gregburst

Non-safe-harbor 401k plan has a discretionary match. Compensation excludes bonuses. Both the ADP test and the ACP test pass using 415 comp and using comp reduced by bonuses. However, the 414s test fails by more than 3%. What, if any, correction is required?

I have a Nevada client that has had a 401k plan for a few decades. They are concerned that they may have to amend their 401k to incorporate all the provision of the new Nevada state program (e.g. auto enroll). I think they are exempt since they already have a plan. But the way they read it, the exemption is only valid if their plan meets all the provisions of the Nevada state plan. Can anyone confirm the proper interpretation? Thanks, Greg

Pre-SECURE, QACA default rate had to escalate to at least 6% of pay. After SECURE, starting in 2025, auto-enroll plans must escalate to at least 10% of pay. So must a new QACA plan for 2025 escalate to 10% of pay, or is 6% sufficient?

I have a client with a small cash balance plan (about 10 participants). The owner/trustee wants to invest in gold bullion. Is this allowed? If so, any specific % limit, or just the "reasonable man" standard? And where would the gold need to be stored?

In light of the automatic enrollment requirement for new plans (beginning with the 2025 plan year), does SHMAC make sense for a new plan anymore? Since automatic enrollment is required either way, seems like QACA is always better than SHMAC (unless the employer want to give the higher match and immediate vesting). Is there some other factor that I'm forgetting that would favor SHMAC?

I've learned that one of my clients has a couple of employees that live and work in Japan. One of them has become a Japanese citizen. I have no info as to whether this person has dual citizenship. I'm trying to figure out whether these employees should be covered under the 401k plan, which uses fairly standard language in its document (see below). I believe a nonresident citizen should be covered, though I'm not sure. Is it determined by whether the person receives US-based income? And what about the nonresident former citizen? Seems like that person should not be covered. If anyone has some experience in this area, please shed some light. Thanks, Greg "Employee": A person who is currently or hereafter employed by the Employer, or by any other employer aggregated under Code sections 414(b), (c), (m), (n), or (o) and the regulations thereunder, including a Leased Employee subject to Code section 414(n) and a self-employed owner of an unincorporated employer, but, unless otherwise provided in the Adoption Agreement, excluding (a) an Employee who is a nonresident alien (within the meaning of Code section 7701(b)(1)(B) deriving no earned income (within the meaning of Code section 911(d)(2)) from the Employer that constitutes income from sources within the United States (within the meaning of Code section 861(a)(3)); and (b) employees who are included in the unit of Employees covered by a collective bargaining agreement between the Employer and employee representatives, provided benefits were the subject of good faith bargaining and 2% or less of the employees of the Employer who are covered pursuant to that agreement are "professional employees" as defined in Treasury Regulations section 1.410(b)-9. For this purpose, the term "employee representatives" does not include any organization more than half of whose members are Employees who are owners, officers, or executives of the Employer.

I set up 2 plans in early December 2022 that became effective 1-1-23. Are these plans subject to the new auto enroll rules? They were signed and "established" prior to 12-29-22, but not effective until 1-1-23.

I realize this is an old thread, but does anyone have the specific IRC section that mandates that catch-up contributions be eligible for safe harbor matching?

A participant in a 401k plan deferred more than the 402g limit in 2020. An appropriate refund check was issued timely. But the participant never cashed the check. Now it's past the deadline. If he cashes the check now, is everything ok? If the check goes stale dated and a new one has to be re-issued, can it be done under the original check date? If not, I assume the funds just have to stay in the plan, leading to double taxation on the excess.

A client of mine, company A, recently purchased company B; it was a stock purchase. Company B was a subsidiary of a big conglomerate and participated in their 401k, which included Roth contributions. Company A's plan does not allow Roth, and they'd like to keep it that way. They don't even want the Roth rollovers coming into their plan. Employees of B were not given distribution options. They were told that all funds would be transferred to company A's 401k (before A had considered the Roth issue). However, if they could bring all assets EXCEPT Roth, they would much prefer that. But is that allowed in a merger? Can the merger instrument state that only non-Roth assets will be merged? And Roth assets will need to remain where they are?

Company X sponsors a calendar year-end safe harbor 401k. As of July 31, Company Z is buying Company X. More specifically, Z is buying the assets of X; it is an asset sale. X's employees will then go to work for Z. If X terminates its 401k as of July 31, does it still get safe harbor protection for the final, short plan year? Normally, if safe harbor is discontinued during the year, then no safe harbor protection is given for that year. But if a company is purchased, then an exception is granted. Does this exception extend to an asset sale?

I have a large 401k plan that excludes HCEs. I just learned that two years ago (as of 1-1-15) they did some reorganizing and moved about half their employees to a newly-created entity; this new entity was never added to the plan. Yet those employees continued to participate in the 401k plan. It seems the logical fix would be to amend the plan to add that new entity as a co-sponsor. But obviously the amendment is not timely. Which government fix-it program should this be submitted to?

Plan year end was 12/31/15. 5500 has not yet been filed. What is the best way to proceed at this point? Electronically file the return and wait to be contacted/fined? Or use the delinquent filer program? No 5558 was filed, so $25 per day penalty is already in the $3000 range.

Assume a corporation has a fiscal 9/30 year end, but it sponsors a DB pension plan with an 11/30 year end. And the contribution for the 11/30 plan year is $120,000, which is deposited before the due date of the 9/30 tax return. How much is deductible on the 9/30 tax return? The full $120,000, or 10/12 x $120,000? And does the answer change if the owner (who has most of the income) took the bulk of his income during November (after the corporate year end)? Any help is appreciated. Thanks, Greg

If a calendar-year safe-harbor matching 401k plan gets set up in September, and it has a Jan 1 effective date in order to maximize profit sharing, would employees that terminated prior to the date the plan is signed have to be included in the profit sharing allocation/testing? Or could those former employees be automatically excluded since they terminated before the plan was signed into existence?

Does anyone have experience with North American Professional Liability Insurance Agency? I am considering purchasing E&O coverage with them. Any negative experiences or warnings? Thx,

This is an owner only plan. No employees. How does that change your answer?

W2. S Corp.

Owner has high-3-year established average comp of $250,000. Cash balance plan was established for 2015, with the owner slated to receive a flat $100,000 each year (with no percentage of pay mentioned). But 2015 census comes back with owner showing $0 pay. Can he still receive the $100,000 thanks to his prior comp (similar to a traditional DB)? Or is a CB allocation limited to current comp, regardless of the benefit formula in the document?

Consider a calendar-year SHNEC plan that is effective 1/1/15 and the document is signed 9/1/15. Does the plan have any obligation to a long-time employee that terminated 8/1/15? Is this employee included or or ignored in the contribution and nondiscrimination calculations? Is the answer different in the world of DB plans? Must a DB plan that is signed on 9/1/15 with an eff date of 1/1/15 benefit an employee that left on 8/1/15?

If the plan document defines comp as gross W2, can the ADP test be run using net W2 (so that deferrals aren't included in comp)? Is this a discretionary option that can be decided each year, or does it have to be hardwired into the plan document?

Dr. Smith sponsored a calendar-year plan for a few years. As of 07/01/14, Dr. Smith formed a new corp with Dr. Jones. Dr. Smith's document was amended to state that Smith & Jones, Inc. would assume sponsorship of the plan as of 07/01/14. Smith & Jones will file a 5500 for 2014. Does Dr. Smith's old corp also have to file a final 5500 for a short plan year: 01/01/14 to 07/01/14? Any cites are appreciated.

Glad to know. I sure couldn't find it in the EOB though.

Calendar year 401k/profit sharing plan is sponsored by a corporation which files an extension for its tax return; so Sep 15 is the tax return due date. But the company files its tax return on Jul 31. Does it still have until Sep 15 to make a deductible contribution for the prior year? IRC 404a6 and Rev Rul 66-144 suggest yes. But several CPAs have told me no.

Manufacturing Inc is owned 100% by Chris. Marketing Inc is owned 50%/50% by Chris and Chris Jr (age 25). Manufacturing Inc pays Marketing Inc $100K per year to do marketing for Manufacturing Inc's products. Marketing Inc only does marketing for Manufacturing Inc; it has no other clients. This can't be an affiliated service group since neither is a service company. Is this a controlled group? Is Marketing Inc allowed to operate a 401k plan for just Chris and Chris Jr? If so, what profit sharing contribution limits apply? The standard 25%?