Lou S.

Are the SH match or SH non-elective? They could also have keys receive the TH minimum and everyone would get 3%. But yes your analysis seems correct on the after tax issue.

Subject to the timing of deposits rules for Simple plans I see no problem making a contribution for 2015 in 2016.

That true. Sometimes an inherited IRA is better but other times rolling it to your own IRA is better. Every situation can be different. An inherited IRA does retain the 10% penalty exception but treating it as your own sets up the RMDs on your own 70 1/2 schedule instead of the deceases spouse and gives the spouses beneficiaries more options. There are pros and cons to both.

She is the beneficiary? The payments wasn't in annuity status? Owners wasn't past required beginning date for RMD? In most cases, not a problem for spouse beneficiary to to roll to IRA.

I'm assume (and this could be a bad assumption) that the Key is Key by virtue of owning more than 5% of the and thus an HCE and that the spouse by attribution is also Key & HCE. I'm also guessing that this spouse was the only participant allowed in early but that there other similarly situated employees who were not allowed in. Are these correct assumptions on my part?

Yes.

You can exclude (some or all) HCEs from the safe harbor contribution in the Plan document. But if they aren't specifically excluded from it in the document you can't just decide not to give it to them.

Run, don't walk.

Q1 - attorney is crazy in my opinion Q2 - depends, is a VCP scheduled? What would you put as a receivable if you are going to wait on IRA approval. Also I have no clue why on earth the CPA could not issue the audit and simply disclose the issue in their report. To me it sounds like they had zero basis for not getting the audit done on time. I'd look for a new auditing firm for next year. Q3 - Yea benefit audit have gotten increasingly insane. First started happening after Enron and whatever law that was that also brought in blackout notices but the level of crazy seems to escalate a bit each year. And attorney may be correct, IRS may disallow a QNEC that goes only to HCEs. I have no direct experience of that but it smells like something the IRS would not be too keen on as it is really a boon to HCEs.

Rollover 1099-R

Why not? 3% of $0.00 pay is $0.00 deferral. Am I missing something?

Salary Deferrals are subject to FICA taxes. Employer contributions from corporations are not subject to FICA taxes Your CPA sounds correct in his analysis given your stated facts and desire to contribute exactly $25K. In fact if you only want to contribute 25K you don't need any salary deferral, you can simply make a 25K PS contribution since you have 100K in w-2 wages. If you want to contribute more than 25K, then you could make an additional salary deferral of up to $18K ($24K if you are age 50 or older), though that needs to run through payroll and time for that is getting a bit short. edit - though in the long run it doesn't matter if your gross w-2 wages are $100K you will pay the same FICA taxes if your salary deferral is $0 or $18,000. The difference will be whether you have more pass through income reported to you and a lower taxable wage on your W-2 or a higher less pass through income and higher taxable wage in your W-2. Now if you have to raise your income to $118,000 to make an $18,000 deferral that would change my answer.

What are the Plan's provisions for proving disability? If she meets those and provides the evidence I would think the Plan Administrator would have to issue the 1099-R with disability code.

I agree with the attorney. I have nothing definitive to point you to. Though we have had clients back out of a PS contribution or discretionary match in the past under similar circumstances.

Probably gonna be top-heavy too.

I believe the answer depends on his wife.

Is it just one payroll? Can you make an adjustment on the next payroll or was this the final 2015 payroll?

I thought the IRS had a Rev Proc last year (forget the number) that cleared up the issue that don't need an Individual DL if the amendment doesn't take you out of reliance on the Opinion/Advisory letter of the the VS or Prototype.

She is an HCE subject to the deferral limits on HCEs in a SAR-SEP

Can they open an IRA in the missing participant's name somewhere with the returned funds? Though with 3 years back TH contribution if they are doing an EPCRS fix they can probably just add this to the VCR application. If they aren't doing EPCRS, I don't have much guidance in this situation.

I have no direct experience with them, but I will say from what little I have read, government plans that offer this option seem to have a death benefit payment equal to the un-recouped voluntary contributions to the beneficiaries. But I honestly don't know the mechanics of how it works. Though I am surprised this is not addressed in the plan document one way or the other. Is there anything in the SPD that beneficiaries might be relying on?

What does the plan say about voluntary annuitized benefits at death?

I think that fails as well on the first condition. I believe you can have a single entry date of the first day of the plan year if the eligibility conditions are no more restrictive then Age 20.5 and 0.5 years of service. And you can also have a last day of the plan year entry such as Tom Poje describes, though I'm not sure that works well in a 401(k) plan, seems more applicable to profit sharing plans.

Yeah it is a clear controlled group, no reason to make it complicated when one plan should work just fine. He'll just have zero income from the sole proprietorship in future years it will all be from the s-corp presumably.

Why not have the sole prop also adopt the S-corp plan and make a profit sharing contribution on the combined income from both entities? I'm assuming he has a 100% ownership of the S-corp but maybe that's a bad assumption on my part.