Lou S.

Assuming a calendar year plan the former owner would be a key employee for 2014 (more than 5% owner in current year) and 2015 (more than 5% owner in the prior year if he was still employed) after which he would be a former-key employee (unless key by some other reason) and he would be ignored for TH testing in the numerator and denominator. If the former owner sold his shares and separated from employment in 2014 he would drop off the test in 2015.

I believe you are correct, that is the wording of the "Maybe Notice" might be very important whether or not you can exclude HCEs from the safe harbor contribution.

Can I assume the plan covers all NHCEs or is that a bad assumption? I am not sure if this qualifies for SCP but I believe it would assuming a large majority of NHCEs are already covered and you communicate to HCEs that they are are now covered. The reason I feel this may qualify for SCP and not require VCP is because you are generally allowed to discriminate with respect to 1 HCE or group of HCEs over another without IRS issues. I would say that VCP would likely be required if there are any NHCEs similarly situated with the HCEs who were allowed in who have been excluded from the plan and you would like have to bring them in probably with a QNEC. But my analysis of the situation here could be off.

I don't work with SEP but have to feel this is not all that uncommon have you tried the IRS SEP fix it giude? https://www.irs.gov/pub/irs-tege/sep_fixit_guide.pdf

The loan is part of a participant's account balance, why wouldn't you include it? It is simply another asset of the plan.

The second one is an easy answer - you have to wait to 2016 to file the EZ. The first one I think once you have a filing requirement you continue to have one even if you now would qualify of the exemption because you are under $250K. I'm 99% confident that was the rule when the 5500 limit was $100K but they may have changed the rule when they raised the limit to $250K and i missed that part.

I would think that would qualify. Have you tried contacting the Plan Administrator with your question? They should be able to give you a definitive answer about whether this would be allowed and what documentation would be required.

Yes. You essentially have 2 RMDs one based on the ROTH balance as of prior 12/31 and the other based on the non-ROTH balances as of 12/31.

I am fairly confident that a notice with a link to the information is sufficient but that hard copy data must be made available upon request, at no charge, to those who do not wish to or cannot access info on line.

I think it is more complicated than that but I haven't reviewed the accrual rules for DB plans using elapsed time accrual in some time.

^to add to the above though if she rolls it to an IRA and then needs to withdrawal money before age 59.5 it would not qualify for the exemption from the 10% penalty in most cases.

I think this is one of the issues with Simple-IRA for self-employed where the deposit deadline may actually be before they "know" their earned income. I could be wrong but I thought the IRS said the 30 day rule applied and you had to meet it even for self employed, which is different that their rule on a qualified 401(k) where only the election needs to be made before 12/31.

If there is I'm not sure the IRS saw fit to disclose their logic. But my best guess has to do with tracking basis on "non-qualified ROTH distributions" pre-59.5 and pre 5-year aging.

Correct.

This is a good argument for restating upon plan termination. I really don't know the answer but if it was me I'd show it as a payable and $0 balance at 4/30/16.

1. If it is only NHCEs you can typically draft the amendment to to cover only effected individuals but it could be drafted such that it covers all similar employees. 2. Depends how the amendment is drafted. 3. If using SCP, no.

If their intention was to maximize the HCEs sounds like they did not choose the most efficient path. They simply could have given everyone a 3% SH Given a discretionary match not to exceed 4% of pay and not to match deferrals in excess of 6% of pay. Essentially a 4% match for the HCEs. Then given a cross tested PS and required gateway to top up the HCEs to where they wanted to be. It would have worked in the regulatory framework and been easier to do. I'm still pretty sure can't say "we are giving some folks the SH match and other the SHNEC." Did the VS plan submit for a letter based on this method? Also is it possible the TPA did it the way I describe but the client mistakenly deposited to the wrong sources with the custodian?

No. You do one or the other. You can do something close to what you want by doing a 3% safe harbor non-elective and a fixed of match of say 20% of the first 5% deferred. That way everyone gets the 3% safe harbor and those contributing at 5% would get the extra 1% which is where they would be under a safe harbor match.

We used to get waivers quite a bit back in the days before DFVC but with the programs available I'm not sure how lenient they are these days. If you are filing on 5/15 you are looking a possible $1,900 penalty if the IRS refuses to waive it. $25 x 76 days verse a $750 fee if small plan or $760 if large plan under DFVC $10 x 76 days. I'd present the option to the client explaining that they can file under DFVC for $750 and be done with it or they can file and request a waiver of the penalty when the IRS sends them a letter but there is no guarantee the IRS will waive late filing fees. Also you might want to let them know your cost for requesting the waiver and that might factor into their decision to just file under DFCV.

Just have the Plan Administrator reject it as an invalid QDRO.

Yes. Of the Sponsor terminating the plan.

I think it may be a bit more complicated but I too am going from memory. I believe you can disaggregate the groups for most testing but not 416 if they are in the same plan. However, I believe you can draft the plan such that the collectively bargained employees are excluded from the t-h minimum. I also believe you can only exclude them from the T-H minimum if there are no collectively bargained key-employees employees. All this is to say, I'm not sure but I do believe including the collectively bargained employees in the plan but not giving them the safe harbor contribution will blow your free pass T-H exemption on the plan. You could have a second plan that covered only the union employees but that is a separate issue that I t hink you are trying to avoid. But again I'm going on memory which seems to get worse every year.

Expensively amend the plan to bring in short service NHCEs and give them a QNEC?

Is he really only giving you 2 days to take a distribution? That isn't clear from the facts given so far. That's true, my assumption may be off. They may be hurriedly trying to close a plan before crossing a PYE to avoid and additional 5500 filing, I don't know. Or it could just be the dates on the notice as masteff suggests.

I've never heard of disaggregating a 401(k) test by group, division, location etc. inside a single 401(k) plan.