Bird

It seems like you are circling back to the original question - if someone has $0 comp are they in the test at all? As far as I'm concerned, owners (that is, a sole proprietor or a partner) are also employees...but with $0 comp I would not include them in testing. An owner's spouse who is not a partner would have to either get a W-2 income or get nothing, and if they get nothing then I can't see how you would include them in the test. As far as software, I think it would short out if they divided 0 by 0, so they program it to = 0. That doesn't mean it is correct.

IMO it is not unreasonable to take $0 salary if the company is unprofitable. If it is an S corp and they are taking no salary but getting dividends, yeah that is a big problem. In any event I agree with others that they are not in the test with $0 pay. It probably makes sense to take some nominal pay for plan purposes. This all assumes there are other HCEs, otherwise it shouldn't matter.

Agreed, and they still have...superb customer service. Coleboy1, there are several options; I think if you choose Cross Test Rate Group at 70% that might fix it.

I dunno. One red flag and probably the fault of a lawyer getting paid by the word, adding too many words.

I would just point out the poorly worded (unnecessary!) language and move on. Having said that, I suppose if the participant did try to change the election and not make the 401(k) contributions, and the employer tried to force it, then they have a problem.

If it was Docu-signed then any text about a signing date is just stray letters.

I agree that if it is done to benefit an HCE (I guess that would be in the case of a market gain after the last val) it is problematic, but it's pretty much a requirement in many situations.

If they share a common hire date, that might make it look better (and/or make someone feel better), but I see no problem with letting in NHCEs early and naming them by name. I don't understand how it could not be definitely determinable or be discriminatory.

? What is the objection? If you have a plan with $1M in it, and one participant has $800K, and that participant asks for a distribution after the plan has lost 20% of its value since the last regular val date, are you not going to do a special val?

Most* plans will allow for the Plan Administrator to declare a special valuation date, then it is up to them to decide if it is appropriate. *Really "all" since this could be done by amendment even if not explicitly allowed in the document.

You nailed it. They have the ears of the staffers who input this stuff.

Yes I would issue 2 1099s and yes the participant should request a distribution from the IRA - but it is important to request it as a refund of an excess contribution, otherwise they will be taxed twice. No VCP. I doubt the check is uncashed and in any event wouldn't want to mess with blowing up an investment company's system with a bad check.

If they executed the election then that means they cannot be in the plan, ever. If they signed it they can't say they should be covered so I think you are ok in that regard. Most of us in the biz don't like irrevocable elections for various reasons, but if it already exists, so be it.

At this point, with my career in the rear-view mirror, I am of the opinion that the retirement plan rules are fundamentally broken and unfixable. We have widespread noncompliance, both due to complexity and willful neglect. I can't say I've given it that much thought but maybe, just maybe, we need to move to some kind of mandatory employer contribution (SS after all is a mandatory employer contribution) that goes into some kind of DC plan...like a SH nonelective. Get rid of the auto-enrollment stuff, or at least make it optional. And increase the 401(k) max but decrease the overall DC 415 limits and get rid of cross-testing (if you want a DB plan then put in a DB plan!) and otherwise simplify. I am literally doing this on the fly so it's not like I gave it any previous thought, and my opinion is no doubt colored by working with small plans and largely taking TH contributions as a given.

If it is a legit election. referencing the plan and otherwise ok, I see no reason not to use it.

Yeah. I think ASPPA rotated a long time ago from having the back of small TPAs to siding with the giants of the industry, in particular the investment companies.

The two actions you cite above are contradictory. I don't know which to believe; either the ownership was changed to the individual (in which case it is a distribution) or it was surrendered and the proceeds put in the annuity (in which case, as Bill Presson notes, it was not a distribution). I would go back to the agent and ask again.

Ah yes, I think you are right. I agree with your analysis.

I am positively giddy about my status of being more-and-more retired. Sorry to gloat. Good luck making lemonade out of rotten lemons.

I'm not trying too hard here but isn't it possible to un-do (recharacterize) a Roth conversion? I would look into that (get the money back into the traditional IRA) and then pull it from there as an excess contribution.

Yes. I am semi-retired and moving more and more towards retired. I don't want to deal with the part-time/permanent stuff and this auto contribution stuff, and I'm thinking that my typical micro clients don't want to either. I get it, and if I had not been in business but just worked in government I would think it's all great. I forget the description for this - behavioral economics? - and I guess it works, but not all companies have 10,000 employees. I might sound like a neo-con but I'm pretty far from it, but being in the trenches does give one a different perspective.

Wow, so what was the point of the amendment? I suppose to allow 401(k) contributions?

EmployER contributions are required so yes they must be made and accepted.

I don't think it requires a filing. IMO if you issue a 1099-R showing the RMD as a taxable distribution that "fixes" it (technically the plan did nothing wrong as the RMD was indeed distributed; it's the participant who rolled it over improperly).

Correct