Lou S.

My understanding is once you have $1 dollar allocated that doesn't meet the exemption, the Plan loses the "deemed not top-heavy status", there is no distinction in the code as to whether that allocation goes to key employees or non key employees. A work around though possibly not practical is to set up a 2nd plan profit sharing only that covers only the participant getting the allocation and spin his policy into that newly created plan. That only works if the participant is an NHCE or you'll violate BRF but I'm hoping he is an NHCE already or you might have the same problem within the current plan.

I would talk to a CPA who is familiar with the issue. My limited understanding since it's not my area of expertise is to take advantage of the NUA rules the shares need to leave the qualified Plan via distributable event into a taxable account of the individual in which case (again my understanding) is you are only taxed on the basis that is transferred and when you later sell the stock would pay the long term capital gains on the appreciation at the time of the sale.

Yes

This is what distribution Code E was made for on the 1099-R.

I doubt they have something in technical corrections that would allow you to add ROTH catch-up only for those that have to do ROTH catch-up but not allow any other ROTH. It would seem to go counter to their budgeting of now seemingly wanting to encourage ROTH to make 10 year forecasting of revenue look better. Also if a Plan allows ROTH I believe it has to universally allow ROTH, likewise if a plan allows CATCH-UPS it has to universally allow catch-ups. So it would seem odd that congress would allow a plan to add ROTH only for CATCH-UPS. But then the both Congress and the IRS have done stranger things in the past so I wouldn't put it past them, I just don't think it is likely.

Yes. You either need to add ROTH for everyone or remove all CATCH-UPS for everyone.

I would think the gains would be allocated to the participants in proportion to their employer match.

From your post I'm assuming plan counts vesting years of service as (calendar years / plan years) with 1000+ hours. Looks like he has 1000+ in: 2014, 2017, 2020, 2021, 2022 & 2023 from the wording in your post so 6 years. Doesn't look like he has any 5 year Break in Service so even if you are using the BIS rules there doesn't look like any service to toss.

Remember if the only contributions are safe harbor, you are deemed not top-heavy. Otherwise Belgarath has the right cite.

Either have the client declare a PS contribution (or match if the plan allows for discretionary match) equal to the amount of forfeitures and off set the contribution by the reallocated forfeitures while following the terms of the document?

I would not lose sleep over a plan with no non-key employees that did not make an employer contribution.

Yes the Plan is top-heavy at 100%. Since you have no non-key ees I don't believe you have any required contribution but you can check with your document provider if it's a concern.

1st - talk to big DC separate record keeper and see if they will re open. 2nd - if they say no, can you open a checking account in the name of the plan? Make the contributions there than pay out the folks who need a distribution assuming you can do the withholding and 1099-Rs or run it through some one who can.

I don't use the FIS/IDP but in the pre-approved doc, which we do use, you could use the short amendment system to check the box to allow ROTH and enter the effective date. Have you tried asking FIS document language support? I've found their ticket system isn't as good as it used to be but they still do respond.

Disability might work too. It could just be problematic if he does return to work.

I think I know the answer but in case I'm wrong I thought I'd ask. For the exception to the 10% penalty, when does the distribution have to occur? That is does the distribution have to happen 6 months after the participant turns age 59 or is it anytime in the year in which they turn 59 1/2? This participant will reach 59 1/2 anniversary in October 2023. Normally I'd just tell them to wait but the participant is going on leave due to medical issue that may be terminal so waiting until October may not be an issue. If it is after age 59 1/2 is there a hardship exemption to the 10% penalty that would allow the distribution now without penalty? I realize there is a work around where the client could deem him terminated and thus the withdrawal would be after separation of service after attainment of age 55 and not subject to the 10% penalty but there might be reasons like health insurance that they would want to classify him on leave instead of terminated. Any thought would be appreciated.

Only if the IRS issues guidance on how the spillover is taxed and reported. But once that happens, I'd expect that to be the default among asset most vendors. I mean who wants to send money back to a participant when they can keep it and earn asset management fees?

They should ask for the amendment or the operational elections that were made, if any, if the Secure 1.0 amendment had not yet been done. And yes the amendment is not due until 12/31/2025.

No

The devil is in the details but you'll need at a minimum- Amendment spinning off wife co ees from the current husband/wife plan and end wife's participation in husband/wife plan which will now solely be husband plan. The spinoff amendment need to preserve certain source characteristics, balances and protected benefits in the new plan. You need a new plan for wife with a separate trust. You need to transfer the wife's assets in the current husband/wife plan to the new wife plan. Then wife can do what she wants with the assets in her plan, assuming the trust documents allow for it.

If the Husband and Wife are the only employees, then you will be fine. If the husband's plan covers any employees you are going to have a BRF problem if she's allowed to invest in real estate and the rank and file employees are not. As to why she's adopted on to his plan, the answer is they likely have minor children making them a controlled group --- until that changes next year with SECURE 2.0 provision and they are no longer CG due to minor child. But spinning her off into a new 401(k) Plan for her company would seem to be the way to go whether it is this year or next year. Just make sure they know the pitfalls if an employee becomes eligible before 1/1/2024.

Why not just spin off in 2024 when they are no longer a controlled group instead of creating potential compliance problems for both plans by doing it in 2023?

I'm not a CPA or Attorney either so good to get one or both involved. That said my understanding is the for Federal purposes owners can hire their kids provided it's not in a "dangerous" position like mining, manufacturing, etc. State laws vary and might be more restrictive so probably best that the owner run it by their employment lawyer. And compensation needs to be "reasonable for services provided" which is a matter for the CPA. But if the owners kid's are reported as employees on the census, I don't think it's the TPA job to make a determination whether or not they should be there.

Tell him to find an IRA to take the note or whatever it is for the 2 remaining payments and roll it to that IRA. He may need an IRA custodian that holds non-traditional assets, not your problem. Tell him to provide an independent valuation for the the value of what was rolled to the IRA. Report that value on 1099-R. File final 5000 series return. Direct him to ERISA counsel.

I don't think it does if X is a corporation. From the PBGC site - Substantial owners plans A private-sector qualified defined benefit plan is exempt from PBGC coverage if it is established and maintained exclusively for substantial owners of the plan sponsor (i.e., if all participants are substantial owners). A participant is a substantial owner if, at any time during the last 60 months, the participant: Owns the entire interest in an unincorporated trade or business, or In the case of a partnership, is a partner who owns, directly or indirectly, more than ten percent of either the capital interest or the profits interest in such partnership, or In the case of a corporation, owns directly or indirectly more than ten percent in value of either the voting stock of that corporation or all the stock of that corporation. The constructive ownership rules, including spousal attribution rules, of IRC § 414(c) and § 1563(e) apply only in the case of a corporation.