ETA Consulting LLC

So, you had 23 people whose Compensation exceeded $110K between July 2010 and December 2010? Or, are they owners? Just asking as I'm trying to make sense of the fact pattern.

I totally mis-read the question. My apology. Now, I'm thinking 60 day rollover

It does, but this is one of those odd rules where you may actually "change your mind" about making the contribution you just funded to your IRA. After changing your mind (for whatever reason), you may remove the funds (plus earnings) by the tax filing deadline of the year for which the contributions were made. The taxability of the earnings will depend on the year of actual deposit. Good Luck!

My tax filing deadline has been extended from April 17th to September. I made a contribution of $5,000 to my Traditional IRA back in December 2011. Let's assume my account has earned 10% since then (so my contribution has earned $500). I can take a distribution by my tax filing deadline in September. I must include the earnings in my distribution, so I may receive a check for $5,500, but only pay tax (and early withdrawal penalty, if applicable) on $500 for 2011. Now, let's suppose I made the contribution for 2011, but deposited in in January 2012. The same rules apply, except the $500 in earnings will be taxed in 2012 (the year of deposit). Good Luck!

Extended tax filing deadline for the year for which the contribution was made. Good Luck!

What you are effectively saying is that HCEs are not eligible to defer until they reach age 50. Why not just come up with a class exclusion identifying the specific HCEs and make them ineligible for the plan (i.e. HCEs who are not President or Vice President of the Company). I would attempt to disguise a 410(a)(1) violation for any class of employees. Good Luck!

Pushing the "Like" button. I think the question was referenced to the actual 401(a) plan being created in addition to the 457(b) plan. They're obviously not going to defer (since they have no Compensation), but it was proposed that they receive a "bonus" that gets deposited into the 401(a) plan. Either way it looks to be a "no-go".

Let's assume they are eligible, having zero Compensation from the plan sponsor would make their 415 limit "Zero". On what basis could this contribution be made to the plan? Good Luck!

It "may" be a moot point when you incorporate the Service Spanning Rules for Elapsed Time. I'd read the document closely to see if these apply. Any period of "less than 12 months" between service dates would be spanned as if the employee never left. When you leave for 12 consecutive months (e.g. break in service), then you begin tracking from the date of re-employment. Good Luck!

Well, the defaulted loan should become an "actual distribution" as opposed to a "deemed distribution" since the participant is terminated and eligible for a distribution under the plan. An actual distribution is eligible for rollover; so he should roll the amount over to an IRA to avoid taxation. You just want to ensure the 1099-R isn't coded with an "L" in box 7; which it shouldn't given the fact this is an "actual distribution". Good Luck!

As a rule, as long as there is a bonafide severence from employment, then a distribution would be available. Like Mbozek stated, there are implications when you arbitrarily assign someone a title of independent contractor when, under relevant facts and circumstances, they are a common-law employee. Assuming the individual is, indeed, an independent contactor, they would be treated as a terminated employee. Good Luck!

As long as there is insurable interest, what is the problem? For the reasons you've implied, I would not want a Stranger Owned Life Insurance policy on me. Good Luck!

Not sure. You can, however, take about 15 credit hours of "self-pace" study from www.myTaxCoursesOnline.com. The cost is around $149. This has, to my understanding, been approved for ERPA CPE. Good Luck!

It's not necessarily "better off", but an issue of "may not be as bad". We know the regardless of what the "Employee" pays, the "Employer" portion of FICA is 7.65% until Compensation reaches $110,100. Then, it's reduced to 1.45%. Let's supposes a business is unincorporated where the owner actually receives $110,100 in W-2 from another unrelated employer. When he calculates his taxes for his business, his over FICA will begin at 2.9% (that's 1.45% to the Employee and 1.45% to the Employer). This takes advantage of the total FICA paid on W-2 from the unrelated employer. On the Contrary, let's supposes that the owner's business is taxed as an S-Corp. In this event, his "Employer" portion of the FICA will begin at 7.65% until the W-2 taken from his own business reaches $110,100. The "Employer" does not get to the reduced rate by leveraging Compensation received while working for another company. In the end, it "may" not amount to much, but a nice piece of information to know. Good Luck!

This is correct. The profit sharing contributions to self-employed individuals are based on Income that has already been taxed for FICA. Keep in mind, however, that the Self-Employed has an advantage once their overall pay gets above the taxable wage base (as their overall payroll tax is reduced to 2.9%; which is 1.45% times 2). If they are taxed as a corporation, the employee portion would be reduced to 1.45% while the employer portion will remain at 7.65%. This only comes into play when compensation reaches the taxable wage base. It helps to know every attribute when choosing how the entity is taxes. There are "gives and takes" for each alternative. Good Luck!

Pushing the "like" button. A & C are a controlled group and C & B are a controlled group (C & B is for the same reason A & C; spousal attribution). So, A, B, and C are a controlled group. Don't forget your affiliated service group analysis. Also, don't forget the additional attribution rules on any Rights of First Refusal favoring any owner during the sale of another owner's shares. Good Luck!

Your best reference would be the actual document (perhaps the Basic Plan Document) for the plan. It must actually be written to allow Life Insurance, and would incorporate all the incidental limits. Typically, the amounts are limited to a certain percentage of "aggregate contributions" since the plan was established. For instance, if my cumulative contributions over the past 10 years to the plan were $100K, then I could purchase a whole life policy while having $49,999 available for premiums without exceeding the incidental limit. Then, you'd get into seasoned and seeded money. We can write books on the possibilities, but your best source would be the actual document to the plan. You'd want to ensure you have a good TPA to accurately recordkeep the plan with the insurance. Good Luck!

Of course it does. Good Luck!

Not really. A controlled group analysis is pretty simple once you determine the percentages of ownership and the attribution rules. I have trouble following your chart. We know that A and C is a controlled group since 100% of each company is owned by the same individuals. Since Father & Mother have ownership, they are attributed each others (as the spousal exeption to ownership attribution does not apply). This is mostly based on the pure numbers. When it comes to attribution between parents and children, The age 21 (not 18) is used when determining who's a minor. Good Luck!

You're reading a little too much, but not necessarily. You are correct that the definition of a match is a contribution made due to a "Deferral or Employee Contribution". So, the amount would be tested under ACP. As for your second point, there are two potential issues: 1) the allocation must be pursuant to a definitely determinable formula. It is conceivable that a match is allocated "comp to total comp" for only those who defer. 2) Other than ACP, is there any other non-discrimination test that would apply for such a match? I would say that this should be tested with respect to a non-discriminatory rate of match. I am not sure, however, if there is a mathematical possibility that this test would fail under this formula (which may become a moot point). Good Luck!

You should remove the excess amounts (plus earnings), typically by the end of your extended tax failing deadline for 2011. Are your taxes on extension?

If they are a US citizen, then they cannot be statutorily excluded under the safe harbor exclusions. The only safe harbor exclusion (exemption from coverage) is a Non US Citizen living AND working outside of the US. For this purpose, Puerto Rico citizens are not treated as non-US citizens (and are not statutorly excludables under this exemption. Good Luck!

Correct. When it requires a sponsor to sign, then that is needed for reliance on the opinion letter. When it's stated "For Administrative Purposes Only", it's merely a power of suggestion to ensure the document gets in the hands of the TPA. It's not a compliance issue. Good Luck!

No, it doesn't. An independent contract is a self employed individual. Hence, the service would be for the contractor's own company, and he could sponsor a SEP on his own. Good Luck!

Yes, to the extent of a higher allocation to the one group. When you aggregate the plans, the participants in the one plan are "not" benefiting at the slightly higher formula. While they are benefiting, in that they all received a Profit Sharing, doesn't show that each formula is non-discriminatory. Good Luck!