Bird

I'm not 100% sure of the situation but it is possible to have $6K of catchups here. If you allocate $38.5K as PS, then you have total allocations of $61K and can determine that $6K of deferrals were catchup and $16.5K regular. In other words the 415 limit is in fact $61K. I like to say that we determine catchups (after some limit is reached), not the participant or the payroll company. Likewise a participant cannot defer $6K and say it is all catchup (e.g. to improve ADP testing results). If no limit is exceeded, it's not a catchup.

Mike, do you really think there is any chance at all that a free document from an on-line vendor would allow for excluding or otherwise limiting participation? And that the OP would complete it correctly? I agree that the reporting could be correct and even that the operation could be correct but I'd put the odds close to 0.

OK you've confirmed my suspicions; this is totally screwed up. You doing this directly is the only thing possibly worse than using a human broker. You are under the delusion that you have three separate businesses and are "only" sharing an EIN; you have one business and it's the business, not the individual partners, that can set up a retirement plan, and that plan is subject to certain rules, one of which I guarantee is that all employees (including partners) have the same eligibility rules and also get the same % employer contributions. (It's possible to set up a plan where you can vary eligibility and/or employer contributions, but if it is free from an online brokerage firm it doesn't.) You are also under the delusion that because everything evens out it is ok. It's not. Other than the document and operational problems described, it also sounds like you have what is referred to as a "disguised CODA" (disguised cash or deferred arrangement). I think you are aware that 401(k) (i.e. cash or deferred) contributions are limited to $18,500/$24,500 in 2018...but if the partners are varying their contributions to an extent greater than that by using employer contributions, then you are using this as a cash or deferred arrangement but exceeding the limits. Not sure if that is your biggest problem but the way you've described it that's what is going on, and contributions in excess of the 401(k) limits would be disallowed.

Well, first of all, new comp is really a testing method, not a type of plan (although some adoption agreements may even say "new comp allocation" but if you look closely, it doesn't, or shouldn't, force you to use new comp testing). In other words, you can have "everyone in their own group" and allocate whatever you want (subject to testing) and then either test on a contributions or benefits (new comp) basis. That type of plan tested on a contributions basis would allow for contributions that look just like they were allocated on a PD method (at 100% of wage base) but you could easily exclude an HCE as you want to do here.

My answer might depend on my mood and/or the client but I think most of the time I would show the trailing dividends as accrued (i.e. assets) on the financials for 2018 and likewise show the remaining distributions as accrued. In other words treat everything as paid in 2018, file a final return, and move on. Same with the 1099-R which would tie into the financials showing everything paid in 2018 (your Option 1).

I agree with the first part of your message but a 401(k) can indeed allow for higher contributions in many situations. Keeping it simple, assume a corporation with one shareholder/employee with $80,000 of W-2 income. Profit sharing contributions (or SEP*) would be 25% max or $20,000. The 401(k) could be layered on for an additional $19,000/$25,000. It's only when compensation exceeds 25% of the 415 limit ($224K in 2019) that the 401(k) adds nothing, except if over age 50. *What is really inefficient is using a PS plan instead of a SEP. A SEP gets you to the same place with no reporting...unless you are talking about different contribution rates for different participants, then you do need a plan. (I see RBG just beat me to it with a more efficiently worded post.)

Understood. I was surprised by your generous and kind response ? and realized that you were in fact, answering the question asked. And given that this appears to be an off-the-shelf, do-it-yourself document ("Solo-k" if you will) I'd be shocked, shocked! if it/they had the provisions needed and that this is anything other than problematic. cme685, if it's not clear, partners in a partnership can't just each adopt their "own" plan. (OK technically they can but it requires very careful completion of a somewhat custom document.) The employer/sponsor is the partnership, not the individual partner, and when the plan was adopted, it almost certainly included all of the partners (please tell me you have no employees...). That's actually not so bad if the only contributions are 401(k) - in theory at least, only one of you made a formal election to contribute in the first year and the others said "no" which isn't really a problem. But when there are employer contributions, they must be shared by all participants, so the other partners should almost certainly have had employer contributions for any years in which they were made.

I guess, but 1) why wait, and 2) why ever file an EZ when you can do an SF/one man filing and get proof of filing?

Wait a sec, do you have two different plans or two different accounts? You can have one plan with two accounts. When you opened the "accounts" were they multiple-page forms with a lot of text (plan related - that would indicate that you created two plans) or just investment Qs (that might indicate two accounts)? I'm inclined to guess that you have two plans. Probably not the best way to set this up, at least in my book, and with the same name...I guess that is not prohibited but definitely ugly. And if you have employER contributions, I'd bet anything and everything that every eligible participant should be getting the same contribution, so how do account for the fact that one of the siblings has no account at all, and only one had contributions in one year? Mike is right that the reporting sounds about right, but I suspect the operation is a disaster. And the word "broker" is in there...almost a guarantee that things are set up wrong.

I'm sure you can't use a 2017 5500 or 5500SF and would assume the same applies to the EZ. Would it be the end of the world to send him paper with "Sign here" stickers? We still do that... a lot.

Makes sense; I was hung up on a secondary code like 7 or 2 but you're not supposed to use them with G. But if you say it is taxable then I guess that takes care of it...Thanks.

I'm going to hijack this...anyone know how to code a regular pre-tax distribution that is going to a Roth IRA?

I believe 100% that they should be reported. The operative words are "guarantees...to pay a specific dollar benefit at a future date." They don't! I believe this section is referring to annuities that are purchased to provide specific benefits (and/or maybe insurance policies in DBs fully funded with insurance). I've seen otherwise very knowledgeable TPAs exclude them (you have to consider the premiums as "expenses" which I find ridiculous) so I guess you could say there are differing viewpoints, although I'd have to say those other viewpoints are wrong.

S corp/C corp doesn't matter for this purpose. Deferrals have to come out of a paycheck(s) by 12/31. Once that happens you have the timing of deposit issues (e.g. 7 business days for a small plan) but that is a different matter.

Do that. The issues with maintaining these two plans are mostly technical and it would take a pretty zealous agent to go after you for anything...assuming you have/had no employees; that might change my answer at least as far as doing the "right" thing.

Agreed. Brokerage firms can code all they want but that info doesn't go anywhere but their own systems; it's not automatically reported to anyone (IRS). If the IRS should ever review your records, under audit or otherwise, yes they will see the coding from the brokerage firm that they are 2017 contributions, but just keep your correspondence and your tax returns and show when you really deducted the contributions and that should take care of it. This all means that you pretty much have to deduct the extra in 2018 though, it could be a 401(k) contribution or an employer profit sharing contribution.* *Off topic but just for the record, you really can't scratch your head on Sep 11, 2018 and decide to take a $24,000 401(k) contribution for 2017. That election should have been made by 12/31/17 (e.g. on a paper form). "Everybody does it" and it's apparently not enforced at all.

Happens all the time. You could write a letter to SSA or you could write a letter and drop it in the trash, same result. "Just" provide evidence to the participant confirming that he was paid out (assuming that evidence exists and is easy to retrieve). The letter really says he "may" have benefits and showing he got paid is all that needs to be done.

If the check(s) is(are) written, I consider that to be a completed distribution. If someone voluntarily set up an IRA, and the check was cut on Dec 1 but not deposited until January, there's no way I would consider that not paid out in December. Same situation really.

We went to an annual doc maintenance fee before the EGTRRA restatement and I think it's a win/win for us and our clients. We know now that we have to restate every six years, so just took our typical restatement fee and divided by 6. We include required interim amendments so it winds up saving the clients a bit to the extent we would have charged for those amendments, it makes it a lot easier for them to pay annually, and spreads out our revenue. There might be some winners and losers in terms of the restatement timing but that's trivial in the grand scheme of things.

Hallelujah!

Scratch that; it seems that is meant for applying for a plan EIN.

Actually, "Created a pension plan" is there on page 4 of the instructions. I agree with the others that an EIN isn't absolutely necessary to establish the plan but we've always had the accountant get one if they don't have one already.

Quite a conversation you're having here. First sign of old age is talking to yourself... ...second is answering. Sorry but I got nothin'.

I'm pretty sure that for a SEP you can "amend" eligibility any time you want to, right up to making the contribution. You could definitely establish a new SEP and do that. I don't think the concept of earning a contribution applies to a SEP. Not saying it smells good but I'm pretty confident of that.

That's what I don't get - why would someone who term'd in 2015 and was paid in 2016 be entitled to recover their unvested balance if the plan terminated in 2018? I understand if it was part of some systematic thing that could be considered a partial termination but I'm not aware of anything that would indicate they are automatically entitled to retroactive vesting.