Bri

Correct. No reduction in one's personal income simply based on the fact there was extra money already in the plan's trust.

The ABPT is going to include all sources, and the definition of pay for the 401(k) is the whole year's worth, though. (But hmmm, if you're able to pass all the rate groups at 70%, might you be able to justify doing that only on post-source earnings?)

I'd make sure of how the plan spells out its compensation for allocation purposes. You're mentioning safe harbor is based on post-7/1 earnings, but also saying the plan uses full year for all purposes. (As in, check specifically whether there is indeed a source-specific definition restricting the safe harbor amount. I've seen it both ways, where you completely mimic the 401k source, versus mimicking non-elective source definitions.)

I think if you want this as 2019 earnings, you'd have to re-do his W-2. Otherwise you're getting a code E on the 1099 for the EPCRS correction, and it's taxable in the year of distribution. The guy didn't exceed the 402(g) limitation, but rather the plan's own limitation ($0, since ineligible).

It does not. Your plan language may say otherwise, but nothing regulatory requires it.

Hi Larry - The argument I'm making is based on the fact that the plan itself doesn't have a formula for allocating contributions. The safe harbors under 1.401(a)(4)-2(b)(2) reference the plan allocating contributions under an "allocation formula" that's uniform (with the disclaimer in subparagraph (ii) that permitted disparity is okay). But in the case above, the plan doesn't allocate on a formula. Each participant is assigned a single contribution amount (that just happens to mimic an integrated formula). So that's the language/technicality I get hung up on. The plan is allocating based on a list of individual names and amounts directed by the Administrator, rather than a formula (which makes it feel less "safe" of a harbor in my mind). Honestly, I'm not going for anything beyond a semantics argument, I suppose. (p.s. Are you guys still getting Pizzeria Uno at the Relius meetings?)

My impression has been that, if your plan language doesn't actually state that it's using a safe harbor formula - such as integrated at something less than the TWB, that the general non-discrimination test has to use the full TWB when imputing the disparity. I've seen it one time where the general test then didn't work due to crazy circumstances, but it wasn't my client. The plan document said everyone's his own group, but they ran it identical to a plan integrated at 80,000. One HCE was only at 108,200, below the TWB, and so the person's rate imputed allocation rate was actually higher than anyone else's. (Which is probably the kind of example Bird was referring to.)

If the enrollment form is a PDF, you'd at least have an email trail from the HR lady's account showing it sent. Is the workforce a computer-using group? Obviously in a factory or warehouse that might not be so applicable. (Not only that, you could have an email subsequently saying, due to not receiving a form, we're instituting you at 0%.) Can the forms be included in the paycheck envelopes?

I presume the IRS will at some point issue guidance on when these remedial amendments would be necessary. It's not like we've all crammed in our 2019 hardship provisions onto amendments yet. (Or have we?)

EPCRS doesn't really spell out (at least as a safe harbor method of correction) simply doubling-up next week's amounts, does it....(With an employer adjustment for missed earnings for the late week, perhaps?)

Of course not, but a compassionate plan advisor would find an out for an uptight worry-wart prospect! ?

If it's that concerning on the 30 days, why not just make the deferrals effective 2/1 but the plan as a whole (for nonelective contributions or what-have-you) effective 1/1?

Are you sure? I would think this is an overpayment. Since the basic tenet of EPCRS is "put the plan back in the position it would have been in, absent the error", I'd argue you could return the excess distributions and revise the 1099s. Would have to "think about" how to address earnings lost (or realized outside the plan).

There's a "'Cuz Stone Cold Said So" crack to be made by a wittier person than I, in the context of an Austin 3(16) question.

Obviously I'm 4 days late to the discussion (Mexico was nice) but Larry's got it spot on - just issue the check from a PLAN checking account rather than a SPONSOR checking account.

They obviously changed up the requirements - back in the 2000s it was just a matter of taking the C-3 and C-4 exams after getting the QPA. But those had essay questions to them, too, if I recall.

If the definition of compensation is full year, then the 3% for the staff needs to be for the full year. If you had used only "while a participant in that component of the plan" then you could have limited it to 3% of the last three months' worth. And if that were the only contribution, you'd have gotten away with it for top heavy purposes, too.

And if you're the participant, of course you'd rather get 4% of the full year's pay!

Are you sure you have to give 5% for top heavy for a second plan that employee's not a participant in? I can see the argument for a 5% GATEWAY for testing purposes, but not a top heavy increase for someone not eligible for both plans. Or if the plan documents say otherwise, too, in their carefully-worded meshing of the top heavy requirement between the two plans.

I know Larry's a stage buff, his allusion might not transcend to everyone

I would want to ask, how are you eligible for a $50,000 distribution from the plan at an age less than 59½? Is this other-source money such as match or profit sharing where the plan permits the earlier withdrawal? If you are eligible indeed under such provisions, then I'd double-check that the loan balance really did originate from 401(k) money (as opposed to match / PS). If so, then the fact that you have a distributable event for whatever source is going to fund the 50,000, leads rise to the potential to discharge the defaulted loan note off your balance. However, if the loan money was 401(k) money specifically, the Regulations won't let the plan to offer you an out before age 59½, so the loan would stay. If your plan does let you take the 50,000, then you certainly could remit the loan balance still due (with interest) back to the plan. The only benefit, really (since you've already had the taxable income back six years ago), would be the ability to clear your loan slate and start over with new ones. Otherwise you're just creating a taxable basis in your account.

I was wondering the same thing, six years later. Both 5500-SF and 5500-EZ indicate that the plan sponsor is signing under penalty of perjury that any actuarial schedule has been completed as well. So I think signing the 5500 earlier than the SB would be legally problematic.

Definitely not a CG - he's a smaller than 50% partner in the "big" LLC. I don't think the industry qualifies as an FSO, either, for affiliated service group consideration, too. The "side" (small) LLC is definitely the plan sponsor. Basically we're trying to figure out if the lack of a tax form from the small LLC to the sole proprietor, is enough to substantiate a salary of $0 (to keep DB funding low), or if the small LLC's K-1 received from the big LLC, is enough to state that there's income to the actual individual.

I don't know what to make of this. Client set up an LLC for himself. He's also a partner in a larger company. That LLC issued him a K-1 for his income, and then also issued his own separate (single member) LLC a K-1 as well for a separate source of income from the larger partnership. It's that "smaller" LLC that sponsors his plans. The first year, he had a Schedule C to reflect the payments from the smaller LLC to the individual. Since then (the past 2-3 years), the income is not being shown as flowing through the smaller LLC - he just received it on a second K-1 issued by the larger company. So I think that's wrong to use for purposes of funding his plans. But - is it enough for the big LLC to pay the little LLC on that K-1, or does the little LLC then need to turn around and issue a Schedule C every year? Or, is it enough that as the single member, the earnings on the K-1 (from big LLC paid to little LLC) enough to count as income for the individual himself? We're trying to figure out if the CPA needs to re-address past years' tax statements, in terms of how the payments were reported, before we get into tracking what sort of benefit he's actually due under the DB plan. thanks in advance.... --bri

-11g amendment up to 9.5 months after the end of the year.....lets you increase benefits to employees (including those not currently eligible) on a non-discriminatory manner. So pick an NHCE you like (who's also not terminated already with no vesting in such a new benefit), and bring 'em in.....