BeanCounterBlues

I have a similar situation, and understand that EZ is the correct current filing. The child will eventually become plan-eligible (about two years from now). The form of entity is an LLC, that has elected to be taxed as an s-corp (a common situation), and sponsors a 401k plan ("Plan X"). Is the child attributed by IRC 318 and therefore is considered a "partner" for purposes of 5500 EZ vs 5500 SF? Assume that Plan X is sponsored by a sole member LLC, with no employees, other than the owner who receives a W-2 due to form of taxation, and the child (also receiving a W-2). My understanding is that attribution doesn't apply for 5500 determination (EZ vs SF) purposes, to LLC's, taxed as either a disregarded entity Schedule C (sole member LLC) or taxed as a partnership. For example, an LLC not electing s-corp tax treatment, with Mom 100% owning the LLC, and son being a W-2 employee and plan-eligible, requires a Form 5500 SF. Does this change when the form of taxation is s-corp? Does Plan X, which formerly would have filed an EZ, still file an EZ after the child becomes plan-eligible, or have to file an SF after the child becomes plan-eligible? Meaning, does the legal form of entity (LLC) take precedence, or does the method of taxation (s-corp) take precedence, in the determination of whether EZ is required vs SF?

I had this same situation occur about three years ago with a client (one owner, three employees, safe harbor 401k plan). Plan terminated, and one remaining filing year existed, with only the owner's assets. I had the same concern, "which 5500 version to file." I conversed with a technical agent at DOL EBSA, but I had first come to the conclusion stated by RatherBeGolfing. The agent, however, said that the client must file an SF, not an EZ. I realize that an agent is not a reliable substitute for research, but since I saw this post and had the exact same situation arise, thought I would add to the conversation.

If an LLC, that has elected to be taxed as an s-corp (a common situation), sponsors a 401k plan, and hires their 15 year old child for administrative work (bona fide employment), is the child attributed by IRC 318 and therefore is considered "partner" for purposes of 5500 EZ vs 5500 SF? Assume that a Plan is sponsored by a sole member LLC (which had filed IRS Form 2553 (s-corp election) and was approved by IRS to be taxed as s-corp), with no employees, other than the owner who receives a W-2 due to form of taxation, and the 15 year old child (also receiving a W-2). The Plan has immediate eligibility with essentially no age and service conditions. Does this Plan which formerly would have filed an EZ, still file an EZ after the hiring of the child, or have to file an SF post - child hire? Meaning, does the legal form of entity (LLC) take precedence, or does the method of taxation (s-corp) take precedence?

Thank you all, I appreciate the thoughtful suggestions!

I am assisting a new hire for a 401k client (my firm serves as third party administrator). The Plan Sponsor's owner (small company) would like me to train this new employee both with respect to an overview of the IRS, DOL, etc requirements for 401k plans, and also issues that are specific to this plan, which I'm glad to do for the this long time client. I also think it might be beneficial for this employee, to take a course taught by a professional educator, that introduces someone who does not have previous job experience that involved the day to day operation of a 401k plan. Can anyone recommend an online (day-long, for example) course for this employee? Specific websites, company names are appreciated. I've searched my local CPA society offerings and done some basic web searching, and of course I'm aware that that there are hundreds of options for specific issues within the 401k world ("EPCRS update" for example), but I'm not having much luck finding a "401k for beginners" overview course. Appreciate any suggestions.

That's an interesting idea. I'm not "overly" concerned, but as the owner of my CPA firm, I prefer to not deal w/ a client incurring a fine because I provided less than stellar advice or ignored a requirement. Appreciate all the comments, thank you again.

My question(s) stems from an issue that has never been resolved my mind. FIS Relius published a technical update on 8/26/2013 stating that the Code imposes a penalty for failing to file a notification of a change in the status of the plan, such as a plan termination (publicly available on the FIS Relius website). The penalty is $1 / day up to $1,000. I've always been concerned that an observant IRS agent could impose this penalty where the plan's termination was not conveyed to IRS via Form 8955 SSA. I agree that the 8955 SSA IRS' published instructions specifically state to not file the Form if there is noone required by the instructions to be reported. I asked Janice Wegesin about this once at a conference, and her advice was to file a blank Form 8955 SSA with a typed notation across the top "plan terminated." This works fine as long as FIRE is not required. If FIRE is required, then typing a notation across the top of the Form doesn't work, because the typed notation won't be included in the electronic file. I appreciate everyone's comments.

PPP funds granted were loans. I don't believe loan proceeds (whether PPP or not) are ever taxable income, unless debt forgiveness rules apply in the case of loan proceeds not repaid by the borrower. Congress specifically exempted forgiven PPP loans from the debt forgiveness income inclusion rules if I recall correctly. If the funds are not includable in income, then the receipt of the funds does not give rise to net earnings from self employment. My opinion isn't authoritative (I'm a CPA and simply stating how I would handle a client in the same situation).

Continuing this thread - a Plan terminates in 2021. Due to diligence on the part of the Plan Sponsor, no participant was ever required to be reported under Code A on Form 8955 SSA (the Plan has never filed a Form 8955 SSA, nor was it required to). Is 2021 Form 8955 SSA required (assume there are no participants required to be reported in 2021)? If yes, does one simply type across the top of the Form "final plan year" and mail it to the IRS, since there is no "final year" check box on the Form? What if FIRE is required because the Plan Sponsor otherwise meets the electronic filing requirement threshold? How does one indicate that the Form is "final" when electronically filing via FIRE? Thank you for any assistance.

Facts: Small 401k plan. Assume that all employees voluntarily choose to not salary defer for 2018 so there are no contributions for 2018 ("no deferral" situation will not be persisting into the next year). Former employee withdraws and forfeits unvested match during 2018. Plan document states that unvested match forfeiture will be used to reduce the employer's matching contribution. Plan document allocation formula for matching contributions is "either a percent of deferrals or a flat amount per participant to be allocated in a non discriminatory manner." The provision does not state that the employee has to actually salary defer to receive a match (although I would assume that is implied?). The match is discretionary, and optional per plan document provisions. Question: for 2018 can the employer declare a match in the amount of the forfeiture by way of board resolution, and then allocate it as flat amount per plan-eligible participant? Something seems wrong w/ this, however, the client would rather dispose of the match forfeiture as a 2018 allocation to the employees than amend the document to allow the match forfeiture to be used to pay plan fees (a feasible option w/in the plan document). ***** Appreciate any comments.......

Thank you all for your thoughtful replies, I greatly appreciate. A few more facts and comments. Company had bad experience w/ local bank (taking months of time to process conduit IRA rollovers out, to deposit to this new plan, poor communication, etc). Company not interested in using a bank to temporarily park funds. I know that doesn't change the law. Company very excited to start new 401k plan Oct 1. Every intention to get the investments going, and get the employees enrolled. Very close knit group of about 10, who had known each other for years. Two owners, started a contracting business, which thankfully thus far has been very successful despite the short duration of the Company. Employees well aware that the investments need to be set up, prior to salary deferring (so that there is place to deposit the deferrals). So it was kind of a "rah rah" beginning, and then it took the Company quite some time to decide on the investment house they wanted to use, get everyone in-house for enrollment meetings, wait for 404a5 notices to be distributed, etc etc. By the time this all finally came to fruition, it was early December, They then decided, "since there's only a few payrolls left in the year," let's just wait until January 1 to start the salary deferrals. I was not made aware of this until late January. The employees were informed every step of the way, and noone had any issues. They could have salary deferred in December, they chose not to (I'm not sure why they made this choice, as there really wasn't any reason to), but they did. Salary deferrals began w/ the first paycheck of January, everyone's happy, and all is well. No one is disgruntled about anything. This is a case of the employer having unreasonable expectations about how quickly everything could come together, amidst running the day-to-day business. I appreciate the comments about the possibility of QNEC's, but right now I'm trying to figure out if the document needs to be amended to change the testing method to current year. I appreciate the 5 year comment, I'm unfortunately aware of that. W/ proper planning, they can be kept informed about the owner's annual ability to defer until the prior year method can be utilized. Would rather not have the Company incur the expense of the plan document revision if it can be avoided. Thank you again - if this changes anyone's opinion, I'd be curious to hear, also any additional comments regarding the current year testing are appreciated.

Non-safe harbor 401k plan legally began 10/1/2016 (plan document shows that as the effective date). Due to issues w/ getting the investments going, no salary deferrals were withheld during 2016 from any paychecks. No employer contributions planned for 2016. Company plans to file a short year first plan year 5500, showing no contributions or assets, for 2016. Salary deferrals were begun during 2017. Question: the Plan was set up for prior year ADP testing. For ADP testing, is 2016, or 2017 considered the first plan year? It seems that 2016 would be the "first" year, thus causing the prior year deferral % for 2017 too be zero, which would mean the HCE's could not salary defer. Remedy would be to recommend amending the plan document for current year testing, to allow the HCE's to contribute. Any better ideas? Would prefer that 2017 be the "first" year, but not sure there is an legal basis for doing so under the circumstances. Thanks for any assistance.

Yes trust, sorry for the nomenclature issue. I used the term "client plans" loosely in my OP.

I've applied for several EIN's for client plans that don't have one, in anticipation of it being required on a future year's 5500. In all cases, except for one, the standard nine digit number has been issued by the IRS. I have one plan, that received a letter from the IRS stating that an EIN was already issued. The letter reiterates the number, and it happens to be the number of the plan sponsor, w/ a "P" on the end. Has anyone seen this? I've been told: 1) The IRS won't accept the employer's ID# in the plan EIN# spec on the Form 5500 2) The software vendor I use has told me that they won't accept 10 digit ID#'s What would you do? Write back to the IRS and ask them for a nine digit number? That seems like a rabbit hole. If anyone has experienced this same thing I would be interested in hearing your concerns and / or what you did about it. Am I worrying over nothing? I'm trying to be proactive and not find myself next year without the necessary information to file the 5500. Thanks for any help.

Thanks for my daily chuckle, and everyone's thoughts. Your commentary was actually very helpful (in my making a decision).