Bird

Definitely. And my gut says the employer is not going to want to spend the money to do it right, whether it was in fact an innocent mistake or deliberate - this is a case where, if done properly, there would of course have been required employer contributions if employees had contributed and...well, let's say that we are all aware of cases where employees were deliberately un-informed. I don't know where this leaves you (DR245). It's of some mild interest that this came about because of a mistake - technically, or not so technically. the box on the W-2 should not have been checked because you didn't actually get any contributions from the plan, and it is used to help the IRS figure out if IRA contributions are allowed, which is based on contributions made.

You don't want to say everyone gets 18%. You want to say the contribution is "79400" (which happens to be 37000+37000+5400). If it's pro-rata then your plan language takes care of the rest.

I agree, it might be the "10-20%" or something like that. If we're going to veer off and get political, I frankly think this (new law) is good policy. All the wailing about it (and RMDs in general, whether it be at 70 1/2 or 72) and how it will impact someone's future retirement abilities is utter nonsense, IMO. If you don't want it then you certainly don't need it. The law doesn't make you spend it, it just makes you get taxed on it. What comes out net of taxes can be moved into an after-tax account.

This would be discriminatory in practice whether it was baked into the plan from the start or done as an amendment; doing it as an amendment just shines a light on it. Would anyone be in the plan without the amendment? If the company started 7/6/18 I don't see how, unless there were other employees that had prior service credited. You don't say what kind of entity it is but it's often not a stretch to say that the business started much earlier than some official date, i.e. when the "partners" started talking about it and laying the groundwork. In a perfect world that would all be established before the plan is written and eligibility would be set up ab initio to allow the owners to participate in year 1.

I'd reject it out of hand and not waste money on an attorney. It might be actuarially equivalent; we don't know the ages of either party. but unless he can show why it is in her interest to do so, you are under no obligation to consider it. Also consider that your mom would have to have some way to enforce the maintenance of the policy - who would own it, what happens if he doesn't pay premiums, etc. and the hassle and complication of that alone probably makes it not worthwhile.

It really depends on what the "fundholder" is expected to do. If it's a full-blown recordkeeping system, then it sounds like deposits were coded incorrectly, or that it's really a half-blow system that the TPA will have to adapt to and deal with. If it's just a brokerage account or similar basic investment vehicle, then of course the "fundholder" has no capacity to code things other than as "contributions" and the grown-ups have to figure it all out. i.e. pretty much what Larry said; I'm not really disagreeing with Pam Shoup but I think that post assumes a certain system that may not exist.

Maybe/probably. Now you have a situation where you hope the plan didn't report things correctly (part RMD, taxable and not eligible for rollover).

You are on the right track. I won't answer your specific questions because the correct approach, at least the way we would do it, is to have the sole prop be an adopting employer. All service would count and contributions for the year would come from both entities.

You don't have to do anything with the SEP-IRA. It is really just an IRA that had special rules for funding (the "SEP" part). The potential "issue" about "maintaining" both is about making contributions to both for the same year, not accounts just existing. The 401(k) is plan 001. A SEP-IRA doesn't have a number since there is no (5500) reporting. You can pay fees from the business. (These seem to be Qs for your "...provider that is also a TPA.")

Obviously some kind of misunderstanding/miscommunication about who does what and...everything. For better or worse, it falls on you to figure it all out and straighten it out.

I was serious. A bit crazed maybe, but serious. I'm sure ASPPA pushed for this (certainly Congress isn't going to come up with it on its own). Maybe it's all because I don't like change but I just don't get it. Yeah we're covering more people, blah blah but I find it trivial. We've quickly recognized that this will be an opportunity to add a new general-tested plan that will give more favorable allocations to owners who have a poorly designed existing plan. Higher contributions for owners but probably not for others. Trillion dollar deficits don't matter until they matter.

There's still something missing. Why would they think a single deposit in Sept is "too much" no matter which year it is coded for?

You used the term "shareholders" which implies - well it means - that it is a corporation. If so, then those shareholders should be getting wages and W-2s and their deferrals should be coming out of their wages. If they are holding onto those deferrals and depositing them in Sept, then that is a different problem (late) than overcontributing. If they are partners and not shareholders, then the contributions may be made as late as the due date of the tax return, and are deductible. There are differing opinions on whether they are late for other purposes. Is this major carrier returning them without asking? Without reporting? When? Are they being reported as current year or prior year deferrals when deposited? There are many ways this can be screwed up; please try to provide more details.

Well, for whatever it's worth, I see no need to give such late adopters an extra break on filing deadlines. The whole thing (allowing plan adoptions after the end of the year) is a dumb idea IMO and smacks of the "oh poor baby" mentality pervading our country. Like the world's gonna end because someone didn't have the foresight to establish a plan by the end of the year. Good grief. I've never had a problem shrugging my shoulders and saying "no you can't do that" to a host of ideas/questions. It's putting another straw on the back of the complexity camel.

Good point. You could use the corporate extension to 9/15 anyway. And whatever happens, it will be our fault.

I agree with ESOP guy on both counts. More specifically for the first Q, we'd show it as an asset with an offsetting liability on the plan's balance sheet, but all 0s on the 5500SF. I don't want to take a chance with "the system" rejecting it for having assets at the end of the year.

I'm not sure what you are trying to say but I dispute what you did say. I don't believe that an 11-g amendment can be used to conform a plan to a safe harbor allocation - I think you are saying that you could use an 11-g amendment to say "we are changing the allocation formula to integrated at 81% of the TWB." No. An 11-g amendment could be used to increase allocations (that may mimic some kind of formula) to pass the general test (presumably on a contributions basis). (And let's all stop saying "cross-tested" when we mean "general tested.")

They can't be reversed but they can be invalidated by adopting a new plan. (I think) they become regular IRA contributions at that time, subject to regular IRA rules. I'm not really sure if that means the W-2 should not reflect the contributions or what, it's all theoretical to me as I've never done it.

I think you have stated it quite well, and it isn't really a semantics argument. You can mimic a SH allocation but can't claim a SH - the allocation must be general tested, and it can fail.

But if it is a self-employed person, then I believe proper treatment is to not deduct the PS-58 costs (and of course not have the plan report them). It gets them to the same place.

Being picky - but not really as this might be significant - your "allocation method" is still groups or whatever the plan doc says it is. Your desired "allocation" just happens to be what an integrated formula would give you. That should then pass general testing on a contributions basis, imputing permitted disparity. But with, I believe, still some possibility of failure (channeling MP with the cryptic comment). You might know this but some innocent lurking may not.

I know of at least one accountant who thinks it applies to plans already in existence, as in your example. I don't see anything to contradict that.

I don't think there is a big risk in doing nothing and just restating asap after your document is approved. It's not like the IRS wants to DQ plans and is looking for flimsy excuses to do so. If there are other potential issues that might change my attitude. Some take the attitude that they're going to restate immediately b/c using someone else's document is more work than restating. Fees on that might vary from $0 to a standard fee. Personally I would feel guilty charging for something that in my opinion is unnecessary but I have respect for those who feel otherwise (and don't twist themselves up in knots thinking about it...which I do).

I wouldn't expect the partnership agreement to shed any light on this. I would at least talk to the estate representative to see if there is a problem with getting the money; it's going back to the beneficiary anyway. If not then it's easy. If they don't cooperate then you have a tougher decision.

In a perfect world, the partnership would owe him some money for time while he was a partner and it could be taken out of that. Otherwise, I think the estate owes it.