Bird

There are two contributions and two formulas - one is the safe harbor, where everyone gets 3%, and the other is regular profit sharing, with a 4 step allocation. Generally, if you are trying to maximize the benefits of integration, you don't want a 4 step formula, so faulty plan design may be the problem. In the 4 step formula, the 3% allocation is not allocated twice - first, everyone gets 3% of total comp, then (2nd step), it's 3% of excess comp, so you get to integration in the second step. Unless you meant the safe harbor was the "first step" but that's not how it should be thought of, IMO.

That's the answer and bears repeating. We (still) do it both ways, with an 8109-B deposit at a local bank, and by sending a check to "Financial Agent" in St. Louis. We're doing it the latter way for plans that aren't used to doing it via the 8109-B coupon, and asking for the check and mailing it ourselves to make sure it gets done. Both work.

"Easiest" is to just return the deferrals as income.

Wow. I hadn't thought of an IRS levy; point taken.

Well, it's certainly going to be cleaner to use the correct id number, but I wouldn't be too worried about using a wrong (company) id number on a plan account and having that account treated as a business account. It's the titling that matters.

Yes, it's ok. In my plans that have insurance (fewer and fewer, to everyone's benefit), we treat premium payments as a transfer from once account to another, not as a fee.

Seattle-Res, most plans are (I think) set up as a "plan and trust" and are typically referred to as the "plan." If the brokerage firm set up the account properly - and that's never a given - then they will suppress 1099 reporting, and it wouldn't matter if you used your business id number, or your own SS number for that matter, at least for purposes of having income improperly reported to the IRS. But it's generally best to have a separate ID number for the plan and trust, and you do, so no worries.

I suggest you write a letter to the relevant IRS office (see the instructions) correcting the name. We've done that for changes of address, etc. and usually a confirmation is sent to the plan, so it seems to work.

I think you'll just have to override the software and put the full distribution on line 15a and 0 as the taxable amount on line 15b. Or contact Tax Cut to find out how to get to the same place. You're right about the (non) taxation of the distribution, but there's no way to report it as a return of contributions when you file; you simply say that it's not taxable.

I've heard that the address on the form will be disregarded and that the letter will be sent to the address of record in the database. I think in the end this will be much ado about nothing (the IRS letters are superfluous). I hope.

What's it worth to ya? PM on the way.

If you are matching contributions with each payroll, then I agree, it is probably best to provide an informal notice, but definitely not required. It does raise the question of whether the matching contribution defined in the document is truly based on each payroll or should be based on the full year's pay, in which case this "suspension" may call for end of year adjustments.

Apparently this practice of setting up an LLC taxed as a partnership or sole prop, but still taking wages, is common, even though it is wrong, at least as I understand it. I would use the wages (and have done it), but also take into account the profit or loss.

Has it actually been annuitized or is it a deferred annuity that can be redeemed at some later date, and just has to have someone listed as the annuitant? That's not necessarily a problem. I've seen a lot, but it's hard to believe that anyone could be that utterly incompetent to buy an immediate annuity on one life using plan assets.

good grief

John, I'm not sure I followed your last post, but getting back to the first one, the language simply says the safe harbor does not apply if no notice is given. It doesn't say "...and the plan reverts to regular ADP testing." So maybe if the plan says it is a safe harbor plan, and no notice is given, there's no safe harbor and no ADP test, and HCEs can't defer at all. I know I wouldn't be comfortable ignoring the regs and relying on simply toggling the notice on and off while the plan says "safe harbor" all the time.

You're right, it's done like that all the time and is not a problem. I'm not sure I can explain it but rcline's answer is probably best. The attorney is extrapolating a concept that simply doesn't apply in this case.

Maybe. I know there was a time when they said, at least unofficially, that they wouldn't ask for documents from before "x" ("x" might have been TRA 86 but I'm not sure). But I've heard that in the current cycle, certain reviewers are asking for documents back to inception, period.

Yep, my understanding is that it would take a participant complaint of some sort to start any kind of correction procedure, and then the plan would have a claim against the participant for the withholding, so it nets to nothing. And I've never seen the IRS do anything about it either; I'm not sure if there is even an official penalty.

I concur with QDROphile.

I thought they said "after" 4/30. I was told, I think at the end of the exam, that they were going to grade them all at the same time and (essentially) curve the grades. Everyone will get their results at the same time.

They are allowed to do that in the same sense that they are allowed to pick a number out of thin air; as Jim notes, it's probably best done by creating a separate group for each person, although I suppose you could write your desired formula into a document. It might be a little more challenging than you think to get the language just right. But it's subject to non-discrimination and testing on the current year's compensation. Personally, I don't think it's worth the hassle and expense.

SMB, you're right, but the idea is that if you allocate a small PS contribution that way, it won't meet top heavy requirements. So the top heavy rules kick in, first allocating 3% to all participants employed on the last day of the year. The tiny bit remaining gets allocated as a "regular" PS contribution, and the terminees will indeed get their "fair" share of that allocation. BUT, that assumes a key made a 401(k) contribution of at least 3%...EPS2 never did clarify that a key made such a 401(k) contribution. If not, then you are absolutely correct, the contribution is simply allocated to all, including the terminees, from the first dollar up to 3%, because that is what the plan says, and it will satisfy top-heavy (if everyone, including the keys, gets 1%, that satisfies top-heavy). It's a "key" (groan) point to the whole argument.

None, IMO. We treat them as a transfer within the plan. I've seen them reported as an expense (in which case the value of the policy is not reported since it would not balance), but I think it's wrong to do so.

I've heard nothing about it.