ETA Consulting LLC

How old is the owner? Is he, otherwise, entitled to the distribution under the plan? As Belgarath alluded, it's only on the books as a defaulted loan until a distributable event (i.e. 59-1/2), and then it becomes as actual distribution of the loan (aka loan offset). If this has happened previously (i.e. more than 12 months ago), then he may very well have $50K available in loans. If this is the case, then issue the loans under the terms of the plan, write him a check, and let him do with those funds what suits him best (as it is no longer a plan issue). Good Luck!

They should probably look at merging the two plans; the prevailing wage plan into the 401(k). You may terminate and distribute as you're proposing, just know that merging is an option. Good Luck!

Don't jump to conclusions without retesting the plans. If B can pass as a standalone plan, then B wouldn't have an issue. If B actually needs to be aggregated with A in order to pass, then the issues "may" begin. Your first step is to prove each plan (either as a standalone or permissively aggregated with the other plan) passes the required nondiscrimination tests. It may end up being a non-issue. Good Luck!

Cannot even make sense of your question. The 12 month restriction (e.g. $50K reduced by the highest outstanding loan balance during the preceding 12 months) is just that; you'd determine the balance each day of the preceding 12 months and the highest balance would be your reduction. Good Luck!

The plan is not precluded from becoming top heavy merely because it is designed to be deferral only. I'm sure there is language within the Basic Plan Document that prescribes for the TH Minimum in the event the plan becomes Top Heavy. For the owner's deferral, her election must be in place by December 31st (e.g. the last day of the taxable year); to be funded when her accountant figures her final compensation on which to make the deferral. Good Luck!

Yes. When a QNEC is used in ADP or ACP testing, then the portion used cannot be tested with the Profit Sharing Contributions. Good Luck!

When considering whether a distribution is a Lump Sum: 1) All Pensions Plans are treated as one plan; 2) All Profit Sharing Plans are treated as one plan; and 3) All Stock Bonus Plans are treated as one plan. An ESOP is a Stock Bonus Plan (and not really a Profit Sharing Plan). Good Luck!

Yes Good Luck!

You 'must' follow the terms of your written plan. Good Luck!

It might not. The key here is to identify your potential areas of concern. You have two distinct plans sponsored by two members of a single controlled group. So, if one member provides a higher match, there couldn't possibly be an issue if they were to pass 410(b) as standalone plans. Should they need to be aggregated for any reason, then you'll have to show that B did not receive a discriminatory rate of match. You would already have shown that when they passed 410(b) separately. When combined, you'd need to show that 'while they are both benefiting for ACP', the Company Match provided by B is a nondiscriminatory rate pursuant to the Regulation. Good Luck!

But along those same lines, if I set up a company and provide services to 100 different organizations and each organization provides 1% of my revenue, then you can see where the ASG rules would prevent it from being defined as an ASG. I usually apply the 'smell' test to areas where determinations must be made based on facts and circumstances. Alternatively, when there is a clearly defined "IF-THEN", I will ensure I compare each detail to that standard. Often, the most difficult part is obtaining all the facts necessary in making the determination. Actually making the determination (after all facts are gathered) is actually pretty easy in many instances. I agree with you. So, there's no argument here. It's just that over my career, I've lost tons of arguments using a broad brush smell test :-) So, I would typically gather as many details as possible and state my conclusion based on those details (and try to make it clear that the conclusion could easily be different should the fact pattern change). But, if it doesn't smell right, I do ask for more details. AND, when I get in over my head, recommend the client obtain the services of a Derrin Watson Good Luck!

I just don't see why a distribution would be taxed in any year other than the year it was received. RMDs merely deal with when a distribution must be taken from the plan; this says nothing about taxation. Under what authority would there be a tax on a distribution that has not been taken. So, if the distribution is actually taken in 2018, then that is when it would be taxed. Good Luck!

I agree with you, but don't see a plan "C". I see that group A will have a portion spun off from it and placed in a separate group "B". But, you're right, it's merely the opposite of a plan merger. There is not plan termination, and therefore no distributable event. Good Luck!

And there you have it. I agree with you! I just had to go through the 'details' to get where you are. Good Luck!

Well, it gets interestinger and interestinger from here. Given that there is some 'shared ownership' where one company owns some part of the other, then the analysis can begin. You know that the Physician's Practice can easily qualify as an FSO, but since the Administrative Organization does not own any portion of the physician's practice, they won't be an A-Org on that line. However, if you know look at whether the Administrative Organization is the FSO (which becomes debatable) AND does the physician have ownership in the FSO (which he does), and is the physician regularly associated with the FSO in performing services for a third persons (which they do), then you can see where you would have to clearly establish that the Administrative Organization is a FSO for A-Org purposes by determining whether it is either: and unincorporated service organization or a Professional Service Corporation (which is where to get your fields of specialty). So, you may see where these may or may not be an A-Org. You would, then go to your B-Org analysis. I guess it's easy to sum this up in a statement "Details are important". This is usually why attorneys charge the dollars to ensure they've ascertained all the facts necessary in performing the analysis necessary to determine ASG status. You may always file with the IRS to have them make the determination for you. Good Luck!

2018 Good Luck!

There were some old 'shared employee' Regulations that dealt with this many many years ago. I would doubt they are still enforced, but don't know. In your situation, your ASG determination may likely result in a "NO" because there would likely be no shared ownership (either a partner or shareholder) of the FSO. As long as I've been in the industry, it has seemed as if this issue was based solely on determining whether a Controlled Group, ASG, or Management Group existed in order to determine whether a doctor was required to cover employees who were common law employees of another organization. The old shared employee rules used to deal with this exact issue. It would certainly help if the IRS were to address this (at least to let us know of the Shared Employee Regulations are still in play). Good Luck!

You're right. It would be an easy objection by the participant on the basis that a taxable distribution was received without them being notified of their right to roll it over. So, the onus would seem to remain on the Plan Administrator (notice the capital letters ) to make all things as they should've been had the loan limit not been exceeded. But, you're right; it can become quite the moving target. Good Luck!

You could easily query all the Form 5500 data sets from EFAST 2. That would get you in the ball park. Good Luck!

Well, I'm with DGEM (e.g. ASCi). They prepared the amendment to their BPD to permit rollovers to SIMPLE IRAs. I just executed mine (as Prototype Sponsor) and would encourage others to do the same.

I agree with you 1000%. The amount that exceeds the loan limit is treated as an actual distribution. It's going to be interesting how the actual payment is solved (since it was calculated on a higher amount). It seems as if a consistent approach would be to keep them the same and simply pay the loan off early. Then again, that's just one option. Another thought is that since he received an actual distribution, this amount was eligible for rollover within 60 days of receipt. Since it is months later, there seems to be no way to avoid that taxable event. There "MAY" be a VCP filing in order to get the money back in the plan in order to avoid the table event, but I agree with your premise. Good Luck!

Thanks for the insight. But, this is, exactly, what we're trying to avoid so that we don't have to hire attorneys. Not being argumentative, but you wouldn't want to hire an actuary to confirm that 2 plus 2 is 4. Heck, I can provide this information to my clients for free :-) Situations such as this, where there is seemingly an intentional refusal to offer concrete guidance, handicaps us from providing our clients the accurate and complete information they seek. If the IRS gives us the guidance, then we can avoid trouble; which is often my focus. But, thanks for the insight. Again, I'm not being argumentative, but merely voicing frustration on what appears to amount to a lack of initiative from the IRS. Good Luck!

Thank you for having the presence of mind to follow up on this. This helps. It's clear the IRS is going to maintain the flexibility to take the tact opposite of the most favorable outcome. Whether or not they operate like this (void of any consistency) is another thing, but it certainly keeps our hands tied as we try to consult with our clients. Thanks again!

Nope. Good Luck!

"IF" he is a common-law employee under ERISA, then why is he being paid on a Form 1099? For argument sake, let's assume that the Form 1099 is the appropriate form (which basically says that this is your 'revenue from self employment' and 'when you complete for personal income taxes you may take deductions against it when determining your earned income'. In that case, you would have the individual complete a Participating Employer agreement; where his income would be defined as 'earned income from self employment' and will be consistent with his form of payment. Good Luck!