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The Company that owns 90% does not want to adopt the Plan and they do not have a plan of their own. Do I still need to add them in for testing?

A company is owned 90% that has a plan.

I have a Plan that is 90% owned by a LLC and 10% owned by another company. This would tell me it's a control group. However the client indicates that the company who owns 90% are investors of about 20 people who receive K1's and do not have any ownership in the 10% company? Can I think of this as a holding company? I asked that he send over the % for each of the 20 people. 3 of these 20 are employees of the Plan. Any thoughts or other suggestions.

Hey Tom, I understand the hardship criteria. They have no back up of why he needed the hardship, they just approved and went on. So it sounds like I need to file under VCP. Do they have to file under VCP or can they just do a Self correction and pay an excise penalty on the deferrals that should have been stopped? Should they stop deferrals now or should we just calculate the 6 months that was withheld with interest? I assume this gets distributed back to the participant and taxed. It only affects one participant in a 403b plan and I would hate to have to go through VCP if they didn't really need to. Thanks for your help on this.

We have a client who let a participant take a hardship withdrawal without requiring them to take a loan. The client states that they weren't aware that they had a loan program. They have also not stopped 401k deductions. We have instructed them to stop the deductions now. I assume that this is an operational failure and it should be self corrected. Is this a prohibited transaction? Would we file a 5330 with a 15% penalty on the amount that was distributed in error or does nothing need to be done?

The client wants the participants to be able to pay on their loans, therefore ceasing the contributions and freezing the Plan. If he terminates the Plan then the loans would become taxable.

A client would like to freeze their Plan instead of terminating it so that participants can continue to pay back loans. Would service for vesting also freeze? Can the employer unfreeze the Plan at a later date if they decided that the company will not go out of business? If so, how do you unfreeze a Plan.

Couldn't each doctor be in their own class?

Can I just do a QNEC to get the test to pass so that no refunds will be due? I didn't know if you could do this after the 12 month period. Would I need a 5330? Thanks again.

A client failed ADP testing in 2007 and never processed the refund. Under a self correction, couldn't they distribute the refund with earnings, provide a QNEC to NHCE's in the amount of the refund allocated pro rata on comp and then file Form 5330 for the late refund? Any guidance would be great. Thanks

Based on the SCP, I thought the refunds needs to be done and then a one to one correction needs to be allocated pro rata based on compensation. And then you would need to file Form 5330 for the late refund and late contribution.

I have a client that is an LLC and has provided K1's to partners of the entities that own the LLC. The income I guess is an amount to cover their taxes. The Accountant will not provide K1's stating that since the entities own the LLC they are not eligible for the Plan. However if the partner is receiving the K1 not the entity shouldn't they be eligible for the Plan?

A participant terminates employment 12/10/08. The client pays her severance until 1/10/10. The participant passes away at the end of 2009. Based on the Plan Document if she dies hours are not required for the Profit sharing contribution. My guess is that she is entitled to the PS contribution for 2009. If she would have received the severance within 2 1/2 months after termination it could have been avoided. Any thoughts? Am I correct?

My client uses total compensation as their definition. For some reason they thought it excluded bonuses. 2 NHCE's received a bonus and did not defer on that bonus. First they did not use the correct definition and even if the plan excluded bonuses 414s would fail. How do I correct this? Do I tell them that deferrals should have been taken out of the bonus? What would happen under audit?

I have a control group with 7 companies. One company has 3 employees who each own 8% of that company but has no other ownership in the other companies. The other 75% is owned by one of the other companies so it is controlled. Do I count these ee's who own 8% as HCE's and Keys? They own more than 5% of 1 out of 7 companies.

I have a large Plan that has 4 individual Trustees on the Plan Document. The Investment company has set up their own Trust Agreement since they are the directed Trustee. Does the Investment company need to be added to the Plan Document as a Trustee or do we just use the separate Trust Agreement that the Investment Company used? If the Investment Company is the Trustee would I even have the other 4 individuals as Trustees?

Tom do you think I can amend the Plan to merge as of 1/1/09, (company was acquired in 2007) add the Adopting Employer and then amend the Plan as of 10/1/09 to allow employees of the acquired Plan to enter if hired by 10/1/09? We want to keep the current Plan at 1 yr and only let those in from the merging company. This is a stock purchase.

Hey Tom, thanks for all your help. Now for the Document. Plan A has not adopted Plan B yet and they have a 2 month wait. Can we amend the Plan as of 10/1/09 to allow Plan A as an adopting employer and honor service for elgibility/vesting but state that anyone hired after 10/1/09 would come in after a 1yr wait? It doesn't seem that we would be taking anything away. Or should we just have everyone in Plan A hired by 10/1/09 enter the Plan. How does that affect the employees who had to wait 1 yr in Plan B?

So it seems I should test ADP on all employees who met the lesser requirement which is 2 months (Plan B). Coverga would not pass if I had to aggregate both Plans since one is a 2 month wait and the other is a 1yr wait. We can then amend the Plan (A) as of 1/1/10 to allow all employees currently eligible to particpate in (Plan A) and then require the 1 year wait for all new hires?

Our client just informed us that they own 100% stock of another company back in 2007. This group will be adopting the current Plan. However they have a Plan and eligibility is less than the current Plan. I know they have to be tested for 2009, do I need to use the lesser requirement for 410b and ADP testing? Moving forward these employees will have to wait 1 yr (based on the current Plan Doc) Can we do a one time entry for the acquired group or do we have to let both companies in the Plan?

Yes, same EIN and Plan No. and never caught.

I have several clients using a Default investment for participants who are not enrolled in the Plan yet but were due a Profit Sharing contribution. However, the default investment is not Qualified. What are the consequences, do they meet 404c? I also have a client that has a ACA and has a default investment that is also not a Qualified Default Investment, therefore they don't give QDIA notices. What could be the consequences on this?