PensionPro

Without doing any research ... generally covering 1% - 5% of employees falls under the definition of select group of mgt/hces with a greater percentage of coverage allowed for small employers. 20% is generally considered too much. You have to analyze the facts and circumstances on a case-by-case basis.

Just curious. Has the IRS stated this formally or informally - that a plan that has each participant as a separate allocation group automatically fails reasonable classification even if the employees benefitting qualify as a reasonable classification? The Code says that

As far as I am aware insurance cos. only inquire about losses or claims in prior years.

Thanks Larry, that's very helpful! Maybe you can provide a quick response without analysing the issue at depth: plan sponsored by partnership excludes union employees. One of the partners receives W-2 as a union employee but he also receives K-1 income. I am assuming his K-1 amount can be treated as eligible income for calculating plan compensation. Am I missing something?

Hope you are enjoying Prague! Couple of questions if I may ... 1) Would you never use amounts that are code B or C on line 14 to compute plan compensation? 2) LLP was issuing K-1 to partner X until 2016. In 2017 they issue K-1 to partner X living trust using partner X SSN. Can we treat this as partner X SE earnings? We are confirming whether the amounts are reflected on X' Form 1040. Thanks!

plan effective date can predate existence of employer but 401(k) deferral feature can not be adopted retroactively. There was an IRS Q&A on the subject some years ago:

No. There is an exception for church plans but to the best of my knowledge we are awaiting Treasury guidance on merging church 401(a) and 403(b) plans. You can terminate the MPP and allow rollovers into the 403(b) plan.

You are correct that he is an active employee and may not be paid as a terminated employee.

Seasonal or part-time employees may fail to meet the eligibility requirements if the plan imposes a 1 year of service requirement but you can not exclude seasonal or part-time employees as a job classification because the IRS treats that as imposing an impermissible service requirement. However, your plan document may be written with certain safeguards as described in this article. https://www.relius.net/News/TechnicalUpdateDetails.aspx?T=P&1=1&ID=1025

This is not an ethics question, rather a plan document question. If the plan is administratively requiring deferrals in dollar amounts and not percentages it should be okay as long as it does not conflict with any provision in the plan document and it is uniformly applied to all participants.

Elective deferrals are included in the calculation of key employee allocation rate.

This is from Relius, you may want to check with your document provider: Does a terminating Defined Benefit plan need to be restated onto the PPA approved document prior to being terminated? Plans do not need to be restated for PPA, even when being submitted to the IRS for a determination letter upon termination using Form 5310. If, however, a currently pre-approved plan is not being submitted to the IRS for a determination letter on plan termination, then we recommend the pre-approved plan be restated onto one of the PPA pre-approved documents. This way the employer can be assured the plan language satisfies the changes made by PPA (and the other changes in the law that are included in the PPA document). If the plan is not restated, then there is no reliance on the interim good-faith amendments that had been adopted and this could be a problem upon an IRS audit (if the auditor finds any defects in those good-faith amendments). In contrast, plans that are currently not pre-approved, such as any cash balance plan, continue to have reliance on any determination letter issued to the plan only to the extent provided by IRS Revenue Procedure 2016-37, so it is not so clear that such a plan should be restated prior to termination. Employers that wish to wait for a PPA preapproved document may want to push back the termination date because the last day to amend a terminating plan is the date of plan termination.

It is not a deemed loan. As of 06/30/2018 or earlier the outstanding balance of the loan is considered a distribution to you and you should receive a Form 1099-R in 2019. I don't think most plans send out communication about your loan. Plans expect you to be aware of the terms of the loan. In your case, the note says that the loan becomes immediately due and payable on the date which you ceased to be employed.

Couple things to consider. You will need to maintain proof of meeting the fringe benefit hourly requirement in case you get questions from the DOL. Employee response to the concept of waiting till NRA to receive "current wages."

Plan A - propose retro amendment. If not approved, propose Plan B. It may be permissible but not advisable to propose two solutions for one error in a VCP filing.

as far as i know the transition rule does not apply to SEPs

revenue procedure 2018-4

This is for IRAs not qualified plans. He can rollover to an IRA and take his RMDs as charitable distributions in the future.

One of the conditions for permissive aggregation is that plans must have the same plan year so I am curious if that would apply in this situation.

Generally, decisions relating to plan investments must be made for the sole benefit of plan participants and beneficiaries. Prohibited transactions are just one of many pitfalls of investing plan money in real estate. The plan should work closely with an ERISA attorney if it decides to move forward with such investments. If the plan is unwilling or unable to retain an ERISA attorney the plan should refrain from investments that can give rise to complex issues. See this article for just some of the issues to consider: REAL ESTATE AS A PLAN INVESTMENT - nl2-1.pdf

These are two separate plans. Just curious ... is there a statutory basis to perform one test?

Obviously, EPCRS does not address the specific fact pattern described but provides that "the correction should be reasonable and appropriate for the failure. Depending on the nature of the failure, there may be more than one reasonable and appropriate correction for the failure." If the employees knew they were eligible for the match it would have affected their decision whether or not to participate. The match would have been an incentive. If you are going to make up the missed match there is an implicit admission that they would have or could have or may have made deferrals. So I would make a QNEC equal to the missed deferral opportunity and a match based on the missed deferral. The calculations depend on whether it is a safe harbor match or non-safe harbor match. This describes a missed deferral opportunity. I don't think there is a way of satisfactorily demonstrating to the IRS that those employees would certainly not have elected to make deferrals.

I see it as an operational failure when "the employees were told they needed to resatisfy the 1 year wait for the match" - improper exclusion from matching contributions contrary to the terms of the plan. I would probably treat it as an improper exclusion from both deferrals and match as described in the OP.

Unless a leasing organization was involved he was not a leased employee. He seems to be making an argument that he was improperly classified as an independent contractor and was actually an employee.

No.