ETA Consulting LLC

This is one of the drawbacks of the traditional (Balance Forward) recordkeeping system. They should weigh various alternatives (daily being one). Good Luck

One tidbit of language that I noticed is that SIMPLE IRAs are now open to receive rollover money from other vehicles after the two year restriction period has expired. So, I'd say this appears to be for SIMPLE IRAs. Good Luck!

They have about 18 months, but it really doesn't take longer than 18 hours. It may be one of those unfortunate times when service providers wait until a day before the required deadline to begin completing the task. It may sound a little cynical (and even pessimistic), but the reality is that the only information that will be of any value to you would likely come from Fidelity. Good Luck!

I like the way you articulated this because it outlines the major issues. I'll venture to say the choice by the owner would be to either take zero compensation for the short plan year or terminate at year and take full compensation. Like you said, technically, the owner receives his compensation on the last day of the taxable year. So, for consistency, his 415 limit is going to be zero until this day. I won't venture to say the idea of prorating compensation is not reasonable, but there does appear to be a clear choice to avoid the issue altogether. That would be to either terminate on December 31st or take zero Compensation should you choose to terminate before then. Good Luck!

I believe the plan sponsors deserve a little better; despite the 'so-called' lower fees. I've personally seen the most incompetent TPAs charge the highest fees; under the auspices of getting what you pay for. I left several TPA firms when it became clear there was no commitment to quality; and I'm talking borderline ethical violations. But, to your point, I agree that quality has been diminished by these large turn-key providers who value bodies over skill. This has become an unfortunate part of our culture. Good Luck!

The MAIN issue, in my mind, is that the sponsor gets a huge manual that explains how to code employees who meet certain criteria as HCEs. This, effectively, puts the onus on the client to learn IRC Section 414(q) inside out and then code their employees properly. There is, apparently, no due diligence when the client does not. It can be easily argued that when working in the service industry, you must actually provide the service with skill and care. Then, again, we do live in a Marketing era; so more of these things are governed by appearance rather than competence. My favorite quote in business was from W. Edwards Deming, "Don't confuse activity with achievement." This speaks directly to ShERPA's comment. You can produce 1000 pages of reports, but they are worthless (beautiful, but worthless) if they are not accurate. Many of us have studied hard to learn how to accurately test a plan for non-discrimination. In many environments today, the actual knowledge is undermined while the value is placed in the ability to operate a computer. It scares the heck out of me, but then again has compelled me to start my own practice. Sorry for the vent, but this is something that has been eating away at me for at least 15 years now. Good Luck!

But to use your painting analogy, might not be able to afford (in a practical sense) a TPA to have access to a Solo K. My painting was not an analogy, it was a real situation for me. My virus protection comment was an analogy used to illustrate the point. The reason I even bothered to comment on this post is because over the past 10 years I've been aggressively correcting financial advisors who were quick to suggest that there was no need for a TPA simply because it was a one-person plan. This was a mindset that carried over from the old Keogh days. Back then, you mainly had a single source of funding in the plan. Nowadays, you have several sources of funds; each with their own rules. Books can be written on the potential failures. I think the most appropriate analogy would be purchasing a Mercedes Benz and not being able to afford the insurance premium. The easy argument is that if you cannot afford the insurance premium, then that would question whether or not you can really afford the Mercedes. I understand that each case is difference, but the idea of cutting corners and trying to make it seem 'practical' has been proven disastrous on many occasions. I've even explained to advisors why $12,500 in a SIMPLE IRA is better than $18,000 in a solo(k) plan. The main reason is that in a SIMPLE IRA, you don't need a TPA. In a solo(k) plan, the $300 fee that you quote is really for the additional $5,500 in contributions you are getting; and that amount is even reduced by the 3% employer contributions on top of the deferrals. Good Luck!

This concept of value is based on a false premise; as previously emphasized. It's like virus protection software on a computer. It doesn't do anything or protect you from anything; UNTIL you are targeted by a virus. Until then, it just sits there. However, the costs of such virus protection would seem relatively small when compared to the potential financial damage that could be caused by not having one. So, it's a moot point. Arguably, you can sponsor a plan and operate it yourself while knowing nothing. When you encounter a problem, you can come to a board like this one and get all your questions answered. At the end of the day, you may come out good. Then again, you may find that you spend 15 hours researching an issue that a skill professional could've addressed in 15 seconds. So, you do calculate your value on the 15 minutes of work the skilled professional had to perform or a 15 hours of work (under stressful conditions of not knowing what you're doing) you saved yourself from having to do. I know this all too well. Even when I tried to paint my house. I often come to the conclusion to hire someone to do work that I have no patience or time for while I continue to do things that yield greater value to me. What I would NEVER do is make a suggestion that a skilled professionals 15 seconds is not worth much, because that would clearly undermine the years of intense study that equipped that professional to address a situation in a relatively short period of time. Good Luck!

A qualified plan is not allowed to impose a maximum age for making contributions; per IRC Section 410(a)(2). This is a basic question that is typically addressed by the plan's TPA. I've been providing sales consulting for financial advisors, directly and indirectly, for the past 15 years. This was something I've always emphasized. No matter how simple or watered down you think a plan may be (i.e. one person plan), you still need someone who actually knows what they're doing. I've provided too many VCP corrections for these plans that decided they can operate without a skilled TPA. I've even provided some corrections for plans that had TPAs (and that was pretty unfortunate). At the end of the day, it doesn't matter if your painting a house, pulling a tooth, or operating a qualified plan, you should seriously consider retaining the services of someone who is skilled in that area; or prepared to be stressed beyond your wildest imagination. When filing VCP submissions, I typically look beyond the revenue (which is good for my practice) and feel a little sad knowing how easily avoidable many of the issues would've been had the services of a skilled professional been retained. Just thinking out loud :-) Good Luck!

I think I'm misreading the question: 1) You currently have a plan with 1000 hours during a 12 month period for eligibility. 2) Many PT employees are permanent fill-ins who fail to work 1000 hours. 3) You have a single PT employee who may actually cross the 1000 hour threshold this year and will enter the plan. 4) He will continue to be a participant in the plan because there is no exclusion for PT employees after eligibility is met. Now, this is the current setup. What is it you're trying to change?

I have many brokers who 'check things out' with other practitioners who clearly get it wrong. This goes to the definition of "Alternative Defined Contribution" plan. It's somewhere within the withdrawal restrictions regulations for Section 401(k)(2). Edited: Looked it up: 1.401(k)-1(d)(4)(i) [[This references the section making distribution upon Plan Termination]] and suggests 12 month period from participating in an Alternative DC plan. Good Luck!

I don't want to appear too blunt and want to provide as much relevant information as possible. When the IRS reaches out for information, this matter should be taken seriously. When it's not, these letters start to fly (and they are automatically produced by computers). So, it would behoove the client to obtain the services of someone who actually represents clients before the IRS to provide a reasonable explanation of why the Form 5500 was not prepared and submitted. Too often, in our industry, that cause is due to the TPA the client has hired actually not following through on ensuring the completion of the reporting. I've seen this happen toooooo many times during my career. When I'm representing a client before the IRS, I never hesitate to suggest to the IRS the extent to which Plan Sponsors rely on skilled professionals to maintain proper compliance and the tendency for many service providers to fulfill those responsibilities. Again, not the be too blunt, but those $15,000 letters typically go out after the IRS has reached out for explanation and likely received a half-assed response. Given where you are, it's time to think seriously about showing an understanding that this report should've been filed and providing the IRS a reasonable explanation on why it wasn't. This is merely where you are in this process. Good Luck!

So, there is a method to the (perceived) madness Thanks Poje!

When I managed teams in Corporate America, we lived for these moments. It's often not about right or wrong, but working to find out exactly what you disagree about and working to reconcile those disagreements. At the end of the day, you'll either agree or agree to disagree, but you'll know why That's my pep talk for today. Good Luck!

Well, mathematically, you have a 15.3% overall FICA up to the TWB. When you look at how many individuals with Compensation above $118,500; then you'll see a huge increase in tax revenue from this increase. I'm not one to choose tax policy over monetary policy or vice versa, but the math alone would project a huge increase in revenue through employment taxes. Good Luck!

I agree with you. I'm looking at it as a business as usual. It is virtually the same process for any company looking to leave one MEP to join another. There really isn't a change in plan provisions and ultimately a change in the platform. The only caveat is that the new plan with A & B will become a MEP, effective 11/1; but that doesn't change anything operationally. I cannot fathom an issue with this. Good Luck!

I want to get more understanding on your question: If Company B were to spin out of the MEP into a plan of it's own (and maintaining the exact same provisions as the MEP), then you'd effectively have the same setup as you currently have (with the only thing is being a absence of the MEP of which Company B is a part). Instead of placing B in an entirely separate plan, you want to simultaneously create a MEP by having Company B join Company A's plan as a Co-Sponsoring employer that is not a related employer. Is this about right?

Because, on the day of the 2nd loan, here's how the participant's account looks. Account Balance in Funds: 90,000 Loan Balance: 8,616 Total Balance (including loans) 98,616 50% of Vested Balance $44,308 Current Loan: 8,616 Additional Loan Available under 50% vested: 35,962 Highest Outstanding Loan Balance during past 12 months: 41,384 Maximum loan Available for the 2nd loan is lesser of $8616 or 35,962 The first loan of 8616 does not serve to increase the highest outstanding loan amount during any time for the past 12 months. Does this help?

LOL. Honestly, the rule that I stated shocked me back in late 90's when I saw it in operation. I had the same objection at that time. Upon my research, I concluded that this was, in fact, the case. I remember back in 2000 (or 2001) the IRS issued "Proposed" Regulations that seemed to address this (to actually restrict the number of new loans during a single year), but the Final Regulations did not include that language. Good Luck!

If the plan is written to allow for more than one loan, then you may still borrow more than $8,616; you'd just have to take a series of loans. The analysis would be as follows (assuming the plan allows for 3 outstanding loans). 1) You apply for a loan today. The highest outstanding loan balance during the past 12 months was $41,384. Your maximum available is $8,616. You take that loan. 2) The following day, you apply for a 2nd loan. You currently have an outstanding loan of $8,616 and plenty of vested balance. Your highest outstanding loan balance during the past 12 months was $41,384. Your maximum available for a 2nd loan is now $8,616. You take that loan. Your current outstanding loans is now $17,232. 3) The following day, you apply for a 3rd loan. You currently have outstanding loans of $17,232 with plenty of vested balance. Your highest outstanding loan balance during the past 12 months was $41,384. Your maximum loan available for a 3rd loan is now $8,616. You take that loan. Your current oustandings loans is now $25,848. This is reflective of a literal interpretation of Section 72(p) and the IRS Regulation. The IRS attempted to change the Regulations to limit this method back in 2000, but the Final Regulations issued did not include such language. So, as long as your plan allows for more than one loan to be outstanding at a single time, you may increase your loans by merely taking 2nd and 3rd loans. You may have personal feelings about it, but this is currently how the rules are written. A prior ASPPA exam back in the late 1990s asked a short answer question on this same issue :-) This was back during my study and research days. Yes, some of us are that old Good Luck!

The language in the plan document should make it clear. Your statement combines two or three concepts that should be stated separately. 1) You enter the plan on the entry date. 2) You will be eligible to benefit on any compensation received on or after your entry date. 3) The plan may be written to allow you to benefit on Compensation received during the entire year that you first entered the plan. When attempting to paraphrase the plan provisions, you must be careful not to change the meaning. Good Luck!

The 1/3 rd rate is based off the Compensation used for allocation purposes. The 5% rate uses 415 Compensation (but only for the period of eligibility) Good Luck!

I agree! The eligibility computation period ends at midnight on 12/31; or 1/1. 11:59:59 is the last second in the computation period; and you would've presumably worked the 1000 hours a long time before then. After this period ends, at 12:00 midnight, you determine whether or the 1000 was worked and bring the participant in immediately. I agree! The eligibility computation period ends at midnight on 12/31; or 1/1. 11:59:59 is the last second in the computation period; and you would've presumably worked the 1000 hours a long time before then. If, at this time, you've already worked 1000 hours, then you'd come into the plan immediately at the end of that computation period (but not after). This is where the language in the plan document saying "The Plan Administrator should have the authority to interpret the plan's provisions when they are unclear." Typically, this will be okay as long as the interpretation is reasonable (or as the IRS would say, is not arbitrary and capricious). Good Luck!

Yeah, because if you don't start the SOL, you can find yourself SOL :-)

Yes. I edited it :-)