Belgarath

Let's change the scenario - SH plan with basic matching formula. So if you defer 5%, you get 4%. In addition, there's a discretionary match of, say, 66% of the first 6%. This stays within the 6%/4% limit, and rounded, in essence means that a participant who defers 6% will receive an 8% total match. Plan still exempt from top heavy, if there are no other contributions? That seems to be allowable under 1.401(m)-3(d)(3)(i) and (ii).

I agree with you. Refer the auditor to 2520.103-1(d) - which specifies the exception based upon the "previous plan year" filing. Then ask the auditor to provide a citation of some guidance which supports the auditor's position. Maybe there is something we don't know about. Now, I have to say that IMHO, it is absurd to allow an existing plan to go up to 120 with no audit requirement, just because they were previously a small plan, while not allowing a new plan to take advantage of a similar dispensation, but I don't make the rules... Maybe when I'm elected as dictator, I can fix some of this.

I sympathize, but if the college has already determined that these employees are subject to FICA, then I'm dubious they are going to get relief on the 403(b) issue.

Thanks David, that makes sense. I was just worried that the last sentence in Section III might be applied very broadly, and it didn't make sense that it would apply in the situation I mentioned. So you have brightened my day - thanks!

This Notice seems to me to lack some clarity. My question is this: Suppose you have a plan where the owner is over 70-1/2, and has therefore been taking his benefit as required under the RMD rules. Now the plan is being terminated. Can he now receive his remaining benefit as a lump sum? The Notice doesn't seem to address this squarely, and it seems like it could be read t prohibit it, which is ridiculous. It also appears that the proposed regulations haven't even been issued? If not, can this notice trump existing regulations retroactively to 2015?

Nope. But you might take a look at Revenue Procedure 2005-11, which provides a "safe harbor" which, if the requirements are met, will deem the student-employees to be exempt from FICA without moving on to the "facts and circumstances" in the regulations. While the auditor may be absolutely correct in this case, they frequently don't know their own guidance. Good luck! Caveat - I haven't done any research to see if 2005-11 has recently been invalidated or superceded, so take the above with a large dose of caution.

Thanks David. Certainly isn't supported by MY reading of the instructions. And I don't expect any citations to be forthcoming...

Thanks. If I'm correct on my guess, I'm also guessing it is the latter.

I've never heard this before - another TPA is saying you don't have to file an 8955-SSA if the participant has less than a cash-out benefit. I've never heard this before, and I suspect what they really mean is perhaps they don't normally report, under the assumption that the cash out benefit will be timely distributed, under the terms of the plan. But, it seems to me that if they don't get it distributed, then there's no exemption from 8955-SSA reporting just because it is less than the cash-out amount. Anyone else ever heard anything like this?

I'm just guessing, that an auditor that challenges this in the first place is unlikely to be swayed by your last point. They might just say, "Then that's what you should have done." But I revert to my original theme that I have found most auditors to be fairly reasonable, and doubt that they would give you a hard time on this anyway. And my opinion and $50.00 will get you a 2 oz. espresso at Starbucks...

I think you'd have to get stuck with an awfully hard-line auditor to give you a problem over this. It is just such a common sense solution, benefiting everyone and hurting no one, as well as truly being in the spirit of voluntary compliance. I'm feeling mellow today (so far) so I'm projecting my mellow attitude to apply to IRS auditors.

I did nothing more than speed read the section in the beginning where it lists the changes, and it didn't appear to be much of a change. Largely just incorporating prior changes, modifications due to the determination letter program changing, some minor clarifications, moving stuff from one section to another, modifying the Appendix C Schedules, etc...

Thanks. That's the exact conclusion we reached yesterday when discussing this.

Is this permissible? Participant takes loan - for short period - say 1 year. Employer never withholds anything. This is discovered just before end of cure period for the first couple of payments. No problems, no matter what, with maximum dollar or 50% limits. Can a refinance, which starts before the end of the cure period, extinguish the "delinquent" payments, since it is considered as repaying the original loan? (Assuming the period of the replacement loan doesn't extend beyond 5 years from the date of the ORIGINAL loan) Seems like a loophole. If allowable, one could keep missing the first payments, and refinance every time and ending up with what amounts to a "balloon" payment at the end.

Thank you. Brain cramp...

I always find this subject confusing. Safe harbor basic matching formula - 100% of first 3%, 50% on the next 2%. Plan also allows discretionary match. If a discretionary match is made adding another 50% on deferrals of 4% and 5% - basically transforming the match to 100% of the first 5%, it seems to me that this satisfies the ACP safe harbor, still. Basic match, discretionary match is less than 4% (it is 1% max). What about nondiscrimination testing? No current availability issue, is effective availability a potential problem, (cause the discretionary match is only available if you defer more than 3%) or am I worrying about nothing?

I've always found it oddly appropriate that the abbreviation/acronym for the Statute of Limitations (SOL) is frequently used in another, less polite parlance.

I assume you are talking about a SIMPLE-IRA - yes, a controlled group can adopt the SIMPLE, but it must cover ALL employees of all CG/ASG members, who satisfy the normal eligibility requirements. There isn't any coverage testing - you just have to cover everyone who is eligible. Watch out for the 100 employee limit in the CG/ASG...

Yup, so he has service in 2013 and 2014, so you'd use 2 year eligibility to allow him to contribute for 2015. And the employee didn't have service until 2014, so is ineligible for 2015 under 2 year eligibility. One caveat - some might assert that since the owner had no income from the LLC in 2013, you can't use that 2013 service for eligibility. I don't agree with that stance (particularly for an owner - owners frequently perform service without receiving any compensation). But I bring it up for your consideration.

Yes. I'm assuming he's on a tax extension... And of course you can always make the eligibility LESS restrictive - the 3 year is just the most restrictive allowed. It sounds, from what you are saying, like the employee has been there just as long, in which case the employee must be covered as well.

Assuming you have a model SEP, although top heavy rules apply, it isn't normally an issue simply because the contribution is the same percentage for everyone. So if the Key employee contributes 25% for himself, then he also contributes 25% for all ELIGIBLE employees. Determining who is eligible is normally where the errors occur, at least in my experience. So, your eligibility is 3 out of the last 5 calendar years, PRIOR TO the calendar year for which a contribution is being made. So, when you say 3 years, do you mean 2014-16, or do you mean 2013-15, with 2016 being the year for which a contribution is being made? So if he worked 2013-15, and the other employees only worked 2014-15, and he has three year eligibility, then the employees aren't eligible for 2016. Hope this helps.

See if Rev. Proc. 2016-47 helps.

If it isn't a "safe harbor" 401(k) plan, it is at least theoretically possible to do this, but it would require separate nondiscrimination testing under 1.401(a)(4)-4 for "benefits, rights, and features." Stupid, but possible. If it is a "safe harbor" plan, then no dice, they can't do this. I would certainly raise the issue again, IN WRITING.

I'm not entirely sure I follow what you are proposing. Are you proposing that the participant write an additional check to the plan, that won't be deferred from current or future salary? So his salary for the rest of the year is $4,000, and he wants to put $5,000 into the plan, so he writes a check out of his checking account for $1,000? If so, answer is no. As to "retroactive" deferrals, no, there is no such thing.

I still don't understand the problem. If I take a bona fide participant loan, complete with appropriate paperwork, there is an obligation to repay the plan. If someone chooses to make the payments for me (my parents, employer, friends, children, The Halfway House for Wayward TPA,s, whatever) what difference does it make? The plan is whole, and the repayment obligation is satisfied. Now, the fact that someone is essentially giving me a gift may possibly have other implications for the gift giver, or perhaps under some circumstances there may somehow be taxable income to me - that's another issue, and I have no opinion on that, but I don't see how there is any PLAN problem.