Bird

Other posters have alluded to this but what you really want is to allocate a 3% contribution to both Keys and Non-Keys. As noted, your language does not permit TH to Keys so forget about calling it TH. It's hard to imagine that you can't just declare a 3% PS and get pretty close to where you want to be, possibly adding an -11g amendment if needed.

Without knowing why the plan might not be qualified (and therefore not knowing ways it might be corrected to be qualified) I have no opinion. You're giving a tiny bit of information and asking for solutions to what is really an unknown problem. In any event it's probably above my pay grade, or at least something I would advise the client to hire an ERISA attorney to fix, especially if I had nothing to do with creating the problem.

Never intended to be qualified, or never qualified due to some failure? Did the participant have reason to think it was qualified? Is the IRS involved yet? Just because the consequences of disqualification are taxation of accounts doesn't mean that happens. If it is some innocent bystander I'd think about letting them roll it out.

So under current procedures someone is paid out but the forfeiture doesn't occur until some years later, after a 5 year break? Wow, I didn't know that was even possible (our basic plan document is hard-coded for "asap but not later than the year following distribution") and would not want to be the one keeping track...but off the top of my head I don't think you have a problem with changing it. I guess you have to consider whether accelerating the forfeitures somehow benefits HCEs in a discriminatory manner and intuitively it doesn't seem like it should.

The general idea is that if loan payments are suspended til the end of 2020, the loan is reamortized starting at the beginning of 2021. I guess if a (new/reamortized) payment due in Jan (or Feb or Mar) 2021 isn't paid, the cure period would be June 30, 2021. If still outstanding, a deemed distribution would occur at that time. Hard to know if that answers your question as the question remains murky.

Those two statements are contradictory. Wouldn't the deemed distribution occur at the end of the cure period? What actually happened in May 2020?

yes

You really need to work with the investment company and the TPA on this. What I was trying to say earlier was that changing to a non-prototype account, if that is indeed what the investment company would call this, typically involves a different type of registration, so it seems unlikely that you can get away without closing and opening an account. As far as a separate account for Roth, you really need to talk to the TPA about this. It's not necessary although it may be desirable. But the last thing I want as a TPA is to find out after-the-fact about all of this stuff.

In my experience it is very likely that the documents and the accounts are linked. I'm not sure the custodian (and are you sure they aren't also the trustee - how are the accounts titled?) would want to be preparing 1099-Rs if it is not their document (however crappy their document is). We have some clients that want to use our document but invest with Vanguard or Fidelity, and we have to be very clear that when they open their accounts they explain that they are not using the investment company document, otherwise you will almost inevitably get the investment company sending an Adoption Agreement. The magic words seem to be "non-prototype account" but they will still make every effort to screw things up.

Can you give an example? I'm not sure what you are asking - if a loan has deemed, then what is the meaning of an extended cure period?

Amen. I don't always click the "like" button but this was a YES, THAT comment. I'm sure the attorneys got paid well.

If it is calc'd per pay period then it is per pay period (period ?). Option 1. I think such changes have the potential to be discriminatory.

If the plan says that changes to deferrals can be made on entry dates (and presumably only on entry dates; I can't imagine it saying that and then somewhere else saying "oh but you can change any time"), I'd say you have answered your question. But that is easily amended. FWIW I've never seen the rationale for limiting changes.

I just talked to an accountant about this and he's of the opinion that it is earned ratably over the year (otherwise why would you have to make estimated quarterly payments?). That is contrary to what I said above (vehemently!) and I'm not conceding but I thought it fair to share. I do think we all agree that you can't estimate half year's comp before the year is over...which makes the discussion rather pointless - why on earth, if you have to wait until after the end of the year to determine half of the year's comp, not just use the full year's comp? (Other than to avoid the embarrassment of admitting it was wrong to terminate on June 30.)

The prior discussion says there is almost no such thing as a reasonable cause, and not knowing is definitely not a reasonable cause. Are you asking if you could possibly get the fee back after paying it? No. If you pay the fee that is the relief. (Not sure I understand "to get relief after paying $1500 filing fee.")

I can't say I've studied this carefully but Section 4 and the examples seem to say you can carry back or forward as you wish. If I'm wrong someone will jump on it!

Well if you want to get technical, and if we aren't in a technical biz then I don't know; I mean, I've seen people fuss over things way less significant than this...the plan still exists until it is term'd; just taking money out doesn't terminate it. So what are the consequences? Well, the doc should be maintained and updated...if not, the plan is DQd, and the consequences would be...taxation of the $0 in the plan, so not exactly a nightmare scenario. But I think there are potential issues with not terminating it and failing to update for SECURE and/or CARES. As a side note, I try to avoid scenarios where "We find out today that he retired and took his money out in February." Anyway, I'd formally terminate it; don't see it being worth taking any chances...and could have prepared a termination resolution, maybe 3, in the time it took to ask and answer the question.

I think the point of the original question was to come up with a better shorthand description of what we do, to use in conversions with laypeople. The length of the answers and overall discussion says there isn't anything a lot better. I will use "TPA" within the industry as you all know what that means. With new acquaintances, I'll say "I work on 401(k) plans - there's a lot of testing and compliance and a tax return to file." With clients and prospects I'll use something more on the lines of "service provider - we do all of the nitty-gritty stuff and prepare things for your signature." If the conversation goes there I will explain that we do some legal, actuarial and accounting stuff but are none of those professions.

If you are saying that given the facts (plan term'd 6/30) the owner gets no contribution, then I agree. It is black and white simple: leave term date 6/30 and the owner gets nothing and you can distribute when feasible, before the end of the year. If the owner wants to get something then the plan has to be un-term'd and wait til after year-end to determine his/her comp. Everyone is entitled to their own opinion but not their own facts.

Larry of course can speak for himself but that is correct. Of course I probably learned my position from him 30 odd years ago but I have no doubt it is accurate.

Agree

Yes

Back up. If you want the owner to get anything, you have to un-terminate the plan. Period. There is no comp at 6/30. If you are going to wait until after 12/31 to determine that comp, and then (improperly) use half of it, why not just un-terminate and wait for the full year's comp? Term'd employees may or may not be entitled to distributions immediately after employment; our plans would typically say they have to wait until after the end of the year (of course that could be amended but don't disregard the terms of the document). Assuming the plan allows for immediate distributions, you do not have to wait until the contribution is deposited; you just need to know what it is (as long as there is sufficient cash...and as soon as the possibility of plan termination comes up, we would discuss moving everything to cash).

I think David's cryptic message was meant to say "the correct answer is NO it is not terminated." You file it as a final but show the transfer on 8j, 13b and c.

I think most folks, myself included, would say he has no comp on 6/30 and therefore no contributions of any kind allowed. It's effectively all earned on 12/31.