jpdrews

I regret including the term "solo 401k". thank you all for taking the time to respond.

Thank you C.B. Zeller. Yes we've spoken on the limits. Sometimes I feel like Winston Wolf from Pulp Fiction. Appreciate you both taking the time to comment.

Thank you justanotheradmin. this is very helpful and I think i know where to go from here. The client immediately w2'd himself and his wife $25,000 each from his s-corp right after establishing the plan. Then, deferred the entire amount (after FICA) and made an immediate SHNEC contribution of 25% or $6250 for him and $6250 for spouse. He generally doesn't take much of a salary from his S-Corp...something I've been on him for a few years about. He likely will not take any more salary for the rest of the year. But that's how he's "fully" funded the plan for 2023 already. He's been a real estate broker for almost 20years and makes most of income from flipping houses now. The biggest reason for the move is to get client's fees down from $1740/yr to $250/yr. He's being charged for admin services (form 5500 filing and producing safe harbor notices) as well as ERISA-related services (distributing 404a notices, QDIA notices etc.) which are all unnecessary for this plan. No service requirement in the current plan🙄

Pros, have a client that went and set up a 401k for his real estate brokerage business with a 1/6/23 effective date. His intent was to set up a solo 401k. Using a DIY 401k vendor, he ended up setting up a full-blown safe harbor 401k w SHNEC (EACA provision, 25% SHNEC, cross-tested profit sharing). The only eligible employees are himself and his spouse. His minor children are employees of the corporation but excluded from the plan due to age 18 eligibility requirement. I would like to move the plan to a new vendor and drop the safe harbor provisions as they're unnecessary. He's fully funded the plan for 2023 for himself and his wife (maxed EE deferrals and the max ER contribution--25% of w2) Is there an issue with simply changing plan docs midyear to one without the safe harbor language? Is there some notice that must be sent to covered EE's? Thank you.

Client has a 401k plan with age 21 and 12 mos service requirement for the purpose of employee deferrals, matching, and profit share. The client hired two employees earlier this year, both of whom are HCE's (owners' spouses). Client is wondering if it's possible to retroactively amend the eligibility to 6 mos to allow spouses to defer in 2022? Or, is it possible to create a new class of employee with separate eligibility criteria for these two allowing them in the plan immediately and leave the age 21/12mos criteria in place for all others. Plan otherwise passes ADP testing (no employer contributions are being made to the plan) and coverage testing.

chc93 may have the easiest method. If dentist sells practice, it's likely to be an asset sale and winding down of the entity that is currently sponsoring the plan...thus terminating the plan. If the dentist doesn't wind down the entity, they would still likely term the plan as there would be no more employees associated with the entity. Either would fully vest all participants. Now that doesn't help the dentist satisfy the employees if he doesn't want the employees to know about a possible sale until it happens.

Check the plan document to see what it states regarding the timing of distributions. The plan doc should also cover your question on whether a partial distribution is allowed.

It's my understanding as you stated the participant has until April 1 of the year following the year the participant retired. If they participant retired in 2018, seems they only need to take an RMD for 2018 under the "still employed" exception to the employer-plan RMD rules. Since the RMD was not taken prior to distribution, I believe you and an excess contribution to an IRA. The RMD amount, and any gains attributable to that amount would be considered excess and need to removed.

Well I know our industry loves acronyms and that's now one of my favorites. So am I initiated into the club?

Can I get permission to reuse "RTFD"?

Thank you both very much for the discussion. I did not see anything concerning verbal communication in the plan doc. We've advised them to speak with ERISA counsel. Seems like a grey area to say the least!

In December of 2015, the CEO of a plan sponsor told employees in a conference call that for 2016 the company would begin matching on a monthly basis and discontinue matching on an annual basis. The CEO also communicated what the match formula would be for the year. As part of this change the plan doc was amended to allocate matching on a payroll by payroll basis. The plan doc has the match as discretionary. The plan doc also states that all employer contributions must be deposited by the IRS tax deadline plus extensions. For the first 3 months of 2016 the match was allocated per payroll but remitted to recordkeeper monthly. But then the company began submitting employer contributions 2-3 months after the payrolls for which they were allocated. It seems remitting ER contributions 2-3 months after the payrolls may not violate the timing requirement established by the plan doc. However, could the CEO's verbal communication of a "monthly match" supersede the plan doc and obligate them to remit ER match monthly? Thanks for any thoughts.

Thanks everyone for the additional input. After more discussion with the participant, she confirmed she was confused by the direction on completing forms provided by the new ER plan recordkeeper. ESOP Guy you're point re the 1099's is probably true. I figure since the IRS would be receiving only one form 1099-R showing a rollover (assuming the transaction was voided and redone as rollover) they would never know what transpired. Given the size of the plan they'd also have to really get into the weeds on an audit to figure out what happened. My concern has simply been I don't feel comfortable having the old ER plan ttee involve themselves since it now appears to be an error in communication/instruction on the side of the participant and new ER plan recordkeeper.

My understanding is amount of IRA protection varies by state. For instance I believe TX is unlimited...similar to 401k...but CA is an amount necessary to support the welfare of debtor and relatives in retirement. Don;t quote me on it, but I think that amount is generally considered to be somewhere around $1M if not a little more.

Yes the old employer plan withheld taxes. Old ER plan recordkeeper said they could go get the taxes back from the IRS should the ttee decide they wanted to redo the distribution request as a rollover. Since 1099's havent been sent, recordkeeper is saying they would void the first direct distribution check, recall the taxes from the IRS, issue a new rollover check payable to new ER plan, and issue 1099 in 2017 showing as rollover instead of direct distribution.