ETA Consulting LLC

No. You never restricted the participant from requesting a receiving a distribution. Had the participant actually requested a distribution back in 2016, they would've been paid. You merely failed to provided the RMD by the deadline, but that appears to be more of a IRS compliance issue. Failing to provide a benefit when due appears to be more of an employee rights issue (under the DOL's purview). Good Luck!

Yeah, in 2018. Good Luck!

Just shooting from the hip, I think it would be 1/2 the deferral and the full match. So, instead of 8%, you may be looking at 6%. In your case, I 'think' the election that was missed would be 4%; as that was the deemed election in the absence of the employee's affirmative election of another rate. Good Luck!

I think that whomever 'told' you this is offering a consistent calculation given the odd circumstances. We know two things about partnership compensation: 1) Employer Contributions to the Employees are made prior to the partner's calculation of SE Tax; and 2) Each Partner takes a deduction against is own 'earned income' for contributions made to his own account (and this calculation is after SE Tax has been calculated). So, if this partner was an 'employee who received W-2' during the first part of the year, then that percentage contribution would seem to be an employer contribution that would be calculated prior to any 'circular calculation' for deriving at the final earned income amount for each partner. It seems as merely an additional step to your calculation. Good Luck!

Some documents are set up to provide the wait and see approach without constant amendments; where you merely provide the appropriate notifications each year. I've, personally, always felt it strange that a document would be drafted to require the plan sponsor to actually amend to reflect the safe harbor each year; that doesn't appear to be the most efficient method to get to the same end. Good Luck!

No. When determining whether or not a 403(b) arrangement is subject to ERISA, you look at the level of 'Employer Involvement' in the contract. For instance, if the Employer make a contribution to the contract, then it would be subject to ERISA because there's clear 'employer involvement'. A participant deciding to roll funds into the account doesn't reflect any employer involvement; and, therefore, does not subject the plan to ERISA. Good Luck!

I stand corrected. Just something that was emphasized to me (for whatever reason) about 20 years ago. I guess I've been completing the final returns major early for all these years :-)

The final Form 5500 is due as soon as possible after all assets are distributed; there is no 7 month period on the final. You can complete this on the 2016 Form. Good Luck!

If the actual deposits of the $5K to each account were made after December 31st, then I'd consider the excess amount to be a deposit for the new year. Other than that, you'd fix 415 first. I'm not quite sure on the statutory authority to distribute funds merely because they are not deductible (which is to the point you made). Good Luck

I just broke my 'like' button hitting it so hard :-)

I've always done it on the excess contributions (not the gains & losses). This was always a question the popped up on all the ASPPA Exams as well; and the answer has always been on the contributions alone. I don't recall it ever changing. Plus, I've never seen anything about an adjustment for gains & losses in Section 4979 of the Code. Typically, if there was such an adjustment, it would state it there. In addition to that, I don't see any instruction on the Form 5330 (that is actually used to pay the excise tax) that would require you calculate the amount on anything other than the 'contributions'. Good Luck!

Yep, that's the thought that I've maintained for over 20 years now :-) Could be wrong, but that's always been my understanding. Good Luck!

Typically, a "hardship" is taken when there are no other available distributions or loans from the plan. So, you're saying that the Alternate Payee has a separate account under the plan, but the plan has them restricted from taking withdrawals. This may be the case, but I'm asking. Your first approach would be to ascertain whether the alternate payee already has a right to a distribution under the written terms of the plan. If you're on a pre-approved plan, that language may be found in the Basic Plan Document. I would doubt the plan's language would go as far a saying a "hardship" as this is merely a withdrawal mechanism for elective deferrals (and the QDRO itself would not be subject to that statutory restriction). Good Luck!

There are two very distinct events here. Those two events should always reconcile, but in this instance they do not. The first event is what actually happened and the second is what is actually reported. My question would be who is to say that the excess amount was rolled into the IRA as opposed to being distributed to the participant? This could easily be a situation where the $41K rollover is correct (and merely go underreported) and that they participant received $25K in cash when he should've received only $12K. If an reporting was actually done on the events as they occurred, then a 1099R for $41,461 would be issued with a Code of "G"; a Form 1099R for $25,000 would be issued with a Code of "1" to reflect the $12,158 cash and $12,842 loan offset, and a 1099Misc would be issued for $12,842 excess which would represent the overpayment to the participant which failed to get returned to the plan (and for which the plan must be made whole). This would merely be an exact way to report it has a happened; absent the actual election of the participant. Ideally, you can sync the series of events and report it pursuant to the elections; which would reflect the excess being rolled over (if that were indeed the case). Good Luck!

I still don't see it. The first step is to be able to write the explicit fact pattern as it happened without drawing any conclusions. Part of that fact pattern would have to explain the actual check amounts. I agree with ESOP Guy (100%) as he's picking up items in your fact pattern that I missed (since I tend to get thrown off after reading the first line). Let's try this for a fact pattern. You're saying: Participant had $53,619.00 plus an outstanding loan of $12,842.00 in his account. At payout, he was issued a check for $25,000 (with no withholding) and another check in the amount of $41,461.00 was made payable to his IRA in the form of a direct rollover. In the meantime, there are various possibilities on what should've happened because we don't know the elections of the participant with respect to rollover amount. It could've been a direct rollover of $41,461 to the IRA and a cash distribution of $12,158 for which $5,000 should've been withheld. This would explain your perception that $25K in cash was received since $12,158 was all the cash that was actually left (plus the loan offset of $12,842) would equal $25K. The only issue, then, would be the fact that you missed the $5K withholding on this $25,000 taxable distribution. Your firm may actually have it right. Then again, they may not. Your fact pattern is missing details and you appear to be jumping to conclusions trying to fill those details in :-) Good Luck!

There is no "L" when you have a distributable event. The loan offset is eligible for rollover. Heck, even a defaulted loan is eligible for rollover upon a distributable event (it's no longer a deemed distribution. It becomes an actual distribution). I'm not saying that he actually rolled it over, but merely saying that I don't see how an "L" could be used for this transaction. Good Luck!

Your fact pattern doesn't add up. Please clarify whether the loan was a default or an offset. Please also clarify the exact amount of the check that was rolled over and the entire cash payout (plus withholding). Here is what I would expect to see under when a $50K account plus a $10K offset is distributed under circumstances similar to yours; assuming the loan was an offset: First is a $25K check made payable to IRA with a Form 1099 Coded as a "G". Second would be a check issued to the participant in the amount of $18,000 with a required withholding of $7,000. Another Form 1099R would be issued for a taxable amount of $35,000 (with withholdings of $7,000, and a code of "7", or "1", or "2"; whichever is applicable). Good Luck!

I would say "no" because he did own part of that business during the year. There "may" be an argument that in order for a controlled group to actually exist, that the businesses must exist at the same time, but that would appear aggressive. Ideally, if someone has sold a business close to the end of the year, then they would not receive the discretionary contribution (assuming discretion) necessary to reach the $59,000 limit. It would be convenient for them to 'double up' on the limit for income derived from "the same business". There may be a another argument of a Management Group since 100% of his consulting revenue came from the business that he owned during the year. I'm just shooting from the hip with reasons that I wouldn't do it :-) Others may articulate a well documented pattern to show a direct conflict with the rules. Then again, someone else may present an argument to suggest it can be done. I'm just saying with "what I know off-hand" that I wouldn't do it. Good Luck!

I think you can. I would advise that the Safe Harbor Notice must be giving concurrent with new participation (which is already the rule). I would recommend actually giving the notice to the new employees immediately for the effective date of the new amendment. In other words, don't amend today and then issue the safe harbor notice to the new participants on Monday (as that would be after the effective date of the safe harbor). But, I do agree with you that you can. Good Luck!

I, personally, do a lot of VCP submissions to the IRS for these types of plans. There is always a relatively simple oversight that was missed where the plan sponsor was not properly advised by someone with an active relationship of providing services to the plan. I think the last couple of submissions were from a missed restatement deadline. One, which was several years back, was an actual IRS audit where the plan document wasn't available; which has made me a firm believer that VCP is the cheapest route. But, hey, your comfort is what is most important. Good Luck!

And I, respectfully, disagree with you. The hardship basis of $10K doesn't change when the loan is issued. So, they are eligible for a $10K hardship to the extent that amount is still available in the deferral source. So, since $6,000 is all that is left, then they can take that in the form of a hardship. Good Luck!

Since you're incorporated, you would make (receive) contributions on whatever you pay yourself in W-2. You will not use profits to calculate the amount. Obviously, the employer contribution portion (e.g. the 25%) will come from the profits of the company. However, that does not mean the company is required to have profits in order to fund this. ALL that is required is that you have the W-2 on which to base the contribution. You really should transfer the employee contribution (e.g. the deferrals) as soon as possible after they are withheld from your W-2 pay. So, these amounts will be funded with each payroll. For the Employer Contribution portion, you can wait until your tax filing deadline (including extensions) to fund this. Should you hire employees, you'd want to measure when they would actually work the 1 year of service in order to enter the plan (on the next entry date). You would want to have another 'full blown' 401(k) plan in place by that time; which would likely be done by restating your solo(k) plan to a regular 401(k) that accounts for the existence of employees. On another note, the fact that you're asking these questions should scare you out of the solo(k) plan. These plans aren't the 'walk in the park' that many salespeople would have you believe. If Fidelity is selling you this plan, then they should be able to answer these questions and also provide you insight into questions that you haven't even thought to ask. Good Luck!

You're thinking about it correctly. It would be a MEP. The only point of contention I could think of if the shared accountability when one of the individuals do not 'play nice'. But, that's business as usual when dealing with MEPs. Good Luck!

It would probably be best to reach out to the IRS and have one of their personnel walk you through it. The tricky thing in dealing with them is trying to get a single individual at the IRS to 'own' the issue. If not, you could end of with 5 different people sending you in 5 different directions (trust me, I've been there). Good Luck!

This would be a major consideration. If the annuity contract is providing guarantees (i.e. fixed interest rate) that you would have to forego in the event of plan termination, then you may consider a freeze indefinitely. Basically, you'll merely change the contribution rate to zero while everything else remains in tact. You'll continue to be responsible for updating the plan documents during restatements and continuing to file the Form 5500EZ each year. These cost may prove relatively small when compared to the guarantees in the annuity contract. With that said, it's up to you to perform the cost-benefit analysis to determine whether or not it's worth it to continue to maintain the MPP. Operationally, it is much smoother to terminate the plan has it has outlived its usefulness with respect to contributions. But, if you have an investment tied to the plan, then operational efficiency would not be your highest priority. Good Luck!