Bri

Are they 50? If they did 19,500 + 19,500 exactly it at least hints that they're not.

In a perfect world the CPA wouldn't suggest just deducting it against his spouse's income, though, either! 🤐

I suppose that since this is outside the SCP window, the IRS would scrutinize it under a VCP application. They might suggest an alternative in light of it only being 2 current employees benefiting. (Heck, what if ALL the NHCEs had turned over?)

I'd think so, since it's not so much a "targeted QNEC" like the typical bottom-up rule. It seems like a straightforward interpretation of the rev. proc., but I'd suggest an "actual attorney" give you a formal blessing. (Since THAT, most certainly, I am not.)

That's on page 91 of 125 in the 2019-19 Revenue Procedure, that you can exclude former employees.

I shook my head at how easy it was when I figured it out that way. (I had the uglier formulas written down somewhere for years, too.) And it can do a QACA, too: match = min(A1 * .005, B1 * .5) + min(A1 * .03, B1 * .5)

no ifs needs: let A1 = pay, let B1 = deferrals match = min(A1*.025, B1*.5) + min(A1*.015, B1*.5) use a round function on it, but that's messier to type out here. You essentially have 2 matches layered on top of each other. 50 percent on the first 5, plus 50 percent on the first 3.

If the balance is over 5,000 then the non-responsive would indeed need an annuity as well.

Got a client, sole prop filing a K-1 as a 100% partner. (Had a partner through 2019, that guy's gone/paid etc.) Sponsors CB and 401k. K-1 shows about 74,000. Cash balance credit is a flat 150,000, but he's done enough cushioning in prior years that his MRC is only around 46,000. Max is hundreds of thousands higher, and he's not near his 415 limit (this is first year I've seen in five where he's been below 401a17 in Earned Income). Sponsor says he'd like to deduct 100,000. Obviously that exceeds his Earned Income so I'd think this is a nondeductible contribution. But he could make a 4972(c)(7) election to not owe any sort of excise tax. I guess the thing I need clarification on is, what stops him from looking at his overall income for the year (taxable investments, perhaps) and use that as something to deduct the remaining 26k of the 100k against.... I suppose it might have to do with the fact that the other income is passive and therefore any claim for a deduction against THAT income isn't an ordinary 162 expense of the business. Am I close, crazy, or somewhere in between? Thanks! -bri

And I suppose the contract with the recordkeeper will spell out exactly where their fault would lie in relying on the participant without trustee authorization, too.

If the mistaken deposit wasn't really deferrals, then forfeiting it out from the wrong account shouldn't suddenly make it deferral money you couldn't later use, just because it had a bad label on it.

Why not just contribute the missed earnings for themselves and pay the naturally dinky 5330 tax? (This might not even be a Title I plan, right?)

I think it's going to be in your basic plan document, in terms of what contributions are permitted - and in this case I'm referring to different types of QNEC. Our document vendor had it at one point that a boring X% to everyone QNEC was always permitted to fix a test. But if you wanted to target the QNEC, the adoption agreement had to have the box checked off providing for QNECs in general

How about an -11g amendment to allocate the additional 10% to HCE 1 and the NHCE on top of a nominal stated contribution of 15% to everyone? Plan doesn't have to fail to do an -11g. The new benefits would be nondiscriminatory.

And of course, make sure your plan document doesn't contain language requiring it to cover EVERY member of the controlled group. (There's nothing STANDARD about a standardized plan document!) 😁

The topic at hand intrigued me, if only because I've got some local towns who were set up with both their deferrals and town contributions under the same contract with a recordkeeper. The employee amounts are on a 457(b) document and the employer amounts are on a 401(a) document but it's all combined on the platform. I consider the deferrals part of one trust and the rest the other.

How about making it part of his 2020 allocation then?

Gotta have rate groups passing, too. (Otherwise you'd just stuff all of what makes up that average into one NHCE who's 22 years old and terminated in January with wages of $500)

I know the answer isn't just an EBAR of infinity. I think the prevailing wisdom the last time I saw this was to treat him as getting 3%. Obviously 3% of $0 is 0, and it's certainly "reasonable."

I guess that's just referring to checking off "first return, amended return, final return, and short plan year"

That's right. Your excludable HCE can either test against the excludable NHCEs (none, so auto-pass), or he gets thrown in with the non-excludable HCEs and tested against the non-excludable NHCEs. (Which carves out the zero excludable NHCEs.) Obviously you have to just find the override spot in your testing software. (Assuming you want the guy out of your "main" test, although that guy's rate will lead you to make the call on that one.)

Isn't it just an amount ineligible for the rollover treatment, and it gets distributed / taxed just like any other test result would be?

How nuts is it to suggest that you'd only have to go back to the date of when the contributions were due to the plan as annual additions? Like maybe April 14, 30 days after the tax filing deadline, unless the plan specifically allocates the contributions each pay period. (My probably too-thin argument is that the ability for "early earnings" is a BRF, and perhaps if you've got 9/10 NHCEs getting early earnings, it's not particularly discriminatory for one guy not to get them.)

Keep an eye out for any other employees (non-doctors) that aren't allowed in under the same 6 month period, of course. Since 410(b) testing generally uses the lowest eligibility under the plan for everyone, you might inadvertently have a bunch of extra non-benefiters among your NHCEs. (Blah blah blah disaggregation etc.....)

At least the AFN language specifically says you can skip ex-participants who've been fully paid out by the end of the notice year.