Lou S.

You can only do one per year. I forget if that's calendar year or 12 month period or you need to satisfy both. I haven't had one in a while, thankfully. But if the Plan allows for rollovers-in I don't see why he can't roll it back into the Plan. You then also have a pretty clear paper trail of the 60 day rule.

Not that I've heard.

Well if 1 is the only problem. You over contributed for one participant for 2020 but deposited in 2021. Shift the $2K excess from 2020 to 2021 and have them file amended tax return for 2020 with lower deduction. If you have an excess for them for 2021 - move it to someone else along with earnings. If owner was supposed to get 5K for 2020 but got $0, shift the 2K to him and make the additional 3K due. You have an excise tax for the 2020 plan year for failure to meet minimum funding by 9/15/2021 and probably need amended 5500 return for 2020 to report the failure to meet minimum funding. If 5330 excise tax is late, pay the penalty (not you but client). You are in the 2 year window so I think this can be self corrected under EPCRS if you meet the rest of the criteria in the rev proc. but double check that this isn't something that requires VCP.

I think you are OK. Doesn't DC TH-min require employment on last day of the year? So you shouldn't have a 411 cutback issue.

I think the plan was probably deferral and match only and there were a number of eligible employees who did not elect to make 401(k) contributions and did not have any balance in the plan. At least that's how I read the OPs post but maybe I'm wrong.

Is it cross tested with everyone in their own rate group? And have a resolution that the allocation is $1,000 for (list folks who got $1,000) and $0 for (list folks who got $0)? And does that pass testing? But yes treating it as an elective deferral might be best and most correct option but that may open a whole payroll can or worms with timing, taxes, reporting and W-2s as well as potential 402(g) issues that are now after 4/15 if this was done in 2021.

Pretty sure conversions were made irrevocable some time ago by law. Forget which law.

Sounds like you found your answer but it is probably addressed in your plan document. Some documents will call for a refund of deferrals so the participant gets the full employer contribution, others will limit the employer allocation to not exceed the 415 limit.

Bird, I think the issue that the on going plan has no problem making installment payments but a terminated plan dissolving the trust isn't sure how it's going to pay out installment payments and may be having trouble finding someone who can.

I think it satisfies the "principal residence" criteria but I am not a lawyer. That said taking a hardship distribution to buy a property in someone else's name seems like the height of financial stupidity on the participant's part but it's not my money.

I thought they were quite common in the small plan market. I'd report 10% of the assets as the bond amount as I'm fairly certain that most of those increase bond protections are capped at the lessor of 10% of assets or $500,000 if you read the fine print.

I think either is acceptable, though with one man plan, I believe it is more common to open a separate ROTH brokerage sub-account to easily track the G/L between sources and transfer from the non-roth to the roth on the conversions. and if the brokerage house will be responsible for 1099-Rs I would absolutely want to set up a 2nd account for the ROTH piece rather than try to argue with them when the eventual distributions are done.

Assuming you have tracked the sources, generally speaking yes you can convert the after tax source and not the pre-tax source assuming the plan doesn't further restrict this. Basis converted is not taxable, gains on the after tax tax funds converted are taxable and I'm not 100% sure but I think if you are not converting 100% of the after tax source (basis and gains) I believe your need to prorate which potion is basis converted to Roth (non-taxable) and which portion is gains converted to Roth (taxable). And each conversion has it's own 5 year aging period.

My plan document has 4 choices for coordinating language. I'm pretty sure you need to address how the T-H minimum is provided if you don't provide it in both plans. This is from our DC plan, but there is similar coordinating language in the DB plan. We almost always use B. A - The full top–heavy minimum will be provided in each plan (if selected, Plan Section 4.3(i) will not apply). B - 5% defined contribution minimum C - 2% defined benefit minimum will be made in the (enter the name of the other plan) D - Specify the method under which the plans will provide top-heavy minimum benefits for Non-Key Employees:(enter method here) (Must be nondiscriminatory, preclude Employer discretion, and avoid inadvertent omissions).

What do the documents say? If the documents says the 5% TH minimum is provided in the DC plan than the 5% TH minimum is provided in the DC plan even if it is more than what is required for gateway or 401(a)(4) testing.

Seems like a facts and circumstances determination.

I think early on it's going to hurt small employers who will invariably have someone in HR not really suited to the job who implements it wrong or fails to implement it. I think over time as employers and payroll systems get used to it it will be just another feature that is a requirement of a 401(k) plan and will "mostly" run smoothly.

One way that would work but may not be the most attractive is to retroactively adopt a new profit sharing plan back to 1/1/2021 that has the same provisions as the current plan except with the expanded eligibility and either off set the benefits in the new plan by the old plan and test them together or just make the contribution for all into the new plan. Then at some point merge the new plan into the old plan. I think there is talk of doing what you want in just the original plan with the amendment in Secure 2.0 but that may or may not happen in this years congress and may or may not be in the final version of the bill.

If he is rolling the loan to the new plan and the new plan accepts the rollover of the loan, sure it's a rollover and not an offset. But not every plan will take participant loan in kind as a rollover asset.

My understanding is if the Plan if Terminated and the loan is offset then it is a Qualified Plan Loan Offset. The $3,000 would be taxable in the year offset with 1099-R issued with code 1M, 2M, or 7M depending on the participant's circumstances. The participant would have until October 15 of the year following the offset to roll the amount to an IRA or include it in income in the year of the offset. From IRS instructions - Use Code M for a qualified plan loan offset (which is generally a type of plan loan offset due to severance from employment or termination of the plan).

The only scenario I can think of is where the employee is self employed and did not realize they had $0 compensation or a loss until they later did there taxes. In which case you "probably" do have a 415 excess that can be refunded with earnings. There may be others but not any that come to mind. Otherwise I think you have an employer contribution to allocate to other members. That said since it was deposited in January of 2022, it doesn't necessarily have to be allocated as 2021 employer contribution assuming it isn't deducted for 2021 and perhaps it could be used to fund 2022 contribution obligations. I assume its a calendar plan.

Well you either have a $10,000 employer contribution to the Plan to be allocated under the terms of the plan to eligible participants, or as Peter points out you may have a 415 excess refund to pay out.

Convert the 401(k) to a Profit sharing going forward? Then stop deferrals.

I've not seen the 11% issue so can't comment. I and other practitioners agree we should be able to rely on the regs, that said I don't want be the test case to push that in tax court.

The big difference being one is employer initiated where the employee does not have control over the transfer of assets from one plan of the employer to another such as in a Plan Merger, as opposed to the employee making an affirmative election to roll their funds from one plan of the employer to another such as upon Plan termination of the first plan.