Lou S.

I going to guess that the independent contractor is really still an employee. But if the employee really is an IC then you can do it. I assume you are talking about a true short plan year after employee's termination date with prorated 415 limit or you are likely going to have first yer problems with coverage and testing in 2021 based on the W-2 service already.

If the Plan's Trust documents allow it it can be done. It would be a non-qualifying asset so higher bonding might be need to avoid annual audit and you can't file SF The biggest questions is would this be a prohibited transaction? I would at a minimum recommend they have an ERISA attorney review to make sure that the physician practice isn't a party in interest with respect to the surgery center.

I think this has come up in some other threads and I believe Darrin Watson has said you can not add an adopting employer to an existing plan after the plan year ends. That is you would need to create a new plan for the Schedule C business for 2020. It doesn't look like you have a controlled group so as long it's not affiliated service group you shouldn't have problems. And just curious any reason why the SCH C business wants a qualified plan and not a SEP? Are there employee concerns in the Sch C side business that a SEP might bring in that qualified plan would keep out?

DB plan or DC plan? There were no required RMDs for 2020 for DC plans so if it was a CRD in 2020 it can be rolled back until 12/31/2022. If it was a DB plan the RMDs were still required an can't be rolled back.

Well it's 3% of full year comp to be SH NE so the ee is eligible for SH 1/1/2020 and gets the 3% NE. You can't have a short year NE it's got to be 12 months.

Strange bump. But you are OK with giving the beneficiary a tax liability for loan balance? It seems to me on death you issue a 1099-R to the participant for the outstanding loan with a code 4M.

I don't believe you can use the 2020 catch-up and carry it forward to 2021. You either have to use it for exceeding the 2020 415 limit (which you did on PYE 3/31/20) or for exceeding the 2020 402(g) limit which the participant has not done with the recharactherized catch-up on the 3/31/20 PYE.

Bob, yes this thread right here

But what if was a large bill that had say a 5 year payment plan. At the beginning of the payments he was not eligible for hardship because he has savings. Over the next two years he exhausts his savings paying off the first 2 years medical debt. Now he has no savings and is living paycheck to paycheck but still has the medical debt payments and no savings left to cover it. Or is married, with the spouse's income they can make the payments but spouse loses job and they can no longer afford the medical debt payment. Under both scenarios the participant now has an "Immediate and Heavy Financial Need"

I think you use Code E for EPCRS corrections.

As to #1 I don't think there is any time frame in the code. I believe it just says "Medical expenses (described in IRC §213) incurred by my spouse, dependents or me" of something similar. If the debt that's being paid off over time is medical in nature I don't see why that might not create a hardship down the road when the pariticpant may no longer be able to make the payments for one reason or another. As to #2, the Plan can have reasonable administrative procedures to determine which hardships they will approve and which they won't including a reasonable time frame on when expenses were occurred as long as the procedures are consistent and non-descriminatory.

What does the document say? Eligibility is not a protected benefit but often documents will grandfather those who previously met the eligibility conditions. Though in practice it might be difficult to suspend his election when it's now determined he became an HCE based on look-back comp. To me this seems like an overly complicated provision designed to create unforseen problems.

No it is not safe to assume that.

I think they are trying to ensure they have no HCEs in the otherwise excluible group so they don't have to run a 401(k) test and process potential refunds. It may be that the owners kids pop on the payroll that could cause testing issue with the less than a year of service group. And I have not seen that particular provision in practice.

While eligibility is not a protected benefit I don't believe you can retroactively amend the plan back to 1/1/2021. The Eligibility change would have to be prospective, that is a date after the amendment is actually signed.

Is he reporting it as taxable income on his 1040 (or whatever schedule attached to 1040 it is this year I think Schedule 1 but don't quote me)? Is he paying Self Employment Taxes on it? Was it for services rendered to the Partnership? If the answer to all 3 questions is yes, then you can use it as earned income for an IRA contribution.

As others have mentioned if the SM match is the only employer contribution the plan is "deemed not top-heavy" regardless of the top-heavy ratio. That said for the determination date of 12/31/2020 you include the full 401(k) amount (pre-refund). The refund made in 2021 is an in-service distribution and will remain in your top-heavy test under the rules for in-service withdrawals and look backs from the determination date as detailed in 416. As long as you meet the "safe-harbor only" rules under §401(k)(12) & (13) you are deemed "not top heavy". Once you have $1 dollar of allocations outside those rules, you are back in the 416 top heavy world and need to comply with those rules.

Once again you are right as usual Mike and a credit to this board. Thanks. After going back and looking at the code I agree that $0 is not more than 60% of $0 which is how the statute is actual worded. I feel today has been a success learning something new that previously took for granted.

0 / (0 + 0) is undefined. The key employee balances divided by the sum of the key employee balances plus non-key employee balances.

I'm not disagreeing with your conclusion, but is undefined more or less than 60%?

It's an interesting question and one I don't think was contemplated when the statute or regs were written.

So if you are not TH for 2020 and you are a safe harbor for 2021, I'm not sure I see an issue as you should be deemed not TH for 2021 if the safe harbor match is the only employer contribution.

Short of a time machine where she doesn't contribute in 2020, sounds like you're stuck with the TH Minimum. For 2021, if the safe harbor match is the only employer contribution you are deemed not top-heavy. I'm assuming all amendments and notices for SHM were timely.

If you are averaging the 24 months I think that's fine if your document has some sort of proration for years where the participant works less than 12 months. That said no matter which method you wind up using I don't think the 3 year comp can exceed the 3 year $275,000 annual limit ((2017 + 2018 + 2019) / 3)

For timeliness of minimum funding under 412, that remains as 8.5 months after PYE. You can get some situations where a contribution is timely for minimum funding but not for deductibility in a particular year and vice a versa depending on dates which can be different. Sometimes this can be used to your advantage in planning sometimes it bites you.