ETA Consulting LLC

Not sure on your exact fact pattern, but you'd use "B" in conjunction with a number. Let's say you have a Roth Account with $1000 in Contributions and $1000 in Earnings for a total of $2000. You take the nonqualified distribution in cash because you terminated in a year prior to age 55. 1099R - Total Distribution $2000 Taxable Amount $1,000 Box 7 B1 This tells the story. Roth distribution of $2000 where $1000 was already taxed. Since it is "Early" (e.g. "1") you have a $1000 taxable event in an excise penalty on the whole $2,000. Now, same fact pattern except the individual was age 55 in the year of termination. Box 7 would, then, be "B2". This says $1000 is taxable but all is exempted from excise penalty. Good Luck!

I think it is permissible not to withhold. The withholding applies to what IRC 3405 terms as "Designated Distributions"; and does not include amounts that aren't included in gross income. So, with the mindset, I'd say if the "taxable distribution" doesn't exceed $200, then I wouldn't withhold. Good Luck!

Off the cuff, I'm not sure an amendment would be necessary if the Plan's definition of "Eligible Retirement Plan" is already written in a manner to incorporate SIMPLE IRAs; usually by a Code reference instead of naming each account. Isn't a SIMPLE IRA still considered an Individual Retirement Account under Section 408(a)? Good Luck!

I guess you'd have to try and ascertain their method for calculating the loan payment. A few easy things that "MAY" throw it off is the first payment date. Ideally, it should match using a basic calculation with the number of periods (i.e. 26 if bi-weekly) and annual interest rate (compounded for that number of periods). This can get thrown off if the recordkeeper's system is actually incorporating the date of first payment to be one other than 'exactly two weeks' (again, assuming bi-weekly payroll). I don't know, but merely suggesting the approach of trying to ascertain their logic since they are the ones whose numbers you'll end up trying to match. Good Luck!

No. As long as your method is consistent, there wouldn't be an issue; despite how odd it may look. Good Luck!

Nope. Good Luck!

Also, ERISA would cover "Retirement" and "Health and Welfare". This doesn't not appear consistent with any "Retirement Plan"; where there is a virtual certainty that the assets in the plan will be used by the participants (e.g. when they retire). This would leave you with "Health & Welfare" where the only way the assets get paid out is through a claim for benefits that are covered under the terms of the "plan". You have stated that there is a trust that was funded initially funded with stock and have continued to cover the next of kin, but we aren't told what benefits are being provided under that coverage. Are they paying for long term medical care if, and when, it is needed? Whatever they're doing, you would be hard pressed to show it is for retirement. Good Luck!

Not sure what you're asking, but keep in mind that there is no "missed opportunity" that would exceed 402(g). So, if the employee (who is under 50) had deferred $17,900 and would've been scheduled to defer another $500 from the bonus, then the missed opportunity is only $100. 50% of that amount, of course, would be $50. Good Luck!

You can begin (and start contributing to) your solo(k) on January 1, 2018. There isn't going to be any significant action to take on the SIMPLE IRA other than waiting until April 2018 to roll over the accounts (or even leave them put). As for as terminating, you're merely not renewing it for 2018 (because you're starting the solo k plan). Normally, some communication to employees would be required, but since it's just you and your wife, then there is no significant action. Good Luck!

You're not missing anything. The question left many missing details. When I first read it, I said "No way were the contributions already made for 2017. After all, you would even know what Compensation to allocate the contributions on. That's why I mentioned 'since you haven't funded the SEP for 2017.' Many times, employers fund their 2016 contributions by their extended tax filing deadline (in 2017) and it gives the impression that it was 'funded for 2017'; when it was not. You didn't miss anything, except for a fact pattern that missed many details. Even if contributions were funded early, it would help to substantiate that by establishing that you're aware of the difference between 'funding for 2017' and merely 'depositing 2016 contributions in 2017' when asking the question. Then, we know which question to address. My answer was based on the likelihood that the deposits made in 2017 were actually used to fund 2016. Good Luck!

They can implement a Qualified Plan (CB or any other qualified plan) for 2017 and discontinue the SEP; since they haven't yet funded the SEP for 2017. Good Luck!

You're saying that: 1) She deposited her elective deferral in April? and 2) She waited until the extended tax filing deadline to fund her Employer Contribution and missed that deadline (due to a minor technicality)? and 3) Because of the missed Employer Contribution Deadline in "2", you want to treat the deferral (deposited in April) as a $9K in deferral and $9K in Employer Contributions so that you can, then, deposit an additional $9K in Deferrals for the 2016 Calendar Year? Please forgive me, I just want to ensure I have the details correct so that the members of the board can give you the information you require. Good Luck!

You should still be fine as long as the house is purchased withing a 'reasonable amount of time' and his valued at $10,000 or more. You're not securing the loan with the residence; so the amount of down payment is really not relevant. You also have the tracing rules in IRC Section 163(h)(3)(B) to tie the timing of the loan with the purchase of the house. Good Luck!

You could easily take Kevin C's point to levels beyond a mere Safe Harbor. I think that beyond the clear fiduciary breach, it's bye bye to the qualified status of the plan. BRF must be currently and effectively available on a nondiscriminatoru basis. You can easily argue that the deferral is not effectively available; despite the written terms of the plan. I guess it becomes an issue of 'what level of wrong' you're trying to substantiate. Good Luck!

I agree. I would use code "G" in box 7 for a direct rollover and include the taxable amount in box 2(a). They really do a crappy job with the instructions. This will say that it's a direct rollover (which is obvious), but cannot possibly be a pre-tax rollover since it's going to a Roth. So, you should include the taxable amount Good Luck!

I agree. This seems like a classic fiduciary breach. The one thing that the Plan Administrator must do (if nothing else) is enforce each participant's rights under the written terms of the plan. In this instance, they are impeding the participants' rights. If they do not want them to participate, then the plan should be written to exclude them. If they cannot pass non-discrimination by excluding them, then they shouldn't have a plan. Good Luck!

Could go either way; as long as it is properly communicated. Good Luck!

I'm not sure any additional action is required by the Participating Employer that terminated sponsorship of he plan back in 2015. Those employees who terminated along with the cessation of the Participating Employer (back in 2015) would merely be terminated participants with balances. Back then, there was a option of the Participating Employer to spin out of the plan, thereby creating a separate plan, and then terminating and distributing that plan. That was merely an option. But, ceasing to be a Co-Sponsor to the plan merely meant that their employees were no longer 'active' participants in the plan. That doesn't require any additional action; since they're no longer associated with that plan. Good Luck!

Keep in mind that the portion of a profit sharing allocation that is allocated as a QNEC cannot be pull double duty in the same manner as a Safe Harbor Non-elective with respect to testing the profit sharing allocation. Plus, (as Mike implied), merely being 100% vested doesn't cut it. The Profit Sharing would actually have to be a QNEC (meaning it would need to come with the withdrawal restrictions in addition to the vesting requirements). So, if NHCEs get a 3% QNEC (that is used in the ADP test) plus a 2% regular allocation while the HCEs get a 5% allocation; then you're running the 401(a)(4) test on the profit sharing formula with the NHCEs at 2% and the HCEs at 5%. I'm merely trying to illustrate a point and not sure if I used the appropriate semantics, but hopefully you get my point. Good Luck!

This was my intended answer. I was shaking my head (not nodding, but shaking) so hard that I missed the first two questions. Good Luck!

All of these fall under asking the client how they want their plan to operate and drafting the plan to reflect their wishes. If bonuses are deferral eligible, then the participants' elective percentages should be withheld from deferrals. If the participant wants to defer more, then they should adjust their elective deferral percentages for that payroll cycle that includes the deferrals (and then adjust it back for subsequent cycles). Administratively, plan sponsors may give the participants the opportunity to make a separate election. It's just a matter of knowing what you want to do, and ensuring the plan document reflects that. Good Luck!

Nope. Good Luck!

There appears to be very little (ZERO) Regulations on this issue. It appears that the most conservative analysis would be to have to liquidation preference amount 'hypothetically' apply to the capital accounts where you assume the company is liquidated. This invites the potential for a nightmare. It would be nice of the liquidation preference amount was totally ignored. I agree with the reluctance to consider it ignorable. I emailed Derrin hoping to get some additional insight.

You aren't missing anything. You just picked it up as an issue (because it is). I didn't bother to perform the controlled group analysis, but merely suggested that it's the first step for purposes of determining whether they would be a single employer plan or multiple employer plan. Details are important. In many instances, 10 questions (e.g. 10 layers of determinations) are loaded into a single question. We can address 8 out of the 10 and still end up with a worthless analysis that fails to consider everything; which is generally why you never rely on 'advice' received from an internet board :-) Good Luck!

@Kevin C, @Larry Starr, @Tom Poje, @RatherBeGolfing, @Mike Preston. I just learned how to 'mention' someone in a post. Hope you don't mind. Care to give thoughts on this? This may be more of a Derrin Watson type of question, but wanted to see if there was something obvious that I may be missing.