imchipbrown

The good news is that the client loves his employees, had a great year and will contribute >3% to all for 2017 and most likely 2018. Will go with Safe-Harbor 3% Non-Discretionary for 2019. This, of course, is an unusual situation.

What a great community. Thanks to all. BG5150, didn't mean to leave you hanging; yes, sole proprietor so 100% owner. So are two of his adult kids.

Thanks Luke, Looks like I missed and important piece, that being "Elective deferrals by non-key employees cannot be treated as contributions for purposes of the minimum contribution requirement in a top-heavy defined contribution plan. But elective deferrals are taken into account in determining the contribution percentage of a key employee. See Treas. Reg. 1.416-1, M-20. " So, his deferral goes into the calculation. Thankfully both the deferral and match were token.

ETA Consulting, This was "sold" to my (soon to be former) client by the experts at Paychex. They have "Comcast-like" support reps and no "their person" to talk with. Cripes

A HCE makes a deferral and is matched. Because of a complete ADP and ACP failure (HCE only deferrer for first year of 401(k)), the deferral and match are refunded. Match was only ER contribution during the year. Plan is Top-Heavy. Do all Non-keys get a contribution (% of match/HCE comp) even though the contribution for the HCE, after refund, is $0?

Tom's first post matches an FT William Document I use. I created individually designed plans in the 80s. Never used one without getting a DETERMINATION LETTER. They were boiler-plate plans and were always tweeked by different reviewers, even though they were the exact same document that got DL from a prior reviewer. You shouldn't be flying without a net! Get a cheap prototype.

Employer is asking if he can include Union Office Manager in his 401k/PS Plan. Knee-jerk reaction is NOOO! I think he has 20+ other Union plumbers. Would like any other opinion.

Maybe (s)he thinks the Plan's investment returns are sub-par?

A long time client with a Profit-Sharing Plan inquired (late 2015) about setting up a 401(k) Plan because of employee interest. I suggested he do a survey to see what employees might defer. He never got back to me. In the meantime, Plan needed PPA restating so I turned on the 401(k) switch. Early 2018, client wants to "discuss the next ten years" with me. During the meeting, he nonchalantly says that he started a 401(K) Plan in 2016 with his Payroll Company. Only he deferred, ADP test failed and he was told he'd get a refund. (Same in 2017, except one other HCE deferred and was due a refund as well.) Client had a MP/PS combo forever. MP (Plan 001) merged into PS (Plan 002) in early 2000's. We filed the 5500 for 2016 on time (assets ~$500k). Payroll Company prepared a 5500 for 2016 showing only the owner deferral and match of $498.39 + interest as assets. Client tried to submit Payroll Company prepared 5500 a number of times and it was rejected. I asked if he had signed any paperwork, he put me in touch with Payroll Company (dude that set up the new Plan was long gone) and they sent me an Adoption Agreement. I found a number of inconsistancies with the AA, including "New Plan 001" instead of restated Plan 002, immediate eligibility instead of 1 year and a 5% of deferral match where it was discretionary in the PPA restement. I also requested and received the account valuations for 2016 and 2017. Dilemma #1- Payroll Company took $498.39 out of owners pay in 2016 and shows the amount in their accounting as $474.69 deferral and $23.70 match. The match amount equals 5% of deferral, by magic. Owner wrote no checks; funds were taken from Company account. Taken by itself, the New 001 Plan is Top-Heavy (Super Top-Heavy w/002). Don't even know what Owners Net C was in 2016 (since no contribution, no census) but assume it's over $200K. So $23.70 / $200K is 0.01185% of pay Top-Heavy contribution for all employees. But wait! Owner's 5% match is forfeited under ACP. Question - Is everyone due a Top-Heavy contribution even if the Owner's match, after forfeiture, is 0% of pay? (As an aside - Why wouldn't the 2016 deferral have been refunded?)

Barring some regulation I'm not aware of, I don't see anything here that makes them "late". I'm aware of a rule that says matching contributions are due before the end of the year following the year they are accrued. The documents seems to favor an earlier date but an "established practice" outside the document wouldn't hold any water in my book. (I may have an old book.) I'd have a problem if HCE's customarily got matched each pay period and NHCEs got their match a year later.

I don't remember the penalties; I'm familiar with the $25/day - $15,000 max one, but also seem to recall DOL, IRS and PBGC can levy separate penalties for not filing. Perhaps you've discovered a 5500 that's overdue? Ouch. Can you charge some admin fees against the balance to zero out the trust?

If you are asking whether you fill one out without actually mailing it, I always mail them in. I also always sign and date, just to know when I did so, even though signing is rarely required.

Of course, the fee must have been previously disclosed to participants, no?

It's also "fair" to have no plans, take the income, pay the taxes and do whatever you want outside the qualified plan "world". Sometimes the tax-deferrals aren't worth "poking the bear" of the DOL and IRS rules.

I'm of the opinion that the Plan Document is a contract between the Employer and Employees. There is nothing outside of the four corners of the document. Break the contract, no Plan. Maybe contributions are an ordinary business expense deduction but certainly they would be non-qualified and taxable income to the employees. But you can forget about all those other nasty qualification requirements... You can fight over whether there's a Trust.

I've excluded "Aliens holding a visa permitting them to work in the US" under the "Excluded employees" provisions of the document, while including them in the coverage test.

Any other employees of either business that makes this worrisome?

I've had a few former girlfriends. A few would deny it.

One participant Owner-Employee under $250k "retains Schedule SB info" but doesn't file. Collective Hmmmm.

Unless you don't have an actuary, of course.

Why not keep him on as an employee? So complicated otherwise.

Agreed, Mr. Bird. I can imagine all sorts of scenarios where you might have a 401(k) or other DC account with a former employer (lower costs/better choices/inertia) and another in your new employer's plan. Both the cites (especially IRS's!) could have been done better. Thanks for responding!

Thanks, Mike. The canned (lazy) answers one can read from sites like Investopedia, IRS FAQs, etc. can get one second-guessing himself. See quotes.

I'm sure this has been asked and answered, but I can't lay my eyes on it. Owner-Participant of 401(k) Profit-Sharing plan has to take an RMD. He has 100k in the pooled profit-sharing account and 50k in FBO 401k account. Isn't this ONE retirement plan and RMD can come from either/both accounts?

The terminees will take Plan checks and endorse them to the company if asked. They are long time "good-guy" employees.