ETA Consulting LLC

"Like" When you pay someone on a 1099, you're saying they are not your employee with respect to the services being rendered. If I work for McDonald's as a cook and get paid on a W-2, I can conceivably receive 1099 income for lawn care services I provide to the restaurant from my side landscaping business. Good Luck!

In order to answer the question, you must ascertain if the companies are "related" under the controlled group, ASG, or Management group rules. If you are saying that these companies are not related, then each plan has it's seperate 415 limit; so they could do it. Say again: IF YOU ARE SURE THE TWO COMPANIES ARE NOT RELATED, then you are saying that they could maximize the 401(k) sponsored by one and the SEP IRA sponsored by the other. Good Luck!

1. Correct 2. Correct 3. You would need to test the After-tax under ACP (as the safe harbor doesn't provide a free-ride for After-tax) 4. No, but you'd likely fail ACP. 5. Not really, assuming you're using a prototype that already contains the language. You'd need to track another source of funds (operationally). Good Luck!

You should set up a SIMPLE IRA. For the initial two years, you can elect the $1 for $1 match up to 1% of compensation. This will give the deferral and match features of a 401(k) while not having to deal with all the annual reporting and plan recordkeeping. After two years (or even immediately), you may choose to either provide a 2% nonelective or a 3% matching. This appears to be an appropriate retirement strategy for your situation. Good Luck!

Your understanding is correct. The "elective deferrals" are subject to universal availability. The nonelective contributions (as you described) are not. Good Luck!

Two different standards. I think it was back in 1998 when the law was passed precluding hardships from being rolled over. I say that to say this: once you've met the standards of a hardship existing and a distribution from the plan being necessary in order to satisfy the hardship, then 'what the participant actually does with the money is irrelevant'. There is no "ends will justisfy the means". As always, you'd want to ensure you have the appropriate documentation in place for the distribution that was actually made; which should leave the amounts in excess of the $2,500 as your only issue to deal with. Good Luck!

Yes, there is "ALWAYS" that possibility; technically speaking. You'd be surprised, however, how human many IRS agents can be. They may drill you, but once it becomes clear that there wasn't any intent to deceive and the situation was nothing more than a misunderstanding, they will typically approve what you're trying to do. Good Luck!

Sure, why not. I'd deduct it, even if I would have to do it as a reasonable business expense. Good Luck!

The 5 year rule applies only when the participant dies before the RBD and the spouse is NOT the beneficiary. The spouse, in this case, could leave the funds in the plan until the year the participant would have turned 70 1/2. Just assuming the document is written consistent to the regulations. Good Luck!

You still won't need an audit until this "count" exceeds 120. Are you that close?

There is nothing to preclude a loan being repaid prior to the loan being "actually distributed" from the plan. So, if nothing else, take the payment. The issue, then, would be whether the loan is repaid on a tax-free basis or a after-tax basis; after-tax being your worst case scenario. Once the case has been assigned, you can then being interacting with the agent on the case. This is, likely, the best you can do. Everything is really speculative until then. Good Luck!

That sounds correct. Good Luck!

Good question. I'd say that when income for a single entity falls below zero, then it is considered zero. This would leave income for LLC #1 at $350,000 and LLC #2 at Zero. Overall income would, then, be $350,000. Don't ask me why, but I had my "a$$" handed to me by a room full of industry professionals (actuaries) at ASPPA this past year by when trying to argue the opposite. My view WAS that it would be $170,000. Good Luck!

RCline is correct. It's a single employer plan because all members are part of a related group. The question, however, speaks only to deductibility, not coverage (or nondiscrimination). You have to remember that IF these members are ALSO PART OF A CONTROLLED GROUP, then it's a moot point and they are aggregated for deduction purposes. Your question, then pertains to them being "ONLY" an ASG and you want to know if they have separate deduction limits. I'd say so. "Why?" Coin toss (basically). It has become common understanding in the retirement community (at least from my vantage point) that members of an ASG have separate deduction limits. Hence, when something is debateable (or close to the line), then I would err on the side of common understanding. Even Derrin acknowledges that there is some confusion on how to determine where the line is drawn. (I own his book, by the way. It's a must have. Very enlightening). When that exists, then following common understanding should not be construed as eggregious. Good Luck!

How can you draw this conclusion without knowing what the document says? How can you conclude that this is a prototype document? if I had to guess, I would say that the attorney may be incorrect. And 11-(g) was later mentioned, which sure seems like a viable option to me. I didn't draw a conclusion, but spoke to a fact pattern. The ERISA attorney viewed the document. I was merely reiterating what the ERISA attorney was saying. How could you possibility disagree with accounting for the gateway when providing a Safe Harbor Nonelective contribution to all NHCEs and not having sufficient language to take them up to 5% in the event it is needed to pass the gateway? Now, we are saying the language is vague enough to support the additional allocation. I'm merely saying that is obvious the attorney is saying the language is not there. Also, there are certain issues when attempting to amend a safe harbor 401(k) plan. Are we sure an 11-g amendment of this type will be acceptable. Would your answer be the same if the language in the amendment contradicts information communicated to the participants in the Safe Harbor Notice? Also, I didn't say it was a prototype document, but saying "to address the fundamental issue, this is what many prototype documents had done". Are we good?

The attorney is correct. That is the most fundamental issue when designing a New Comparability plan with accrual requirements. Many prototype documents has a box to select stating that those who fail to meet the accrual requirements for additional contributions will be allowed an allocation to meet the mimimum gateway. Without such provision written in the plan, then you violate the definitely determinable formula when you attempt to give them an additional allocation. Sorry to be the bearer of bad news. Good Luck!

"Like". "Like". "Like". <- This is me hitting the "Like" button This is because there is no accumulated cost basis (economic benefit basis) for the unincorporated owner.

Good question. I questioned this a while back and this was explained to me: When you amend for the interim amendments (i.e. EGTRRA), these are only Good-Faith amendments that you "may" rely on as long as you restate your plan by the end of the remedial amendment period. This, effectively requires the plan to be restated. Good Luck!

That would work. If you have the tests, you can chart the numbers to ascertain if they would continue to pass using the prior year method. Remember, you are always running the "current year" for the NHCEs, even though you won't use the averages until the next year. So, the testing would have three averages: 1) Last Year NHCE Average, 2) Current Year NHCE Average, and 3) Current Year HCE Average. You don't have an issue unless one of the tests have failed, but you would need to maintain the tests showing they passed using the prior year method. Good Luck!

Keep in mind that, technically, a determination letter is NOT a requirement for the plan to be qualified; it's just prudent to have one. So, "requiring" it be a determination letter would be inconsistent. I've had an instance where I showed the SPD, because I couldn't obtain a determination letter (or opinion letter). The key is just not to turn a blind eye. Good Luck!

No. The loan is an asset in the unrelated rollover source. Cash (an asset) left the plan, the loan (a receivable) is also an asset. The entire accrued benefit did not change. The only change is between cash and a receivable. Good Luck!

"Like"

After a while, we all learn two things in this industry: 1) The rules and applications; 2) Relationship Management. I've gotten tons of the same questions over time. I began to understand that the individual asking them doesn't know, but is hearing different things from different places. This is merely an opportunity to explain to that individual why you take the approach you do; and why they should appreciate that approach. They are right to ask, but how you respond will determine whether they believe you or someone else. Eventually, it will become second nature; we can disagree without being disagreeable Good Luck!

It should be doable, but may have to be done under another case. Technically, a QDRO is payable to a Spouse, Former Spouse, or Dependent. While she's no longer your spouse, she is your former spouse. The ball was clearly dropped, but that "may not" be the end all. But, without a Domestic Relations Order meeting all the necessary requirements for being Qualified, the plan will not distribute. Good Luck!

You're not out of date. It's a good procedure you have. Keep in mind that there are different standards between qualified plans and IRAs. I wouldn't ask for this type of paperwork for an individual to rollover an amount to an IRA. However, in a qualified plan, your procedure seems appropriate. Good Luck!