Lou S.

How did you define the opening balance? If it was something like $Y x (past service not to exceed 5 years) than I would argue you could use up to the past service grant in the accrued to date testing. But I don't know if that would pass muster with an IRS agent, though I could see making a good argument for it.

I think it would depend on how you drafted the amendment for their eligibility and whether or not you pass testing.

Required no, recommended yes.

I think you can send in a letter stating "no distributions from the Plan ever, Form 945 not required"

The loan probably should have been offset at the time of the cash distribution but yes it sounds like a QPLO and you just need the correct accounting entries and 1099-R.

In the past I've found that most IRS auditors are flexible if you need an extension for a valid reason, which it seems this client has. Especially if the request for extension has a specific time you will respond. Like the initial letter says supply this information by X date and the client says "due to (reason) we request a extension to X +20 days" or something like that. I have not had a problem in the past, but every auditor can be different. I think though that if the client believes the auditor is being unreasonable, they can can contact the manager to discuss the situation

see this related thread with similar question earlier today.

I could be wrong but I think the limitations are using the Form 5305 does not have coordinating language with a qualified plan, mostly on top-heavy which is I believe the #1 reason why the IRS does not allow any other plan I think but there could be others. So you are allowed to use a proto-type SEP which then gets treated like a "quasi-profit sharing plan". Most of the ramifications I believe all revolve around deduction of the combined employer contribution to SEP and DB plan or discrimination testing which isn't an issue if it is 1 man shop. So if you have no SEP contribution for the year, you are fine even if SEP account still exists holding the IRA assets. At least that's my understanding. As to Q4, I don't know the legal answer. That is if your DB funding is $0 for 2023 (say by deducting the MRC in 2024) but the plan is in existence, does that cause a problem with the 2023 SEP deduction or its qualification if it is on Form 5305?

Yes, you add Code M to whatever other code normally applies to the Offset. Also know the difference between Loan Default and Loan Offset. They have different technical meaning when it comes to participant loans in qualified retirement plans. A loan default is not eligible for rollover. A loan offset is eligible for 60 rollover. A qualified plan loan offset is eligible for a rollover for an extended period of 9.5 months to 17.5 months depending on when QPLO happens.

See the rules for Qualified Plan Loan Offset (QPLO). Plan Termination generally qualifies. Summary version - participant would then have until the extended due date of their tax return for the year in which the QPLO happened to rollover some or all of the QPLO to an IRA to avoid current year taxation. So for example if the Plan was terminating today and Joe has an outstanding loan balance of $10,000 for which the plan will issue a 2024, 1099-R for the QPLO, see instructions to Form 1099-R for proper distribution coding, then Joe would have until October 15, 2025 to come up with $10,000 from other sources to deposit to his IRA as a Rollover contribution.

Maybe run a scenario with amending for 2023 and and taking deduction in both years v not amending and taking double deduction in 2024 then let the client decide. If he want "the max now" because he's slowing down in 5 year, you might find the total is more if you deduct in 2023 but you might find the numbers are about the same and the client doesn't want to be bothered with amending. Your MRC for both years is probably going to be the same either way but your max deductible might change because of how the cushion works.

Yes that can work. But since you'll need to get the plan in place by 4/15 anyway for the retro plan since there is no extension, why not fund by 4/15 and amend the 2023 tax return with the contribution?

I'm not saying that is the reason, but it's valid. Even if it's required, what happens if the sponsor goes bankrupt say next week and say's "I don't care if it's required by the document we don't have the money, let the Trustee make a claim in bankruptcy court." Just playing devil advocate. I can see valid arguments for not doing the ACP refunds until the match is actually deposited. Don't want to pay the excise tax for refunds after 3/15? Simple, fund the match before 3/15 so we can process the refunds. Again not saying which is right or wrong, just presenting an argument for why a custodian might not process it which may or may not be spelled out in their contract.

Check the rules on participation waivers. You are probably better off excluding from the Plan in the document than having them execute a waiver. Pretty sure it must be executed before they become eligible and must be irrevocable. I believe it also applies to all future plans the employer may adopt but not 100% certain on that point. In your example the Owner and both daughters are all both HCEs and Key employees since they are all 5% owners by §318(?) stock attribution rules. All the rules for top heavy continue to apply.

What if you make the refund but for whatever reason the company never deposits the match?

You're not crazy. That doesn't mean government forms instructions are always crystal clear.

I'm unaware of anything other than filing the SF, assuming they meet the requirements on the assets.

He can not defer more than 100% of compensation, you can't defer what you didn't make but an employer allocation can bring him over 100% but it being a sole prop... With such low comp the math gets circular if you are trying to do the absolute max. You'll need to do a PS contribution first which can't exceed the 25% deduction limit so using your $26,900 figure you get a $5,380 PS contribution which reduces his pay to $21,520 of which he can deffer 100% and the last $5,380 would be catch up. For a total of $26,630. Or he could do no PS and contribute the full $26,900 as deferral. It doesn't matter if the deferral is traditional, ROTH or a mix.

What does your loan program say? You can suspend for up to 12 months for approved leave of absence if loan program allows. You can take payments outside of payroll if loan program allows. You can reamortize when they return, see §72(p) for acceptable reamortization methods. You can take a payment for the missed payment when they return. Note the loan continues to accrue interest in while thy are on leave and payments are suspended. I've done #1 in the past of several plans when the participant returns from leave.

I think it is OK but I can see the argument for proration. I don't know if there is a definitive answer. If there is hopefully someone will post a citation. Also I believe the answer might changed whether you have a self-employed, especially schedule C entity, or a corporation as I don't recall that you file a short year schedule C.

I think if your plan year and limitation year are both the calendar year, you are OK with full 401(a)(17) and 415 limits.

You don't say what type of plan or if there are other employees involved, but if the owner does not have any W-2 compensation than their 415 compensation from the S-Corp is $0.

If the bonus inclusion lowers the ADP of the HCEs more than lowers the ADP of the NHCEs then it would beneficial in passing the test. But if it already passes the test without it, then I don't see a point in re-runing unless ACP fails and running with improves ACP. If most of the HCEs are over the comp limit with or without bonus, it probably hurts testing. But in some cases I could see it being helpful. I think each situation might be different. But to use an quick example say base pay is $200K and bonus is also $200K and the HCE defers the max of $22,500 for 2023. Testing on base pay gives an ADR of 11.25% for that HCE, testing on total comp (limited to 401(a)(17)) gives and ADR of 6.82% for the same HCE.

For allocable earnings I always took that to mean the earnings while in the Plan. So if the guy rolled over say $100,000 in June but was due a refund of $5,000 after testing and the earnings from BOY to date of distribution was say 5% the earnings would be $250.00. The Plan presumably sent him a 1099-R in January for $100,000 showing code G rollover. Now you would send him two amended 1099-Rs one showing $94,750 and code G and one for $5,250 with whatever the code for refund is (8 maybe?) I'd have to look at instructions) and presumably a letter explaining why that amount is not eligible for rollover is includable in his income in the year of distribution and needs to be removed from his IRA as an excess IRA contribution before the due date of his tax return with extension to avoid the 6% excise tax each year it remains in the IRA. The participant would be responsible getting the funds from the IRA as a return of excess IRA contribution along with any earnings while in the IRA. Most IRA custodians I would assume have such a form or procedures in place. The trick is to use the correct language that it's a return of excess IRA contributions and not a regular IRA distribution. From the Plan standpoint, correcting the 1099-R is what is required at a minimum.

They are one employee. If their Company B wages are excluded you will have a 414(s) tests on compensation I believe. No? I haven't run into this particular situation but it looks like you have 3 groups of employees when running your tests. (1)The employees of ONLY A - who are fully benefiting. (2)The employees of BOTH A & B - who are partially benefiting. (3)The employees of ONLY B - who are not benefiting. Are there any HCEs who are in (2)?