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The plan covers more than one participant, i.e,. both HCEs and NHCEs. Our initial reaction was that the TPA is OK in this case, but it seems we started to overthink things. Thanks everybody for all of your input. There is a signed service agreement that spells out that the TPA is not a fiduciary, data received will not be audited, and that there's no obligation re prior errors. I agree that lengthening the agreement to add every detail of the services provided and not provided would be prudent. The days of fitting such an agreement on one or two pages are long behind us, aren't they?

A TPA who is not responsible for providing payroll services sets up a 401k plan and instructs the employer more than once in writing that deferrals are taken from/come from participants' paychecks and are tax deductible. The employer, being a thrifty sort, does her payroll herself on Quickbooks and does not indicate such to the TPA. A few years down the line, after making deferrals most years, she figures out that they were incorrectly contributed from her corporate account rather than from her paychecks and her accountant never deducted them on the business returns. She also paid federal and state income taxes on her unreduced W-2s. Now she is blaming the TPA for just assuming that she was using a professional payroll service and not specifically instructing her how to process the deferrals on Quickbooks. The accountant, who probably put her up to this since he must now charge her to make it right, is also taking the same stance. The TPA believes the accusations are inappropriate for various reasons, including the belief that it's on her since she decided to do her own payroll without realizing all that's involved. I am curious as to what TPAs think about all of this and what details they usually provide on this matter during the installation process. Thanks in advance for any assistance.

Unless the plan document specifically defines 'Year of Participation' or contains anything to the contrary, I think it would be acceptable to use either method as long it's done consistently. If the elapsed time info you have found is in the doc, however, then the requirement wouldn't be satisfied until 7/1/20.

An employer that is fully owned by one individual sponsors a qualified plan in which several employees participate. This individual has also set up a separate shell LLC (in which she also has 100% ownership) that does not perform any business transactions, and for which no business tax returns are ever filed. She does not receive any income from the shell company, and it does not have any other employees. I'm trying to determine whether I should indicate that the plan sponsor is a member of a controlled group on the 5500-SF. Is just signing a document establishing the shell company the only thing needed for it to be considered a controlled group member? Or would it also need to first have an EIN issued?

What is the procedure for an employer to remit federal taxes withheld from a 401(k) distribution during the year? Must the employer enroll with EFTPS and do it electronically or can a physical form be filed with the payment attached? We realize that Form 945 can be filed at the end of the year with the payment if the total amount withheld throughout the year is less than $2,500, but it's very likely that amount will be exceeded, so we'd like to pay the withheld amount from the current distribution at this time. Also, is there a deadline for when such a payment must be made? All help is greatly appreciated.

I don't think it is but wanted to make sure, as I couldn't find a thread on this. Company A, which sponsors a 401k plan, is owned 80% by Joe and 20% by Mike - only Joe is employed by A. Mike also owns 100% of company B, and although both companies frequently work together for a common client, they would not be considered ASG members as they are in the construction biz., and therefore, not service orgs. Would an ASG situation exist if Mike were to become an employee of A without anything else changing?

There are quite a few details involved in answering your questions - the best approach may be to refer to IRC sections 414(b) and 414(c), with definitions found in IRC section 1563(a).

A profit sharing plan accepts rollovers on behalf of employees who haven't met the plan's eligibility requirements. I would image such employees would technically be considered participants and included in the participant count for Form 5500 purposes. Would you include them in the annual testing before they meet the eligibility requirements?

I also agree that the NHCE would not get either a TH or gateway allocation, however, wouldn't he have to be included in the discrimination testing since he worked over 500 hours?

Perhaps I'm misinterpreting the ASG rules, but since 1) both companies are working together to provide a service to a common client, 2) the 100% owner of A now owns more than 10% of B, and 3) at least one company refers an amount of business to the other presumably equal to at least 5% of their revenue, wouldn't this be an ASG?

I've seen final 5500s filed showing the assets being netted out to $0 by listing a benefit payable, but I'm sure not everyone agrees with that method.

No doubt this is a tricky area, but it would seem that 408(e) would provide the exemption as long as you meet the adequate consideration requirement and no commissions are paid, or I am just missing a cross-reference?

Thank you all. The trustees are now asking about whether the employer (who is a fiduciary, a disqualified person) can buy back it's own stock from these self-directed RO accounts. Luke Bailey, I'll check to see if they have the appropriate voting power and dividend rights described in 409(l) to be considered qualifying employer securities. Reading through 4975(d), I was hoping to find an applicable exemption and the closest one seems to be (d)(7), though I wasn't able to find specific info regarding 'the exercise of a privilege' and the 'regulations of the Secretary' - they sound like very loaded terms. The stock is annually appraised by an independent third party. As for the setup, the employer stock was an investment choice offered, among several others, from which participants could choose from pursuant to the terms of the plan. Since it seems that it's not too uncommon for a plan to not only offer employer securities as an investment choice, but to also change (e.g., replace) the available choices offered from time to time, one would expect some kind of reasonable method to exist that would allow the plan to purge the stock (provided the participants holding the stock voluntarily agree to do so). Suppose the employer wants to do this because they fear the stock price will drop and wants to avoid the plan being affected? Is having the plan sell the stock to a third party the only way this could happen?

A profit sharing plan allows for participant-directed investments only for rollover accounts, all other amounts are pooled. The only participants with ROs are a majority owner and an NHCE, and they have chosen to invest their RO balances in employer securities (company is privately held), which the plan allows (FT William doc). They now would like to sell their employer securities to a financial advisor who assists with the appraisal of the stock and were wondering if this could somehow be legally accomplished without it being considered a PT. If these participants elect to change their RO investments to cash and get out of the stock, could the plan then sell it to the FA? When the plan was first set up (but before this stock sale was considered) FT William indicated that transactions involving the stock would generally not be considered PTs because it is not publicly traded stock and, therefore, not qualifying employer securities. It seems that 407(d)(5) can be interpreted that way but I would like to be sure. I can't say I have ever come across such a situation and would appreciate any guidance offered.

I understand your position, Rosemary, but if I could play devil's advocate for a moment - it would seem that one would also would have to check the box 'yes' whenever a substantial owner takes a permitted participant loan to be consistent. Likewise, wouldn't it be generally acceptable to answer 'no' regarding the OP's transaction, as it's ultimately a permissible transaction (or PT exemption)? I don't think answering 'yes' is incorrect, but throwing up a red flag for the stock purchase (or for something as common as a participant loan) may be impractical compared to answering 'no' and then having to explain that the transaction was legal, should a random audit occur that questions the answer. Wouldn't it be very likely that no action would be taken once the auditor understands that it was not a PT and not claim that the 5500 was incorrectly prepared? What is the board's opinion on this?

The trustees for the plan mentioned above are now considering making a profit sharing contribution and, of course, the ABT would fail even if it was done on a comp-to-comp basis. In this scenario, would the PS allocations be considered nondiscriminatory if they also were done on a comp-to-comp basis? More than 70% of the NHCEs would benefit.

Is there a requirement that participants must receive a notice every quarter that states that info regarding their account may be provided to them via multiple statements (e.g., a statement from the investment company and one from the TPA)?

Thank you

A 401k plan has a safe harbor design using matching contributions. The plan is not top heavy. There are no profit sharing contributions but there are a small amount of forfeitures to be allocated to participants who work at least 1,000 hours and are employed at the end of the year. New comparability (with each participant as a group) is normally used to allocate the forfeitures, however, doing the average benefit test and including the deferrals and match produce results much worse than if the forfeitures were allocated on a comp-to-comp basis. If the forfeitures are allocated on a comp-to-comp basis, would the ABT still be needed to be done? Can this type of allocation be considered nondiscriminatory?

A 50-year-old participant had comp of $24,000 for the 2017 plan year, and he deferred all $24,000 of it. Since catch-up contributions can be disregarded for the 415 dollar limit, can the participant be allocated up to another $6,000 in employer contributions, bringing his annual addition to over 100% of comp?

The plan document can be drafted/amended to specify that the sole prop can be named as a predecessor employer, and that service with the predecessor employer will be recognized. This is an option that even most prototype docs offer.

One of several participants in a 401(k) plan is age 50+ and has compensation of $28,000. He is an HCE and defers $24,000. The company will be making a profit sharing contribution - will he be able to be allocated $10,000 as a PS contribution ($28,000 comp + $6,000 catch up - $24,000 deferral), or will he be limited to only a $4,000 contribution due to the 100% of comp 415 limitation?

A participant who has been taking required minimum distributions dies, her beneficiary takes one RMD on the deceased participant's benefit the following year and is then paid the remainder of the benefit the year after that - would that last payment be considered a lump sum distribution for purposes of line 3?

Thank, you, especially for the cite - I was incorrectly focusing on 401(a)(4).

Can catch-up contributions be excluded from the ABT?