Lou S.

The plan is deemed not top-heavy under the regulation if the only contributions are employer contributions satisfying the safe-harbor rules and employee elective deferrals. So you are fine with this design. That is the HCE, non-Keys do not need to receive an employer allocation. I'm assuming this is the employers only plan, that is they aren't using this plan to support er contributions or accruals in another plan.

Excellent point. I, like the OP, was focusing on the wife and forgot all about the husband's clear attribution in A!

Don't forget you also need to satisfy all of B, C, D (B) The individual is not a director or employee and does not participate in the management of such corporation at any time during such taxable year; © Not more than 50 percent of such corporation’s gross income for such taxable year was derived from royalties, rents, dividends, interest, and annuities; and (D) Such stock in such corporation is not, at any time during such taxable year, subject to conditions which substantially restrict or limit the spouse’s right to dispose of such stock and which run in favor of the individual or his children who have not attained the age of 21 years. And if they live in a community property state she may be deemed to own husbands shares anyway. But I am not a lawyer.

By attribution I'm pretty sure you have a CG since wife is deemed to own shares of husband and vis-a-versa. However you may meet the exceptions in 1563(e)(5) so you may want to give those a look.

I believe it is just the deferrals not refunded by the deadline that are subject to the excise tax.

Why is it unique? Are they eligible? If yes Have they terminated? and if no They are participants.

I'm tempted to say - no harm, no foul. But I don't know if the IRS would go for that. If you are correcting under VCP (because of late deferrals) ask the IRS to rule on this and explain it was simple misunderstand on the deposit rules and document that the client changed procedures as soon as it was discovered. If you are fixing under SCP document the same but know there is a potential the IRS may disagree with your correction.

I believe on a hard freeze the IRS gives you a pass on 401(a)(26) if you pass at the time of the freeze. Though that exception may only be for underfunded plans. I am not aware similar "free pass" on a soft freeze.

He needs to change his procedure to deposit the employee contributions when they are withheld. The first issue I see is you probably have late deposits on a fair amount of the withheld contributions. Assuming the are doing the current quarter deposits retrospective and prospective in the middle of each quarter. That is the deposit on 8/15 is for the period 7/1 - 9/30. The second issue is you are depositing 401(k) contributions that have not yet been withheld (if I read your post correctly). In this second case, what do you do if you make the deposit then the employee, stops contribution, takes a hardship or terminates employment before the deposited contributions are ever withheld or if the estimates of the future deferrals run out to be wrong? But my guess is what is likely happening is he is making quarterly deposits of deferral and safe harbor AFTER the period not in the middle and then you have a lot of late deferrals.

Most likely the participant was reported on an SSA back in the 80s and is now receiving a letter from SSA that they they may have benefits in this plan because they just applied for SSA benefits. We've found that even some participants who were properly removed from the SSA when paid out still get the letter from SSA.

Out of curiosity why would someone with a SAR-SEP now want a 401(k)? And if they want one, why not just put it in first of the year? I think since new SAR-SEPs were axed by the IRS quite a few years ago you might have trouble finding a proto-type or custom SAR-SEP now since there is really little or no incentive to draft one that I'm aware of at this point other than maintaining existing grandfathered SAR-SEPs. Lastly if they are currently on a 5305A-SEP are they even allowed to change that to a prototype or custom SAR-SEP mid year? I honestly don't know.

On time and expense?

I believe she can rollover to an inherited IRA and continue RMDs from there.

Ha, Ha I didn't even catch that in the original post. In that case it just par for the IRS course.

I've heard different opinions on changing loans mid-year on SH Plans. It is not one of the limited items that has the IRS blessing as far as I know but since it generally doesn't have an impact on what is in the SH notice that some folks thing changing this is OK, and other think because it is not on the pre-set list changing it is not.

On safe harbor, I've seen most advice saying make amendment effective 1st day of the next plan year. RPG, I see no reason not to make those types of changes in the restatement process.

See code section 411. I believe (d)(6) is the relevant sub section but I could be off. In short some benefits are protected, things like vesting, retirement age, certain distribution options and timing. Other benefits are not, things like - eligibility, loan availability, insurance, the right to direct investments.

It is standard. Save the letter for when you file by the extended deadline and the IRS still sends you a notice that you are late.

It sounds like an administrative policy, but if terminated employees are allowed to set up an ACH to make payments I don't see why active employees would be treated worse by forcing a default.

What does the participant loan program say?

Not only have I never heard of it, I'm not sure it is even allowable under the regulations.

They are trustee directed until they hit individual participant accounts. It is more of a fiduciary issue on prudence of investment selection then anything else. And possibly a failure to follow plan terms if it takes "too long" to allocate and all funds are supposed to be participant directed under terms of the plan. But participant direction is not a protected benefit.

Thanks for some reason I'd read it as 5/12/09 not 5/09/12. My bad.

I believe this was the relevant thread http://benefitslink.com/boards/index.php?/topic/54289-another-contribution-due-date-question/?hl=sole+prop#entry235882

I think there has been quite a bit of discussion on this issue in the past and the conclusion has been the contribution has to be on the Schedule SB for 2013 to be deductible for 2013 even though the tax payers extended deadline is 10/15. Contributions made between 9/15 - 10/15 would need to be deducted in the 2014 year in this case. I think a search might find the prior discussions with more supporting detail.