Santo Gold

I think your comment at the end of the first paragraph is what I was hung up on. I was thinking there would be a statement saying that unless indicated otherwise in the adoption agreement, all service is counted and none is disregarded. But that statement would not appear necessary if we are not using the rule of parity/1 year hold out. Thanks for replying.

An individual met the 1 YOS/1000 hours requirement in the past and was employed for 15 years. He did not contribute to the plan and has never had a balance. He leaves for 2 years (has 2 BIS) and then returns. The 401k plan does not use the rule of parity and does not use the one year hold out rule. He would be eligible to re-enter immediately, is that correct? Can we ever disregard YOS for eligibility in a situation like this? What if he left after 3 years, was not 100% vested (he did not have a balance regardless), has 3 BIS and then returned? I've checked the document and it is confusing. This has to be addressed in it but without having anything specific to point to that says "disregard the following service..." I do not think we can ever disregard any eligibility service. Any comments are appreciated.

This 401k plan uses for a PS allocation individual groups - one group per participant. The plan has 3 HCEs and 1 NHCE. The desired allocation is for the owner to hit his 415 max (he makes $330,000). But, he wants to give a lot to the others. It just so happens that the owners PS contribution rate is 9.03%. The other 2 HCEs and the NHCE is 28.83%. The plan passes the non-discriminatory classification test and the average benefits test, but only on a contribution basis, not on an equivalent benefit basis. 401(a)(4) rate group passes as well. Because of the plan's allocation method in the document, do we have to pass the average benefits test using the equivalent benefit basis, or can we rely on the contribution rate passing, even though this is a cross-tested plan? Thank you

We have an owner in a 401k plan, turns age 73 and has Roth, 401k, and profit sharing money in the plan. Is the RMD calculated based on the entire account balance or just the 401k and Profit Sharing? Thank you

Yes, the plan does switch to calendar year after initial eligibility period.

An over age 21 employee is hired 3/1/23 and works between 501-999 hours in the 12 months after her initial date of hire. She then works between 501-999 in calendar year 2024. Lets say she reached 501 hours on June 1, 2024. Am I correct then that her LTPT plan entry date is 1/1/25 and not 12/1/24 (6 months later) since not only is the LTPT eligibility period 12 months but if she goes over 1000 hours later in 2024, she would be eligible to enter as a "regular" participant on 1/1/25 and would not classify as a LTPT? Thank you

OK Thank you for those replies.

Is it required that a profit sharing contribution be deposited before the business tax return is completed? The same question with form 5500; is it required that the deposit be made before the form is filed? Thank you

We are working with a machine shop that has two unions plus office staff. Benefits are collectively bargained with the 2 unions. One union allows the employees to contribute to that unions 401k plan. The other union however does not have a union 401k plan. But regardless, since all benefits are collectively bargained, both unions can be CBA excluded for the 401k plan for the office workers. Even though the one union does not have access to a 401k plan. Do you agree?

And after asking more questions, there is no ownership overlap, so no ASG. Thank you for all replies

Thank you Belgarath.

I should have also added: Do I need to exclude this individual as a class of employee in the plan document or, since the document excludes Independent contractors already, no further exclusion is needed?

This is a new one for me. I have a small size financial employer: owner and spouse plus another employee. They also have what he is calling another individual as a "statutory" employee that I honestly have never come across before. A had to look this up that a statutory employee is an independent contractor with the distinction being the business pays half of SS and Medicare and the individual pays the other half. If this meets the definition of a statutory employee, then can we not only not provide 401k entry to the individual and do they NOT count against any testing? I.E., with 2 HCEs and 1 NHCE, am I at 100% for 410b or 50%? Thank you

Thank you Is that the case even if the ASG is not participating in the plan?

We TPA a doctor's office. The doctor is 100% owner of the practice but does not participate in the 401k plan. His top assistant is an officer and makes over $250,000 but has no ownership. Based on that, she is an HCE and a key. She has 3 children working there not at that compensation level. They are not HCE or Key. The top assistant is 100% owner of a separate business that has most of its business with the doctors office. We are looking into it but lets assume an ASG exists. She is also the only employee of the separate business. The separate business is not an adopting employer, but we still need to include the ASG for testing purposes. With no other employees in that business, this does not impact the plan very much. (1) Unless, because of the Top Assistant being 100% of the other business, would she be considered HCE and Key regardless of income? (2) And if so, does that mean her 3 children are now HCE and Key? But if the separate business did become an adopting employer of the 401k plan: (3) Would the top assistant would now be HCE and Key regardless of income? (4) Would the 3 children also become HCE and Key in the 401k plan? Two are over 21 and one is 20. Thank you for any comments.

An individual owned his own business as a sole prop for 5+ years. No employees. No retirement plan. Within the past year, he switched to an LLC. I'm not sure if he has a new EIN or not. He also hired an employee after the LLC was created. He would like to start a SEP, but would like to keep the new employee out, at least for a few years per SEP eligibility. But can he be immediately eligible taking account of his sole prop service? Can a SEP count prior service with, in this case, the predecessor business entity? Thank you

The normal eligibility is 90 days. Since that is below the statutory eligibility period. What if we had different eligibility for the Temporary Employees, say 1000 hours/12 months and semi-annual entry. That should be a large enough hurdle to keep the Temp EEs from entering the plan and not keep them out as an excluded class. But can different eligibility requirements for different employees be discriminatory? Is discrimination possible if you are not yet a participant?

LTPT should not be too much of a problem. These Temporary employees come and go quickly. 50/50 whether they get to 500 hours but even if they do, its only for one year as they are long gone before year 2. They want to bring the ""regular" employees in quickly which is why they have the 90 day eligibility. I want to say temporary employees could be an excluded class given their exclusion is based on limited employment with the company and not really hours-based. We use an ftwilliam document so I am checking on what their language is for excluded classes.

Simple enough, a 401k plan sponsor does not want "temporary employees" to be eligible to be in the plan. These TEs only work a few months. The 401k plan has a 90 day service requirement, elapsed time, no hours requirement with monthly entry. Without the exclusion, a few of these TEs could slip over the 90 days and still be there on a plan entry date. Can they be an excluded class or does this seem too connected to a service issue that would not be permitted as an excluded class? What if the exclusion centered on something like "employees not eligible for health benefits" are excluded? Thank you

A plan sponsor asked their financial advisor (who in turned asked me) about possibly permitting what may be a REIT in the 401k plan. The plan is a pooled asset plan with trustee, not employee direction. The plan sponsor/trustee I believe wants to invest a significant amount into this new investment. The plan document does not have any restrictions on investments. The owner who is pushing for this is over age 70. I want to give them some possible downsides. Risky investments beyond retirement age would be one. So would possibly investing in a high risk investment that could negatively impact participant balances. Although a small plan (around 15 participants), This could be considered a non-qualifying asset and trigger an annual audit. Any other obvious matters to point out? Thank you

The above is the correct assumption so thank you for your comments. I found it a little odd that with the taxable amount being $100, that a code in addition to "G" in box 7 would apply. Thank you

Hoping for confirmation if the below is correct: solo 401k plan. Owner doing the mega backdoor Roth. Contributes $30,000 after-tax in 2023, converts $30,100 to a Roth IRA in 2023. The 1099-R would be as follows: box 1: $30,100.00 box 2a taxable: $100.00 box 5: $30,000.00 Box 7: G Does this look correct? Thank you

An individual is receiving some large NQ plan distributions for the next several years and is looking for a way to avoid some of the taxes. He could not use those payouts as a basis to establish a solo 401k plan for himself and defer into the plan on a tax deferred basis could he? I'm pretty sure the answer is no, but just checking around for him. Thanks

That would seem to make sense. Treat the h/w as one individual. Thank you

Looking at how attribution affects my common and identical ownership tests. This shouldn't be difficult, but...... Husband owns 40% of company A, spouse separately owners 40% of company A. Two other unrelated individuals own 10% each. No exceptions apply, so husband/spouse are considered to own 80% of Company A. Husband and wife each own 20% of Company B, same thing, attribution applies and they owned a combined 40%. The two unrelated individuals from Company A also own 20% each. Third unrelated individual owns the other 20%. When I am adding up my common ownership do I use 40% plus 40% for husband and wife for Company A, or is it 80% and 80%? Is Company B 20% and 20% or 40% and 40%? Same with identical ownership then, are they each 40% or 20%? It has to be the lower percentages, correct, otherwise we exceed 100% for common ownership, which can't be correct, can it? Thank you