Mike Preston

Yes.

People do the darndest things. They need an ERISA lawyer. Sheesh.

It doesn't. It may render part of it moot, though. Can you see what part?

It is not altogether unusual for an owner to work hard for a year and yet have zero compensation. If by following the plan terms an accrual violates a rule (think 415) then the document is drafted poorly. Assuming 415 is not an issue then the original intent would no doubt be to test compliance with the a4 using the general test (hard to believe a flat benefit of that size would satisfy a safe harbor). So do so. If you pass, you pass. If you fail, fix it by increasing NHCE's as you would with any a4 failure.

You jest, right?

Pardon my silliness, but NOBODY pays employees solely for billable hours, part time or full time. Something makes no sense.

Bill, I appreciate the "technical" laid out in your message. But it saddens me to think of all the essentially wasted resources spent on this. Isn't it obvious?

Are you an actuary? If not, find one.

You want to look at the regs under 410(a). I thought there was an example that was almost directly on point. It may be that the example is under 410(b) but it references 410(a).

Here is an article that may help. See item 7. Perhaps your bank is telling you that the trust is somehow drafted improperly? http://www.forbes.com/sites/advisor/2011/06/28/7-mistakes-with-stretch-iras/#75f4804c2617

BTW, if you want to change G6 such that the expectation is to use Gross Profits before "Section 179 expenses and unreimbursed partnership expenses" and then take into account "This partner's adjustment to SE Income pursuant to Section 179 expenses and unreimbursed partnership expenses" I think that would be great.

Yes, see the instruction for G6 on line 22 of the instruction tab. The spreadsheet doesn't take into account 179 reductions directly. What is expected (and I admit this is not self evident) is to adjust the individual partner's ratio in cell G8 to reflect the appropriate change brought about by the difference between that partner's share of the Gross Profits before "14A-179" and the partner's share of the Gross Profits after "14A-179". Kinda strange using 48.9%/51.1% for a partnership of two that expects it to be 50/50!

Yes.

ideal salary current from Tom Poje.xls Here is a spreadsheet that Tom Poje originated and I modified it a bit. No warranties. If you find an error, though, please report it.

It goes against every bone in my ERISA-fied body to both give somebody a SHNEC and include them in an ADP test. I vote for $20 bucks and a less confused manager. Doesn't your document state that the default ADP test will be performed only on those that are not eligible for the SHNEC?

Everybody (there is no restructuring available to determine eligibility for TH).

While most likely correct, if there were required amendments to the EGTRRA document that WERE NOT made in the PPA document itself, at the least one "should" make similar amendments to the PPA document. About the only thing I can think of off the top of my head would be sex-distinct language that requires replacement by DOMA (and various subsequent court cases I can't cite without looking them up). But there may be others. *IF* (and it is a big if) you are confident that your PPA document was up to date on any specific date, then all you need to do is check the provisions in the PPA interim amendments and make sure those provisions are incorporated into the PPA doc and if not you have identified what needs to be done. I recognize that the above may be a bit of overkill because some documents have successfully incorporated language that essentially states that an interim amendment that isn't separately adopted with a subsequent re-state continues to survive for qualification purposes. Your document may not have that language and some are uncomfortable with depending on the IRS granting absolution in such case without it. And some aren't!

I don't think so. Don't have time to look it up but the IRS went out of its way at one point to make it clear that such payments count as annual additions (i.e., contributions) and are not deductible except as contributions. Maybe there is a distinction I'm not remembering that would allow treatment of withdrawal charges as administrative expenses (which can be paid by the sponsor without contribution-like treatment).

As far as I know, the granddaddy of all scrivener's cases is McDaniel v. Chevron. Look it up and I think you'll see that if you have 2 billion or so on the line, the court (9th circuit, I believe) thinks that massive scrivener's errors are fixable, complete with 411(d)(6) issues. The key is that you need everything to line up. That is, a track record of having administered the plan and, IIRC, an SPD that was contrary to the scrivener's error, as well. If the participants' reasonable expectations allow fixing the error, I would go for it. But your client should be referred to plan counsel.

Yes, if it is nondiscriminatory and otherwise treated as a directed contribution. I'm on the fence as to whether a plan amendment would also be necessary. I'm leaning towards not.

You need to follow the terms of the plan. It won't be the first time that a plan was designed such that when all is said and done, nobody is eligible for an allocation.

PF, just in case it isn't clear from the fact that BG and Poje are continuing this thread, you do NOT fail 410(b) for the "profit sharing" because as BG and Poje have already pointed out, when testing the plan for compliance under 410(b) you would count profit sharing and SH contributions together, which means your ratio percentage is 100%, not 58%.

Did you mean "lower"? *IF* the document doesn't have gateway language the effectively allows you to ignore the fact that there is only one formula in play for the all other participants group, then you simply have to put enough money into the all participants group to satisfy gateway. *IF*, as you say, you have allocation conditions that preclude both you will fail non-discrimination, initially. Then you use an -11(g) amendment to cure the failure.

It is pro-rata.

You actually don't need to re-write the plan to reflect that because 100.0000000% of all plans already have that language. Take the case of the example above. If the contribution was voluntarily limited to $37,174.08 then both A and B would get 1/2 that and there would be no 415 violation. If the desire was to maximize the contribution and deposit $37,765,94 then the document would naturally limit B to $37,174.08 and the balance would be allocated to A. I can see no justification for an individually designed plan. Just have them find a pre-approved plan that provides for individual allocation groups and then handle whatever manner of crazy by administrative action.