Bri

Isn't the withdrawal from the pooled plan basically an instruction for a trustee-to-trustee transfer to the new plan? Rather than a distributable event?

Nothing smelly, though. The plan will retroactively be amended so that currently your guy can get the 6K upon his termination of employment without the need for either the annuity options or spousal consent.

I think the underlying thought there to Cuse's point is that why would/should a company get a deduction for some OTHER company's ordinary business expense. One tax return blurs it all together, separate ones would not.

This is the right place. A cross-tested PS formula means that there will be different contribution rates to different employees. (Thinking, the IRS typically would expect a plan to provide some uniformity to the contributions.) But if the contributions can be projected to retirement age, perhaps the eventual benefits from those contributions will be closer to equivalent. Especially if the people getting more are so close to retirement age that there's not much of a projection, relative to a 30-year-old who could start with a lot less but let the time do the work of growing to a comparable benefit. Anyway, that's the "cross" to the definition - instead of testing contributions, we're crossing it up and instead testing the eventual benefits. Okay, so now the IRS came up with "gateway" rules to try to put the kibosh on just hiring 16-year-olds, giving them $100, and saying hey 50 years of time should even things up compared to the company owner who's 65 and wants $69,000 in profit sharing *currently*. Basically the gateway rules force a guaranteed floor on how low the $100 to the youthful staff can be, and it's typically a percentage of pay that depends on what sort of amounts the highly compensated employees are getting from the company. Not all plans like this, where the plan does not provide a uniform rate to all employees, are subject to gateway rules, but most are. The ones that aren't could potentially include your hoped-for design. There are regulations which spell out what kind of designs may get away with this. Typically they involve bands by age, so that all employees have the chance to "age into" the higher rates. A common approach is to age-weight the contributions so that every single age ends up with an equivalent benefit rate at retirement age. (Basically each person the same age gets the same rate, and that rate goes up by an identical 8.5% a year as you age.) If you do get a plan that fits the exceptions, then it's okay if certain individuals' contribution rates are smaller than what these "gateway" rules would require. Anyway, I suspect your PEO wants no part of making sure your subset's allocations can fit into such a design, so they're telling you just to go with the more-common approach where you do guarantee a gateway floor rate to the staff employees.

Yeah, but he's still holding "plan money" later than he should, regardless of whether there's DOL oversight, though. Otherwise why bother to fund your deferrals at all, just take the tax deduction 😀

Actual W-2 wage or a draw from an unincorporated entity? The prohibited transaction rules still apply but the deferral deposit timing might adjust if this is someone for whom all the income is actually realized only at year-end.

If you can log on at the DOL EFast site, you should be able to create 5500 filings. I do it once a year for a client.

I think as soon as you mention to a CPA that you're inclined to reduce K-1 income by splitting by the total cost by the partnership ratio (rather than along the lines of who actually got what among those partners), they tend to indicate the partners have something along those lines in place to better align the deductions for each. Like their DC plan would.

"Rocky VII: The new RMD regulations"

If only withdrawal fees worked like PT excise taxes.....

At that age wouldn't a DC plan get him a higher maximum?

oooh, I'll start with the easy one: Failure to follow the plan's written terms. Hopefully that triggers the "we don't have to be your TPA anymore" clause in the service agreement!

Well we haven't figured out if the guy would qualify as Key under the 1% owner test.

A SH 3% nonelective amount is part of the rate group calculations, whereas a SH match is not. A match is still part of the average benefit percentage test (along with deferrals) though.

Is he actually asking whether it counts as a component of either W-2, 415, or 3401(a) wages?

I look at it as, you're not failing coverage, but rather you're failing nondiscrimination (or, at least, there's still work to be done), if you have less than 70% benefiting with a non-uniform formula but over 70% getting "at least something".

obviously a DC plan might have an exception to its last-day rule for retirees. An ERA definition can inadvertently trigger an allocation you weren't expecting, especially when the allocations aren't "individual groups." But otherwise, yeah, what benefit is that definition bestowing upon anyone?

How about a 20-pound vat of glue for your portion?

That sounds appropriate, but really comes down to the Plan Administrator interpreting the document and its standard operating procedures conforming to Its interpretation. So if the bonus were a separate paycheck, he'd have gotten $200 total that week, I suppose.

Wait, isn't the problem just that the guy has too much take-home pay, but the correct plan amounts were deposited? Seems like the plan is actually in good standing but that the guy's next paycheck needs to have six months' of deductions properly taken off the gross.

No, matching contributions do not count towards (or "trigger") gateway minimums.

of course they could roll the proceeds to an IRA, avoid the 20% withholding, and then turn around and raid the IRA without mandatory withholding.

I always imagined if I had my own company I'd make the plan as legally unappealing as possible for the staff - pooled investments, no ISW or loans, QJSA requirements, no payout until 65+5....and then I'd do the triple-stack match nobody would want to sign up for

Maybe try for a PBGC coverage determination after there's nobody left?

just get them to re-sign-up for the $X per paycheck as you claim it's not always obvious whether they'd be above or below 3% each time.