B21

I have a client who established a pre-enactment MEP 401k plan. During 2024;, an employer, who is a member of a controlled group which includes the sponsoring employer, adopted the MEP 401k plan. Would this employer be considered as adopting a grandfathered plan since it would not be considered a "new employer" if a member of the controlled group?

IRC Sec 125 does not consider self employed individuals ,including 2% Sub-s owners, to be eligible employees for participation in an employer's cafeteria plan. Is there an ownership threshold for partners which would make certain partners eligible employees? Specifically, nonequity partners or partners that own less than 2% of the partnership?

Secure Act 2 permits sole proprietors (and LLC taxed as a sole proprietor) to adopt a 401k plan including salary deferral contributions effective retroactive to the first day of the prior tax year up to the due date for filing the sole proprietor's individual tax return for the prior year. Why didn't this section of the act include partnerships? Can a partnership adopt a 401k plan retroactive to the prior year and allow partners to make retroactive salary deferral contributions?

I'm not sure if it makes things less complicated, but the plan is a trustee directed pooled profit sharing plan.

I am a TPA for a profit sharing plan that is sponsored by a 3-entity controlled group. On 1/1/21, one of the members ceased to be part of the controlled group due to a change in ownership. Sec 410(b)(c) provides a transition period of the last day of the plan year following the year of the change for coverage testing purposes, does this transition period also apply to the plan documentation. When would the plan document have to be amended to remove one of the members as a participating employer? Can all 3 entities share in a profit sharing contribution for the 2021 plan year under the current plan document?

Yes they can. In fact, the custodian agreed to change the fiscal year for custodial reports from 2022 to 2021. It's the 1099R they can't adjust.

I have a client who received an in-plan Roth transfer election form from a participant on 12/27/21. The request was submitted to Nationwide the custodian on the same day. All participant's contribution sources are record kept in the Nationwide account. No transfer of funds from outside of Nationwide. Nationwide shifted the funds from pretax source to roth on 1/3/22. Is there any guidance available that would allow the conversion to be taxed in 2021 as requested by the participant even though Nationwide will be issuing a Form 1099R for 2022? I reviewed notices 2013-74 & 2010-84 which states taxed in year of receipt or year of conversion. Can one argue that the conversion occurred at the time of the election?

If a real estate partnership pays commissions to the two partners which are reported on Form 1099, is the 1099 earnings considered self employed earnings for sponsoring a SEP on behalf of each individual partner? A partner is not considered an employer for SEP purposes but a 1099 individual is considered an employer for SEP.

I agree it's a 415 issue rather than excess deferrals. Since the sole proprietor had $0 net earnings, there is no compensation eligible to defer.

I have a client that sponsors a 401(k) plan & has been allowing employees the option to have 401(k) deferral elections applied to their bonuses. The plan document states that Bonuses are subject to the same deferral election as regular wages. Can this failure be self-corrected under Rev. Proc. 2019-19 by adopting a retroactive amendment to allow special elections for bonuses? Would this amendment be considered an increase in a benefit, right or feature?

If Plan B (small plan) is merged with Plan A (large plan) would the Schedule of Reportable Transaction be required to be filed by Plan A if merged assets exceed 5%? I'm thinking it would not be required because Plan A is the receiving plan.

Mike, I refer to 414(c) 414(c)(1)In general.— Except as provided in paragraph (2), for purposes of sections 401, 408(k), 408(p), 410, 411, 415, and 416, under regulations prescribed by the Secretary, all employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer. The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (b). It doesn't mention section 404(a) which is how I based my conclusion. Former ESQ,-I agree with you that 404(a)(7) would apply based on 1.414(c) if the two entities adopted the same plan not if each maintained separate plans.

The 31% limit is the combined deduction limit for the DC/DB contributions for DB plans not covered by the PBGC. There is an exemption to this combined limit if the employer does not contribute more than 6% of compensation in the DC plan. I don't think the controlled group rules apply to Sec 404(a)(7) deduction code. Therefore, would not have to treat the two entities as a single employer & can provide a 25% profit sharing contribution for the entity that does not sponsor the cash balance plan.

Does the exemption to the DB/DC combined 25% deduction limit where the employer contribution to the DC plan is limited to 6% of compensation apply to the plans sponsored by a single employer regardless if the employer is part of a controlled group & there is a DC plan sponsored by another member of the group? Specifically, can a sole proprietor who operates two separate businesses sponsor a cash balance & profit sharing plan (limited to 6%) for one entity & a separate profit sharing plan for the second entity & contribute 25% of compensation?

I agree with you both. More logical to list as a receivable since the conditions existed as of the date of the financial statements.