Lou S.

I believe for a terminating plans you get automatic approval to change the valuation date; typically the change is BOY.

That might be difficult to do with the one that has already been rolled to an IRA.

The exception you are quoting is for a person electing a single sum distribution upon retiring or plan termination. You can not use it for an ongoing participant.

Related match should be forfeited.

Unless you run into state law issues debiting the fee from the employee's pay check I don't see an issue, especially if it is disclosed with the loan application process.

Leave it to the IRS to make SIMPLE plans exceeding complicated in some respects. LOL With the 1 person plans the biggest issues I've seen over the years, where a TPA often gets called in after the fact happens when the 1 participant puts the plan on auto pilot and forgets about it are - 1. Failure to keep up with IRS amendments or restatements. 2. Failure to comply with the 415 limits 3. Failure to comply with the 404 deduction rules. 4. Improper and often undocumented in-service distributions 5. Failure to identify eligible employees when they "forget" they have hired one or more. 6. Improper and undocumented Plan Loans that often fail to comply with 72(p) 7. Not filing 5500 when assets exceed threshold. 8. Not formally terminating the plan. 9. Not filing a final 5500 even is assets don't exceed dollar limit. What it comes down to is what level of comfort is the 1 participant owner willing to assume. Like you said it can be done and possibly without a hitch but fixing errors after the fact is often much more expensive than avoiding the error in the first place.

You get what you pay for Matt. Either the solo-person can become an expert at running his/her own plan and take all the risks of blowing the rules and disqualifying the plan when they screw something up or they can hire someone qualified to do it. There are a lot of programs out there that don't really need a TPA. IRA, SEP, Simple-IRA (At least I think I don't really follow them). But basically the guy wants an $18K+ tax deduction with none of the cost associated with making sure that is properly done. If you'd like you can track all the sources for them (different types of money have different withdrawal restrictions for one), monitor when the IRS has required amendments, check for when the 5500 is due, determine if they have employees who might be eligible (bringing in a whole host of other issues), determine if they have other business that may be related, help them with formal termination of the plan when they want to get rid of it, explain the loan rules when they want to borrow money and help them comply with those rule, explain if and when they are eligible to take money out of the plan, help them prepare 1099-R when money does come out of the plan,... There is simply a lot to monitor on a 401(k) plan even if it doesn't have much money so you have to decide is the extra tax deferral now worth it and do you want to go it alone and hope it doesn't blow up down the road or do you want to hire competent help. If it wasn't a formal retirement plan that had to comply with all the IRS rule they would call it an IRA, not a 401(k) plan.

I don't work with FSA plans but what does the FSA document and summary plan description say about eligibility?

The devil is in the details as I suspect this person does the "same" job as many employees they don't want to exclude by class. We have a similar issue with Plan and honestly don't have a simple solution. I'm guessing they are worried about communication issue with other employees not covered if they cover this one employee? The simplest is to just cover the employee after they enter and continue to do so. I'm not a big fan of drafting a complicated rule to exclude one NHCE but if you do it, good luck.

Simple? Not that I'm aware of. Once you satisfy the 1 year of service you are in and going to "part time" won't exclude you. I think what you have to do is come up with a reasonable business classification for the the employees you want to exclude; exclude them from participation in the plan document; test for coverage. Presumably the coverage test wouldn't be a problem unless you have "a lot" of these types of employees.

Was 2012 the final year of the plan? I don't see how they can have 0 participants and 0 assets in 2013 and need to file a return. Or do you mean the return shows 0 participants and assets at the end of the year?

There is a good rundown here http://www.napa-net.org/news/technical-competence/case-of-the-week/case-of-the-week-valuing-life-insurance-contracts-distributed-from-a-401k-plan/?mqsc=E3854111&utm_source=WhatCountsEmail&utm_medium=NAPA_Net_ListNapa-Net%20Daily&utm_campaign=2016.10.20%20-%20NAPA%20eNews%20-%20(Thu) The long and short is CSV may or may not accurately reflect the fair market value. See IRS Rev Proc 2005-25. But yes I believe a taxable distribution of the Insurance Policy can satisfy some or all of the RMD. But I thought Insurance Policies couldn't be held after Normal Retirement Age had been met under Incidental Death Benefit Rules but maybe I'm confusing that rule.

IRS Publication 560 seems to allow some discretion. See Page 4 - Compensation. https://www.irs.gov/pub/irs-pdf/p560.pdf

Your analysis sounds correct. Deposit of lost earnings, if any, for not following investment direction would seem the appropriate fix.

Point them to the code and regulations and instructions to form 5500. Also let them know about the LRMs so they can make sure the plan document is current and in compliance.

Yep, this is how it would be handled if it landed on my desk as well. Although, most auditors I work with are very reasonable as well and would probably offer to pay half of it in a situation like this. This is probably a good compromise.

I don't think so. The participant has a valid loan and simply made a larger payment. Under what exception would you allow the funds to be returned? If he overpaid the loans and had NO other loan then sure it's a mistaken deposit that should be removed from the plan.

We have not tried one since the DFVC program has been around. That seems to be the way they want you to fix late filings. But back in the day, it was quite common to get the penalty waived for "reasonable cause." Good luck. If you do try it please let us know your experience with it this time around.

I might be tempted to treat him as a re-hired employee and follow those terms if it isn't directly addressed in the document. I could be wrong but I'm guessing the client has this provision so the transfer from one company to the other is more seamless and that the employee would immediately be eligible but that's just a guess on my part. Also I might look at what is written in the SPD on this situation.

Estimates here - http://www.401khelpcenter.com/2017_401k_plan_limits.html#.WAUnPslUPOM Third week off October is official release so yeah we'll know exact for sure "soon".

I think you only need one if they are the same. I believe you still need two if they are different. But I have not confirmed that.

I think you would be OK with something like 4 month eligibility first of the month following and base compensation on full year. That way owner enters 10/1/16 and employee enters 1/1/17 if I've got the dates right. I think where you might have an issue is if you make the eligibility less liberal in the future. You might have some testing issues in the transition year. I think were you might also have a problem is if you have something like 1 year wait but anyone employed as of May 1 (or whatever the start date of the company is) is immediately eligible. That's where the "most liberal eligibility" condition might come back to bite you.

The question becomes why is the audit late? Did the client not hire an auditing firm soon enough or did the auditing firm drag it's heals. That might determine who should pay the DFVC filing fee.

I think the best option is to file late under the DFVC program when the audit is complete. What may or may not work is the solution you said of attaching a statement "audit not complete" in lieu of the actual audit and filing an amended return when you have the audit but you technically do not have a completed filed Form 5500. I have no direct experience in trying this so I can't say if it would work or not. In the old days before EFAST I think this was sometimes used as a de facto 2nd extension, or so I have heard, but again I have no direct experience with doing that, just what I've heard.

Do you meet the exemptions listed in those sections? I believe those are only applicable to short plan year of less than a certain duration where the following 5500 will have a audit covering the full year and the short year.