ETA Consulting LLC

I can see where this would be a problem; hence the debate :-) It would, of course, involve showing a consistent pattern of providing a zero contribution (under the auspices of employer discretion) to anyone with less than 2 years of service. But, it's not my call. It's just something the IRS may challenge (in the same manner as they're know to challenge the indirect exclusion of service class employees). The consideration here would be whether or not (under these facts and circumstance) 100% vesting would be required. Absolutely no problem; doesn't even appear to be a potential for a problem and is actually a strategy I've recommended to a few of my clients. In my case, it was "Do not give this young employee making $100,000.00 per year a $30K bonus. You can give him $20K bonus; not $20,000.01, but exactly $20K and the rest should be a nonelective to the plan." You know where I'm going with this Good Luck!

This is potentially an entire book and delves into how the trust (which is a separate legal entity) gets taxed in the event of plan disqualification. Typically, all "open" years are taxed and the trust would need to file a Form 1041 to pay those taxes. If the Form 5500EZ has been filed and the statute of limitations has expired, then there is no assessment of taxes. The book gets further involved when the IRS uses the 'tainted assets' theory or shows that the Statute of Limitations doesn't apply because of fraud or an intentional evasion of income taxes. At the end of the day, it's just good to know that filing the Form 5500 will start a Statute of Limitations which "may" or "may not" be of value. Good Luck!

It's not permitted. If eligibility for match exceeds one year, then vesting should be 100%. I don't even see this as debatable since the zero match is hard coded in the plan document. Let's suppose there is a similar instance where it's a nonelective and each participant is in their own group with eligibility of 1 year. Let's also suppose, for whatever reason, that the employer (in their discretion) allocates zero percent to everyone less than two years. NOW, you have a 'disguise' and the debates can begin; with the obvious argument being that the employer is effectively requiring more than 1 year in order to receive a nonelective. Good Luck!

If the plan assets (at the end of the year) are below 250K, then you do not need to continue to file. As a practical matter, it may be good to continue. Filing the return gives you the 3 year Statue of Limitations for assessment of taxes; which "may" be of some value to the client. Good Luck!

Yes, 'solely funded' isn't the only requirement. All amounts must be under the written safe harbor arrangement. In this case, you can defer after 3 months; and that provision is not under the safe harbor arrangement; even though you're exempt from ADP testing. This would apply even if there aren't any early entrants to defer after 3 months. Good Luck!

Depends on how much less than $1000. If you say "less than $200", then the answer would be no. Keep in mind that this is an annual amount "if the distribution for the entire year is less than $200 then there is no withholding". This information can be found on your special tax notice. Good Luck!

There is no TH exemption to begin with; regardless of any profit sharing contribution. Good Luck!

You forgot that the plan is top heavy Once you're require to make the Top Heavy minimum, then you would invoke the gateway as well. Good Luck!

Once a person becomes union, he is no longer eligible for the plan (that is until he is non-union again). There is, typically, no grandfather provision when you amend a plan to exclude a class, but you should actually read the plan. Many times, the answer depends on what you actually amended the plan to say. Remember, plan participation is not a protected right under 411(d)(6); which means that you can amend the plan, prospectively, to exclude anyone. As long as you continue to meet nondiscrimination and other rules, you're fine. Good Luck!

All you have to do is redesign the plan out of the Simple 401(k) provisions. It's the same plan. Good Luck!

There is no specific cite. It's merely saying that you cannot operate the plan in a manner that would provide an advantage over the Owners or HCEs that is not provided to the NHCEs. Arguably, it's discriminatory. Let's suppose a doctor has $80K sitting in the plan during year and you deposited $20K into his account during the year. Now, the doctor $100K, of which he can take a $50K loan. Prior to that deposit, he could take only $40K as a loan. Given this simple deposit, his loan availability under the plan has increased by $10K by the deposit. At the time time, the NHCEs didn't receive this advantage. Is there a rule that says "you must deposit the NHCE money at the same time you deposit the HCE money"? No, there is no such rule. But, this type of inconsistency "MAY" be challenged as making benefits, rights, & features available to HCEs that aren't being made available to NHCEs. This is merely a hypothetical. Good Luck!

Several flaws in the 'process'. Participant takes a loan and fails to repay it, then the loan will become taxable as if it were a distribution. This will likely include a return of after-tax basis and earnings; and a Form 1099R will definitely be issued. If your goal is to take a distribution of all the after-tax basis from the plan without receiving any of the pre-tax amounts, then this could likely be done with a distribution and rollover. You'd need to provide details on the participants actual value in the plan. What are the money types? What money type contains the after-tax basis? What are the withdrawal restrictions for that money type? Good Luck!

Wow. I've been doing this for 23 years and have never heard of a measurement of hours being based on how it was scheduled. I would love to see a cite on this one. I've never seen any document language on it. Good Luck!

Doesn't appear as if a 401(k) or 403(b) would be permitted. A 457(b) plan would be allowed. Good Luck!

It's the minor details that often get missed

Actually, I think the effective date of the amendment would be the effective date of a year of service being defined under the reduced hours. So, if you amend a plan today to change the definition of a year of service for eligibility from 1000 hours to 750 hours; I believe a year of service for last year would still require 1000 hours. In other words, the credit for the year service for working only 750 hours would begin on the effective date of the amendment. The only individuals possibly effected for this change in eligibility would be someone who has never worked 1000 hours during the year. Even if they worked 751 hours in a prior year, I don't believe they would earn a year of service for eligibility until they work 750 hours after the effective date of the amendment. I think the same logic applies to vesting. I would love to hear what others think, but this seems pretty reasonable to me. The effective date of an amendment does carry some value when you're actually changing a definition. Good Luck!

Better yet, does anyone have the code citation stating that they cannot? Good Luck!

That's true, as is the case for all contributions; the plan terms will control how they are treated. But, if you want to get those amounts 'credited' as fulfilling the prevailing wage contract, then certain items must be in place. For instance, in order for a contribution to be used to satisfy prevailing wage, it must be 100% vested. So, if you have a Profit Sharing into an account that is not 100% vested, then it's a no-go (unless you create a separate account that is). You can even label the separate account 'Prevailing Wage" and make it 100% vested. You have two distinct equations and are working simultaneously: 1) the plan's operations and 2) the prevailing wage required contributions. All you're doing is ensuring that dollars deposited meet both. Good Luck!

"Prevailing Wage" is treated as Employer Nonelective to the IRS for all intents and purposes. All that is happening here is that the DOL is requiring a certain level of benefit for each of these employees (and that level of benefit is being met with contributions to the plan). It is, ultimately, incumbent on the Employer to demonstrate to the DOL that those benefits were indeed provided. The IRS just sees a contribution. So, to your question: How is a re-source necessary? If you're giving a 3% SHNEC to each employee, then that 3% merely gets used to satisfy the DOL's requirement that the employee receives a certain level of contribution. There are other requirements (e.g. immediate entry) that the DOL imposes in order for those contributions to be accepted as fulfilling the Employers responsibility to the employee, but the level of contribution is merely one. Again, the IRS doesn't care as long as the amounts being provided are made pursuant to a definitely determinable formula and does not discriminate in favor of HCEs. Good Luck!

We’re going to start discussing ‘arbitrary and capricious’ if you keep this up

I 'think' what KevinC is suggesting is that your statement gets changed to 'We are the TPA and we calculate match for the client based on the language in the plan'. That may solve this issue and many others Good Luck!

As long as no amount of deferrals exceeding 6% of Compensation receives the match, then you are fine with respect to that standard. If you earn $100,000 in Compensation and defer $7,000; the only deferrals receiving match (under the safe harbor) would be $6,000. You can design the plan so that matching contributions of $25,000 are made on that $6,000 in deferrals (and meet the ACP safe harbor). You just cannot match the amounts deferred that exceed that $6,000. There are additional safe harbor requirements. This is merely with respect to the level of deferrals that receive the match. Good Luck!

We actually posted at the same time. I didn't see your comment prior to posting mine. When reading the initial question, I couldn't see enough detail to even ascertain if there was a problem. But, yes, I can see the assumption you made in your position :-) Good Luck!

This $18,000 would seem to put them at their prorated 415 Limit for the short limitation year (if the limitation year is in fact the shortened by the short plan year). But, there is no proration for deferrals. You can actually have an off-calendar plan year with $36,000 in deferrals. The point is that deferrals aren't tied to the plan year. Good Luck!

It's still a 2017 Contribution as it did not exceed the 415 or any "Plan" limit. You'd merely take a deduction in 2018 (and each subsequent year until the overage is exhausted). Good Luck!