Dougsbpc

Suppose they have signed salary deferral elections indicating that they wanted the dollar amount indicated. Since the deferrals did not go into the plan by 10/15/2025, could they be contributed now as a late deposit of salary deferrals and deducted for the 2025 year? They are on extension until 10/15/2026. Then of course they would need to go back and file an amended return for 2024 when they took a deduction for the contributions but they were never deposited to the plan. Thanks.

We have had this happen in the past. Of course it is best to have the shareholder make a loan to the corporation and then have the corporation fund the plan. However, some years ago the same thing happened and the CPA recorded it as a shareholder loan on the books of the corporation and did not seem to be very concerned that the loan proceeds came from the 100% shareholder.

Suppose you have a small defined benefit Pension Plan and the 100% shareholder is now 73 and needs to take his first RMD on April 1, 2026. It is our understanding that if the RMD is calculated and based on a 20 year certain annuity (for example), he can later take the balance of his benefits as a lump sum distribution if he actually retires. However, if the RMDs (prior to actual retirement) were calculated and based on a single life annuity, he is prevented from taking the remainder of his benefits as a lump sum when he retires. Instead, he is forced into taking the remainder of his benefits under the plan as a single life annuity. Does anyone agree or disagree with this? Suppose we started calculating his RMD basing it on a 15 year term certain annuity. Is there any problem using only 15 years? Generally, most plan sponsors and participant's want the smallest RMD possible but not in this case. Then presumably when he retires in a few years or so, he can take the balance of his vested benefits as a lump sum and then roll over to an IRA. Thanks.

We administer a defined benefit plan and a 401(k) plan for a small employer. They have two shareholders (husband and wife) and 3 full time employees. Just the shareholders participate in the DB (passes 401(a)26). All participate in the 401(k) plan. The 3 non-shareholder employees get a 7.5% contribution in the 401(k) plan every year. Both plans together pass 401(a)4. The DB plan has had and still has a benefit formula of 5% of FAC per year of participation. They want to increase benefits (with a fresh start of course) to 9% of FAC for each year of participation. Would this be considered discriminatory because the amendment itself is just raising benefits for HCEs? All other employees are excluded but are getting adequate contributions in the the 401(k) plan every year. Would this type of amendment be considered discriminatory? Thanks

Sole Proprietor with a Solo 401(k) plan was with a brokerage firm that was bought by another brokerage firm. Apparently everything was very automatic in transferring investments etc. However, the sole proprietor had an automatic withdrawal of salary deferrals of $2,000 per month. When the new brokerage took over, the automatic $2,000 salary deferrals did not happen. It was always so automatic that the sole proprietor took a deduction for $24,000 for the 2024 year. Later, it was determined that none of the $24,000 went into the sole proprietor's account for 2024. Does: 1. The sole proprietor just pound sand, suck it up, have his return amended and hand over the income tax, penalties and interest? 2. The sole proprietor have any possibility to deposit $24,000 now and keep the $24,000 deduction for the 2024 year? Thanks.

We administer a calendar year 20 participant 401(k) plan with salary deferral, match and profit sharing. They failed the ADP/ACP test for 2025 so refunds will need to be done this week to HCEs. We spoke to them about making safe harbor contributions, QNEC etc. but they just want to go ahead with refunds. And the refunds are not so bad (around few thousand for each of the three HCEs). In this case they have a discretionary match. Question: they have a discretionary match and have been happy doing it that way. Also, they usually fund the match around early May when they fund profit sharing contributions (corporation goes on extension). How do we correct discretionary match contributions when they will not be funded until early May? So suppose we have the following: a discretionary match of $40,000 will be funded for the 2025 year. Suppose the 3 HCEs would each be entitled to a $5,000 match and match contributions of $700 each would need to be forfeited to pass the test. I would think these forfeitures would need to happen for the 2025 year but would not be available to use until the 2026 year (plan uses forfeitures to reduce subsequent year contributions). I don't think we could just have them fund $37,900 ($40,000 - $2,100) for the 2025 year. So I would think we would show full match contributions on the 2025 benefit statements for the three HCEs. Then in 2026 show $700 each being forfeited from their match accounts. Does anyone agree / disagree? Thanks.

We administer a self-trusteed 401(k) plan that offers self-directed investment accounts to all participants. I believe each can purchase mutual funds through their American Funds account. The plan does not restrict each of these participant to just mutual funds but also allows for private investments. One of the participants wants to purchase a small Almond Ranch. He would like to personally invest $400,000 and invest $600,000 from his plan account. There would be strict accounting splitting the income and expenses each year for both the individual portion (40%) and the plan portion (60%). If this is followed we do not think there would be a prohibited transaction. We know somebody needs to run the Almond Growing entity. They could get 3 leased employees from a PEO. Correct me if I am wrong here (I very well could be). I believe that after this potential transaction, they would need to cover these leased employees in their plan if the leased employees are substantially full time. I believe substantially full time is 1,500 hours or more per year. What if they had 3 Leased employees who would be restricted to only 1,200 hours per year? I would think the leased employees would ever become eligible for the plan. Another Issue might be UBTI. Does anyone think UBTI would apply in this case? Thanks!

Year 6 of a one participant DB had no AFTAP done. Therefore benefit accruals are frozen as of the end of year 5. That means no benefit increase for year 6 until a subsequent AFTAP is done and is high enough such that prior year's benefit accruals are restored. My understanding though is that for funding purposes, that is not an issue for year 6. In other words freeze the benefits because of no AFTAP but go back and assume a benefit accrual for funding purposes. In other words, benefits are frozen but not considered frozen for funding purposes. Does anyone agree / disagree? Thanks!

Have a 401(k) plan that is a safe harbor plan with salary deferrals, non-elective safe harbor and profit sharing. Would there be any problems or additional testing requirements if the plan had the following eligibility requirements: Salary Deferrals - immediate entry after working 100 hours. Safe Harbor Nonelective - immediate entry after working 1,000 hours. Profit Sharing - immediate entry after working 1,000 hours. In other words, they want almost all employees to be able to fund salary deferrals soon after being hired but only want to provide employer contributions to those who who are full time and almost full time. Thanks.

Have a scenario where a county employed judge has a private business. As a county employee she has a government provided pension plan. Her private company is very profitable and will be for at least another 8 - 10 years. Can her private company (an S-corp) sponsor a defined benefit plan for her as the only employee? Would her government provided pension plan benefits she accrued factor into what could be done with the private plan? Thanks.

We might take over a 1 participant DB plan. The plan is in its ninth year. The plan has adequate assets to pay all benefit liabilities. Looks like it always has. The problem is that no AFTAP was ever done. So benefit accruals are frozen for years 6,7 and 8. If we get the current AFTAP timely signed, it is at 122%. If this is done, are all prior benefit accruals (from years 6,7 and 8 automatically restored? Thanks.

In the past, a terminated participant with a vested benefit payable from a pension plan had to be provided with annuity options (actually, the normal form of benefit) if the lump sum value of their benefit exceeded $5,000. In other words, terminees with a vested lump sum value of less than $5,000 could simply be paid a cash lump sum. Did this threshold go up to $7,000 with the SECURE Act? If so, then I would think a terminee with a vested lump sum value of less than $7,000 could just be paid a cash lump sum for plan years beginning in 2025. Does anyone disagree with this? Thanks!

Information update: the asset purchase will take place over 10 years (approx. $170k per year). I think above I mentioned that the defined benefit plan will be made active for one year. It will actually be active for about 5 years then terminate and distribute. A's corporation still exists. The income from the sale to practice B is paid to practice A's corporation. This amount per year will represent about 90% of practice A's revenue each year for the next 10 years. What would happen if the $170k per year is paid directly to the 100% shareholder of Practice A each year instead of the practice A corporation? Thanks.

Thank you CauseFan What if this had been an asset sale? Other than a management group, I believe there must be some common ownership in each entity for an ASG to exist. If ABC company is purchasing the assets of DEF company, does purchasing the assets equate to having an ownership interest in DEF company?

Many of us have probably run into this scenario: We administer a small defined benefit plan for an attorney. He has no employees and gets most (if not all of his paralegal work) done by a firm that provides contractors. The plan has been in place for 7 years and is currently frozen. The idea was that it will soon be terminated and distributed. The attorney is now selling his law practice through a stock sale. Each year the buyer will receive 20% of the corporation's stock until 100% is owned after the fifth year. The seller wants to unfreeze the plan and make substantial contributions for one year of about $300,000 then terminate the plan. Question: when this sale is taking place, does an affiliated service group exist? And if so, I would think the buyer and his 3 employees and the seller (only him) would need to be aggregated for all testing in the now unfrozen defined benefit plan. It turns out the seller does not want to cover anyone but him. If an affiliated service group exists I would think we would have 5 to consider. Just for 401(a)26 he would then need to cover (5 x 40% = 2). Just out of curiosity, would an affiliated service group exist if this were an asset sale (for example a sale price of $1.5M with the buyer paying 20% of $1.5M each year for 5 years)? Thanks.