imchipbrown

Good question BG and one I'll ask right now. I'll get back to the board with the events.

These were accounts from long-time participants.

Pooled account plan. No other contributions for the year (2017). I prepared distribution paperwork and employer wrote checks from a company account. Now he wants the plan to reimburse the company (no WAY)! If I treat as contribution/distribution, I think I need to allocate the contribution to all eligibles.(?)

Employer paid two employees their Profit-Sharing distributions from company account. Any fix?

Yeah Mike, agreed. It wasn't clear from the question as to what year he was talking about.

From a prospective point of view, I don't see a problem. I'm sure we've all amended plans (Money Purchase, Profit-Sharing, etc.) in the past. Timing is everything, as they say. Speaking again from a prospective point of view, what's wrong with amending a PS formula to another option that's presumably one of the pre-approved ones? My FT William doc can accommodate a 0-100% of TWB integration with appropriate reductions of integration percentages.

Many of the vendors mentioned also have Document and Reporting software. You should consider "bundled costs" (much like Cable TV/Phone/Internet) if price is an issue.

You do not have to file Form 5500-EZ for the 2017 plan year for a one-participant plan if the total of the plan's assets and the assets of all other one-participant plans maintained by the employer at the end of the 2017 plan year does not exceed $250,000, unless 2017 is the final plan year of the plan.

FT William document with "New Comparability - One Group per Participant" selected as the Allocation Method. The are only three participants; owner, owner's daughter and job-cost estimator, all earning roughly $100k this year. Estimator quit after year end. Owner wants to skew contributions in favor of himself and daughter, if possible. He's also considering no contribution. Limited reading sees to indicate that I could at least limit the estimator to 70% of what owner and daughter (owner by attribution) get - say 17.5% of pay vs 25% of pay. But I get the sinking feeling that I have to look at the "reasonable business classification" portion of the Average Benefit Test to do so. So, is Owner/Non-Owner a reasonable business classification? All I find are "great debates" from ASPPA and limited examples in the regs.

Looks like NO, eh Belgarath? Just can't catch a break...

Can the return of excess annual additions be part of a RMD? In other words, if the 2018 RMD is $26,000, does the $6,000 return of the excess annual additions in 2018 reduce the balance to be distributed to $20,000?

BG5150 - If it doesn't make sense it must be right. What would be ideal would be that the owner doesn't take taxable income but instead has a suspense account to spread around in the new year. He's always made a generous PS contribution. I'm thinking the distribution would from his FBO account and be coded as "E" in box 7 of the Form 1099-R in 2018. Earnings from when? Beginning of 2017 to date of distribution (or close enough)?

Apologies for mis-indentifying the the source of the pasted text above; it's Rev. Proc. 2016-51, Part III, Section 6.06 (it's very dense) 401_noob's link says (and I thank you for the reply): "the plan may provide" for the distribution of elective deferrals and/or the return of after-tax employee contributions equal to the excess amount.65 What if my plan doesn't provide for such returns (FT William's doc). Also, I want to hang my hat (and possibly myself) on the phrasing (continuing on with Rev. Proc. 2016-51, Part III, Section 6.06) : "Excess Allocations that are attributable to elective deferrals or after-tax employee contributions (adjusted for Earnings) must be distributed to the participant." So, if there was no PS contribution, or if it had been less, there would be no excess. By making a (too large) PS contribution, the excess was created. So, to my thinking, the excess is attributable to the PS contribution, not the elective deferrals. A perfect PS contribution would max out the owner, such that allocations to all other participants would have been a lot less.

Thanks Guys for the responses. To be clear(er), Owner has max 401k taken out during 2016. Safe Harbor Match is deposited alongside deferrals during the year. So by 12/31/16, he has annual additions of $24k (401k) plus $8k (match) = $32k. A large PS contribution is made in 2017 for the 2016 year and per the PS allocation formula, he is allocated $33k. Owner's total AAs are now $65K; $6k over 415. I think it's an Excess Allocation and $6K goes into a suspense account, to be allocated (again per the PS allocation formula) for 2017. There will most likely be a new additional PS contribution in 2017, but this time limited to avoid another Excess Allocation to the Owner. I guess I'm asking if this is the right was to deal with the facts of the situation, ie creating a suspense account.

Posted elsewhere with no responses. Safe Harbor 4% Match 401(k) Plan with Integrated Profit-Sharing. Owner (over 60, HCE) with 5 other employees (one is HCE). In 2016, Owner maxes 401(k) at $24K, matches $8K and contributes to PS, resulting in his PS allocation being $33,000 per the Plan formula, resulting in him being $6k over 415(c) limit. I'm reading Rev. Proc. 2016-51, Part III, Section 6.06 (not Notice 2016-60 erroneously cited), which says (emphasis mine): (2) Correction of Excess Allocations. In general, an Excess Allocation is corrected in accordance with the Reduction of Account Balance Correction Method set forth in this paragraph. Under this method, the account balance of an employee who received an Excess Allocation is reduced by the Excess Allocation (adjusted for Earnings). If the Excess Allocation would have been allocated to other employees in the year of the failure had the failure not occurred, then that amount (adjusted for Earnings) is reallocated to those employees in accordance with the plan’s allocation formula. If the improperly allocated amount would not have been allocated to other employees absent the failure, that amount (adjusted for Earnings) is placed in a separate account that is not allocated on behalf of any participant or beneficiary (an unallocated account) established for the purpose of holding Excess Allocations, adjusted for Earnings, to be used to reduce employer contributions (other than elective deferrals) in the current year or succeeding year. While such amounts remain in the unallocated account, the employer is not permitted to make contributions to the plan other than elective deferrals. Can I calculate 2017 max PS to get owner to $60K (401k, Match and PS) using up the 2016 $6K overage plus whatever else needed? Anything I'm leaving out?

The title of this thread seems to be the proper place to pose my question. Safe Harbor 4% Match 401(k) Plan with Integrated Profit-Sharing. Owner (over 60, HCE) with 5 other employees (one is HCE). In 2016, Owner maxes 401(k) at $24K, matches $8K and contributes to PS, resulting in his PS allocation being $33,000 per the Plan formula or $6k over 415(c) limit. I'm reading Notice 2016-60, which says (emphasis mine): (2) Correction of Excess Allocations. In general, an Excess Allocation is corrected in accordance with the Reduction of Account Balance Correction Method set forth in this paragraph. Under this method, the account balance of an employee who received an Excess Allocation is reduced by the Excess Allocation (adjusted for Earnings). If the Excess Allocation would have been allocated to other employees in the year of the failure had the failure not occurred, then that amount (adjusted for Earnings) is reallocated to those employees in accordance with the plan’s allocation formula. If the improperly allocated amount would not have been allocated to other employees absent the failure, that amount (adjusted for Earnings) is placed in a separate account that is not allocated on behalf of any participant or beneficiary (an unallocated account) established for the purpose of holding Excess Allocations, adjusted for Earnings, to be used to reduce employer contributions (other than elective deferrals) in the current year or succeeding year. While such amounts remain in the unallocated account, the employer is not permitted to make contributions to the plan other than elective deferrals. Can I calculate 2017 max PS to get owner to $60K (401k, Match and PS) using up the 2016 $6K overage plus whatever else needed?

Who's the Plan Sponsor?

Why wouldn't the "account balance" be the Present value of the accrued benefit a/o 12/31/16, reduced by the payment made in 2017? I must be missing something....

Sounds like a non-custodial account that didn't require a Trustee's signature to withdraw funds from the account.

Somewhat off topic, but I get the sense that the annuity was never purchased by the Plan. Odd, isn't it?

Can some Match be "shifted" into the ADP test? I saw something about the match being subject to the same "restrictions" as deferrals, but... From an ASPPA slide presentation: (emphasis mine) Correcting a Failed Test Through Shifting • If you pass ADP by a lot and fail ACP; you can shift amounts not needed in ADP to ACP – Testing method only – you do not actually move the funds – You must pass ADP both before and after shift – You cannot shift ACP to ADP (unless the ACP amounts are subject to the same withdrawal restrictions as deferrals)

Might be better to go belly-up and save the 401k for retirement. Just my 2 cents.

I recall a restatement period (EGTRRA or earlier?) when our firm merged several non-contributing Profit-Sharing Plans into (new or existing) 0% Money Purchase Plans.

I remember having several doctor clients in the early '80s. They told me that every Jan 1st, they had a new $250k malpractice liability insurance premium to cover. They probably saw 4 patients an hour for 7-8 hours straight, 5-6 days per week. Can only imagine what that same premium is now. Their practices were practically unsalable. Yeah, they took down some big $, but they helped a lot of people and worked their butts off. A Google coder makes more without a day of medical school. Just saying...

The RBD has not yet occurred. Why would you make a RMD if it was possible to elect to delay until April 1, 2018?