Belgarath

Generally considered terminated for a sole prop if all assets have been distributed, right? No contributions were due, no other employees, never were.

Like you, I've seen plans where 100% vesting was required, but I've never seen them take the 1.401-1(b)(2) requirement to this extreme. Seems like a remarkably foolish thing - I'd bump it up to a supervisor. Don't know if anyone else has had this come up!

Thanks Bird.

Say a sole prop dies - has a small 401(k) plan - all assets distributed to beneficiary. Assume plan doc is up to date, and final 5500 form properly filed, and 1099 to beneficiary issued. Does the executor of the estate itself have any specific duties with regard to filing anything further with regards to this plan/distribution - forms, paperwork, etc.?

Yeah, as I recall, the only general difference between 3401 and W-2 is that excess group term life insurance is excluded under 3401, and there's possibly something funky on the W-2 exclusion regarding certain stock options - I'd have to look that one up, as I don't recall off the top of my head.

Looks like it changed for 2009. Pre-2009 still had the controlled group restriction, 2009 didn't.

...Based on our most recent analysis, we decided to increase the VCP user fees for small plans to more accurately reflect the average time spent on these cases and to reduce the fees for larger plans to reflect the average time it takes to do these cases. To attempt to be objective, it may well be true. I have no data on the average time spent on relatively small cases vs. large cases. I'm giving them a partial "benefit of the doubt" until someone publishes/uncovers some real data/statistics. Which will probably never happen.

Mike, I know that used to be true, but is it still? I seem to recall that it was changed. Copy of current instructions attached - at a quick glance, I don't see that item you mention. https://www.irs.gov/pub/irs-pdf/i5500ez.pdf

18" of new snow as of 4:00 AM, and still snowing...sheesh.

Tom, I've always understood that restriction to apply to vesting only. In other words, yes, it is treated as a "terminated" plan for purposes of 100% vesting, but you don't have to "terminate" the plan and distribute the assets. Agree/disagree?

I don't think so. You could have 1-1/2 year eligibility, as long as you 100% vest immediately.

No, this isn't permissible. I believe you may be thinking about a plan that uses age 20-1/2 with a 6 month eligibility and a single entry date. That would be ok. But in the situation you have, a person might not enter until after the statutory entry date requirement.

Is the fix for the deferral piece really 50%? Aren't you eligible for the reduced 25% QNEC under Appendix A, .05((9)(b)? Agree that the match is 2%. Hmmm - as I think about this, it seems debatable. There appears to be an odd technicality in this - whether intentional or oversight I don't know. So under .05(9)(b), it allows the 25% QNEC in lieu of the higher QNEC required under .05(2)(b) or .05(5)(a). Under .05(2)(b), that section is specifically NOT for plans using a safe harbor, where a participant was not provided the OPPORTUNITY to defer. This might lead you to believe that for a safe harbor plan where no OPPORTUNITY to defer was given, that .05(2)(d)(i) controls, which is the 50% QNEC, and .05(2)(d)(i) isn't referenced under the .05(9)(b) correction. .05(5)(a) is for situations where someone made an election where it wasn't implemented properly. So under a very literal reading of .05(9)(b), it appears that that you could use the reduced QNEC correction for situations where an election wasn't properly implemented, but not for a situation where someone wasn't given the option to defer. This makes no sense to me, since you must give the full match anyway, even under the reduced QNEC correction in .05(9)(b). Anyone have any thoughts on this? I almost think this may have been discussed/debated a while back, but I can't remember.

I absolutely defer to the attorneys or those who are more knowledgeable in this arena, but the plan probably has a "standard" default if there is no named beneficiary. In ours, for example, the progression is surviving spouse; issue, per stirpes; surviving parents in equal shares; estate. Jpod, I'm sure you can enlighten me. I'm under the impression that "per stirpes" can sometimes mean different things in different states, depending upon state law? But if there are grandchildren as per the OP, does that mean, in this case, that the grandchildren are considered direct beneficiaries of the plan, and therefore it wouldn't go to the estate? So let's say the only daughter predeceases the decedent - and the daughter had three children, all of whom are alive. Does it get paid in equal shares to those grandchildren? Thanks for any information you care to pass along.

100%

Wow, you really do know people in high places...

I have no opinion...

Snow hasn't made it up North yet, but depending on which forecast you get, anywhere from 6 to 20 inches. I suspect we'll be closer to a foot or so. Springtime! Not nearly as severe as the blizzard of '78, when I was in college in the Boston area. A week without classes! But we had power, food, and plenty of beer. The best of all possible worlds, if you didn't have to work for a living... I'm not overly nostalgic about "the good old days" but that was a great week.

Your instincts are correct. The answer is no.

Ah, I get what you are saying - the dispensation under (10)(B)(ii). Thanks.

Thanks, but even if a wholly owned subsidiary, how can Corporation B sign on as a Participating employer in the Corporation A plan, without violating the "only plan" rule for a SIMPLE? Corporation B would then be sponsoring both a 401(k) and a SIMPLE during the same calendar year. That's the part that is hanging me up.

Corporation A sponsors a 401(k) Plan. Corporation B sponsors a SIMPLE-IRA. Corporation A is purchasing Corporation B in a STOCK sale, not an asset sale. Question is, can the employees of Corporation B participate immediately in Corporation A's 401(k) plan? I don't think so. While there is the IRC 410(b)(6)(c) transition period and the 408(p)(10) period available for continuing to run the plans separately, since this is a stock sale rather than an asset sale, the corporation still exists, and the SIMPLE can't be terminated mid-year. If it were an asset sale, then no problems. Any other thoughts/opinions?

For anyone who cares, yesterday the IRS announced a revised (downward) HSA contribution limit of $6,850 (a $50 reduction from previously announced limit) for participants with family coverage. Participants with self-only coverage are not affected. https://www.irs.gov/pub/irs-irbs/irb18-10.pdf

Perfectly possible that client performed legitimate services while in prison - correspondence, corporate decisions, etc. - I would check with the CPA first, to see how this was paid, (W-2, Schedule C or K, etc.) and then move on from there once you have that information.

In your example, since you are within the SCP period, I think it should be 25% across the board, if you comply with the notice requirements, etc., plus of course full appropriate matching if applicable, and earnings. Also see examples from the IRS fix-it guide. Example 2 is included because it contains data for example 3, which appears to be the appropriate example for your situation. Example 2: Corporation XYZ maintains a calendar year a 401(k) plan that contains automatic contribution features. In this case, all employees in the 401(k) plan automatically have salary reduction contributions of 3% of compensation withheld from their pay. Participants may decrease or increase this amount by filing an affirmative, written election. In 2016, XYZ realized four employees hired in June of 2015, were improperly excluded from the plan due to an administrative error. XYZ discovered the failure in 2016 and auto-enrolled the employees in the 401(k) plan as of April 1, 2016, and began withholding 3% of their compensation as salary reduction contributions to the plan. On May 1, 2016, XYZ issued a special notice to employee that satisfied the content requirement specified in Rev. Proc. 2016-51, Appendix .05(8). XYZ does not have to provide a corrective contribution for the missed opportunity to make salary reduction contributions due to the employees’ improper exclusion from the plan in 2015 and first three months of 2016. The conditions of the Appendix .05(8) safe-harbor were met when: Improperly excluded employees were enrolled; special notice provided within the applicable 45 day period; and The above actions occurred within 9 ½ months after end of the plan year which the failure first occurred (i.e., before October 15, 2016); and XYZ is still responsible to pay corrective contributions to the 401(k) for any 2015 or 2016 matching contributions or employer contributions, if applicable, that the employees would have been entitled to under the terms of the 401(k). Example 3: Assume the same set of facts, except that the terms of XYZ’s 401(k) plan did not provide for automatic contribution features. Assume the excluded employees become plan participants on April 1, 2016, and at that time were given the opportunity to participate in the 401(k) plan. XYZ issued the special notice on May 1, 2016. Under these facts, the lost opportunity cost for the missed deferrals would be 25% of the missed deferral amount for 2015 and first three months of 2016. Adjust this amount for earnings through the date of correction. This is permitted because XYZ complied with the special safe harbor requirements in the Appendix A.05(9) safe harbor discussed in Rev. Proc. 2016-51. XYZ would still owe 100% of any owed corrective contributions associated with matching or non-elective employer contributions, if applicable, and all corrective contributions would have to be paid to the plan before the end of the second plan year beginning after the initial year of the failure.