Lou S.

Assuming John and Joe don't have ownership in ABC that might change this, it does not appear to be a controlled group between A and B under §414(b). The ABC company does not own at least 80% of Company A for a parent-subsidiary group to exist. Though it would for 415 limits, since the at least 80 is replaced by more than 50/ So if A & B have separate plans you still have 415 aggregation but no other aggregation. ABC would be a parent-sub of B, but not A.

https://www.irs.gov/pub/irs-drop/rr-25-15.pdf The IRS issue guidance on uncashed checks in Revenue Ruling 25-2015 that may be helpful to you. You can ask the actuary about question 11, but my understanding is that question would be answered as "no" and you would not attach a Schedule SB for the year following the termination where only payouts are being made.

I assume they were under $1,000 cash outs or they would have been rolled to IRA in the first place. I probably would not have put the money back in the plan but since 1099-Rs were issued are you now creating an after TAX basis in the plan for these participants? What happened with the tax withholding? If you have a trust for 2025, presumably you have a filing requirement for 2025 and 2024 would not be your final return. If it's terminated in a prior year, it's not subject to the minimum funding rules and no SB would would be required. And chance you can show it as a payable on the 2024 return and open savings accounts for them based on the 2024 1099-Rs or issue them cashiers check assuming you have good address you can send by registered mail?

So too much ROTH was deposited to his account? If so remove the excess, use it to reduce the next company 401(k) deposit and you are done at least from the plan stand point. You will need to correct the payroll so their year-end W-2 is correct. As for how you retrieve the over payment from the employee, I'll leave that to other folks to address.

It would seem based on your clarifications that the Plan Sponsor's options are - 1 - fix it's payroll to deal with the law change. 2-elimated catch-up altogether by plan amendment. 3-deal with fixing any errors after the fact.

That box is checked if you adopt after year end. For the extended deadline... Presumably the plan sponsor tax return is on extension or you couldn't do it anyway and you rely on that for automatic approval of extension assuming plan year and tax year are the same but that extended deadline might be 9/15 or 10/15 depending on entity type of the sponsor. Have you checked the instructions for Form 5500? it may be in there, I'm not sure.

That would be odd to say the least but I suppose you could put any dates you want on them though I'm not sure how they would both be correct with different dates. The 5500 is filed through the DOL EFAST system, the 8955 through the IRS FIRE system. Whether or not the two systems talk to each other, I don't really know. I assume you are asking because of the 7 month deadline? I'd say the correct answer is you probably shouldn't but the audit risk seems quite small when you are likely reporting a bunch of final year Ds to remove from the rolls.

Great ask the advisor for an IRS citation or letter stating he will pay any IRS penalties if the IRS takes a position different from his.

No If they deferred $27K and the limit was $23K, $4K recharaterized as catch-up and not in the ADP test, $23K is in the ADP test. If they fail the ADP, up to an additional $3,500 will be recharetreized as cacth-up reducing the refund they otherwise would receive and be retained by the plan because they had not used their full catch-up. If they need a refund larger than the recharaterization amount, they will need refunds. Unless you are over an applicable limit, plan or statutory, the amount goes in the test.

I depends how good you feel about using reasonable classification or not and how you would defend in the event of an IRS audit. The safest most defensible way is the 70% ratio percentage test that has been presented above but that's not to say a more aggressive approach might work. Sounds like a billable consulting project.

I haven't done it but you can search prior threads hear on B-link as this has come up a number of times. I believe the two theories were - 1 - file now without an audit if you are sure you can get an audit done before the DOL letter of deficient filing requiring the audit be submitted in 30 (?) days. 2 - wait until you have the audit and file late under DFVC. Which is better, I couldn't really say. In the "old days" filing without the audit and attaching it later seemed to be the prevailing wisdom, but with DOL auto-match on e-filings, I believe you have to be prepared for a quick letter from the DOL so unless your audit ducks are in a row, you could be left scrambling with option 1. Present the options to the client and let them make the call.

1.401(a)(4)-8(b) See - 1.401(a)(4)-8(b) (B) For plan years beginning on or after January 1, 2002, the plan satisfies one of the following conditions -- (1) The plan has broadly available allocation rates (within the meaning of paragraph (b)(1)(iii) of this section) for the plan year; (2) The plan has age-based allocation rates that are based on either a gradual age or service schedule (within the meaning of paragraph (b)(1)(iv) of this section) or a uniform target benefit allocation (within the meaning of paragraph (b)(1)(v) of this section) for the plan year; or (3) The plan satisfies the minimum allocation gateway of paragraph (b)(1)(vi) of this section for the plan year.

Oh and is this plan top-heavy? I hope not, because if it is you lose the deemed non-top heavy exemption for being a SH match once you make any other employer allocation. Maybe this is a odd plan where every NHCE is contributing and receiving a match large enough to satisfy TH but that's not usually my experience in plans like these and you might find that 1,86 for some might have to become closer to 3% for all.

If you are at $0, and pass all testing you don't need gateway for that employee. Once an NHCE gets any employer allocation, even just $1, they need to get gateway. So yeah that employee need gateway. I'm not sure why you think profit sharing doesn't trigger gateway. Any non-match employer allocation will trigger a gateway in most plans like this. That is safe harbor non-elective, profit sharing, and reallocation of forfeitures being the most common. There are some general test exceptions to gateway in the regs but it doesn't sound like your plan design meets any of those exceptions.

https://www.irs.gov/pub/irs-drop/rp-21-30.pdf https://www.irs.gov/pub/irs-drop/n-23-43.pdf See Rev Proc 2021-30 section 6.06 for correction of excess. See Rev Proc 2023-43 for expnaded guidance to see if you are eligible for self correction r need VCP.

1 - 402(g) I think now stays in because it was not corrected by 4/15 following the failure. Employee should have picked up the income on 2022 tax return and requested refund. Unless the deposit was wrong and the W-2 shows no excess. Given the other issues you raise might be worth double checking this. 2-415 is qualification issue and needs correction. Probably a refund with earnings but possibly a forfeiture. Read the document. 3 -The incorrect match should be forfeited and used to fund future contributions with an explanation to employees. This might also help reduce or eliminate your 415 issue depending on the magnitude of the match failure and 415 excess. 4 - Check the current Rev-Proc on EPCRS for the acceptable corrections and time frame for self correction v VCP. With expanded IRS guidance you may still be in a widow to self correct. 5 - Refunds if any would be reported on 1099-R and taxable in the year received. 6 - I don't see any failures that would require a 5330 but I might be missing something.

DR245 you raise good questions but due to the issues involved, the Plan may not be able to certify a timely AFTAP which might also preclude the plan being able to make lumpsum distributions, but that also triggers additional participant notices which it sounds like you have not received. And I don't know if that's on the sponsor, the old actuarial firm or the new actuarial firm or some combination of all 3. As to you turning 55, there is nothing really magic about that age unless it is the Early Retirement or Normal Retirement Age in the Plan which you won't know until you get the SPD. It's possible but not likely that the Plan is setup to only allow distributions at NRA which might not be until age 65 in which case there is no delay right now because you're not yet entitled to benefit. That would be unusual in a small plan such as this, especially one they thought only covered the owner but not impossible. Based on the industry, it does look like the Plan would be PBGC covered so they may also be dealing with past filings for that as well. Also, if they are a PBGC plan that is termination, that will bring up a whole additional set of forms notices and timing requirements they need to make. I do sympathize with the owner who does seem to have gotten some poor or at least incomplete advice on plan startup but he may also be to blame for not supplying the right data. As to why they might switch midstream, maybe contact with the IRS clued him in to the fact that maybe the prior firm was in over their head and he should switch. I don't know, but from the owner's standpoint I'm sure it is stressful and he probably doesn't have a full handle on what the correction costs will be yet that could be substantial. And lastly, because they are in a VCP situation they may not even know what your benefit is until the IRS approves whatever corrections they submit and sometimes the IRS can be quite slow. And yeah, if they thought they only had to fund for one participant and found out several years later than a bunch of participants should have been accruing benefits, it's quite possible the Plan is underfunded, and the sponsor may be trying to figure out how it can stay in business and still fund the plan.

More than 12 months might indicate the Plan is going through the IRS Voluntary Correction Process or less likely but still possible the IRS Determination letter program upon plan termination and they are awaiting IRS approval before processing benefits. If you are eligible for benefits, file a claim for benefits and save any paper trail. Request a copy of the Plan's Summary Plan Description if you don't already have it with you claim. If they remain unresponsive consider contacting your local Department of Labor branch for their assistance.

I think it depends on whether you want the Plan to be a loan collection and processing agent for ex-employees or you want that loan off the books ASAP when a participant terminates.

Ive seen it done both ways as a receivable and payable on the prior 5500 making that one zeroed out on an accrual basis and a final return, and I've seen a short year final return filed for year the money came in and out. Which ever one you and the client are most comfortable with defending from a potential audit stand point and who is paying the cost of the final year 5500 if you decide there an additional one required should be agreed upon upfront. It's probably also been completely ignored by some though that's not the correct way to handle it.

They failing even when testing otherwise excludable separately? That's without getting into the question of whether or not "part-time" is a reasonable classification for exclusion.

Just test it on an allocation basis instead of a benefits one. Everyone will get the same percentage and be in the same rate group. Unless you have a ton of turnover and fail the ration percentage test due to last day requirement or some other odd scenario.

You are going to need to define burden a bit better. Affects would be a better term since it's hard to see some who is able to afford to defer more than $23K into a retirement account as being burdened that their deferral beyond be designated ROTH and the future earnings on that not subject to income taxation.

One is an on going formula that the IRS deems overly back loaded, the other is a fresh start amendment that is treated differently. But Effen's reference is what it relevant.

That sounds workable, even under the long term part time (LTPT) rules. You are just bringing in the LTPT employees earlier than the statutory limit of how long you can exclude them for 401k. The IRS doesn't generally have any problem when you are being less restrictive. Just need to have the document and your LTPT amendment match what you want it to for eligibility.