Lou S.

Well what some folks are saying is that if the IRS Audits the Plan they "might" disallow the original filing since the client does not have a timely signed SB that goes with the original filing. As I see it if you do take the engagement there are 3 possible ways to proceed (assuming everything checks out at the contribution is in the right range). 1. Sign SB, put in the file. Be done with it. Argue with the IRS IF they challenge that position. 2. File and amended 5500 that has no change but is signed by the client after the date you sign the SB. 3. File using the IRS late filer program on the theory that the original was not a complete filing. How you proceed and what level of risk both you and the client are willing to accept will determine which path you chose.

If you take on the client outline the scope of your work and let them know what some of the pitfalls may be and estimated costs. When is the last good valuation and Schedule B? From there you can probably map out a strategy for the client. Assuming 2020 was "good" you'll need to match that valuation and work forward. You may find that the 2021 contribution is more than the MRC and less than the max deductible when you do the 2021 valuation. That would probably be your best case scenario. But you may find they did not meet the MRC in 2021 or they contributed more than the max deductible for 2021 in which case you have a different set of problems for the client to correct.

I don't believe the IRS has given a bright line. If they have I am not aware of such guidance. I believe it is fact and circumstances. In your case for example maintaining a second defined contribution plan might weigh in your favor for a longer period, particularly if the plan covers substantially the same group of employees, makes recurring employer contributions and has a vesting schedule that is similar to the frozen plan. But the ultimate decision rests with the IRS.

When the complete discontinuation of employer contributions is deemed to have occurred, then you will require full vesting of all affected participants in the 401(k) Plan.

Sounds like a perfect use of self correction by plan amendment to conform the plan's terms to it's operation. (again assuming this is an NHCE and not the owner's kid)

If they have self-employment income subject to the self-employment taxes then yes they can defer from that. If they only have pass through income not subject to self-employment taxes then then don't have "pensionable" income.

Have both entities adopted the Plan? I'm assuming yes. If so why wouldn't you simply aggregate his comp from both entities, limiting the aggregated comp to 401(a)(17) limit for 401(a)(4) testing? I don't use Datair but it might be an issue where it's having trouble reconciling the same individual in the plan having both SE compensation and W-2 compensation. You might get a different result for deduction purposes since in ASG each entity has it's own deductible limit based on camp paid by the entity

I believe he can waive his right but I also believe it requires a QDRO. Obligatory, I am not a lawyer disclaimer.

It's not PBGC. Assuming they have met minimum funding, you would seem to be introducing conditions not in the Code, Regs or Plan Document. I'm not saying your position is the wrong one, particularly when the benefits were probably skewed towards the HCEs in the first place, but the Sponsor needs to make the decision they feel is best for them assuming it falls within allowable guidance. Some sponsors will agree with you not to short the employees, others want every last dollar they can get for the owners. You are in a grey area for sure, just make sure you present the options that a legal within the framework of the Code/Regs/Plan Doc and leave the decision to the Sponsor. I will say there are also scenarios where straight proration might be shown to be discriminatory, I think integrated plans may fall into this situation, but I haven't looked that closely.

It's not PBGC, follow the terms of the document so if the Document says to follow a 4044 allocation even if not PBGC then follow the terms of the Plan. On the other hand if the Plan says for non-PBGC prorate in proportion to the PVAB (in this case the hypothetical account balance) I don't see why you couldn't do that assuming it's non discriminatory.

Would it qualify to avoid eviction or foreclosure?

I know next to nothing about 409A plans but it seems if they are paying the taxes and penalties on their mistake they are trying to "fix their mistake". It seems like they should also pay any fees you have with your CPA if you need to file an amended return because of this, but that's something you probably need to take up with them.

Could it be the plan simply didn't want to give participants the option to delay the first distribution so they don't have to process 2 in one year? Though I'm not sure how you get the first one processed by January 1 if say a non 5% owner terminates on December 31st.

If the document allows she can delay until her husband would have received RMD. If leaving it in the Plan, it's probably best to leave in the deceased husband's name at least until she turn 59 1/2 unless there are other reasons she needs to access the funds but she might want to discuss with her estate planning attorney or financial advisor. The main reason being is if she rolls it over into her name she will lose the ability to treat distributions as death benefit distributions that are not subject to the 10% excise tax.

Is she a participant and elected to rollover the balance into her own? What does the Plan say about paying out death benefits and the required timing?

ROTH-IRA or ROTH-401(k)? Contributions or conversions? Whether it is a ROTH-IRA or a ROTH-401(k) if all of the money is contributions plus earnings than the distribution is a qualified distribution and there will be no taxes. It does not matter if some of the contributions are less than 5 years old, unless they are conversions in which case each conversion is subject to the 5 year rule. The beneficiary would have no taxation on the distribution if she dies since it is all a qualified distributions.

Are they confusing the safe harbor and the profit sharing and assuming they are the same? I mean sure it was existing plan that didn't have a 1000 hr requirement I would agree with their 2024 comment but if this is a brand new plan that is putting in 1000 hr requirement form the get go on PS what is the problem?

I would treat it just like failed ADP test after total distribution. (See instruction to Form 1099-R the procedure is in there) I believe the procedure is you amend the 2022 1099-R and issue 2 1099-Rs, one for the excess contribution and the other for the rollover. The excess contribution is not eligible for rollover so the participant needs to be instructed to remove the excess contribution (along with earnings/loss). The IRA should have forms to remove the excess IRA contribution. It does not need to be returned to the Plan.

The 80-120 rule allows you to file the same form you filed last year. But if you are already a large plan, you need drop below 100 to file as a small plan.

My understanding is that filing the return before the initial due date invalidates the extension. But I am not a CPA.

I don't see any reason why a participant qualifying for total and permanent disability would not be an event allowing offset of the loan. The only question would be if this is a permanent and total disability and if the Plan Administrator had made that determination than it is I don't see why his full benefit can't be distributed, assuming the Plan allows for distribution on disability and most DC plans do. I would further posit that the loan offset would likely be a Qualified Plan Loan Offset.

Remember a freeze is not a termination so the restriction on in-service distribution of certain pre-59 1/2 distributions for active employees will still apply. But yes you could freeze the plan instead of terminating it. But that might bring up some unintended consequences so make sure you understand the implications.

Tell the advisor he had the option to contact you before the Plan Year ended if he wanted to change it.

I'm pretty sure it applies to all participants, which would include terminated vested.

https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf From a handy DOL site.