Santo Gold

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

For funding purposes then, after-tax contributions have the same deposit deadlines as 401k/Roth contributions, is that correct? Sole props and partnerships (no W-2 involved) the deposit deadline is the date of the owners tax return, including extensions But for S-Corps and C-Corps (W-2 is involved), isn't the deadline the usual "as soon as possible" or 15th business day requirement? Thank you

If the plan sponsor is a C corp or S corp, would the after-tax deposit deadline then be 12/31/23 to be considered a 2023 plan year contribution?

At this point, there is no resolution stating the contribution.

In late 2023 we calculated the 2023 profit sharing contribution allocation for a 401k plan. Only 4 participants shared in it (1 HCE). The profit sharing is optional and is allocated on a cross-tested basis, each participant as its own allocation group. The PS amount for each participant was communicated to each participant. The NHCE's allocation was more than the minimum needed to pass testing. Early 2024, one of the NHCEs is leaving the company. Can the employer change only his allocation to a lower amount (enough to still pass testing)? Since the employer previously informed the participants of their 2023 PS allocation, is it a problem to go back and change that allocation to a lower amount just for this specific NHCE? Thank you

Thank you for those replies

I do not work enough with after-tax contributions and came across a question for an owner-only sole prop where the owner wants to contribution profit sharing and after-tax. (1) The owner has gross income for the year is $100,000. Minus expenses (not counting plan contributions), this his net compensation down to $80,000. (2) He is looking to contribute 20% profit sharing and, as much after-tax as he can (under age 50 FWIW) Do we determine the PS amount first and then subtract the after-tax or after-tax first and then PS? Thank you Mike

Under 20 hours/week is roughly equal to 1000 hours/year. Our 403(b) plan would by definition possibly exclude individuals who work 500-999 hours, which would fit the LTPT classification. Based on the guidance that was recently released, I would conclude that LTPT applies to any 403(b) employees who have been kept out of the plan but who have worked 500-999 hours each year since 2021. They would have to be provided with the opportunity to contribute to the plan. Would you agree? Thank you

Thank you very much.

A sole prop established a solo 401k plan in 2023, wants to include after-tax employee contributions and do the mega-backdoor Roth with it. (1) do the after-tax contributions have to be deposited by 12/31/2023? (2) Does the Roth conversion have to be done by 12/31/2023 as well in order to be applied towards the 2023 tax year? Thank you

Thank you everyone.

A key employee began RMDs in 2021. We have the calculated RMD due 12/31/23. Before it was taken, the employee passed away. His spouse is his beneficiary. Is the spouse required to take the RMD by 12/31/23? Reading the document below, I interpret this to mean that an RMD is now not due by 12/31/23, but will be due in the year following, or in 2024 (12/31/24). Does this sound correct? Plus we would need to calculate a new RMD amount based on the spouse DOB compared to that of the deceased's DOB. Hoping to get a comment on whether others come to the same conclusion. Thank you Death On or After Date Distributions Begin. (i) Participant Survived by Designated Beneficiary. If the Participant dies on or after the date distributions begin and there is a designated Beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's Account balance by the longer of the remaining life expectancy of the Participant or the remaining life expectancy of the Participant's designated Beneficiary...

Great. Thanks everyone

I was asked a basic question but not working with Davis Bacon contributions I was not sure: Are Davis Bacon contributions considered employer contributions to a plan and if so, would they count towards the 25% deductible employer contribution limit? I assume they count towards an employee's 415 limit. Thank you

That is great information Zeller and Peter. Thank you. I will use your links to reference further.