Lou S.

I would suggest talking to an ERISA attorney. There appears to be a Plan Qualification defect discovered on Plan Audit from the information you have provided. That can get expensive beyond just funding the the missing benefits if the IRS wishes to play hardball. It sounds likely you are looking at some sort of EPCRS correction with the IRS under audit-CAP. I'm guessing the Retired Owners were likely the Plan Sponsor and Trustee of the Plan?

Do they have a resolution, amendment, SPD and/or SMM that shows the NHCEs are excluded? If not they were participants who were supposed to receive benefits whether or not they passed the testing.

I think you should talk to an estate planning attorney and/or financial planner versed in the nuances. But overall yes your idea can work if she has need to access the funds prior to age 59.5 without the 10% penalty. One thing with respect to the Spousal Inherited IRA, she does not need to drain it 10 years. The ability to do a "stretch IRA" as the term was used prior to SECURE is still available for spousal inherited IRAs.

It's part of his balance right? Of course it's included in the calculation.

That sounds correct. It looks like you are using a fresh start date of 12/31/2021 and a formula without wear-away (sum of the frozen as of fresh start plus benefits accrued after the fresh start).

Terminating the Plan, Reverting the assets to the Plan Sponsor (which at this point may be the same thing as the estate I am not a lawyer), and Paying the Excise tax is certainly one way and possibly the easiest way to end this. To reduce the impact, suggest having all fees paid from the trust to reduce the reversion. As for selling the Plan I'm not sure, someone with some direct experience in doing this may be able to chime in. I thought how that worked is you sold the business along with the DB Plan or merged with a company and plan with an underfunded plan. I'm not sure there is any business to sell in this case but maybe I misunderstand the mechanics.

If you don't use any catch-up for calendar year 2021 in the 10/31/2021 PY, they any deferrals that are over the 402(g) limit in the 11/1/21-12/31/21 period of the 10/31/22 Plan year are catch-up contributions since they are deferrals about the applicable limit. I have to looks up the rules every time on a non-calendar year plan when these things come into play because it can be a bit confusing when you can recharaterize and when you can't as timing becomes important.

Close if is total allocation is $64,500 for PYE 10/31/21 then you've used up 100% of the 2021 catch-up limit for 2021 when you recharaterize for exceeding 415 limit. If he defers another $4K from 11/1/21 - 12/31/21 (which he can) that can't be recharacterized at all in the 10/31/2022 Plan year. That is those deferrals will count against his 415 limit in the 11/1/2021 - 10/31/2022 Plan year with no ability to treat them as catch-up because the catch-up was used as of 10/31/2021.

If you are thinking of a 401(k) Plan with elective deferrals only where they choose to defer 0%, they are still participants, they just have a $0.00 balance. They still need to get a SPD.

I agree, assuming the repayments are made timely which would mean very quickly the loan is not the only asset. However, in t his case it does not sound like repayments have in the past or will in the future be made timely. I also agree that whether or not they are still in the cure period and when that cure period ended is important.

I think I'd recommend the following course of action but you do what you want. 1 - suggest they terminate the plan 2 - get paid in advance 3 - if possible, treat the distribution of the loan as a qualified plan offset (gives her till next October to come up with funds to pay off loan as rollover). you can probably only do this if the plan is terminated before the cure period expires. 4 - resign if they want to keep the plan going without repaying the loan on the loan schedule.

I don't disagree with you but absent written guidance from the IRS I think Bird has a reasonable approach and it's the one we follow as well.

You need to attach an explanation of reasonable cause for why it is late. They will cash your check and likely send a letter for penalties and interest. Instructions for Form 5330 (12/2020) | Internal Revenue Service (irs.gov)

I've always thought of it that way too. I don't think you can get away with not giving the SH just because someone terminated and you made the contribution in the approved 12 month window but not in time for prior year annual addition. And I'm pretty sure if the IRS did have any issue with it because of the conflicting rules they would treat it as self correction under EPCRS. Though I don't its ever been specifically addressed in any IRS guidance.

My understanding is the same as yours. For 2020 deduction by due date of tax return with extension. Which you state as 9/15. For 2020 annual addition no later than 30 days after the tax return with extension. So if deposited by 10/15 30 days after 9/15 then 2020 annual addition, if deposited between 10/16 and 12/31 2021 annual addition. To meet 12 month Safe Harbor deposit deadline deposit by December 31, 2021. In scenario 1 yes deposit it by 12/31/2021 and deduct it in 2021 but get it in by 10/15 if you want it as 2020 annual addition. In scenario 2 yes if they want to make PS contrib to 2020 annual addition it would need to be deposited by 10/15 and designate as 2020 contribution. If 3% deposited by 10/15 would be 2020 annual addition if done after 2021 annual addition. I'd make sure the client keeps good records about what is what if they split it deposits before and after 10/15 but all of it would be against 2021 deduction limit

I'm pretty sure you still need 3 months of deferral opportunity for safe harbor. So while SECURE added expanded options to add SH Non-elective (the 3% and 4% options) to existing 401(k) plans, I think you still need a full 3 months to get safe harbor relief for brand new plan or converted PS plan.

You could have her apply for a US Tax Payer ID with IRS Form W-7 https://www.irs.gov/forms-pubs/about-form-w-7 But as 401king states it might be easier to contact your current Plan Administrator, the on-line system may have automated checks that won't accept a beneficiary without a tax id but they may have a paper based form you could complete.

3 year cliff is still allowed and does work for Top Heavy. 5 year cliff and 7 year graded are still available for traditional DB plans. There was a change a number of years ago to Cash Balance Plans that required full vesting after 3 years whether the plan is top heavy or not. So 3 year cliff can be common is some cash balance plans. At least in my experience. EDIT - fixed due to Zeller post - forgot about the DC change that 5 year cliff and 7 year graded no longer allowed.

I don't believe that it is. As I understand it from our document provider there are 2 types of In-Plan conversions of Pre-Tax money to Roth money. The first is an In-Plan Rollover. This is available when the participant is eligible for a distribution under the Plan but choses to do an In-Plan rollover converting pre-tax to Roth. In this case the new funds are treated like a Related Rollover account in the Plan with Roth tax characteristics attached. The second is an In-Plan Transfer to Roth. This is done when the Participant is not eligible for a distribution from the plan (unusally pre-59.5). In this case the the funds are converted to Roth, but the source retains all the other charateristics of the source from which it was converted. So if it is 401(k) money subject to the pre-59.5 restriction on in-service distributions, that remains. If I'm wrong I'd love to see a citation because otherwise it seems like a loophole to avoid some restrictions.

He owns all 3 100% correct? Controlled Group.

Do I understand that you have 3 corporations A, B and C. Parent A owns 100% of sub B and sub C? They want to have B be the lead sponsor and C be an adopting employer (or the other way around)? If that's the fact pattern I don't see a problem doing a single employer controlled group plan. If I misunderstood the fact pattern, my apologies. If A also has employees you'll need to decide if they are adopting too or not and whether your document pulls in all members of a controlled group. If A has employees and you are excluding them, you'll want to make sure you still pass coverage.

I am not a lawyer but I tend to agree. If the beneficiary designation is in order and the Wife submits all the correct paperwork for a death benefit distribution I don't see why the Plan wouldn't pay it.

Does MP = Money Purchase in this case? If so the MP percentage needs to be in the SPD but the SPD you give to each group only needs to desrcibe the allocation that group would receive.

Unfortunately it appears the IRS treats the 5-year holding period of Roth-401(k) as separate from the ROTH-IRA holding period. Seems like you should get credit back to the year of original ROTH 401(k) deposit if you rollover to ROTH-IRA but unfortunately that's not how the rules are written. Maybe there will be some future correction to this but doesn't seem like an issue that is at the forefront of congress attention.

I agree with Jakyasar. The allocation from the QRP goes against the 415 limit but but doesn't effect the deductible limit or the sole-proprietor's comp as that is all money that was deducted in prior years. While not 100% analogous I like to think of the QRP allocation similar to a reallocated forfeiture.