ETA Consulting LLC

I see what you are doing, and think Lou stated it correctly. You have to remain mindful that you cannot defer compensation you did not earn. With that said, you are (technically) deferring from compensation that has been reduced by the Profit Sharing contributions you made to the plan. Let's assume (for argument sake) that $24,000 was the net Schedule C (after the reduction for 1/2 SE Tax). Then 20% of that amount would put you at the 25% PS funding limit. $4,800 is 25% of $19,200. Your compensation is $19,200 because it was reduced to this amount due to the PS contribution. $24,000 - $4,800 is $19,200. The maximum you may defer would then be $19,200. I always have problems when trying to run on software, so I do it by hand using this methodology. Good Luck!

It will mean filing with the IRS when the SIMPLE fails. Some companies intentionally fail the SIMPLE IRA when it no longer serves their needs. However, they do it with the mistaken impression that they won't need the $250 filing with the IRS. There may be arguments to the contrary, but I'd never fail one without that IRS filing. Good Luck!

Never transitioned, but you should be in good shape if you have the CEBS. You may, ultimately, need to pursue your PHR with the Society of Human Resource Management. At any rate, don't focus on what you don't have, focus on what you do have; and that's a strong foundation to build on. Many items can be learned within a week, but good judgement takes years to build (and you have that already). Just stop selling yourself short. Good Luck!

You should contact your local Department of Labor office. They'll initiate an audit and ensure your rights under the plan are inforced. Good Luck!

No. The SEP may require an employee to 1) Attain the age of 21 during the year, 2) have performed services with the employer during any 3 of the 5 years immediately preceding the current year, 3) Must receive Compensation of at least $550 for the plan year in which the contribution is being made, and 4) Must not be a Non-Resident Alien or member of a Collective Bargaining Agreement. This is pretty much the maximum you may do toward excluding employees. Good Luck!

I would begin with the definition of 415 Compensation for Self Employed individuals. I do not think there is a distinction of which operation the self-employed individual's cash flow comes from. We know that if his 415 Compensation is zero, then his 415 limit will be zero. That's just how I would approach it. With that said, I would combine the loss with the gain. Good Luck!

Correct. It is the SIMPLE IRA that has the exclusive plan rule. If they fund a profit sharing (or provide a forfeiture allocation) for any year, then the SIMPLE for the calendar years containing the beginning and ending dates of the profit sharing plan year will be invalidated. Good Luck.

Answers to your questions: 1) Not really. Depending on whether the failure to provide the notice is significant, you may correct under SCP. You may also file for a $250 VCP correction with the IRS to add a little comfort. 2) True. This standard applies for plans beginning and ending in the calendar year where a SIMPLE IRA is funded. 3) True. Since the plan year began in 2011. Good Luck!

The one consistency that we know exists is that the QDRO procedures must be written within the plan. I would start there. I am not aware of any specific distinction for QDROs for ESOPs. Just thinking, any main differentiations would be between DB and DC plans since you are (typically) assigning a payout stream as opposed to a percentage of the account balance. Good Luck!

He must sever ties with all controlled group members. Good Luck!

True. I was assuming it was a natural person. I missed the fact that it was an estate in the original post.

I would still say the 2008 year end balance was zero. Otherwise would be like splitting hairs. Also, since he is not an employee (as independent contractors are not common law employees), then his first RMD requirement for that transaction would've been December 31, 2010 (assuming the plan was amendment to waive 2009 RMDs. Good Luck!

It is still treated as an 'annual deferral' under 1.457-2(b). This will mean that regardless of where the funds originate, it is (for tax purposes) treated as if it were compensation that was deferred (at least that appears to be the source of the argument). I think I know what you are getting at, but do not believe the taxability changes depending on whether it was a nonelective contribution or 'elective deferral'. At any rate, good question. Hope this helps. Good Luck!

That used to be the case, but has since changed. It is 20% if they are eligible for a direct rollover to an inherited IRA. It shocked me too when the rule changed a couple of years ago. Good Luck!

I stand corrected.

You are correct. The initial period for a Roth IRA is the January 1st of the year in which the Roth IRA was first funded. Typically, this will be measured when the first Form 5498 (hope this is the right form) was issued. Anything else happening within the account is irrelevent. Good Luck!

Typically, this type of class differentiation is included in a profit sharing plan containing a 401(k) feature. When everyone is eligible to defer into the plan, then the zero profit sharing class becomes a moot point because the zeroed employees would've already met the definition of eligible employees for deductibility purposes. I think we're on the same page with respect to anything being disguised; always an issue of effective availability (reality) in addition to current availability (stated intent). It always helps to include as much details regarding the situation as possible so we continue to speak apples to apples. Good Luck :-) Oh, btw, you guys rock!

You cannot rely on a safe harbor feature for any plan that terminates during the year. If it is a stock sale, why not terminate the plan effective December 31st and continue to operate the plan under the current provisions? 410(b)(6) allows you to do that with no problems. Now, if it were an asset sale, then I could see an immediate plan termination being in order; you still would not be able to rely on the safe harbor for the year. Good Luck!

Correct. Since non-profits are typically set up as either trusts or corporations with no allocable shares, there aren't any owners. Good Luck!

Sure, they can. I see your issue; and it is one of semantics. 1) You must distinguish between plan eligibility and eligibility for a contribution. An employee enters the plan as an 'eligible employee' upon meeting the age, service, and entry date requirements. That does not mean he actually received a contribution. For DOL purposes, he's part of the participant count. 2) Plans must operate under a definitely determinable allocation formula. Any "eligible employee" (as defined above) may be in a group that receives a zero allocation during the year. This can be due to failure to meet the actual accrual requirement (e.g. last day or 1000 hours) or being member of an allocation class (Cross-tested) that receives a zero allocation for the year at the discretion of the employer. Being eligible for the plan does not guarantee you a contribution. The plan's document is the best resource for this plan. It will be very important to understand the definitions section of the plan document to understand the particular terminology the plan uses to classify employees. Hope this helps. Good Luck!

I agree with 12AX7. If the participant is eligible for a distribution he can repay the loan, and then perform a direct rollover of cash into an IRA. This would give him a subsequent ability to take a 60 day loan (distribution and rollover within 60 days) from the IRA. Just a thought. Good Luck!

Not really, but the government can fund a contribution to the plan. That contribution will fall under the $16,500 limit ($22,000 with catchup) and is treated as if the employee made the deferral. I am not sure if, semantically, you would consider that a mandatory contribution. Good Luck!

You are right. Not everything is eligible for self correction; especially when you do not have reliance on an opinion letter or a favorable determination letter. Just a technical issue to consider. Good Luck!

No. That was only for 2010. Good Luck!

You make a valid point with respect to the fact that a DB plan is not an individual account plan. And, it does seem rather odd that an actual split is done. But, to your other note, if they were not split, then the entire amount should be deducted as a business expense on the Schedule C; not on the front of the 1040. As a first rule, the retirement contributions are a deductible 'business' expense. The owner's portion being deducted directly on the 1040 instead of the Schedule C is like the exception to the general rule. At any rate, it's a moot point, because the deduction for the owner is split. Hope this helps add a little perspective for you. Good Luck!