Lou S.

HCE1/Owner is a participant in both plans, correct? That's the assumption I'm going on anyway. So DB and DC both have key participant so you have a required aggregation group so I'm not sure why the DC plan would be exempt. Q1- DB TH minimum is always 2% accrual as far as I recall (subject to limits in 416). I seem to recall the 3% DB dealing with buying back fractions a long time ago, maybe old 415(e) related on super top heavy. Q2 - No Q3 - If HCE2 is excluded from DB you would need to give a TH minimum in DC plan but it could be offset by SH match if the plan allows. Q4 - He is excluded from the DB plan and thus not a participant in the DB the DC minimum of 3% would apply. The plans should spell out the method being used to satisfy TH.

Thanks. I guess that was clarified in IRS Notice 2016-16. I'll have to go back and re-read that one.

Thanks Larry. I know you can amend out a safe harbor match with 30 days advance notice to participants but I was under the impression that if you have a 3% safe harbor written into the document for the year you could only amend it out mid-year if you had a "sever economic hardship." Did that change in published IRS guidance and I missed it?

Unless a maybe notice was handed out for 2107, under what theory can you get away with not giving the 3% non-elective for all of 2017 without disqualify the plan? I think you might be in the position of having to give the 3% non-elective for all off 2017, the safe-harbor match for the part of the year that was amended in, and you still might be subject to ADP/ACP testing for the year.

Then she sounds like an eligible employee.

Is she a partner with self-employment income on her K-1 subject to self-employment taxes? Is she eligible for the Plan?

In this case with the facts you describe you aggregate the compensation from both and then limit it for 401(a)(17).

Is it only deferral and safe harbor match? If yes you are deemed to be "not top-heavy" Additional employer contributions (with certain additional match exception), voluntary after tax contributions or forfeiture re-allocations will "blow your top-heavy exemption".

Why do you want to risk a potentially discriminatory pattern of amendments so one employee making seven figures can defer taxes on $18.5K (or $24.5K) of income?

I'm not a CPA but I thought Partner traditional 401(k) contributions got deducted on their 1040 not the K-1.

A rollover is a contribution. A contribution is not a loan payment. What more do you need?

Why wouldn't the exception apply? A loan offset is simply part of his distribution, a loan default I think is different. Did you use code "2" on the 1099-R or "2L" If you used "2L" I think that might be causing the issue as I don't think code 2 is allowable with code L so it might be an auto kick but I'd have to go back and check the instructions of Form 1099-R.

It should totally be billable but it doesn't violate any terms of the plan and doesn't give a benefit not owed to the participant so I don't see how you can say it's not qualified. Move the vested and non-vested part to the alternate payee account. Only pay the vested portion each year. It's not rocket science.

Yes and no. You can't DEFER more than 100% of comp but you can be allocated 100% of comp plus the $6,000 catch-up and not exceed the 415(c) limit. You could in theory have an employee over 50 who makes $10,000K wages, makes a $6,000 401(k) deferral and receives a $10,000 profit sharing contribution. The $6,000 would be recharaterized as catch-up due to the 415 limit being reached but the $10,000 profit sharing contribution. Obviously you need the right demographics and additional eligible salary somewhere else to make the testing and deductions work out. And it won't ever in a 1 man shop.

The 415(c) limit is 54,000 (for anyone earning at least $54,000) but the $6,000 catch-up is not part of the 415(c) limit. So if you have employee over age 50 who deferred the maximum $24,000 (including catch-up) then the remaining allocation to reach the 415(c) limit is technically $54,000 - $18,000 = $36,000. Now if the employer allocation is less than or equal to $36,000 you are fine for 415(c), if the allocation is greater than $36,000 you are going to have a 415 excess that you need to deal with.

Yes. After tax contributions are tested under ACP, being a Safe-Harbor Plan does not get you a free pass on voluntary after-tax contributions. You may also run a foul of the free pass on Safe-Harbor exemption, if that is a potential concern, but I'm not sure about that one.

LOL. Are you talking a qualified distribution after 5 years and 59.5? I'd think the code would simply be B. Gross amount would be the check Taxable amount would be 0 Cumulative contributions and 1st year of distribution would be whatever they are. But it seems like they could make it clear by having a similar code Q for retirement plans like they do for Roth-IRA. In that case you don't use any other code so I'm assuming B with no other code is what you'd report but hell if I know for sure. I see what you mean.

What does the Plan say about breaks in service and rehires?

It's in English alright. Whether or not it is easy to follow is up for debate.

I think your question is covered on page 10 of the instructions "Designated Roth account"

Isn't that covered in the 1099-R instructions under the section "Guide to Distribution Codes"? https://www.irs.gov/pub/irs-pdf/i1099r.pdf Chart begins on P15 of the instructions.

File an amended return with the updated audit opinion and call it a day.

Yeah, just TPA getting angry call from participant after 1099-Rs went out. Had I looked at this thread I'd have had my answer right away. As for "solving the problem" the Plan will be telling the participant to talk to their tax advisor and IRA custodian to discuss options but informally suggesting without giving tax advice that they should be able to recharacterized their ROTH IRA as a traditional IRA if they act quickly and if that is their intention but that is a matter for them, their IRA custodian, their tax advisor, and their financial advisor. Fore some read the link is embedding but it is the recharaterization thread in the IRA sub forum.

Well it looks like I found the answer to my own question while researching this so I'll put what I found in case others find themselves in a similar situation or if there are differing opinions. I will also note this only applicable to tax years before 1/1/2018 because it appears the rules have changed and this won't be applicable beyond the due date of tax return with extension for the tax payer after the 2017 year. Under Treasury Reg 1.408A-5 the ROTH-IRA rollover from the qualified Plan can be recharacterized by making a trustee-to-trustee transfer from the ROTH IRA to a traditional IRA. There are additional caveats about earnings but it appears this is perfectly possible and allowable for any reason, including "damn I owe what in taxes?!?!?!" which does not need to be disclosed to the IRA. At least for conversions done in 2017.

So in 2017 (more than a little more than 60 days ago, I checked) a participant elected to roll over a fairly substantial pre-tax 401(k) directly to a ROTH-IRA. Despite making this election and agreeing they had read the Special Tax Notice that indicates if you elect to rollover to a ROTH IRA this will be tax able (but not subject to the 10% penalty) participant now claims they had no idea it would be taxable and wanted it to go to pre-tax IRA. Is there any "re-charaterization" option available to the participant to convert the ROTH-IRA back to a traditional IRA for 2017 that I am unaware of? I'm also 99.9% sure the transaction can't be unwound by returning the funds to the Plan and re-issuing as rollover to traditional IRA but on the 1 in a 1000 chance I'm missing something I thought I'd ask here. Nothing appears wrong with any paperwork and the funds did get to her ROTH-IRA and were cashed.