Bill Presson

Gotta say, that's just very weird. You need to get a TPA to do all that or other things are going to get missed. That definitely shouldn't be your responsibility. The other gathering of "stuff" I think just goes back to you and your CPA experience. They trust you to do the right thing and that's a compliment.

Yep. Auditors heads almost explode if you tell them the ADP test won't even be run until after 10/15.

I don't think it's odd that they might task you with this since, as you say, you have experience with this area. They aren't going to be able to categorize the experience, it's all the same. But I do find it odd that you are doing testing and calculations. Is the firm handling all the administration internally? Is there no outside TPA involved? You could always ask for a raise.

Before doing anything else, they should amend the plan to a 401(k) and start deferring the maximum. That would likely eliminate the deduction issue going forward and give them additional contributions.

If the money is deposited after year end and in a pooled account, it doesn't necessarily belong to anyone. Money is fungible. So the records of the plan need to be corrected and the deduction needs to be corrected, but the cash is a contribution for the following year.

Agree with BG, but there's also no reason they can't have two plans.

Correct.

It's only for an owner only plan. https://www.irs.gov/retirement-plans/financial-advisors-are-assets-in-your-clients-one-participant-plans-more-than-250000 https://www.irs.gov/instructions/i5500ez

There may be something in the agreement allowing it, but if that's the case, i'm not sure they're really offloading any liability.

Did Ms Sherri not work out?

I very vaguely recall something like this being done with the excess going to a nonqualified plan rather than staying in as after tax contributions. But I don't remember any details and that was a lot of years ago (pre 409A at a minimum).

You still have the 59.5 restrictions for deferrals and safe harbor money. Also in the first post, you referred to a "termination of employment", but if she just sells assets and keeps the employer, she's not terminated. If it's a solo invested plan, what could she invest in using the IRA that she can't use in the plan? These kinds of questions always seem to not provide all the relevant details.

Mike was saying the opposite of that.

I agree. I haven't found anything that eliminates 1.401(k)-3(e) which requires at least 3 months for a newly established plan (except for a brand new employer).

Bringing this back up. During the end of an ASPPA video hangout yesterday, this subject came up. There was quite a bit of disagreement. I felt (after the discussion above) that the 3 month requirement was still in place. Others (including @Larry Starr) were pretty firmly in the camp that the SECURE Act changed the law and that was no longer required. Would love to see some more discussion because I think this is very important.

You say he will "still be eligible" but you need to define eligible for what? No he doesn't get kicked out of the plan, but there are rules delineating who gets a year of vesting, who is eligible for a top heavy minimum benefit and who accrues an additional benefit for the year. This employee may be eligible for one or more or none of those items.

An advisor (or broker) has to have their clients assets held by someone. Some advisors use Schwab. Others may use a number of other B/D groups. LPL is one of the largest. An entity that actually executes the trades that an advisor or broker would request.

I think it depends on what "affiliated with" means. Is it a broker dealer like LPL? Is it just a friend and they provide help from time to time?

If they made the election, then the issue is the deposit and it should be corrected immediately. I don't see this as being different than a w-2 employee making an election and it not being deposited.

Jak, if you use "seasoned monies" for insurance premiums that exceed the incidental limits, those amounts are treated as a taxable distribution. That's why you get to exceed the incidental limits. I don't recommend it. Also, just an FYI even though you didn't ask, rollover monies are not considered in the calculation for the incidental limit since they weren't contributions to that plan.

Agreed. It's all about the timing on this.

Loan limits are separate from distribution limits. Since a loan can't be made from a SEP, take the distribution from there and the loan from the DB.

The participant terminated in 1989, not the plan.

If it's a corporation, you use 1563(e)(4) instead.

https://www.napa-net.org/secure-act-tax-credit-qas Technically it was NAPA. But no membership required.