Bird

no problem

Yes, I think a partner can definitely have a 402(g) excess. If it is deposited to the deferral account, and it's too much, then it's an excess. Having said that, if the plan does have room for profit sharing or match or whatever and that "excess" could fund the other contribution for the partner, I'd have no problem telling the recordkeeper to just move it to another bucket. If it's intended to be a 401(k) only plan, then I think you you are stuck with it being a 402(g) excess.

Agree

I hate to use the term "forfeiture" for something that's not. I'd be comfortable taking that money (plus earnings) from their account and reallocating it as an employer contribution, to them and/or others. Not so comfortable putting it into a forfeiture account and not reallocating it.

Agreed as well, but it's possible the actuary was trying to say "a spouse doesn't have to get minimum wage" or something to that effect.

I think your numbers are clear enough. If you're not going to get the money back from the participant, and someone else is going to restore the money to the plan, you just amend the cash 1099-R from 25,000 to 37,842. I believe the IRS will eventually get wind of the excess rollover b/c that 1099 will be for 28,619 and the form the IRA sends to the IRS showing money received (Form 5498 I think?) will show 41,461. I'm not sure if they will do anything about it...pretty sure if amounts reported received are less than the 1099 they will inquire. As far as no withholding, it's not acceptable that it is the investment company's procedure. Someone has to figure out a way around that for the future, including getting another investment company.

I would approach all of this from a different perspective. Like I said, good luck...

Are you looking to add money to both plans? If not, there is no reason to terminate or do anything special with the Vanguard plan (if not adding money to that plan). If you do want to add money to both plans, well, you're letting the investment tail wag the plan dog. I get that the "free" documents seem attractive and all that, but at some point, is it really worth all the hassle? Vanguard and Fidelity (et al) are the ones giving you enough rope to hang yourself and should be answering your Qs. Odds are very good that you are doing something wrong; exactly what I don't know but from experience and the nature of your Qs it seems likely. Whether you get "caught" or not is another matter. Good luck, like I said, I get it, but IMO these solo plans being "run" by individuals with no knowledge in the qualified plan arena are just an invitation for trouble.

Mmm, as noted above, your numbers don't add up although I think I get it. It seems you need to amend the "cash" 1099-R to $35,000 and that will take care of it. Yes. I think you can "just" self-correct but that could be considered to fall under a compliance program. Others might know if this fits in a box.

Easy to set up but easy to set yourself up for things you don't necessarily want, if not total disaster. e.g. you might look at the eligibility section and say "sure, immediate eligibility, of course I want to be in the plan." That means that the second you hire an employee, they are in the plan, and you'll have to make, at an absolute minimum, a contribution of 3% of pay if you make any contributions for yourself, 401(k) or profit sharing. And the formula for profit sharing probably says that if you make a 25% profit sharing contribution for yourself, you have to make a 25% contribution for the employee(s). And your 401(k) contributions are subject to testing, which means if the employee doesn't contribute, you'll get a refund of all of your money (if you know enough to do that testing). That's just for starters... As noted, when you set up a "solo (k)" plan or whatever they call it, you are setting up a full-blown plan that just happens to be designed for a one-participant situation - typically with very liberal provisions.

Thanks for the replies. Agreed that this might be a lot of wheel-spinning when they could just do SEPs or solo K's.

We just set up a plan for a real estate agency, covering staff. Now the owner asks if we can include 1099 agents. My initial reaction was no, but then I thought "why not" if we just add them as participating employers. We'd create our own little MEP. Testing is separate for each employer. Not a problem (?) if some sign on and some don't, right? Am I missing anything obvious that makes this not work?

"Low" returns could be function of high fees, or conservative investments, or poor investment management. If you're in a bond fund, even partially, you can't compare your returns to the S&P 500 index. But if you put in 90K and only have 122K after 22 years (and the same as you had 2 years ago) then it is fair to say there is some kind of a problem. I kind of suspect that the problem is indeed high fees, but just saying that your fees are 3-15 times the national average doesn't really give us any useful info. Maybe provide a fund name and the fees on it and we can answer better.

Super-quick answers below to point you in the right direction, but you really need someone - a third party administrator most likely - to help you with the specifics to accomplish the desired actions. The plan should be terminated. No need to "freeze" it and keep it indefinitely if you're not making contributions. Assets can/should be rolled to an IRA. You should be able to use the SEP if you wish (a SEP is really just a vehicle to get money into an IRA). Check with your SEP custodian to be sure. You should be able to re-title all assets, one way or another, from the MP to the SEP. But if the SEP custodian and the MP custodian are different, it will be difficult at best. You or your broker are going to have to expend some effort on that. The annuity is (probably) just a deferred annuity with a rider that promises lifetime income. Shi...crappy, expensive nonsense that just makes more commissions/revenue for the company but that's my opinion and you didn't ask. Anyway, your agent, who made a nice commission on it, should do that work for you (moving from plan to IRA) so you just have to sign a form. Don't forget to file a final 5500. Good luck.

Wow, that is an impressive award. Congratulations and thanks for your advice over many years, going back to PIX days. Ed Snyder

Likely correct, but let's not ignore the possibility of a screw-up/bad reporting. You say "I had to repay my loans" - did you actually write a check and pay them off, or did they just reduce your rollover by the amount of the outstanding loans? If you wrote a check, then something is wrong with the reporting...I'm not sure how someone could mess that up but you never know. If they just wiped out the loans then yes, they are treated as an effective taxable distribution (remember that you did get cash when you took out the loans) and would be subject to the penalty if you are under age 59 1/2.

And a good theoretical case can be made that the industry has it all wrong and that participants should NOT be self-directing, especially the little guys. Inevitably many will be too conservative or too "aggressive" (polite euphemism for "stupid"). But it's a waste of breath. I do want to thank everyone for their comments; I realized that what I can do is show a pooled account as a zero-added cost option and then give the option to self-direction with those costs and let them decide. Seems basic enough but since AF was generally no-cost, I got out of that mode to try to streamline proposals.

I don't see a way around it. But is she sure it matters? That is, does it actually make any difference, tax-wise, if she takes a taxable distribution and then makes a tax-deductible charitable contribution, vs. doing a qualified charitable distribution? If she's not itemizing deductions it would make a difference, and if, at the high end, exemptions are being phased out, it can make a difference, otherwise it is usually the same net result.

Of course it's ok. I had pretty much the same situation where a vendor couldn't/wouldn't prepare an amendment in a timely manner, so we did it. Sent it to the vendor which resulted in much wailing and gnashing of teeth. Eventually someone there admitted that it was a legitimate amendment, but it could not/would not be entered into their "system." Oh well, then, you sure showed us...

Nobody's brought it up so I will...the RecordkeeperDirect platform, which was perfect for micro plans, is changing pricing from an average account balance basis to a total assets basis. A plan that was no cost with average assets of $5000 is now going to be $500 setup for a startup and $750 + $20/participant per year. It's a punch in the gut for us; tough to add those prices to our fees when selling a plan for a handful of people. So...what are the options? John Hancock (meh)...Voya (meh)...? I really really hate using individual brokerage accounts and effectively recordkeeping in house, manually. Appreciate any thoughts.

I agree with 18,871.80 for the deferral but I think the catch-up is 871.80

That's the question; well, really, does it have force out language, if not then...no force out. And if someone does ask for their money, you just determine their PV now and pay them out. It's like adding interest but the auditor is stating it poorly, at best. Probably doesn't know anything about DB plans; I think they are pulling people off the street.

I don't think you have anything to worry about. I followed this thread and found a reference to an IRS manual which led me to this page which says this (my emphasis, and keep reading for an additional comment below...sorry about stray outline marks): It also says that the discontinuance becomes effective the year after the last contribution year, FWIW:

It's only a problem if participants were paid out at less than 100%. Do we know that?

Agree with prior responses. This might help (or make it more confusing...): You do NOT have a "safe harbor new comparability plan." (Even thought your document may call it that in the Adoption Agreement!) You have a plan where you can (presumably) allocate any amount to any person, so long as it passes testing and limitations. Most of the time, you will pass testing using a "New Comparability" testing methodology, where you are comparing benefits for HCEs to benefits for NHCEs. Every once in a while, that may not work, but you have another option, in some ways a more direct option, to test on a contributions basis. You may impute permitted disparity. FWIW, "old" comparability was based on RR 81-202 (as in...from 1981), and "new" comparability is based on the 401(a)(4) regs, first proposed in 1991, I believe. Those who understood and used RR 81-202 started calling the rules "new comparability" and it stuck. I still have a paper copy of a special study from RIA, prepared by TPF&C (Towers Perrin...?). Don't take this history lesson to mean I knew a whole lot about it back then (or perhaps now). Having said all that, I suppose an argument could be made that all testing, whether benefits based or contributions based, could be considered "new" comparability because it was all "new" - but historically, "old" comparability was using benefits based testing on contributions.