Vlad401k

Let's say there are 2 companies in a Control Group. One of them is Safe Harbor, the other one is not. What happens if they fail coverage on their own and must aggregate? I understand that you generally cannot aggregate Safe Harbor and non-Safe Harbor plans, but what would be the way to run testing if this scenario were to happen?

Let's say the plan requires 1 year of service with 1,000 to become eligible. The entry dates are 1/1 and 7/1 (semi-annual). Also, let's say if the participant did not complete the 1,000 hours by anniversary date, the plan changes the eligibility computation period to calendar year. An employee is hired in 2018 (let's say on 1/10/2018). He is terminated in 2018 before completing 1,000 hours. He is then re-hired in 2019 (let's say on 2/10/2019 - so he hasn't completed 1,000 hours by anniversary date) and works 1,000 hours in 2019 calendar year. Would he become eligible on 12/31/2019 (and enter the plan on 1/1/2020) or 2/9/2019 (and enter the plan on 7/1/2020)? Basically, would the plan switch to calendar year eligibility period because the employee did not complete eligibility by anniversary date? Or, would he be treated as a new employee as he did not complete the eligibility requirements by his initial anniversary date? Thanks.

With the new changes in Hardship Rules, is documentation from the participant required for pre-approved plans? Or can they rely on the representation requirement? Thank you.

Let's say the plan failed ADP testing and a participant has both Roth and Traditional sources. If the plan document does not state the order in which the corrective distributions should be done, how would you process the corrective distributions? Would you process it proportionately from each source or would you start with Traditional source first and then do Roth source if the amount exceeds Traditional source. Thank you.

Let's say a participant is over 70 1/2 and took a full distribution as a rollover and let's say that his RMD was not processed by mistake. What would be the correction method for this mistake if the participant already deposited the check into the receiving IRA? Is amending the 1099-R to reflect that a portion of the distribution is an RMD and requesting the participant to take out the excess from the IRA the only method? Thanks.

We have a participant who terminated during the year he turned 55. So, normally, he would have a Code 2 for the distribution. However, since he has Roth funds in the account, the code would be B2. If he had the funds in the account 5 years or more, my understanding is that he would not be subject to the 10% penalty on the earnings (because he was terminated in the year he turned 55), but would have to pay taxes on the earnings (because he's not 59 1/2). Would you agree?

I have a question. I realize that LLC can be taxed as either Partnership/Sole Proprietorship or a Corporation. What about PLC? Can it be taxed as either one as well or can it only be taxed as a Corporation? Thanks,

Let's say a plan has an in-service distribution option for matching and non-elective contributions. A plan previously did not require participants to be 100% vested to take an in-service distribution from these sources. Can a plan be amended to allow in-service from these sources only if the participant is 100% vested? Thanks!

A participant would like to do an in-plan conversion of after-tax contributions to Roth. Which code would be used for this distribution? Thanks.

What about state taxes? I'm assuming that since the participant is living in another country, state taxes won't apply (even if that participant previously lived in a state that had state tax). Would you agree?

We have a participant who lives abroad but is a U.S. citizen. The participant filled out the required W-9 form for the distribution. How would this distribution be taxed? Would it be subject to 20% federal tax withholding and no state tax (even if the participant previously lived in a state that had state tax)? Thank you.

Let's say a participant contributed over the 402(g) limit in 2017 to the plan and the error wasn't discovered until after April 15? How would this issue be corrected? My understanding is that if the participant exceeded the limit at just one company, that means that the plan is at risk of disqualification and the excess needs to be distributed even if the participant is not terminated. Is that correct? Also, I read that the 10% penalty would apply as well as the 20% Federal tax rate. How would that be coded? Still code "8"? Thanks.

Let's say a plan does not allow for in-service. Also, the plan document states that there is an exception for non-owners who are still employed (that they don't have to take an RMD until separated from service). I have two questions: 1) Can a non-owner (who is over 70 1/2) still elect to take an RMD even though he's not terminated? Meaning does that provision give an option for the non-owner to take an RMD or wait until terminated, OR is it a requirement to wait until terminated. 2) If the answer to Question 1 is "yes", can he stop the RMDs at any time after starting them or does he have to keep taking RMDs once he takes the first one? Thanks.

The sponsor has a plan year with fiscal year end of 6/30. Let's say that this is the scenario: 1/1/2016 to 6/30/2016 - The owner deferred $9,000 7/1/2016 - 12/31/2016 - The owner deferred $15,000 1/1/2017 - 6/30/2017 - The owner deferred $12,000 The plan started on 1/1/2016 and there were no deferrals before that. Let's say the owner is catch up eligible and we're running the test for plan year 7/1/2016 to 6/30/2017. The plan failed ADP test for the plan year ending 6/30/2016 and $1,500 had to be re-characterized as catch up. For plan year ending 6/30/2017, the plan failed the ADP test again. The question is, what is the catch up limit for this plan year that can be used to re-characterize the deferrals for the owner. The owner deferred $15,000 + $12,000 = $27,000 for plan year ending 6/30/2017, but how would that show up in the failed ADP test?

Let's say that a company excludes one of its divisions entirely from the plan. Would that affect the Top Heavy test in any way? The software provider we are using considers excluded employees to not be participants and doesn't even count them in the Top Heavy test. However, that doesn't seem correct. Shouldn't these employees (and their year end balances) still be counted in the Top Heavy test?

Would that first RMD be based on Single Life table?

A participant in a 401k who is 76 years old died in 2018. The spouse was the primary beneficiary. She wants to rollover the funds into her own 401k plan and treat it as her own. As she is the spouse, I believe she can do that. However, the question is: does an RMD have to be done from the original 401k before the rollover? Thank you.

How do you interpret the last day allocation condition? The IRS language states that you should be employed on the last day of the plan year, which I believe can be interpreted 2 different ways: 1) You should be employed as of the END of the last day. 2) You should be employed during any part of the last day. So, if someone was terminated on 12/31/2017, do they receive a contribution that has such allocation condition. The software we use would not allocate a contribution to a participant terminated on 12/31. However, I have seen some responses on the forum that state that the participant would be entitled to the contribution. Is there any additional guidance on this from the IRS?

Hi Tom Poje, I agree that if the allocation is not done on Pay-Period basis as the document states, then it must be fixed. Let's say the company misses the contributions for 5 people (the document states that the contributions must be done on Pay-Period basis). What would be the correct procedure to fix this? Would you say it would be to deposit the missed amount or to deposit the missed amount plus earnings?

Yes! Thank you.

Ok, so basically when you're creating the brother-sister table to determine if you pass the 80% test for total common owners and 50% test for identical ownership, what would those percentage be for Company A? I assume that both the total for common owners would be 100% and the identical ownership would also be 100%. Would you agree?

Let's say husband and wife own 50% each of Company A. They also have some ownership in other companies, which could form a potential Brother-Sister Controlled Group. Would you consider them both as 100% owners when determining the if the controlled group relationship exists for a Brother-Sister Controlled Group, because of attribution, or would they just be considered 50% owners? Thanks.

Let's say an owner who is over 50 deferred $25,000 in 2017. So, the $1,000 is excess deferral and will be refunded by April 15 of 2018. Would the excess $1,000 be counted in the 415 limit? So, if the owner wanted to max out with a Profit Sharing contribution, would he be able to put in $36,000 or $35,000 in 2017? Thanks.

What would you say would be permissible use of the funds the company takes back? Can they use it to pay invoices or fund future contributions?

Let's say the company has a discretionary match provision chosen in the plan document. The company chooses to fund the matching contributions pay-date by pay-date. Let's say at the end of the year, the company decides that it actually does not want to fund the discretionary match. Can the company take away the matching contribution from the people who were funded?