tghooper

Thank you for the insight gents

I remember this same scenario that was answered in a TAG Q&A years ago but I don't have access anymore.

Facts: Company A - LLC taxed as a partnership (SE income). Bob owns 8%; Corp B owns 75%; remaining % owned by 2 others. Bob owns 100% of Corp B Question: Plan defines compensation as W-2 (not 415). Lets assume that there is a loss on his Schedule K-1 of ($10,000). Bob receives a w-2 from his Corp B of $40,000. For non-discrimination testing, I only need to consider's Bob's compensation of$40,000. I don't need to net the loss with his W-2. Correct?

Did you run 401(a)4 on a contributions basis vs benefits basis? All of our PW plans are cross -tested so that gives us more options to correct and tested on a contributions basis to avoid Min Gateway. Also, the 10% limit applies only to NHCE.

Reviving an old thread... Everything here makes sense. However, need clarification via example. HCE data as follows: * Allocation wages = $240,000. PS = $36,000 , which is 15% so Min Gateway is 5% * 415 wages = $280,000, which is 12.86% so Min Gateway is 4.29%. Plan passes 414(s) comp ratio test. That means that NHCEs don't need 5% on 415 comp, correct?

Luke...correct, we don't believe they have been providing this election via the rollover notice and it's also not disclosed the SPD.

Our new client is an S corp. with put option. We discussed the NUA treatment with the client whether or not this has been applied to past distributions and received very vague and incomplete information. This has made us skeptical if this was correctly applied. Seems to me that this treatment would have been applied across the board to all particpants to which it was applicable since plan inception (or post Rev proc 2003-23) to avoid nondiscrimination. Any thoughts?

Sure thing...per ERISA book. "Under the regulation, the 404(a)(3) deduction limit for any taxable year following the termination of the plan is computed by taking into account the compensation of the employees who were benefiting under the plan at any time during the one-year period ending on the last day of the last calendar month in which the plan was terminated." Let take this further...what happens if the termination date was 12/31/2017 or prior?

NVM...found the answer.

The plan terminated 12/31/2018. Employer failed to make required contributions in prior years and made them in 2019. Let''s assume that they never deducted these on prior years tax return and we're self-correcting under EPCRS. Since there are no eligible compensation under 404, is this subject to excise tax on the 5330? Or these non-deductible contributions?

From my experience, auditors like to calculate lost earnings and think that solves the problem. I would agree with Kevin but make sure you pass Sec 415.

Larry is correct. But I'm wondering if the plan passed coverage before and after termination, it seems that that would be ok?

Feedback from anyone that has filed using the new electronically filing?

I think it just depends on the type of filings and the regional office that processes them. We've had a few model loan filings that was closed within 6 months.

Thanks Tom. It was late last night and I wasn't thinking clearly. So ABT is for the full $51K even though my annual additions has been reduced. Makes more sense now since the crediting rule seems to reduce the individual's limit and not the plan's limit (such as a short limitation year).

We had to reduce an owner's contribution because of the 30-day crediting rule. The owner is self employed and wants the maximum contribution but will be limited to $41,000 ,including catch up. A refund of $10,000 in elective deferrals was necessary and following EPCRS Rev Proc 2008-50. (per plan doc). ERISA book says these refunds of elective deferral are disregarded for 402(g) / ADP Test. The plan is a Safe Harbor 3%. The total contribution of $41K was used for the cross test due to the limit. Question - should elective deferrals be $18,500 or $10,500 in the cross-test?? I'm inclined to the later but corrective distributions are generally included for ABT. If the former is used, I'm basically "making up" for the that amount that has will be refunded...doesn't seem correct. This will have an effect on minimum gateway since we're trying to get to the $41k.

Another scenario...why do accountants make this so difficult!? Two partners in a partnership receive both W-2 wages and K-1 income. Both had $10,000 each in 401k withheld from W-2 and $7,000 in SE income from K-1. They said they wanted to maximize contributions to $24,500. My contention is that they wouldn't be able to do this unless they went back and "corrected" the W-2 because the SE income is insufficient. Also, any profit sharing would reduce SE income even further. (I know...they shouldn't be receiving W-2 from the partnership) Thoughts?

Accountant confirmed...Schedule C and not k-1..ie not a "partner". Thanks Jpod

Correct...no capital interest. Yes, seems that the accountant is not giving us the correct data or not doing it correct. Thanks

Yes, non-equity partners do not have interest in profits/capital. The guaranteed payments flows to a Schedule C, which is an adopting employer of the plan...i.e. they're 100% owner of an adopting employer.

Follow up to this old thread... Assuming that the guaranteed payments for the non-equity partners is well below the compensation limit, I would contend that they're still an HCE because of the fact that he/she files a Schedule C, in which they're 100% owner. Any disagreements?

Welll, if I'm filing the VCP then I get to drive the bus

We filed a number of these and never changed the original terms of the loan, even if the interest rate went down and was more favorable to the participant. They were all accepted.

Why would you change the terms of the loan if the participant signed the loan agreement at 6.5%.

Yes and Yes to both...also gateway is N/A if test on a contributions basis. Thanks!