Lou S.

Yes, you compare the 2019 ADP/ACP of the NHCEs in 2019 to the 2020 ADP/ACP of the HCEs.

For 2020, any one who made more than $125,000 in 2019 is an HCE for 2020. This list can be restricted to the top-paid group with an election. In addition, anyone who owns more than 5% of the business at any time in 2019 or 2020 is also and HCE regardless of compensation or TPG status.

You'd need to talk to your 403(b) provider about distribution options and what the implications might be for the investment contract. As I understand it you'd like to take a distribution from your 403(b) account and convert it to a ROTH-IRA while paying any taxes due with funds you have outside of retirement accounts?

You have a demographic failure that is likely to always exist with no good way to correct it that I can see. Either the waivers should not have been allowed or the plan should not have been implemented. I'm not sure what the correction is but it likely involves taxable refunds of deferrals and termination of the plan. Hopefully there haven't been any employer contributions yet.

As Zeller notes he has one 402(g) limit so if he exceeds that limit he'll need to request a 402(g) refund from at least one of the plans. The plan should have procedures for making that request and based on factors such as matching or investment options it may be advantageous for the participant to request the refund from Plan A or Plan B. The plan will probably want some evidence of the 402(g) excess such as W-2s.

I'd title them in the name of the Plan with and FBO attached.

She terminated in 2020 so you only need to add back in the 2020 withdrawals to the TH test. The in-service add back is for active employees.

If the plan adopted CARES provisions and the withdrawal was a CARES withdrawal with signed self-certification we did code 2.

The Plan is not a safe harbor plan for 2020. You need at least 3 months of deferral to qualify, 2 months doesn't cut it. Secure act didn't change that. And you'd need to cover 12 months on the 3% safe harbor, though you could limit it to comp while a participant but I'm guessing most participants have a retro active entry date to 1/1/2020. If the TH ratio on 12/31/20 is > 60% yes you are TH for 2020, and 2021 and have a required TH minimum of 3% of annual 415 comp for eligible partcipants. Though for 2021 your 3% SH should cover the TH minimum.

If you know the amount, I would talk to your IRA custodian about withdrawing that amount (with earnings) from your IRA as an excess IRA contribution. Let your IRA custodian know that a your prior retirement plan has determined that $X.XX that was deposited as rollover in 2020 was not eligible for rollover and you wish to withdraw the amount prior to April 15th to avoid excess IRA contribution penalties for 2020 and/or 2021. Probably put that in a saving account since you'll likely need to return it to the Plan. You'll want to tax to the IRS custodian such that they do not generate a 1099-R because if they due, the IRA will think you owe tax again on that amount in 2021. Next call the local branch of your Department of Labor and ask for their advice. You'll also want to check your 1099-R(s) carefully which you should be receiving shortly since the Plan needs to mail them to you by 1/31/2021 for 2020 withdrawals.

See Cusefan's post above with respect to timing and deducting the combined DB/DC contributions. It will probably limit your 2020 deduction with respect to the DB plan but may let you avoid the excise tax on non-deductible contributions. But even if you are deducting some of the DB contribution in 2020 and some in 2021, you would still need to satisfy the minimum funding deadline by 9/15/21 for 2020 calendar year DB plans.

So it was simply an internal investment of the 401(k) plan? It sounds like it may have been set up incorrectly somehow if a 1099-R is being generated.

I'm confused. If you were laid off shouldn't the Code have been 1M since you had a separation from service? 1L indicates the loan is defaulted and not eligible for rollover treatment, 1M would indicate a qualified loan offset due to loss of employment or termination of the plan that is eligible to be rolled over by the extended due date of your tax return for the year of offset under the change you mentioned.

Luke I think you are correct but that the participant also has to be put in the same position had the error not occurred. So if the DC earnings > DB earnings than you transfer distribution with earning from DC back to DB and your are done. But if DC earnings < DB earnings you transfer distribution and earnings from DC back to DB but plan sponsor makes up difference in lost earnings. Is that you mean?

Effective date would be 1/1/2017 Assets at BOY would be assets as of 1/1/2020*. Plan year would be 1/1/2020 - 12/31/2020. *filing can be on cash or accrual basis as long as you are consistent going forward.

The Rollover you did of the outstanding loan balance is not part of your basis.

Yes, that works. You have to be at least 100% of 1st 1% and 50% on the next 5% but you can be more generous.

I assume the Plan allows for payment of expenses... 1. Assuming the IC isn't a party-in-interest that that would create a PT, I don't see a problem with the plan paying what amounts to reasonable administrative expenses. 2. Again assuming it is ongoing adminstrative expenses of the plan shouldn't be a problem. If its a settlor function it should be paid by the sponsor. 3. I believe this would be a prohibited transaction. I don't think there is a class exemption that allows this but I could be wrong.

One year I had a client take a large taxable distribution on plan termination, not 2M but high 6 figures, because he had losses to off set all or nearly all the income. So you never know what a participant's tax situation might be unless you are their CPA. Maybe with COVID they have large 2020 losses elsewhere they can apply against the DB distribution somehow. Just speculating, I'm not a CPA. But on the initial question I'm with Bird based on the size of the withholding.

Well for one if they have funded the 401(k) for 2021 and terminate in January they may run into 415 limit issues depending on the size of the contribution. If they had employees who were eligible but not contributing they probably have ADP (and ACP if there is a match) issues. Lastly they are almost certainly top heavy under 416. If they are looking at a 401(k) to cover the rest of the employees, they probably already have one in the "solo-k" and just don't know it. As Bill mentions amending and restating the existing 401(k) is likely the path of lease resistance. As for a good option I woold recommend calling several local TPA firms to get quotes on converting the existing solo-K plan document and transferring the administration to them.

The restriction of in-service distributions prior to age 59.5 applies only to certain sources of funds such as elective 401(k) contributions. If the plan has some other in-service condition and the funds were from an eligible source, such as employer profit sharing I see no reason why the rollover would not be allowed. And Bill is correct a rollover should have Code G, not Code 1 for a rollover.

The $35K released from the suspense account is not being deducted, it's simply being allocated so I don't see a problem with allocating $160,000 as long as it follows plan and IRS rules and complies with 415. If you had a client who was reallocating $35K of forfeitures on top their 25% of pay employer contribution, would you have a problem with that? I wouldn't.

Participant separates service after attainment of NRA seems like the condition to me.

Does revenue ruling 2019-19 on uncashed participant checks help the Plan out at all in this situation, particularly if you can determine that the plan properly started paying a J&S benefit? It may be a simple case of re-issuing the checks to the participant, possibly (probably) with interest. As it sounds like the plan may have followed procedures and likely also issued 1099-Rs. Though they probably want to review and document their uncashed check policy for the future to avoid similar issues.

How long has this been going on? Were taxes withheld from the payments (of the uncashed checks)? Have 1099-Rs been issues? And as David asks does the plan allow for lump sum withdrawals and where did the 401(k) payments go?