Lou S.

Oh yeah maybe I wasn't clear, sure they would have to be 0% vested, take a distribution of their vested amount or have a 5 year break in service. Oh now I see maybe I read the OPs original question wrong.

Amend the plan to forfeit on termination?

The tax question may be better for your accountant. Are you and your husband the only employees or just one the ones who will be eligible for the plan? If you have other employees are you sure they won't be eligible and if the become eligible are you comfortable covering them? Is your income stable or are you just having a good year? Would you be happy with putting $112K or less into a plan for you and your husband or do you want to make larger contributions? If the former you can probably do it with a SEP or 401(k) if you want to put away more a DB plan might be right for you as you could get much larger contributions depending on Plan design. My advice would be to find a local actuary and have them do a study for you.

I'm sorry for your situation and hope you get help. I find it terrible that an employer would hold it against an employee for getting help with opioid addiction as result on pain medication in conjunction with cancer treatment, but sadly I do understand your concerns. And hopefully your cancer is gone or stays in remission. Can you get your doctor to write up something that doesn't address the specific reasons or treatments citing HIPPA privacy issues that your Plan Administrator would accept in approving the Hardship as a qualified medical expense. And while possibly not the route you may want to go, with all the talk of multi-billion dollar opioid settlements in the news, have you considered consulting a lawyer to see if you qualify for benefits under one or more of the class action suits? I have no idea if that is viable but just throwing it out there as an avenue you might explore.

We had one 1/31/19 plan come back with an extension date of 10/15/19 like it was a calendar year plan.

You say all participants received SH NE and plan is cross tested. Then to the extent that the already made SHNE support additional contributions that pass testing pass testing you are fine. Just don't forget about gateway and other possible restrictions.

Buddy don't over think it is a simple as having $5,000 additional ordinary taxable income this year. You had 20% withheld for federal tax and 2% withheld for state income tax. That may be more or less than you owe on just this piece. But the withholding will be a credit against what your eventual total tax bill is for 2019. If your taxable income for 2019 is less than $100,000 it is very likely that the withholding on just this piece will more than cover the taxes you owe on just this piece, at least for federal. But I'm not a CPA nor do I know your full tax situation but most people with $100,000 or less in income have an effective tax rate that is lower than 20%. If you were under 59.5, which you are not, you'd have an additional 10% penalty but because you are over 59.5 you don't need to worry about that.

Assuming calendar year plan. For 2018 Part A is Key by virtue of owning more than 5% in the current year. For 2019 Part A is a Key by virtue of owning more than 5% in the prior year. For 2020+ Part A is a former Key unless facts change. For ownership determination you look at highest ownership percentage at any time during the year, not just the last day of the plan year.

Yes a 5% owner has to take the minimum distribution from each retirement plan. They are still allowed to make contributions. Whether or not it "makes sense" is dependent on their tax situation and is likely a better question for their CPA. No they may not aggregate Retirement Plans and IRAs. Each Retirement Plan must independently satisfy the RMD rules on its own. If he has multiple IRAs, the IRAs can be aggregated and the total RMD for the IRA potion can be taken from any one of the IRAs or any combination of IRAs.

Maybe this is a facts and circumstances thing on timing. I guess I'd be more comfortable with the amendment if the Plan has been around a couple of years that if this is a new 1 person K where he's got 1 year of service and is hiring EEs next year.

It's an interesting position and I think would be very aggressive of the IRS to try to apply it to any potential future hires. Otherwise how would a company with any kind of turnover ever change a vesting schedule to something more restrictive? And there are clearly rules in place to chance a vesting schedule, preserve vesting, and give certain participants with 3 years a service an option to remain on the old schedule. I mean here as I understand it there are no other employees besides the one HCE. There are no NHCEs and no past NHCEs to test for discrimination at the time of the amendment.

I agree with Hojo 100% on this.

There really is not enough information. Is the plan over funder or underfunded? Is this an asset sale or stock sale? Is the plan covered by the PBGC? Does the new business want to assume the plan? There are probably a host of other questions that should be directed to the Owner who is selling, the owner who is buying and the Plan Actuary.

As others have said It may or may not be a good idea (My vote is bad idea) It may or may not be legal (probably legal) It may or may not be a prohibited transaction. (Not nearly enough information to make this determination) It may or may not generate UBTI (based on the description I would lean more likely than not that it does) And as others have noted real estate in qualified plans, especially small ones like this one probably is, come with a whole host of issues to consider. But I tend to agree with Larry that even when it is possible, legal, avoids all prohibited transaction issues, and is even a good investment that the potential problems and possible downsides often far out weigh the upside. I mean why would you want to throw away all those sweet favorable tax rules on real estate outside a qualified plans and convert it into ordinary income when it is eventually distributed from the Plan?

Why not amend the vesting schedule in 2019 for the current 401(k) before you hire anyone? How can that be discriminatory at the time of the amendment?

Yes look at the same 5 for common ownership and identical ownership tests. In your case owners 1 through 5 have 91% common and 91% identical ownership which is the highest amount so you have a CG.

The 403(b) has accepted money not eligible for rollover and needs to disgorge those funds. What it really comes down to is form over substance as if the 403(b) pays the participant a taxable distribution equal to RMD she is in the same position as if she took the RMD from her IRA. Unfortunately the IRS doesn't really see it that way for some reason.

The correct step is to return the RMD to the IRA because it wasn't eligible for rollover and have him take the RMD from the IRA before 12/31/19. Whether or not the participant and Edward Jones will actually do that is a separate matter.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds In 2019 I think you are limited to single life of beneficiary or single life factor for the participant from the prior year minus 1. If spouse rolls the remainder to an IRA in their name and treats as their own in 2019 (not an inherited IRA) the 2020 RMD would follow the regular rules for RMD of the IRA owner and you can use the longer table for payouts. The one that assumes joint life with beneficiary 10 years younger.

Good advice in the 2 posts above. Short answer is if you own or are deemed to own more than 5% of the company in current or prior year you are an HCE for the current year. If you made more than a certain dollar amount in the prior year you are an HCE for the current year. There is an election you can make that can limit the number of HCEs due to pay to the top 20% of your employees. If you are eligible for the plan for any part of the year you are in the test. There are a host of elections and testing options that can make this much more complicated because the IRS never likes anything to be easy so that's why you hire a TPA firm to do this for you. They should be able to explain most of the basics to you but if you want in depth explanations about how the tax code works be prepared to pay for their time.

Some monies could be made available prior to 59.5, others are restricted. Your understanding seem correct.

What are the consequences of not following the terms of the Plan document?

If you set them up for filing this year on myppa.gov do you get access to past filing history? Or does myppa.gov only store only the history you done from prior years? I haven't been in a situation like yours so unfortunately I can't give you a firm answer.

As to the last question - No.

It is very reasonable to have a vesting schedule for 1 person plan. #1 in case plans change and he hires someone. #2 if the plan is put in at or near age 70.5 to delay first RMD. #3 I'm sure there is a good #3 but I can't think of it.