justanotheradmin

Is there a QSLOB? at it's most basic, the ratio percentage testing on an individual basis might pass, allowing other testing to be done individually. But you should look at benefits, rights, and features carefully. Are you looking for the mechanics? Assuming all are benefiting- super duper simplified. 300 + 3 = 303 HCE 1000 + 180 = 1180 NHCE GroupA 300/303 = 99%, 1000/1180 = 84.7%, 84.7% / 99% = 85.6% Ratio is over 70% Company4 3/303 = 1%, 180/1180 = 15.2%, 15.2%/ 1% = 1540% Ratio is over 70%

I'm not a fan of rearranging compensation to try to game the system. I would suggest a defined benefit plan and a 401(k) plan covering all entities including the husband and wife as sole proprietors. The wife's employees would need to receive enough benefit to make it worthwhile, which may be a lot if they are older than the husband and wife. There are lots of ways to slice and dice it with combined testing, combined plans, offset, cash balance, etc. Those particulars will come down to their personal preference and what they are willing to commit to, and what you are willing to work on. Edit to clarify: I would NOT do the SEPs and SIMPLE with the above arrangement. I would discontinue those if going with the 401(k) / DB arrangement.

1. What is the plan document's definition of compensation? 2. Are there any exclusions to the definition of compensation in the document? Fringe benefit exclusions? Shareholder insurance exclusions? I will tell you that most of our plans use a W-2 based definition of compensation, without any exclusions that would affect shareholder insurance premiums. So those plans include it in calculations.

I agree with Tom. To get a sense of whether or not the match is more efficient at maximizing the HCE contribution than the PS you should look at what portion of the Total Safe Harbor match is going to the HCE. If the HCE's are receiving 75% of match dollars, but only 60% of the PS dollars, then they might want to consider doing a Discretionary Match + SH Match + PS to get to the maximum. That's assuming of course the plan document allows for a discretionary match and safe harbor match at once. Ours usually do, so sometimes our clients like to do their 4% SH Match, + 4% disc Match, + the 3% / 9% PS. If they think the match will continue to be favorable to the HCE for future years, they could try to increase their SH match formula up to 6%.

Agreed.

As for the no NHCE group % to use for the QNEC, I have asked informally at conferences both the IRS and other practitioners what to use, and what I usually see is a safe harbor style percentage as a stand in. Something like 4% or 6%, which would result in a 2% or 3% QNEC if going the 50% route. I have never received a firm answer, but those rates seemed reasonable to me, depending on the circumstances.

No. Read appendix A of Rev Proc 2018-52 It has language in several places similar to "For purposes of this section .05(2), in order to determine whether the plan passed the ADP or ACP test, the plan may rely on a test performed with respect to those eligible employees who were provided with the opportunity to make elective deferrals or after-tax employee contributions and receive an allocation of employer matching contributions, in accordance with the terms of the plan, and may disregard the employees who were improperly excluded. " So if the NHCE were exlcuded for whole year, the ADP test is done with only the HCEs. It would pass.

Curious: Did the employees of the wife's company have a distributable event? I didn't think partial plan term (or stopping participation in a plan) in and of itself is a basis for distribution? Particularly if it was a stock / equity sale (instead of an asset sale) those employees wouldn't have a job termination event.

This is older, but I still find it helpful, and the language easier to understand with some of the examples for deduction issues. https://www.irs.gov/pub/irs-tege/epche903.pdf

To clarify - the money wouldn't be removed from the plan. It doesn't go back to the employer. If there was too much in the trust as of 12/31/2018 (assuming calendar year plan) we would allocate it as an additional employer contribution, and then have the sponsor move the money from the participant accounts to the correct participant accounts. You allocate it until 415 limits are reached. This is older, but may be helpful: See page 27 Suspense Accounts https://www.irs.gov/pub/irs-tege/epche903.pdf

If the document says No. Then the answer is No. Just because something is possible, doesn't mean the specific plan in question allows it. Plenty of things can be accommodated by vendors, or by the tax rules, etc. doesn't mean the plan permits it.

You can probably merge them all you want, and maybe have good reasons to do so (related businesses, payroll, management etc). but if they are not part of single employer, each entity would need to have the compliance testing performed separately, as if they were truly stand alone. and I'm not sure what the existing MEP document / agreement says. It would be a pain if you have to get each of the 20 employers to agree to the plan change. You may have other efficiencies gained by keeping it a multiple employer plan, such as investment or recordkeeping pricing, audit cost, plan documents costs, etc. But it won't be treated as a single employer plan. Single Plan /= single employer plan Good luck.

I think some clarification on the facts would be helpful. Is this correct: Tier 1: Your Company Tier 2: Acquired Co. wholly owned subsidiary, or to be absorbed into Your Co. Acquired Co. - Lead Sponsor of a MEP Tier 3: 20 other companies that participate in the MEP Who owns those 20 companies? If they aren't a related employer group (control group, affiliated service group etc) merging them into a single employer plan doesn't change anything. If you have unrelated employers participate in a single plan, its a MEP. Even if it isn't marketed as a MEP, it's still a MEP. A single ER plan only exists if all of the business entities are a single employer (such as a control group).

lol! :-)

thank you austin3515.

Kevin C. is correct. It's a classic late deposit. Deferral money doesn't lose it's status as deferral money simply because the employer holds onto it longer than they should. The fact that the late deposit crossed the end of the plan year doesn't change this. If the payroll person goes on vacation, or family leave or whatever, situations like this arise. Unfortunately this happens all the time.

Once a plan is safe harbor, it needs to comply with the rules. Running the ADP as an alternative to the ADP test isn't an option. If it were, more plans (especially small ones) would roll the dice if they knew they could just do ADP testing as a fall back. The plan needs to fix its compensation issue, not run the ADP test.

Is the stipend compensation included in plan compensation? 401(k) plan - employees are paid regular hourly wages, plus a stipend for meals, lodging, etc. when traveling. The sponsor specializes in providing services to other areas so the stipend makes up a large portion of the company payroll. I believe these are also sometimes called per diem payments. (not to be confused with per diem employees). The plan document defines plan compensation as W-2 Wages without any exclusions (so fringe benefit is not marked as being specifically excluded). "Wages within the meaning of Code §3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statements under Code §6041(d), 6051(a)(3), and 6052, determined without regard to any rules under Code §301(a) that limit the remuneration included in wages based on the nature of location of the employment or the services performed." It's clear that the stipend in NOT a reimbursement, as it is based on the government rates, and not actual expenses. It's also clear that the stipend is not taxable income and doesn't appear on the W-2. But plenty of things don't appear on the W-2 (FSA elections for example) but are still included as comp. I don't have familiarity with this type of compensation. Thoughts? Other Benefit link threads that have covered this?

This whole little thread is hilarious. :-) This line is my favorite.

how a person is paid does not determine their status as an employee of an organization. PEOs, Leasing companies, Temp agencies, even office sharing arrangements all frequently result in a person receiving pay and a W-2 from an entity that is not their employer. who is determined to be an employee is determined based on who has control of the employee (there is a list of factors somewhere the IRS uses as a guideline) but no where on the list is how the person paid or from what entity. However, as a stand-in, and for simplicity's sake, usually the payroll of an entity is taken to represent all of the entity's employees. While that is usually true it doesn't sounds like it is true here. Though with the nanny on payroll, I would wonder if there would be some sort of presumption they are an employee of the S-corp. What do you mean by the control group comment? Control group status would likely exist regardless of how the nanny is paid. If the same person that employs the nanny as a household employee is the 100% owner of the S-Corp, I don't see how there wouldn't be a control group. Household employees (including nannies) are a common control group issue. Years ago I had a client that included their nanny, housekeeper, driver, and helicopter pilot (yes, they had a personal helicopter pilot to carry them around the city) on their business' employee benefit programs for this very reason.

The pre-approved plan document we use has language in the basic plan document that mirrors the regs and revenue procedures for the Top Heavy exemption. So if you are not comfortable pointing back to the IRS, and would prefer to point to your document, look there. Maybe it has similar language.

I'm guessing the refunds were to people other than the person with the $6,000 eligible for catch-up? Otherwise if if failed in January, and that person was the one allocated the refund, it would have been reclassified as catch-up at that point and not actually distributed. I would say yes, to try to get the refunds back, unless those participants are otherwise eligible for distributions and want to keep the money.

You should look up prevailing wage, and Davis Bacon 401(k) plans, which I believe are part of SCA. There are service providers out there that specialize in plans with those provisions and have some good articles and resources. Or you can search here on benefits link, as there are quite a few threads about those contribution types. Yes, they are usually 100% immediately vested. I have seen two plans with prevailing wage provisions audited in the last few years (by the state) and the 100% immediate vesting was something they paid very close attention to since neither plan sponsor wanted to do it.

S-corp shareholder premiums are usually taxable, and reported as income on the W-2. What does the W-2 say? Are the premiums included? https://www.irs.gov/pub/irs-drop/n-08-01.pdf "The premium payments are included in wages for income tax withholding purposes on the shareholder-employee's Form W-2, Wage and Tax Statement, but are not wages subject to Social Security and Medicare taxes if the requirements for exclusion under section 3121(a)(2)(B) are satisfied." Unless the plan document excludes fringe benefits (which shareholder premiums usually are), they would be included as plan compensation.

Thank you C.B. Zeller and CuseFan! Good to know it's possible, (though not as simple as I'd like), and as I suspected the actuary is correct. I don't have a copy of the Cash Balance Answer Book, but one of our actuaries might, so I will definitely look into it. And yes CuseFan, I've thought about splitting the participants up and doing component testing as you suggest. Now that I know more about testing a DB plan on a contribution basis, I'll have our actuaries give it a whirl!