Bri

In past years there were only 4 employees to worry about. The terminee in question is one of those four. If I disaggregate, I've got 2 NHCEs by themselves, neither benefiting, though. Then the statutory group is still the 2 out of 4. But the language of the regulation doesn't seem like I get a pass on the otherwise-excludable group, because nobody benefits at all in that "plan".

Dang, I thought I had this figured out by disaggregating out the two statutory exclusions, but I can't tell what the 401(a)(26) regulations mean by the plan the otherwise excludable employees benefit under. There is no plan (those meeting 410a, or those in early) under which they benefit, but the disaggregated "plan" WOULD be the one they'd benefit from, ya know, if the formula weren't currently zero.

This cash balance plan (half of a combo) had 6 eligible employees during the year. One of them terminated with fewer than 500 hours. And the plan requires 1000 hours for an accrual. Seems easy....but, the plan has separate classes for the contribution credits, and her class always gets zero. Did she fail to accrue solely based on the lack of hours? She does get 415 participation credit for prior years even without an actual benefit, since she had the hours before 2021. So I'm back to at least thinking "maybe". (The two principal employees benefiting, out of either 5 or 6 employees, obviously are different outcomes for the test.) Does the answer change if the plan is amended to provide any nonzero amount for a new class just for her, even though she won't accrue it? Thanks! --bri

I vote for 2, since often when spoken aloud, they are the stressed syllables. "Those salary deferrals are technically employ-ER contributions rather than employ-EE contributions."

Are you referring to the ADP/ACP tests, or general coverage/nondiscrimination? For coverage and the average benefits test, doing two tests mean the statutory exclusions, both HCE and NHCEs, get tested separately from everyone else. For the ADP test, you have two choices. a) Do the exact same division, running two sets of tests b) Do a "carve-out" - That's where the excludable NHCEs are left completely out of the one test you'll run. But any excludable HCEs stay in the test with all the HCEs who had already met the statutory 1 year/21 requirements

The EOB has an explanation of "dual status" in the coverage section. It sounds as though it addresses hours of service in a non-union capacity specifically and the pay associated with those.

Agreed. (I'll have to verify with our forms folks...)

Thanks - 415 isn't an issue. So I did basically 180 myself, and realize the 10cc amount governs the 417e conversion, even if the separate life conversion would have a higher underlying 417e value.

It's that the plan's AE table of factors doesn't govern the lump sum payment, just the conversion to other annuities. I'm concerned I might be erroneously applying the 415 methodology (where you have to convert anything different to the SLA to check the maximum) to 417e. So you're saying that I apply 417e to the life annuity amount even if it's higher than 417e as applied to the normal form. (thanks!)

Quick question - Plan has its own table to convert the normal form of "10 years certain + life" to other forms, including single life annuity. For 417 purposes, do I do the lump sum first by: a) Convert 10cc to life via the plan factors, and then convert the life amount to lump at 417 rates, or b) Convert 10cc to lump with 417e factors, but convert 10cc to life separately with plan factors (even though the lump sum value of that life annuity would be different?) Thanks in advance (and presume the plan's AE factors aren't going to override 417 minimums) --Bri

Sometimes plans will allow in-service distributions, and a subset of those will allow them specifically/solely for RMD purposes. That could open up the opportunity to withdraw at least an RMD amount if not more.

I agree with Bird - the "year" in question probably refers to the RMD year, as opposed to a plan year. As for finding out, I suppose it would be part of the year-end data collection questionnaire to confirm ownership, and if anything has indeed changed, then you'd go back to confirm dates of the ownership changes.

I believe limited scope refers to the CPA's ability to rely on previously prepared financial statements regarding the underlying investments (like if everything's in a group annuity contract with John Hancock, for instance). Might have trouble applying that to an ESOP.

Yeah, but that's 2024 if they're smart enough to only count the years after 1/1/2021.

Up to 5.7% of pay up to $0, plus the non-integrated piece. Yup.

I don't think having an EIN for your sole proprietorship prevents you from applying the earnings paid on your 1099 under your SSN. Your Schedule C will have lines for both your SSN and EIN. Which would mean you have no other steps to take regarding the plan sponsorship.

Often though, the "plan B" eligibility provision, the 1000 hours in 12 months, requires the full 12 months to elapse like a traditional Year of Service requirement, so it's possible the guy who hits 1000 hours in month 8 doesn't come in until after the full 12 months elapse. So as CBZ said, definitely check what the doc says to that effect.

Maybe they meant it as plain pro rata and didn't know how to skip the integration question of their document software. Because that's what they end up with basically, right? Up to 5.7% of the first zero of wages. Either that or they have employees with negative earnings (they PAY us to work here!) and therefore are below the integration level. 🤷‍♂️

That's what I'd tell the guy. And they'll be 415-limit catchups so not in any of your testing.

Well, I don't think you need to actually put SH provisions into a one-man plan, but if he wants to burn off the 58,000 of transferred assets, then sure, he can put 6,500 as his deferral election some time in the next week or so.

This IRS website page (blah blah blah not official guidance disclaimer dot dot dot) confirms it: https://www.irs.gov/retirement-plans/deadline-extended-to-add-new-in-plan-roth-rollover-provisions

That's clearly a reference to Bill S. Preston, Esq. there, rather than Mike. 🙂

I think Chapter 10 is dedicated to permitted disparity (it's got to be the shortest chapter along with vesting and 415), and a quick peek does have some illustrations to the calcs.

I'll "fourth" it, just for giggles.

Ha, I'm going to naively say just write to the IRA custodian mentioning the fact pattern and see if they'll do what you tell them! (I suppose in this case, issue the 1099-R only for the taxable gain/loss, since the plan would be issuing the form relating to the 5,000.)