Mike Preston

Folks aren't going to like this, but....... there is no exception to the 402(f) Notice for distributions under $200. With that said, the 402(f) regulations allow a plan sponsor to remove inapplicable sections. So, other than plan identifying characteristics you end up with a very short 402(f) Notice that merely tells them they have the right to rollover what they have received if they want to do so, as long as they do it "timely" (I don't have time to look up the rule, but I think it is within 60 days). Then again, is the only downside to not providing a 402(f) Notice a potential $10 fine? Unless you want to drag in the "intentional violation of ERISA" stuff (but I find it hard to believe somebody would pull out such a heavy handed enforcement tool in this case).

Does not compute. "Plan A is cross tested and giving 6% contribution." Why in the world would you cross test that?

You can only follow the procedure. If you don't think it protects the plan properly, amend the procedure. Then follow the amended procedure.

ETA, way too limiting. One can adopt an operational amendment before plan year end, subject only to 411(d)(6). 2007-44, me thinks. 5.05(2) therein states: (2) In the case of a discretionary amendment (i.e., one which is not an interim amendment described in section 5.02), an employer (or a sponsor or a practitioner, if applicable) will be considered to have timely adopted the amendment, if the plan amendment is adopted by the end of the plan year in which the plan amendment is effective.

Most plans call for a full year of benefit accrual service once the hours requirement is satisfied. Hence, if the hours requirement is 1,000 a participant is credited with a full year once credited with 1,000 hours. To drive home the point if the plan document is changed, effective 1/1/2017 to provide that the hours requirement is 10 hours, then a participant is credited with a full year once credited with 10 hours. In such a case, the plan could be terminated 3 days into 2017 and the participant would have 10.00000 years. Nothing contained in this message is meant to contradict the very good advice written into earlier messages making it clear that it is most likely (although not guaranteed) that the increase in the 415 limit we are likely to experience as of 1/1/2018 argues for termination next January.

I don't think you have to reach that far. I was thinking more along the lines of John Doe as fiduciary of a plan using the plan's assets to shore up an investment John Doe (an individual or marital estate) has in Corp B. It might even reach to effective control. If the stock purchased by the plan is 10.0000000001% of B then, on its face, it looks like a PT to me.

I've had one client do it that way. They knew what they were doing and did it consistently, across years. Most clients wouldn't be able to.

I would be very concerned that this is an indirect PT. No time for chapter and verse, but it doesn't take much to make a case that the investment of the plan in the entity is a benefit to the prohibited party.

That is painful to read. Try this: One commentator asked for clarification of the interaction between these timing rules and the rule under the regulations that treats a self-employed individual’s earned income as being currently available on the last day of the individual’s taxable year and whether this last day rule precludes a partner from making elective contributions during the year through a reduction in the partner’s draw. The restriction on the timing of contributions is not intended to prevent a partner from deferring amounts that are paid to the partner throughout the year on account of services performed by the partner during the year, and the final regulations have been modified to clarify this point. However, self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits (such as the limits of section 415) that will apply to the individual, based on the individual’s actual earned income for the relevant period.

You are kidding, right?

Is 2017 a distribution calendar year with respect to this participant? Whoever is arguing for no RMD needs to read he 401(a)(9) regs again and again until they can answer this question. Once they can answer this question they need to agree to the required RMD.

Not you. TPAJake.

Some? I'd say it is universal.

The conditional on deductibility is only available for the first year the plan is established, if at all. Has to be a plan provision and most plans no longer have that language. Either amend or it is a reversion, plain and simple. MoJo, how long is your list?

Young'n.

I think mine (which I think originated with Tom) handles Brother-Sister CG only and is limited to 5 companies and 7 owners. Send me a PM if you can't find it and I'll see if I can find it.

Check out the March 13, 1998 IRS Memorandum from Robert Padilla: INTERNAL REVENUE SERVICE MEMORANDUM Date: March 13, 1998 To: Robert Padilla, Chief, EP/EO Cincinnati Key District From: Director, Employee Plans Division, CP:E:EP Subject: Requirement for definitely determinable allocations On September 8, 1994, we issued a field directive concerning whether a profit sharing plan that provided for employer discretion to determine amounts allocated to particular groups of employees satisfied the definite predetermined formula requirement under section 1.401-1(b)(1)(ii) of the Income Tax Regulations. The field directive concluded that this requirement was not satisfied for such a plan. On June 30, 1996, we issued a second field directive which rescinded the prior field directive and illustrated several plan designs that satisfied the definite predetermined formula requirement. You have asked whether the first field directive was rescinded in its entirety or was limited to the illustrated plan designs. The first field directive was revoked in its entirety. Consequently, the second field directive should not be interpreted as applying only to the illustrated plan designs, but rather to all plan designs. A plan would not violate the definite predetermined formula requirement if the employer has discretion to determine the amount of the contributions to be allocated to particular groups of employees defined under the plan and the plan specifies the method for allocating these amounts among the employees within each group. The number of people in each group or the number of groups is immaterial provided that each group is identifiable under the plan and the identity of particular employees in each group is not subject to employer discretion. It is also immaterial that the purpose for forming the groups is to satisfy the cross testing requirements under section 1.401(a)(4)-8. For example, a plan with defined groups including a group with one person (i.e., 100% shareholder) would not violate the definite predetermined formula requirement. Although the plan can provide for employer discretion to determine the amount of employer contributions for each group, the plan must require that the employer notify the trustee, in writing, of the amount of contributions for each group. This requirement does not mean that the plan must provide the specific amount of contributions for each group. Instead, the plan must provide that the trustee be given written notification from the employer as to the amount of the contribution to be allocated to each group. [Emphasis added.] If you have any further questions regarding this matter, please call Mr. Al Reich of Technical Branch 5 at (202) 622-7976. ================================================================== I doubt the number is still good, but the bottom line is that every plan should have language which addresses this issue.

How do you know this?

Guy, where do you come by the information that the author of the misguided post is mad at BenefitsLink?

Must up the PS to a full 7.5%.

If plan loans are a bad idea, let it be for reasons that actually make sense. And even if one concludes that they are a bad idea doesn't give license to make stuff up. Statements like "However, that does not change the fact that a participant appears to experience a tax on the principal portion of 401k loans that is more than double his/her incremental tax rate." are at best simply cowardly and at worst are intentionally spreading "alternative facts" (lies).

As long as EdgarBeaver is neither a retirement plan consultant nor a financial advisor then his lack of understanding should cause no harm. Otherwise, the tired rodent should be involuntarily re-tired.

Sorry, but I don't have time to do a thorough review of your rule set, but it appears right at first blush.

Bingo!

So, how does your formula work with net self-employment = 20k; deferrals of 18500? Doesn't the formula say $750? Will anything between $751 and $1,000 be a problem?