Bird

Thanks for posting. RIP

Well, it's not prohibited by Notice 2016-16; nobody is having anything taken away, and I don't see anything that says you'd have to increase the SH to 4%. I'd tentatively say it's ok.

Most, maybe all SEP docs will have something in them that says "you can't use this at the same time that you have a qualified plan" or words to that effect. It means you can't make contributions to both for the same year. If you pay attention to 415 limits and non-discrimination it is "just" a document issue. As M.S. Hatlee notes you are probably thinking of the SIMPLE rule. You don't have to terminate the SEP; just don't contribute to it.

(I think) we'd normally do the first part as a negative distribution; if redistributed it nets out and I see no problem. If there are no distributions and it's not redistributed you'd wind up with a negative distribution amount...not sure if that will be accepted or not. We might do it as other contributions in that case.

Hypothetical for me..."...would your view be different if you were not dependent on someone else’s document-assembly software..." Sorry for not being clear.

Recent discssion...

Thanks for answering; I agree. And add that it's a hypothetical that I'd rather not entertain.

I agree with prior answers. I would not generally stray from the safety - perceived or actual - of using what is spit out from our doc provider.

There is a bit of a cloud hanging on all such self-employed PS allocations that are not directly done by formula, but I don't think the IRS is trying to do anything about it. As far as reducing distributions, I think it is a mathematical/accounting necessity. Partners' retirement plan contributions are taken on their own returns, so their profits are one thing and cash distributions are another - if the partnership cuts the PS checks, they need to reduce the respective partners' distributions by their share of the PS allocations.

I don't see why it would be a problem to make something right that was wrong.

It really is. What prompts someone to make their very first post on a 4+ year old topic, and forcefully say something that isn't accurate?!

When you say no one reported anything - I assume X reported it as a rollover, but not code S? I'm not really sure what proper reporting is for a SIMPLE to SIMPLE rollover. If they fix it to the way it should have been, I don't see the risk to anyone. And if they don't fix it, and the money is now in a SEP-IRA instead of a SIMPLE, and the two year period has passed, I don't see any harm there either. Sorry, I'm just wingin' it here.

I think this Q came through before but maybe no replies? Anyway, did Recordkeeper X report the rollovers as subject the penalty? I'm guessing not otherwise this would be a bigger issue. If Recordkeeper Y clearly did not follow instructions, I might be inclined to make them fix it (by moving to the SIMPLE account(s)), or at least try, but at the end of the day, since the participants weren't hurt, I'd be inclined to be monkey-no-see and let it go, documenting that Recordkeeper Y messed up and refused to or otherwise didn't fix it. Somehow I don't see 100% of the blame on Recordkeeper Y; at the very least the investor and/or broker should have seen which account money went in to.

FWIW my accountant includes the 401(k) contributions in wages (C corp), and obviously not under the pension, profit sharing, etc. line. That's what makes sense to me. I see the instructions appear to say otherwise but somehow don't know that's what they meant. Agree 100% that they are deducted only once.

That's interesting, and to be honest I'm trying hard to think of vendors we deal witih that even want a copy of the document. So we haven't seen any of this. But I agree, they should stay in their lane.

I think the way I would put it is that it's always been a problem but realization of that has come along slowly.

I'd say it didn't "cease" it was "suspended."

Are you talking about shared employees, where, say, two docs share a receptionist? And you want to allow participation in one plan? It's not really clear what is going on here - who is paying whom, for instance.

I think the TPA doesn't have enough to do. The plan may be terminated but it still exists and can be amended. I'd even say it could be amended after assets are paid out if something needed to be tidied up.

That answers your question - it was an error, and not due to some reasonable implementation process (which would, I'd think, be manageable by the second pay period at the latest).

Or tell the CPA that you ran it past some very (very!) experienced folks on this board and they all said no (and that CPAs only know enough to be dangerous in this field). Or look at a SEP application and go through it line by line, noting that it asks for the EMPLOYER info.

Taking an educated guess that this is a SIMPLE? Payroll companies are the bane of our existence...WTF does it mean to accrue contributions from a $0 paycheck?! IMO this is "simple" - if someone has a paycheck and has elected a $ or %, you withhold that $ or % from that paycheck, period. No paycheck, no withholding, no "accrual." Anything else is stupid.

I would not bother amending. If under examination, just explain how it was reported (cash basis). IMO amending while under examination just makes it worse.

That's not very specific. When was it withheld (month) and when was it paid (month)? Whether there are penalties or not would depend on timing and amount. I probably wouldn't worry about it a whole lot at this point; let them assess the penalties and then pay them. I think they are based on current rates which are extremely low. We would have shown the WH as a liability on the 5500 but then again this wouldn't be something we'd have to deal with. It's ok to report on a cash basis.

Our policy, as advised by our document provider, Fort William, has been to use a restatement date that is the beginning of the year in which the document is signed - with the understanding that there are many provisions sprinkled throughout that have earlier effective dates as specified in the document. If you, accidentally or on purpose, used an earlier restatement date, I don't think it is a problem, unless you were actually changing something that potentially took away a benefit. So, if you had a certain allocation formula in the old plan, and have the same allocation formula in the restated plan, the restatement effective date is of no consequence. I tell my clients "the words are different but the plan is the same."