Mike Preston

Are you sure about the year? It seems to me that a reasonable position would be that, as of 12/31/2016 the deferrals weren't late. What do you think about treating it as being late in 2017, rather than 2016?

spiritrider asked me privately what part of the formula I disagree with? While I agree that the formula holds water when there are no catch-ups, I have a problem with the formula when there are catch-ups (which don't count for 415). I don't have time to determine how the formula should be changed when there are catch-ups. Perhaps spiritrider can do that.

I disagree with your specific formulas, but I agree the abbreviated formula breaks down when the sum of the deferrals (exclusive of catch-ups) plus ".25*(Earned Income)" exceeds the 415 limit, which for low Earned Income amounts is 100% of Earned Income. Good catch.

Trick question, huh? I think the answer is "neither". Basically, the term "(.25)(Earned Income)" represents the maximum employer contribution that can be made. So, first thing, is that deferrals don't have any impact on the calculation. Second thing, whatever happens to be a match is just a part of the employer contribution for the year. Give a couple numerical examples to prove the theory.

Everything Tom said, squared. This is the danger of blogs and social media. Unbelievable.

BG, what you referred to as a "penalty" I talked about in terms of "correction". If I understand what the OP wrote, the plan has recieved about $30,000 in contributions circa 2007 and some unspecified amounts for 2016, with nothing in between. The most agressive position I would expect to see from a reputable service provider would be to suggest that the Plan Sponsor treat the plan as owner-only from 2007 through 2015 because that *is* the way it was administered. It is most certainly a chicken-egg scenario, at the least. This combined with an EPCRS filing might just do the trick.

Three things: 1) You may be able to establish that the rollover was allowable. See the following link: https://www.irs.gov/retirement-plans/retirement-plans-faqs-relating-to-waivers-of-the-60-day-rollover-requirement 2) If you can't, then you made an ineligible rollover and should distribute the funds from the IRA by the applicable annual deadline. You didn't say what date you made the rollover so I can't tell you what the deadline is. If you did this in 2016 then I think the deadline is the due date of your 2016 tax return, which might be 4/18/2017 (i.e., you don't have much time). 3) If you fail to remove the rollover by the applicable annual deadline, you incur a 6% cost for each year it remains in the IRA past the deadline. You are not taxed on the distribution amount to the extent that it represents a return of the rollover. You are taxed on any earnings that are distributed. Good luck.

You need to ask these questions of the organization that generated the summary.

Perhaps somebody on this bulletin board will reach out to you privately and offer a solution. Publicly I'd be surprised if anybody suggests anything other than you need to file back to as far as 2007. It may not require quite that many filings, however, because it is unclear from the facts that you recited that you needed to file a 5500-SF for all years. Whoever you engage should get the relevant information regarding your employee (date of birth, date of hire, hours worked in each calendar year, compensation information [probably a copy of the W-2 would suffice]) and carefully comb through the plan documents that you signed and their related master documents to see whether you were exempt from filing for one or more years. You may be pleasantly surprised. Again, regarding your questions as to any liability that Edward Jones or your advisor have in this circumstance I doubt that anybody can give you that information based on what you have recited and, even if they could, they wouldn't do so publicly. The advice you are getting from the tpa is probably rooted in the fact that the correction (filing 9 years of past Forms 5500 (sf or ez)) is prohibitively expensive when viewed in the light of how much money you have in this plan. Unfortunately, the IRS doesn't take that information into account in determining late filing penalties, which can also be prohibitively expensive. Hopefully, you have the records to allow a tpa to definitively analyze what you can and should do at this point. At the least, copies of annual account statements for all years going back to 2007 and source documents to determine contribution amounts for years where those might have been required for your employee that you are unaware of. Good luck.

This discussion has implications in another current thread. That other thread essentially asks the question: what is the participant's last day of employment? IMO, organizations that don't have robust HR capabilities are better served by using the 1,000 hour rule. As far as RBG's comment regarding cause for concern, I would say that is the very nicest way of wording it. If left to my own devices I would say that whoever suggested 2,080 hours would result in the crediting of two years of vesting service is dangerously incompetent and any organization that doesn't remove that person from client responsibilities is complicit.

tl;dr

BG, if the plan has no HCE's, how can it matter?

Congratulations, old man! I will miss our spirited discussions.

What if 3% gateway only "buys" 8% w/o disparity but 8.25% w/ disparity? I agree that if 3% buys exactly 9% (very unlikely) you have concocted an example where it is not better. But it certainly isn't worse and can often be better. Even if the consultant runs the test w/o disparity it is often advantageous on audit to use disparity to save a test that through data entry error would otherwise fail. Tell me the downside (other than getting the concept into the skulls of other advisors)?

Betcha Dave can get it back.

You guys are missing my point. When testing based on permitted disparity the 3% SH can not take advantage of the integration. That same amount as a regular employer profit sharing contribution can do so. All other things being equal, the HCE's can get more dollars as employer profit sharing than as SH.

You need a better reason than the general test is better off?

It is not that an audit for the 1 month plan year isn't required (it is). Instead, the audit requirement is allowed to be met by having the auditor's report for the subsequent plan year expanded to include the short period.

Yes.

Haven't you answered your own question? Doesn't the document effectively read: "Use comp without bonuses if 414(s) is satisfied, otherwise use comp with bonuses"?

Yes.

Sure. But we are mind-stretching an after-the-fact solution!

There *IS* a school of thought that once a contribution is designated "on account" of a particular tax year (as would be the case if the check or authorization were designated as a contribution for a particular tax year) that it can't be changed. I think the IRS also takes the position that even in the absence of a specific designation the act of deducting it on a tax return designates the contribution for that tax year. With that said, when an act of designation would violate the 415 limit it is arguable that such designation, having never been allowable, is valid in the first place. I *CAN* tell you that every accountant I've spoken with on this issue does not hesitate to amend the offending tax return and treat the excess as a contribution for the next fiscal year.

Bob, stop being so darned logical!

Amen to that! (Mental atrophy) I have a number of TPA clients that (theoretically) run things like this by me and this low level of liquidity vs. RMD's has literally never come up. Now, if you are talking a SDBA by a partner in a law firm that has generated this problem, how about the following for a solution: Partner buys all or a portion of a not liquid asset from the plan. Files via voluntary compliance with the DOL to "correct" the prohibited transaction. Pays the 5330 excise tax. Partner bears all extraordinary costs. BTW, I still don't think your example makes much sense because can't the promissory note be distributed, in full if necessary, and the participant can come up with cash to roll over to an IRA within 60 days all that is rollable?