D Lewis

Thank you so much. I think they are not being precise with their terminology to me, so I apologize if I didn't frame things correctly. Do we have to understand who owns the PE, or just how much the PE owns of the advisory business and possibly the attest business?

We have an CPA firm - an LLC taxed as a partnership with about 80 participants. I've been informed that they are selling an equity interest in the the company to a private equity firm. It's a practice referred to as an Alternate Practice Structure "APS". I've asked a lot of questions and a lot of the answers don't make sense to me. I've never dealt with this before, so I don't know what I don't know. I'm guessing they need an ERISA attorney, but I wanted to see if anyone here can shed some light for me so I at least know the right questions to ask. "As part of the APS a new legal entity will be formed to separate our attest and advisory functions. Our current named insured will be the "attest firm" owned by the current partner CPAs. and a newly formed entity will be the non attest entity. There will be a management agreement between these two entities that explains how the non attest entity will provide administrative services such as back-office staff, IT, insurance, employee benefits and office space for the attest firm. All individuals employed by the company today, CPAs and non CPAs will be employees of the attest entity." They confused me by later saying both the existing firm and the new "Attest" firm will be a subsidiary of a holding company. They have yet to tell me who owns the holding company and it doesn't make sense if they partners are still owners yet they are a subsidiary. On a follow up they told me: "Present day All employees are employed by current LLC. The 401k arrangement is tied to current LLC. New Advisory firm is an entity that currently exists today. New Advisory does not have any employees. Current LLC and New Advisory are subsidiaries of the same holding company. At transaction close, Current LLC will move to an Alternative Practice Structure. The APS model is a well-established framework in the industry and enables external investment from private equity into CPA firms. It will look something like this: Current LLC and New Advisory will continue to exist with the same names and EINs. Current LLC will move out from under the holding company and become a standalone entity. Over time, the employees will migrate from current LLC to new Advisory. It could happen all at once, but we aren't sure. Current LLC will have some CPAs as employees, but those individuals will also be employed and paid by New Advisory. We do not expect a change to the census / participation as a result of this change. There will be a management agreement between Current LLC and New Advisory whereas new Advisory will be responsible for obtaining and managing the employee benefits for all employees. As I mentioned yesterday, we would like the 401k plan to continue through the transaction with no disruption to the employees." Finally they are telling me that other TPAs simply make New Advisory and adopting employer with Current LLC as a controlled group and move on. I don't know if I'm making it more complicated than it is, but something doesn't seem right. Any insights on this would be helpful as I've obviously a novice to this.

Thank you for your responses.

We have an LLC taxed as an S Corp with a PS plan - no 401k feature. 2 year wait with dual entry next. PS only - everyone in their own group. Seven 2025 participants. They haven't made a PS contribution in a number of years but would like to for 2025 (on extension). We just found out that they installed a 401k plan effective 1/1/2024 with their payroll provider (sigh). It has a 3 month wait with 1st of the month entry. EACA with 4% SHM (calced each payroll). It has a discretionary pro rata PS with no allocation conditions. There are 4 additional participants in this plan that do not have 2 YOS. The PS only plan is top heavy. I don't have the 12/31/2024 balances of the 401k plan yet, but I'm assuming it will still be top heavy. They want to maximize a PS contribution the PS only plan for 2025. Can this be done? If so I assume they have to be tested together, but I'm not sure what that looks like. Someone from my organization said the PS formula in the 401k plan supersedes the groups formula in the older plan and we have to use the pro rata formula, but I don't think that is true since they are separate plans. I think the problem is can it be tested with the different eligibility provisions. Since the THM is needed - we can exclude the non statutory participants from the TH I think, but what about those who have over 1 YOS, but not 2? I don't know what I don't know here. I've never had this situation before. They didn't come to us when they decided to install the 401k. Any guidance would be appreciated.

We send a notice that gives them the opportunity to elect the withholding, but it tells them if we don't hear from them by X date, it will be processed with 10% W/H I suppose if I was every up against the deadline we might just process them, but that isn't typical for us.

I knew something was off in my thinking. This is the light bulb moment for me. Thanks everyone.

I'm trying to confirm if the new new law changes the RBD for a non owner participant in a qualified plan that turned 72 in 2022, and retired in 2023. Is his RBD 4/1/2024 for a 2023 RMD under the old rules? Or since he retired in 2023 his RBD 4/1/2025 for for a 2024 RMD? Thanks

We use Ft William and need a csv file for importing. I've been able to open the MM/Empower txt file and save it as a csv and import it into our system. It's been a long time since I worked with Relius so I don't know if you can save or convert the text file to a dat file. I would suggest contacting Relius support and/or Empower for the solution. There must be one.

Thanks for your comments. We didn't think there was a way around it - just wanted to see what others thought.

A CPA came to us with this situation. A woman suffered a stroke a year or so ago. She needed cash to buy some type of long term care or medical policy. Not sure exactly what it was, but it doesn't matter for this question. In late December 2022 she took a $450,000 cash distribution - $90,000 was W/H. A couple of days later, but still in 2022, she unexpectedly died. The money is no longer needed and the husband would rather it not be taxed. Normally she would have 60 days to roll it over if she came up with the withholding. Husband said he could afford the $90k, but the wife is deceased, so I don't think there is a way to do that. If it was in the plan, he could roll it to a spousal IRA, but I don't think that can happen without having the distribution reversed first. The check for the $360,000 has not been cashed. Husband has it in his possession. I doubt the plan can reverse it. Can the plan limit the damage by voiding the $360k check and making the distribution $90k - 100% withheld? Any other options, or are they stuck?

I don't have an answer for how to handle this in your payroll system, but from a plan perspective it's not a catch-up until a limit is exceeded. Electing it on a form doesn't make it a catch-up. It's a catch-up once the annual limit is exceeded (or another plan limit). We find many payroll systems and record keeper forms do not handle this well.

I don't know if there is a way to find out. I do know that if the number is not used for a long period of time it gets deactivated. It's a big hassle and takes a long to time to get it active again when the IRS deactivates it. I would wait until it's needed to process a distribution, and then apply for a new one at that time. Use a more recent plan effective date. We have done that and not had an issue.

Sorry - I don't know. One would have to rely on Albany's plan then. I sometimes forget there is a bigger world out there then the small plan market I'm in.

Why not have the sponsor sign one on paper and mail it? Then there is no question.

It depends on how the resolution to terminate the plan was written. If the resolution states the plan is terminated on 8/31/2022 and no new contributions will be allowed after that date, then deferrals can continue until that date. If it doesn't spell it out, then the Plan Administrator will need to make an interpretation. Check how the resolution was written.