ETA Consulting LLC

That is unfortunate, since it is a QNEC and not a QMAC. It must be given to all NHCEs who are eligible. There are some variations of employees with respect to those who were NHCE in the year of failure but are HCEs in the year of correction, and those who have since terminated employment, but in the end the amount is allocated to those NHCEs based on compensation; not deferrals. You do have the option of filing VCP and seeking permission from the IRS to allow you to allocate to only those NHCEs who actually deferred. In self correction, you have to follow the rule to the letter. In VCP, anything is possible, especially when you explain to the IRS the increase in costs from creating 65 additional small accounts. Good Luck!

Peggy, Rule #1: The deferral portion of the 403(b) is subject to universal availability, meaning (with very few exceptions) any employee who is expected to work 20 or more hours per week must be allowed to defer. For Employer Contributions (i.e. Matching) then you may impose eligibility standards (i.e. 21 & 1), but the deferrals are subject to universal availability. With this said, you are only performing the coverage test for the employer contributions; not the deferrals. Now Rule #2. The IRS does not allow service class exclusions (meaning a service class that is based on a customary work schedule cannot be excluded by class). So, when you say Part-time is excluded from matching contributions, how are you defining part-time?

Sure. As long at any of them does not contribute more than $11,500 to the SIMPLE or $16,500 overall. This is assuming that neither is catchup eligible. Good Luck!

This is a good one and subject to a little interpretation. The way I read it is that the one to one is calculated on the "excess contribution amount (adjusted for earnings)". This is clearly the amount of failure. The non-vested portion of the excess contribution amount will be forfeited and used under the terms of the plan. Good Luck!

You are correct. There is no need to perform the average benefits test.

Your fact pattern isn't detailed enough. You can cross-test a plan without having to perform the average benefits test. As long as each rate group passes the coverage ratio test, you should be fine. However, this only deals with testing one source of money (e.g. nonelective contributions). If the nonelective contributions are allocated under a uniform formula, then cross-testing shouldn't buy you anything. Now, if you are combining deferrals and matching contributions in your test, then you must bring in all other plans (including DB) because you are no longer testing one source of contributions. More details on exactly what is failing, why it is failing, and how you are testing may help in getting you the answers you seek. Good luck!

This is the question that needs to be answered. It is pretty easy to find. If B took over sponsorship of that portion of the plan, he would likely have a summary plan description (SPD) titled with Employer B as the sponsor. Also, back in 2009, if he was issued a special tax notice and package from the plan advising him he is eligible for a distribution since he is terminated employment, this would signify the plan is still with Employer A. So, determining the employer should be relatively easy, but you are on the right track. Good luck!

They would still need to take it. The determination of 5% owner is made only once (and that is in the year the Participant turns age 70 1/2). There are no subsequent determinations. Now, let's suppose during that year he wasn't a 5% owner. When he turns (let's say) age 73, his son buys the company. In this case, he would NOT have to begin receiving RMDs because he was not a 5% owner in the year he turned age 70 1/2. Good Luck.

You make a good observation. I read it to say that they were not related at any during 2010 and used that as the basis for the answer. You can see how important the minor details become. Had the companies been related during 2010, then the answer would be different.

No, the penalty would continue to apply. This is a classic separated from service versus severance from employment issue. The Participant's Account remained inside Plan A when the participant terminated employment in 2009 and moved to Company B. The case would be different had B took over that portion of the plan at the time of the takeover in 2009. It's hard to follow your fact pattern (but you were very detailed). Your first step is to make a definitive assessment of 'who is the employer' sponsoring the plan for which the Participant is a part of. The second step is to determine when did the participant sever employment from that employer. In your fact pattern, A is still the sponsor, and the Participant terminated employement with A back in 2009 to work with B. Good Luck!

You're not necessarily eliminating Key Employees (e.g. anyone who is a 5% owner, or a 1% owner with compensation exceeding $150K will be key). Now, if you are looking at officers, then the number considered Key may be limited (and it get's pretty detailed). Good Luck!

It is interesting that you clarified that no entity receives 10% of it's revenue from providing services to the other entity. I think the 10% revenue standard applies to services being provided to the other entity (or their clients). Do these two organizations provide work to the same clients? If so, your fact pattern would need adjusting for the Affiliated Service Group determination. Even below 10%, you have facts and circumstances for amounts between 5% and 10%; so the actual number may be necessary when trying to make your determination. Good Luck!

No, you have a different issue. There was a distribution made that fell outside the terms of the plan. The excess amount would have to be collected from the Participant and put back in the plan. You didn't fail to timely correct; you overdistributed.

Technically, yes. But only the increased amount would be considered late and subject to the penalty. That would appear to be the most consistent approach. Good luck!

Erin, There are issues that likely go beyond the question you are asking. You appear several steps into a process that appears inconsistent with the fact pattern you presented. Let me explain: Rule 1) Each employer is either a member of the controlled group (or affiliated service group) or not. If so, then they are treated as a single employer for nondiscrimination purposes. In this case, you are stating that at least one company (Corp B) is not. Rule 2) If more than one employer (who is not related by controlled or affiliated service group) adopts a plan, then that plan would not be treated as a single employer plan, but instead a multiple employer. One thing we know about multiple employer plans is that they cannot be written to prototype adoption agreements. Based on your comments, they were hopefully written to a volume submitter or some type of individually designed plan. Rule 3) Plans must follow their written terms. If you don't like the terms, then amend the plan (remember that amendment timing issues must be addressed to ensure you do not violate any cutback or notification issues). So, you are thinking correctly with your questions regarding the timing, but they employer should draft an elaborate flow chart of exactly what they have and compare it to what they want. From there, your question, and many others that will be like it in some form or another, could be addressed in one sitting. If nothing else, I would (at least) continue operating under the current written provisions for the remainder of the year as Corp B gets spun off into a separate plan. That would appear to be a reasonable start. Good luck!

Yes, he can. Entity type does not change the Employer sponsoring the plan. Therefore, the employer is the same, and he worked during at least 3 of the preceding 5 years. Good Luck

The 10% penalty will not apply since the distribution is made to the beneficiary on the account of death. Since the taxpayer died after their required beginning date, the distributions must continue annually. In this case, the son should've taken a distribution by December 31, 2010 using his single life expectancy during 2010. This year, he will be due another distribution using the 2010 life expectancy minus 1. The 1 & 5 year rule would not apply since the mother had already reached her Required Beginning Date for 70 1/2 distributions. Good luck!

Just think of it this way, the death RMD rules preempt the lifetime RMD rules. So, if taxpayer dies on or before the required beginning date for age 70 1/2 distributions, then the age 70 1/2 distributions no longer apply. The death RMD rules will then apply. Good luck!

You should be fine going back to the E-Z. Your question is simply whether or not this plan is an ERISA plan. Without a rule stating 'once ERISA, always ERISA' you are to presume that the plan is no longer subject to Title I when the plan no longer covers a 'common law' employee. All references on the Form 5500 would suggest coverage to be in the present tense (e.g. plan that covers only owners, or owners and spouses). Had the provision stated plans that have never covered anyone other than owners or their spouses, then it would have implied 'once ERISA, always ERISA'. I would feel safe, but wouldn't be surprised if the DOL ultimately sent a letter asking where is the return. LOL Good luck!