Bill Presson

Very interesting. I've never processed a 5500 without the phone number or had anyone request it not be included. I looked at the instructions and it doesn't even suggest that it's optional.

Thanks John!

Austin, we've done some of these before. We usually use the Vanguard/Ascensus plan set up. Just be careful you don't get pulled into doing things the advisor would do. We consistently had to push back on the sponsor about employee education and answering participant questions, etc. They tend to lean on you as the expert in all things without that additional body around.

Peter, I have always used the stance that once a participant has satisfied the conditions to receive a contribution under a current allocation method (if one is made) then that allocation method can't be changed. Historically those included a single allocation group (like for a pro rata allocation) or last day employment or 1,000 hours of service. The restrictions on amending safe harbor plans in general has caused me to be a bit more cautious. But I find in most cases if the benefit is significant enough, the new plan for one year method works pretty well.

Don't need to. Meets this exception: Plan merger or consolidation or spinoff. Do not file Form 5310-A if the plan merger or consolidation or the spinoff complies with Regulations section 1.414(l)-1(d), (h), (m), or (n)(2). Generally, these requirements will be satisfied in the following four situations: Two or more defined contribution plans are merged and all of the following conditions are met: The sum of the account balances in each plan prior to the merger (including unallocated forfeitures, an unallocated suspense account for excess annual additions, and an unallocated suspense account for an ESOP) equals the fair market value of the entire plan assets. Example. Neither plan has an outstanding section 412(d) waiver balance. The assets of each plan are combined to form the assets of the plan as merged. Immediately after the merger, each participant in the plan has an account balance equal to the sum of the account balances the participant had in the plans immediately prior to the merger.

No, they can't because they've already "earned" the right to the current allocation method. What they can do (and I've done before) is to start a brand new PS plan with whatever allocation method they want and then merge it into the existing plan on 12/31. We've done the new document and merger materials simultaneously. Made the receivable deposits after the end of the year to the surviving plan. Do a 5500 for the new plan that is the first, last and only 5500. Show a transfer out on the asset section. Show a transfer in on the surviving plan. WCP

Bump

I still remember the joy of upgrading from my 4800 baud modem to a 14.4kb modem and it was screaming. It would upload the answer packet and download the new message packet and I was golden for another evening of trying to keep the hell up.

Well, it's tax fraud and I'm not sure there's a specific reg that says "don't commit tax fraud" anywhere. It isn't an approved corrective fix for a top heavy plan. Technically no one is eligible for the top heavy minimum yet because they aren't employed at the end of the year (assuming a 12/31 year end). So, one solution is to terminate a bunch of employees. Another is that the contribution (whatever amount it is) doesn't have to be deposited until 12/31/2021, though earlier for deduction purposes. Not a lot of great fixes here.

What is the issue with distributions?

It should be allocated as long as it's not violating any other limits. Doesn't matter whether it was deducted or not. They could choose to not deduct anything.

Agree with ESOP Guy. There's no penalty for choosing to not deduct an eligible expense.

Agreed.

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.