Mike Preston

Open a freakin' checking account in the name of the plan/trust and deposit the deferrals. Transfer electronically when you can.

Tom, let me recap a bit. The simplest solution for you would be achieved if you could definitively rule out the possibility that the partnership is part of an Affiliated Service Group (ASG) with you and your co-owner's S-Corp. If so, then it is perfectly permissible for your S-Corp to sponsor two separate 401(k) plans, one for each of you. However, nothing you have written allows a definitive conclusion regarding the existence or lack thereof of an ASG. If you can state the nature of the partnership (that is, what does the partnership do to make money) and the nature of what you do to earn the approximate $20,000 that does not come from the partnership, it just MIGHT be possible to rule out the existence of an ASG. Fair warning: it is far from certain that even if you provide this information a definitive conclusion can be reached. It is far more likely that it will just lead to more questions. If you are trying to make a determination before the end of the year (for whatever reason) I urge you to abandon these forums and hire somebody (not me, I'm far too busy between now and the end of the year).

Sometimes? :-)

I see no requirement to do it any specific way. Nor do I see a requirement to be consistent from one year to the next. I would be a little squeamish if the comp were 260-10 and the deduction was 0-53. Others may be squeamish at anything other than pro-rata. 52? Are you correcting 2014?? :-)

Sigh. I would be flabbergasted to find that he meant anything other than the fact that he and his "partner" each own 50% of the Sub-S. While you can claim to be technically correct that he used the words "my partner" to refer to his 50% co-owner, and that he shouldn't have, for you to jump on that and point him in the direction of the self-employed is downright mean-spirited (and that is the kindest thing I can think of to describe it). Come on, the guy isn't a pension professional and is looking for a little guidance. I think he did a great job of describing what has been done and while it is not terribly usual for a single entity to have one 401(k) plan for each employee, there is nothing wrong with it at all. And, with all that said, I still agree with your last sentence.

QDRO, read his original message. He already stated: "The s-corp as the employer and the two of us as the employees". Directing him to 401 © is not helpful. Mentioning partnerships is not helpful. While I don't disagree with your conclusion, the rest of your post is more likely to confuse than untangle.

Are you "allowed"? Subject to the second question you pose, absolutely yes. I can't say whether it is wise, though. The second question is much more difficult. In the vast majority of cases, the answer here will also be yes. But one would need to know the nature of the partnership and the various ownership percentages along with maybe some details as to what percentage of your S-corp's revenue is generated from its partnership interest. I applaud your desire to do things correctly.

Let me split hairs. You need to satisfy the gateway rules if you end up testing at least one component plan using cross-testing. 99 and 99/100% of the time that will mean everybody is entitled to the gateway. If I spent enough time I could conjure up a census where using two component plans, one of which is tested on the basis of contributions without permitted disparity and the other of which is tested on the basis of contributions with permitted disparity, is called for. In that case, no gateway would be required.

You can't use the 4.3%/$41k for component plan B. You must use "regular" 5.7% and integration level in this scenario.

Not saying it can't be done, but care is required. I'd be worried about eliminating the risk of forfeiture and causing early taxation. Need a tax lawyer for this one.

" Result: the plan can pay the $190K J&S benefit.".... typo? Did you mean ~$181k?

Check the document language. It may limit comp from which deferrals are allowed to the comp limit. While there is no requirement to do so, it certainly may have been drafted that way.

GFAK!! Not you. My best guess as to the reaction.

http://www.napa-net.org/news/technical-competence/case-of-the-week-terminating-a-simple-ira-plan-mid-year/says the above is dead wrong with regard to a SIMPLE. It may be a relevant comment to a SEP.

Yes, a 5500-EZ is required to be filed. Do you really want to be on the wrong side of an IRS inquiry on this when it can be so easily avoided by a simple filing? I think best practices is to tell the client it is required and if they decide not to file send them a formal "because you are not following our advice we are terminating our services and can't be held liable for bad stuff that happens to you" letter.

Reminds me of those all too frequent conversations I have when talking to the company representatives of mid-size plans when I find that the person I'm talking to is both the HR supervisor and the named Trustee. Come to find out that part of the listed job responsibilities for the HR supervisor is to be the named Trustee! I usually end up telling them that the only way out is to quit.

The vast majority of small plans have the company as the Plan Administrator and suffer not because of it.

What is the allocation formula in the plan?

Then what did you mean by "payroll checks"?

LOL

You also need to ensure that setting her up as an owner with earned income attributable to her is not contrary to the Internal Revenue Code 1402(a)(5). Have your accountant give you an opinion as to whether or not that section of the IRC is applicable to your situation.

I'm not willing to completely discount the possibility that the entity in question is a sole prop. So, I'll ask: Is it?

If eligible for EZ they can switch.

I should read more carefully.

If the first year the plan is/was a SH is 2016 you can amend anything you want for 2015.