly controlled, offering a 401(k) plan to only the employees of Entity 2 would likely result in coverage testing issues. My initial thought was to have Entity 2 make an election to be a QSLOB. My question relates to the 50 employee requirement. Specifically, Treas. Reg. §1.414(r)-4(b) requires those 50 employers to "not provide services to any other separate line of business of the employer for the testing year." Am I correct in saying that, if Entity 2 made a QSLOB election, that Entity 1 would be treated as a "other separate line of business", even if Entity 1 does not make a separate QSLOB election for itself? If the question prompts any alternative solutions that would allow Entity 2 to sponsor a 401(k) plan, I would be interested in hearing them. Thank you in advance for your time.