Santo Gold

A small office has 2 owners and 2 employees. As of 7/1/18, one of the owners is selling his share of the business to the other owner. The former owner will still continue to work as an independent contractor for the business and will report to the same office and be paid via 1099. As of 7/1/18, should the former owner be considered an employee given that he is still doing mostly the same work as before even though he is being paid via 1099 and considered himself an independent contractor? He also expects to make some payments to the business to cover a portion of the costs of the other 2 employees who may do some work for him that could include work not related to the company business (but directly for him). The company has a 401k plan that he participates in so whether he is an employee or not needs to be determined after 7/1/18 to know if he can still actively participate in the plan. If not an employee and if he starts his own business (self-named) as a sole prop, given he is paying some fees for the other 2 employees, do you think there is a concern that he would have to include them in his own 401k plan? Thanks for any advice.

Can a 401(k) plan have a tiered match contribution based on service? There will be no HCEs eligible to be in this plan. For example: · 0% match for individuals with less than 1 year of service · 100% match up to 1% of EE contribution for 1-3 years of service · 100% match up to 2% of EE contribution for 3-5 year of service · 100% match up to 3% of EE contribution for 5-10 year of service · 100% match up to 4% of EE contribution for 10-20 year of service · 100% match up to 5% of EE contribution for 20+ years of service

Participant is going through a divorce and the plan administrator has been contacted by the spouse's attorney regarding information on the participant's 403(b) account. Currently, there is no QDRO, although that likely will be coming. The participant claims she needs to take a hardship from the plan. However, is that allowable if the plan administrator knows that the spouse may be entitled to a share of this account, even if no QDRO has yet been produced? Thanks

Thanks Tom. I think I understand. My concern was centered on what the date of participation actually is. By making the plan effective retroactive to 1/1/17, everyones DOP into the plan is 1/1/17. But that pertains only to the PS eligibility. Since no one can make 401(k) contributions until 12/1/17, would that allow them to use 12/1-12/31 comp for both ADP testing and QNEC contribution? It sounds like the answer is yes. Thanks

Tom - I'm not sure I understand your example. If we base the QNEC on whole year compensation, can we still test it in the ADP test based on 1 month compensation? Safe harbor for 2018 and beyond is a definite.

What is intended is that the owners bonus themselves around $25,000 each from now to year end. Each owner would defer $18,000 each. There is 1 NHCE who will not want to put anything in. So the ADP test would be HCEs = 72%, NHCEs = 0%. FAIL! So if we can provide a QNEC to the NHCE on compensation from now - 12/31, even one at 72%, it might only amount to $2,000. That would be acceptable to the owners. Even if we have to provide an additional 3% on whole year compensation to satisfy top heavy, that is still an overall good deal for the owner. They would want to avoid doing a 72% QNEC on whole year compensation for obvious reasons. We can use partial year compensation ADR calculation. But can we use partial year compensation for the QNEC as well? We need to have a 12 month plan year in order to not have to prorate the 415 limit. But the 401(k) effective on 11/15.

The plan is not going to pass the 2017 ADP test using either prior or current year testing. So the QNEC is how they want to pass. Which leads to the compensation on which the QNEC is based. full year comp will cost a lot more than 1 month worth of compensation.

We would have the participants entry date for the PS 1/1/17. For the 401(k), we would have a special entry date of 11/15 or even 12/1 if we simply have monthly entry dates. In which case particiants could only defer for a month out of the year. Would the QNEC have to be full year? The 401(k) test would be based on compensation from 12/1-12/31. Shouldn't the QNEC compensation be based on the same period?

Company is starting a calendar non-safe harbor 401k plan, document to be signed 11/15/17. The plan is effective retroactively to 1/1/17. 401k is effective 11/15/17. 415 limits therefore are not prorated. We will use current year testing. The owners, due to December bonuses, could deposit $10K+ in 401(k) contributions before end of 2017. Giving them a high ADR. The NHCEs would not be that high. A QNEC is being considered, which will cost $$$, but the question is whether the QNEC uses full year compensation as a basis or just the compensation from 11/15-12/31? This would obviously make a big difference in the QNEC. Hoping that 11/15-12/31 can be used. Thanks for any comments '

Hoping for any comments as to whether this would fly or not: We have a small employer looking to start a safe harbor 401k for 2017. Its 11/10/17 so the deadline for 2017 has long passed. However, could they start one 12/15/217 and have the plan year run from 12/15/17 - 12/14/18. Have a short plan year 12/15/18 - 12/31/18. Then, go to calendar year for 2019. Their company fiscal year is calendar, so does that automatically sink this idea? They have 3 employees, 2 of which are owners. The owners would be receiving large bonuses which they could make in late December, 2017, with the owners deferring most of that to the 401k plan in late 2017. They then have 11+ months to make 2018 deferrals. do nothing for the 16 day SPyear, and then pick up on a calendar year basis for 2019. The other employee will not be putting anything into the plan. given what is likely to be a high contribution rate for the 2 HCEs for 2017, a QNEC for the other employee would be pretty expensive and not desirable. Thanks

Thank you both. I wasn't aware of the QNEC point that Tom brought up.

My title kind of asks my question: If we have a cross-tested safe harbor plan (3% SH). We want the owner to receive 15% of pay total ER contribution (3% SH + 12% PS) and everyone else to receive 5% (3% SH + 2% PS). Does the PS portion of the contribution have to be 100% vested? Thanks

IRS has brought to our attention that two 1099Rs were filed for an individual. They both contained the same data ($21,000 distribution). It was a cash distribution and the individual reported both amounts as income from both 1099Rs, so he reported more than he should have. Two Form 945s were filed as well, both showing $4,200 paid in taxes. The IRS is looking for the other $4,200 since they only received $4,200 and were expecting $8,400 (based on both 945s). How would you go about fixing this on the 1099Rs? They would have to file a corrected form, but what figure would be used? If we show "$0.00", since there were two forms, could that be interpreted as he had no distribution at all for the year? Is there a fix or would it be best to try to work with the IRS via reply to their correspondence? Same with 945? Thanks

Thank you for your replies.

ER has sponsored a SIMPLE IRA for several years for company employees. Final EE contributions for 2016 plan year deposited in 2016. Started a 401k 1/1/2017. Just found out now (8/2017) that the 2016 ER contribution to the SIMPLE has not yet been deposited. Is this 401k still OK for 2017 since the SIMPLE deposit is for 2016, but being deposited in 2017?

Is there a waiver required in order to establish a 403(b) Plan for a charter school in PA, allowing the school to not participate in the state's PSER program? If so is there much to that?

Employer A is part of a controlled group consisting of one other larger company (company B), but has a great deal of autonomy from the CG. They are permitted to take part in Company B's 401k plan. However, The owner of Company A is an HCE in the Company B plan and keeps getting hit hard with 401k returned deferrals since Company A plan is not safe harbored. Can company A start their own safe harbored 401k plan immediately or do they have to wait until the start of a new year to have a new plan effective? Would anything need to be done in Company B plan to then exclude Company A employees from being eligible for Company B plan? I do not think that having Company A employees eligible for both plans would be desirable, so I would assume of a Joinder Agreement allows Company A employees to be in the Company B Plan, it would just be a matter of changing that agreement? Company A employees have money in Company B plan. Once Company A has their own plan, can Company A employees move their money out of Company B plan? Would that be via distribution or transfer? Since no one is terminating employment, I would think a transfer out of B plan to A plan would be the only option. Both plans would have to be tested together correct? The contributions in A plan might be better than B plan, but if B plan has more HCEs, there is a decent chance both plans pass 401(a)(4), would you agree? Thanks

Can an individual age 50 have a 457(b) deposit of $24,000 in that plan as well as in a 403(b) plan? Thanks

Thanks to all for the great replies. Would rolling it into a USA IRA be an option, or would similar restrictions apply? Thanks

We have an employee in a current USA 401k plan who has a large retirement plan account in a Mexico-based retirement plan from his previous employer (non-related to the current employer in the USA). The USA plan accepts rollovers from other plans, IRAs, etc. But since the Mexico plan is not a 401(a) type of account, I assume this could NOT be rolled over into the USA plan, is that correct? Any way he could roll it into the USA plan? Thanks

I know this has been asked before, but could not find it (easily) on a prior thread, so... Employer wants to have a safe harbor plan eff 1/1/17. Its 12/1/16 and the safe harbor notice is due. Or is it? Is there an exception to the 30 days before the plan year starts requirement for start up 401k SH plans? We'd like to have this effective for all of 2017, but there a some plan design questions not settled yet so we cannot have the document signed by 12/1/16. Thanks

Can any company that is part of a controlled group adopt a SIMPLE? If so, would it follow then that either all members of the CG MUST be eligible for the plan or that all members are included for testing purposes, even if not eligible to be in the plan (which would seem to take the simple out of SIMPLE). Is it even permitted for all members of a CG to adopt a single SIMPLE? Thanks

Is there an easy online way to electronically pay the 20% amount withheld on a cash distribution? We have a small client who has brokerage accounts for the people in the plan. This is the first time they will have a cash distribution. The brokerage account will not pay the 20%. The client does not want to open up a bank account for what will likely be a 1 time only transaction. Payroll (correctly) will not accept deposit of the 20% and then transmit it to the IRS. If the 20% was under $2,500, it is allowable to pay it at year end when filing Form 945. But, the amount is well above that. I've read on other post that Penchecks could work. But is there an IRS link that could be used to pay the tax online? Even if it costs a few $$$, that might be OK. Thanks

I was able to file it as is, but when I review my submissions ("filed" forms) for all clients, under the STATUS column, it says "filing received" for all of my plans, but this is the only one that I can still "click" on, and when I do, I get the Z-003 message. So, based on what Laura A has stated, this is a warning, not an error, the filing was "received".... is there anything for me to complain about other than I don't like having a filed form with a warning message attached to it?

This is what DOL told me as well, for the 2015 filing. I may try "kicking it upstairs" when I call back again.