Lou S.

I'd check dates and amounts of contributions every year since 2013 as well and his tax returns from 2013 on to see if anything needs to be amended. If you are very lucky the contribution pattern will be OK and he hasn't over deducted contributions this will be largely dependent on the timing of the contributions. If you aren't luck you are going to have some non-deductible contributions and excise taxes and possibly a VCP filing in your future as well as some amended tax returns if he deducted too much.

No it is not subject to the 10% penalty. However I believe that after 4/15 you can no longer remove the 402(g) excess. Rather the employee picks it up as taxable income on his 2015 tax return and it is taxed again when it is ultimately distributed from the plan or IRA it gets rolled to. EDIT - I see Tom has more complete and better info then me as usual. Thanks Tom.

She probably didn't maybe still doesn't. It sounds like she had gross receipts from "consulting" or some such of $9K and threw them all in a solo-k because some one told her she could defer a 100% of it and not pay taxes. At least that's my guess of the less than accurate advice she probably got.

If the sale was indeed $18M then even with a "discount" $3.1M is grossly undervalued. What we don't know is the actual purchase price of the 51% stake, the $18M appears to be a "best guess" of the participant.

Sounds like your solution #1 is the correct one. Though her net earnings for the 25% calculation may be off as you need to back out 1/2 the SE tax and the contribution that she makes.

did she put the 9,000 in in 2015 or 2016? did she have an election to defer to the solo-k before 12/31/15? is she catch-up eligible?

No independent valuation is a red flag. Also how close is the $3.1M to the value reported on the prior Form 5500? That would be on your Summary Annual Report. You can also look up Form 5500 on the DOL website. If the Plan showed a huge loss in the year of termination, I would be concerned. I would recommend contact an ERISA attorney with your questions.

I'm not sure fair and equitable come into play. It's what the 2 parties can agree upon and whether or not the DRO is a QDRO that can be administered by the plan.

But most participant treat the SPD like junk mail, shouldn't it be sent bulk rate? I think mailing the SPDs certified is a bit over the top, but I do agree first class seems reasonable.

I believe the reason was a ton of plans used to have an early retirement age of 55 and it was a way for folks who elected early retirement to not be subject to the 10% penalty.

You would have a 10 month short plan year from 3/1 - 12/31. Hard to say if it will negatively impact the employer. The answer is probably not in most cases but I'm sure someone could come up with a set of facts where the employer would be better off with the Plan running on FYE instead of CYE.

I've seen the argument presented that because they were not keys on the determination date of 12/31/2014 they can't possibly be keys for 2015. Even though that contradicts the plain reading of the statute that says if you own more than 5% in the current or prior year you are a key for the the year. To me I'm with you I have no clue how someone could determine they are not key employees in 2015.

Earnings. Otherwise how could you possibly make them for someone at the 415 limit?

What I have seen the IRS screw up is say you file an extension today. You get a signed form on August 2 and file it. They send you a notice for it being late because they haven't processed the 5558 yet. I've never heard of an issue with filing for an extension but filing the form on time.

No worries. If you file by the due date you simply have an extension that is not needed. Don't lose any sleep over it.

Shouldn't be an issue. But if you do get noticed, let the merry-go-round begin. Should be a simple matter of 1 letter stating plan was not required to file in 2014 and why it wasn't.

I think he means they have a discretionary match that would be exempt from ACP testing absent the after tax contributions.

I believe it is the Plan Administrator's legal requirement to file the corrected 1099-R. That said, if you are the paid prepare and it was your fault the incorrect 1099-R was issued I would think best practices would be to prepare and file a corrected 1099-R at no charge. If it was not you fault (you relied on faulty information from the Plan Sponsor to prepare the original) then you should be compensated for preparing and filing a corrected 1099-R.

Related employers or unrelated? I think the answer might be different in both cases.

If the Plan is matching on a per payroll basis, probably best to fix it now and going forward. Sounds like it is an administrative system that needs some updating.

If a person over age 50 puts 12K in one employer plan and 12K in another unrelated employer plan then the both plans would put the full 12K in each ADP test. As far as they are concerned he hasn't hit any applicable limit, assuming the plan doesn't impose some limit below the $12K in my example.

It is, and we're looking into that possibility. Unless it is a related employer though it wouldn't matter. As far as this plan is concerned it's not technically a catch-up contribution at this point.

How do you sign up for "Catch-up contributions only"? You can't make catch-up contributions until you have hit some applicable limit, either plan imposed or IRS imposed.

I agree your solution makes sense. I just don't think it would fly with the IRS is all I'm saying. They seem to get all bent out of shape with these form over substance arguments.

I would say a standing election would be tantamount to making a ROTH deferral election subject to the 402(g) limit. I could be wrong but I could see the IRS taking that position if the Plan was audited. Is it really that hard to submit a conversion form with each check? I mean given the fact that result of doing so is permanent tax free gains?