Lou S.

I'm 99.9% sure that the IRS position at several conferences has been no pay, don't count them for any testing purposes. They use similar logic on the 401(k) test where you have a self-employed HCE owner with 0 comp for a year and the say exclude that person from the test. I'm not sure there is a citation in the code or regs I can point you to. Perhaps someone else has researched it more.

Was it previously included on the 2013 test? How have other similar participants HCE/NHCE been treated in the past? I think it could fall under 2013 or 2014; if you have a consistent method that is always followed that complies with 415 than you should be fine. Provided it also follow the plan document.

I do see why not. But that would be something that should probably be addressed by the loan policy as to source ordering priority for loans, or whether the participant can chose the source of loan.

If they have they are paying back to a ROTH source and they have a qualified distribution (more than 5 years and after 59.5) then the gains (including interest on a loan) are non-taxable.

No, you can't repay the IRA with a rollover from a qualified plan. You have to repay with after tax dollars. Otherwise you'd permanently be escaping taxation on the funds taken from the IRA which the IRS tends to frown upon.

No, top-heavy minimum is based on 415 compensation for the year. It is no different if a participant enters mid-year.

Might be dischrageble in bankruptcy but I think that would still likely disqualify the plan. If the if HCEs are planning on rolling any kind of substantial balance to an IRA, maybe try and use that as leverage? Though if there is no money, there's not much that can be done.

I'm far from an IRA expert but short of a private letter ruling I'm not sure what can be done.

Kevin, you rock.

Nothing from the IRS would prohibit him taking a partial distribution, only the Plan Terms.

I did not but I thought someone else gave and IRS position on the matter now that they are not ruling on "pre-approved" plans. I tried searching for the thread yesterday but I couldn't scare it up with the word combos I tried. Sorry.

Allowing partial distributions is allowable. You'd likely create an optional form of benefit available to all participants.

Thanks. Yeah nothing screwy at all. No last day. No split current/prior issue, both are prior year. Everything looks kosher expect for the fact that the prior year ACP is just a hair too small.

If you do a search I think this came up a few weeks ago. If I recall correctly the conclusion was "amend" and "no submission required on pre-approved plans". Assumed participant allowed in early is NHCE.

Plan uses prior year testing. If using current year testing would pass ADP & ACP easily. Plan passes ADP by a lot using prior year testing. Plan fails ACP by tiny amount using prior year testing. Matching formula has always been the same in the plan. Can I shift small amount of prior year ADP to prior year ACP to pass ACP test? I know I can do this current year, I'm just looking to see if it is allowed with prior year.

Qdrophile took the words right out of my keyboard. And said it better than I could have.

How old is he? Is he an active or former employee? What does the document say about distribution options?

re-amortize over 5 years or repay the loan. the loan he has is NOT for the purchase of a principal residence and does not qualify for the extension past 5 years. One of the many reasons a some plans don't allow loans more than 5 years, even for home purchase. They are simply too much of a head ache for some folks.

I would say because they were terminated there was a distributable event (separation from service) and you have an offset rather than a default.

I believe if you have excluded them from the plan (or portion of the plan) that they do not need to receive the contribution. It sounds like the plan was drafted such that they never enter that component of the plan. In other words it sounds like you are good to go, and not give them a contribution.

Is the plan retro-active to 1/1? Is the plan drafted to specifically exclude them? If it is drafted to exclude, do you pass coverage testing? What does the document say?

If the self-employed person (or them and their spouse) are the only eligible participants and assets are less than $250K then you do not have to file form 5500 series, If you have even 1 eligible participant who is not the owner or their spouse employed, you have to file Form 5500 or Form 5500-SF no matter how small the assets are. I believe this is probably the exact same answer that Tom is quoting above.

How are W-2 handled and which year does it go into for 402(g)? Those would be my biggest concerns. But I agree with QDROphile's response above.

What is the drawback? I'm of the opinion that Plan Loans should be hard to get and you shouldn't be using them as a piggy bank so the additional restrictions are good in my opinion. That said, I don't believe you can refinance a home purchase loan later on to a term of more than 5 years since the new/refinanced loan is NOT for a home purchase anymore. Though maybe the IRS has some guidance that allows it, if so it is something I missed. And yes the refinanced loan generally get's you stuck with a shorter repayment period to not violate the 5 year repayment period. The other alternative is to pay off the first loan and take a new one with a new 5 year period, though sometimes that is problematic if the $50,000 limit reduced by highest balance in the last 12 month restriction comes in to play. edit:typos

LOL Sorry I can't help you with NJ withholding, we have very few east coast participants.