Bird

I'm not going to offer an opinion on this, but I am curious - cutting through the somewhat tortured syntax and terminology used, the gist of this is that the wife's plan owns the husband's business, or at least part of it, is that right? If so, then what does this sentence mean - "The operating agreement for the husband's company states how the memberships get repurchased by the wife's 401K once the business returns double the original investment" - if the wife's 401k already owns the company? It's not necessarily relevant but just curious.

Our (Ft William) software spits out "The charge to cover copying costs will be $5.00 for the full annual report, or $0.25 per page for any part thereof." I assume that's the max in the regs.

The problem with "solo" 401(k)s is that they are sold as simple products, but as rcline notes, they are in fact a full-blown qualified plan. "Solo" is a marketing term, not a definition. We handle some "one-man" plans (right there, things get complicated because these plans can cover more than one person) and we apply our regular checklist. Some things matter, some don't, and the fact that a 5500 is not required is actually a somewhat trivial relief, because by the time we get done with our testing and compliance work, the 5500 for most plans, at least SFs, is almost an afterthought; preparing it or not is a matter of a few minutes' time. What I'm saying, and I think what the other posters have implied, is that there is no minimum/easy threshold or shortcut for providing services for just these plans. You really need to know at least something about controlled groups, eligibility requirements, and any and all aspects of retirement plan testing and compliance. Yes they are easier than plans with other participants but without having such knowledge and experience and systems in place I think you are asking for trouble. (For starters, a 5500 is required in the final year of such a plan; who is going to prepare it?)

Reg § 1.401(a)(4)-5 Plan amendments and plan terminations talks about a "pattern of amendments" possibly discriminating in favor of HCEs. While it's not literally an amendment, a special participation date has the effect of 1) adopting the plan with no eligibility, and 2) amending to require some service. I don't think it's a problem if you use that language to bring in some people immediately, as long as there are some NHCEs included. But if it is used to just bring in an HCE, well, if we are being honest, it is discriminatory. I've always tried a workaround as Lou S. described.

I've had them ask for account balance statements, but never the plan. Someone is probably misreading a checklist.

Our (Fort William VS prototype style) plans have these options, so unless these plans have a major flaw, yes, a plan can provide for extended payouts: 9. Payment upon Participant's Death Distributions on account of the death of the Participant shall be made in accordance with the following: a. [ ] Pay entire Account balance by end of fifth year for all Beneficiaries in accordance with Sections 7.02(b)(1)(A) and 7.02(b)(2)(A) only b. [ ] Pay entire Account balance no later than the 60th day following the end of Plan Year in which the Participant dies c. [ ] Allow extended payments for all beneficiaries in accordance with Sections 7.02(b)(1)(A), (B) and © and 7.02(b)(2)(A) and (B) d. [ ] Pay entire Account balance by end of fifth year for Beneficiaries in accordance with Sections 7.02(b)(1)(A) and 7.02(b)(2)(A) and allow extended payments in accordance with Sections 7.02(b)(1)(B) and © and 7.02(b)(2)(B) only if the Participant's spouse is the Participant's sole primary Beneficiary e. [ ] Other:

I'd consider this a clerical error (on the basis that the participant did nothing wrong), change the election to let the person do what they want, and move on. And consider whether it really accomplishes anything to restrict changes to quarterly. I set up all of my plans to allow changes every payroll and have never had a problem with that causing too much activity, and the kind of problems discussed in this post simply do not exist. Generally, people set their deferrals and leave it alone. Having limited change periods might actually increase activity; people think they have to "do" something when the time comes up.

See Bill Presson's post above. It seems likely that he already is an owner-employee and that nothing special needs to be done...except that all prior tests were wrong. Now, if the income is in fact being treated as passive income and he does not have self-employment income, then you have a couple of questions - 1) is that legit (see jpod's post), and 2) if it is legit, then why would it suddenly, for business reasons, be legit to change that? Having said that, I find it hard to believe that an owner has absolutely no involvement and absolutely no "earned" income from this venture. Paying him something would not be a stretch. But paying a partner on a W-2 is wrong, and paying him $0 accomplishes nothing, IMO. It sounds like there are a lot of people involved who have a hint about things, but only enough to be dangerous. I'd start by finding out exactly how he gets paid and work from there.

Starting actual deferrals on Nov 1. Um, yes!

I don't see a refi as being the same thing as making a payment. I guess you might do it once as an informal self correction but I agree that you shouldn't make a pattern of it.

It's not something I'd worry about. I'd be a little more comfortable with it being a safe harbor nonelective, but overall, it sounds like they tried reasonably hard and at some level you have to wonder if it's worth the effort to do anything.

I'm of little help in utter disasters such as this (my instinct is "run away") but it might be helpful, or at least interesting, to know how this money got into their Schedule Cs - I assume the partnership cut checks and issued 1099s instead of K-1s? Did they still get K-1s? It implies that someone knew that they "could" set up individual SEPs if they had Sch C income and did it deliberately. Just sayin'...

mmm, interesting. I think you're wise to stick with the original distribution as it occurred.

We've done it, at least in the case of a plan merger. As noted, just spell it all out.

Just curious if there was withholding...

As the self-appointed "finder of the real problem" this may be your problem. Payroll departments, and payroll companies, routinely screw up retirement plan matters. They probably have something buried in their system that needs to be fixed - after they talk to someone who understands retirement plans.

I'm not sure the plan cares where the money came from (be glad they were made!). They "just" have an accounting issue to resolve - all of those payments should probably be considered loans from the company to the employee/owner.

You don't want to do that and make money that was never deducted taxable. It's a case where you just have to keep moving up the chain until you find someone who understands the situation. The best route IMO is to say the "plan" never existed b/c there was no sponsor. I assume they used the guy's SSN...that's a tiny flag in a sea of red flags showing that not only was the guy a moron, but that the brokerage firm was at fault as well for not insisting he get his own EIN if he in fact was a sole proprietor. When you show them they are at fault they should pay more attention.

I'll put the question back to you - what are you (or anyone else) gonna do to enforce an election of 100%? You can't. So I think it's ok to interpret that with a caveat of "to the extent administratively feasible." I get it - we can all obsess over details. But this isn't an issue.

Well, we would make a change to our Standard Operating Procedure (accrual basis) and tell the client. In that sense it is "no big deal." I guess if they objected we would keep doing it the way it was.

Fidelity is being Fidelity - just asking for anything and everything, whether they need it or not. With the caveat that we don't know if the plan has a default bene des that effectively names you and your sister, I'd either ignore the siblings page or write "not applicable" or something to that effect. If they don't like that and say that they need the info, you're going to have to ask "why" because it really is irrelevant. And "because" is not an acceptable answer - they should not be creating artificial impediments to you receiving your money. Don't be afraid to argue with them.

I'll return the favor and echo RatherBeGolfing's comments. Sometimes/often it's a lot easier just doing something yourself and accepting some (largely perceived) liability instead of trying to get a client to do it, having them screw up, and then fixing it.

We use EFTPS; we have a dedicated bank account, and the program, and remit under the plan EIN...so far so good. (The WH check is payable to us; we deposit it, wait for it to clear, then submit thru the system.) I believe that you may indeed submit using the employer's ID, but it is not recommended. Your plan WH taxes become subject to the same schedule as regular payroll, and then there is the issue of year-end reporting. It's almost sure to get all bolloxed up with the 941 and 945 type reporting, as noted above.

Mmmm, after saying we're seeing it a lot, I can't quite find an example of how we handled it. I know I have one where income was way over $265K so it didn't matter (to me, although it raises the question of where the accountant deducts the contribution). I think you have to do it as two calcs, as in your first example.

I see an annuity as just another funding vehicle.