David D

The difference is for business tax returns, the deferrals are withheld from their employee paychecks. So the employee is making the contribution timely as it is withheld from their pay. It's the employer that pays the penalty for sending in that money late. For the Sole Prop, if the money was not deposited by the extended due date of the tax return, no employer or employee contribution deduction is available for that year. Any deferrals contributed now will count towards the current 402g limit, so there is no benefit in trying to say they are late deferrals as they cannot be deducted for the year they were intended to be made.

Yes, they are included in box 1 of the W-2.

You need to find out whether it's an S Corp that contributions are based on w-2 wages, or a partnership that bases contributions on line 14a of each K-1.

Because the participant is still working, there is a Treasury Reg that permits RMD payments to be made while working and then payout under any available option upon actual retirement. This is different from a participant who has terminated service as they are then electing their benefit option at the time they elect their RMD payment.

Amending is fine. Assuming it's a non PBGC plan, just be careful of the 6% of comp limit in the DC plan as you may have to give more in the DC plan to one or two to pass testing.

I did see some accountants take this approach in 2025 to keep the comp below the limit to avoid the ROTH in 2026. For an owner only plan it has no effect on the amount the owner can get in the plan. If there are employees, and cross tested, then there may be higher contributions required for the NHCE's.

Sounds to me like the record keeper was either instructed to allocate money to the participant in error, or they allocated monies that should have gone to another participant in error. The record keeper then made the plan whole by funding the amount of the over payment into the plan. The plan sponsor can either take it as a win, or they can instruct the record keeper to remove the funds they credited and the plan sponsor can deposit the needed funds to make the plan whole. The plan sponsor can then pursue through the court system to see if the courts will agree that monies allocated in a record kept account were incorrect and should be repaid by the participant. If they recoup the legal fees as well as the money, they would be in the same position they are now.

For tax deduction purposes, contributions to the Sole Proprietor account must be made by 10-15 assuming an extension was filed for the personal taxes. That goes for both employee and employer contributions. He cannot deduct anything for 2024 unless other money was timely deposited.

The employee can still contribute to the 403(b) plan, they just don't get the immediate tax benefit. For those of us in the business a long time, there was a time when 401(k) pre tax deferrals were not recognized for state tax purposes. I live in CA and they still don't recognize HSA contributions for income tax purposes.

You would also want to review the plan loan policy in place. Most loan policies that i see say that if a participant defaults on a loan, that participant cannot take another loan.

In that case it does not, but unfortunately many accountants are against paying Self Employment Tax or payroll taxes on wages, so we often see a client incorporate as an S Corp and pay little to no wages and seriously reduce or eliminate their ability to make pension contributions.

RMD's are on the total account balance of the pre-tax assets, so $620,000

I would test the plans together again, but now rather than using the credits in your val you use the credits plus the excess you are allocating to see that it passes. It seems to me that you would need to give something to the other in the CB plan as you will be amending after the plan term date and the amended credit would not pass on it's own as only the owner would get anything.

I have only set up a QRP when the owner is limited by 415 on plan termination and cannot be allocated the excess. Most plan documents allow for the allocation of assets in a non discriminatory manner on plan termination. Whether you need an amendment to allow for the maximum deductible contribution made prior to December 31, 2025 depends on whether the amount contributed during the year is less than the allowable maximum or not.

Are you actually trying to exclude existing participants from participating in the plan, or just excluding them from being eligible for a Safe Harbor Contribution?