spiritrider

Normally, you can not change FSA elections mid plan year. Luckily, marriage is a change of status event that allows you to do so. In this case you should be able to make HSA contributions up to the family plan limit for March - December. Normally, that would make your contribution limit 2/12 * individual limit + 10/12 * family limit. However, under the "last month" rule, you can make contributions up to 100% of the plan limit you are eligible for on 12/1. This means you can make 100% of the contributions up to the full family plan limit, but there will be a "testing period" from 1/1/17 - 12/31/17. If you do not remain an HSA eligible individual for this entire period, your contribution under the last month rule (full contribution - prorated contribution limit) is subject to a 10% penalty.

The current version of the IRM lists the 5330 in the chart under 25.6.1.6.4. I have no idea if or when this recently changed. What is less clear to me is why the 5330 is not covered like the 5329 has been forever in 25.6.1.9.4.3.6. It is certainly a form reporting more than one item of tax. 25.6.1.6.4 (09-20-2016) Statute of Limitations Chart for Tax Returns The filing of the Form 5330 starts the running of the statute of limitations, except for the section 4975 excise tax, the filing of the Form 5500 starts the running of statute of limitations for section 4975 excise tax. It is 3 years if the information is disclosed and 6 years if it is not disclosed on the applicable form. 25.6.1.9.4.3 (04-01-2007) Forms Reporting More Than One Item of Tax

Yes, one-participant plans are a marketing gimmick, but it is a marketing gimmick that allows them to offer such plans at no cost because their administrative costs are lower. To enforce this, they do not allow you to adopt or remain in these plans if you have or acquire eligible employees. Vanguard is even stricter. Their adoption agreement does not provide for the specification of age or service requirements. It defaults to no restrictions on eligibility what so ever. They do provide a compliant document that they keep up to date with amendments/restatements if you respond to their directions. All of the ones I have seen do provide custodian services and some provide trustee services. They will do transmittal of withholding on withdrawals and report/issue 1099s where appropriate. You are correct. To my knowledge, none of them provide Form 5500 filings. They send to a report the information necessary and instructions for filing. You still haven't responded with who this brokerage is that will provide a no cost plan with after-tax contributions.

Who is this major brokerage firm that allows after-tax contributions to their marketed no-cost one-participant only plan? Is this a full fledged plan with record keeping, or is it just a plan document and custodial services? If it is the latter, that would be playing with fire without a TPA. If it is the former, they are certainly not making this well known. There are many people who have been looking for such an offering for the last couple of years. As recently as a few months ago, I verified that Fidelity, Vanguard, and TD Ameritrade do not allow after-tax contributions to their one participant only plans.

1) Yes, technically it is a transfer. I know there is no 1099s. I never mentioned a 1099 for this action. My terminology was imprecise, but it is clear what I was referring to. 2) What I believe the OP was suggesting was a no cost one-participant plan marketed directly to end users. For example, Vanguard Individual 401k, Fidelity Self-Employed 401k, TD Ameritrade Solo 401k, etc... None of these providers offer low cost after-tax options for small businesses let alone one-participant plans. For example, Vanguard does not offer 401k plans with their own record keeping for plans < eight (8) figures. They partner with Acensus and the minimum administrative expenses are ~$4K/year. The same is true for Fidelity and the others. If you want a one-participant/small business plan with after-tax contributions you are going to need a TPA. You are not going to be able to use their no cost marketed plan. That is my point. 3) To take maximum advantage of Notice 2014-54 in a plan with after-tax contributions and in-service withdrawals prior to 59 1/2, the participant is going to want to make at least one rollover of contributions and earnings/year. This will require one or two Form 1099-R(s) in any year you do a rollover. Let us not get lost in the weeds. My points to the OP were: There was a fairly straight forward process to change providers to a no-cost one-participant plan at major financial institutions or to a lower cost TPA. I was speculating that the administrative fees charged might be less for a plan with just a single participant owner. As far as I last knew, the mainstream providers do not offer after-tax contributions in one-participant plans they market. If someone has factual information that this has changed, I'm all ears. Short of that, the bottom line is, the OP can have free or after-tax, but not both. I admit I was imprecise in the details, but could we be constructive/helpful and direct the OP to a moderate cost option.

Incredibly incorrect??? 1) It is obvious that I meant to say rollover to the new account, because I was talking about the same plan. 2) Try contacting them and asking them if you can make after-tax contributions to their respective one-participant plans. They use their approved plan document for many different types of customers, but their adoption agreement for one-participant plans does not allow after-tax contributions. For example on another issue, Fidelity does not even allow their Self-Employed 401k plan to make Roth 401k contributions even though the plan document clearly supports them. 3) The rollover of the after-tax contributions and earnings will require 1099-R(s). One if both go to a Roth IRA with the earnings taxable and one each if the contributions are rolled to a Roth IRA and the earnings are rolled to a traditional IRA with no taxable income.

OP, I am assuming that you are a plan sponsor, and not a TPA, etc..., from the only other thread you have posted in about after-tax contributions. What are you trying to do? Are you really looking for "simplicity" or saving on the administrative cost by moving to a one-participant 401k provider? If all you are trying to do is move to a no cost plan at Fidelity, Vanguard, TD Ameritrade, etc.. there is no need to terminate the plan. Once you have no eligible employees, amend the plan to the new custodian and possibly trustee, and rollover the assets to the new plan. You can name yourself as administrator, but your prior posts do not lend themselves to a high degree of confidence. I would suggest that you at least hire a professional to make sure you do the transition correctly and to at least make sure you do things properly for this and next year. If your goal is to make after-tax contributions, the above is not going to work. I am not aware of any custodian provided plan that allows after-tax contributions in their adoption agreement. This is going to require an independent plan document and a TPA to administer and properly follow the IRS' new guidelines in Notice 2014-54. Some large corporate plans are still confused about the proper procedures. This is not going to be free, but the yearly administrative costs and filing fees for the 1099-R(s) are likely to be less than the administrative burdens of a plan with employees and the yearly Form 5500 even when the plan balance was < $250K The good news is that as a one-participant plan, you don't have to worry about ACP testing.

IRS Notice 2014-54 and allowing in-service rollovers of after-tax contributions have made them a more valuable 401k feature. This notice allows the direct rollover of the after-tax contributions to a Roth IRA and the pre-tax earnings to a traditional IRA (or convert to the Roth IRA) Surprisingly a fair number of plans manage to pass ACP testing and those that wouldn't, a fair number of them manage to pass with a modest (8-10%) contribution limitation on HCEs. This is especially true if the plan match is extended to after-tax contributions. Also, it is best if after-tax contributions are fully available without requiring the reaching of the 402g limit first. That said, it is still a minority of plans offering after-tax contributions.

Not that I know of. It is treated as a sole proprietorship for Schedule C purposes. The only limitation that comes to mind is that in a non-community property state an LLC (even though disregarded) can not elect a "qualified joint venture".

You are right that the SE tax calculation is marginally lower when the net business profit > the Social Security max wage base. The IRS certainly could have chosen to design Schedule SE to use two separate paths with two different adjustment factors. One to use 0.9235 to apply 15.3% to the amount <= the SS max wage base and another one to use 0.9855 to apply 2.9% to the rest. Instead they chose to apply a single 0.9235 factor on the full amount. Then they apply the 12.4% up to the SS max wage base and 2.9% after that. Net effect you pay a marginally smaller Medicare rate at that point. Shhhh, don't tell the IRS.

Technically, I do not think it would be an impermissible plan design to have a general purpose HRA and an HSA. It would just be dumb and render the participant ineligible for HSA contributions. See Rev. Rul. 2004-45 The most common HRAs complimenting an HSA are limited purpose and/or post-deductible not unlike similar FSAs.

They are putting the burden on the participants to transfer their assets from the old plan to the new plan. The old plan requires a $20 fee to do this.

Is a cafeteria plan responsible for the costs of changing HSA custodians or can it force the burden on the participants? While the HSA accounts are opened and owned by the participants, the plan selects the designated financial institution where the employer contributions (including employee payroll deductions) are deposited. The plan has sole discretion in selecting this institution and any change to other institutions

Deferral contributions are technically deemed to be made by the employer and the self employed are not subject to DOL regulations. Therefore this is subject to section 404. 404(a)(6) Time when contributions deemed made For purposes of paragraphs (1), (2), and (3), a taxpayer shall be deemed to have made a payment on the last day of the preceding taxable year if the payment is on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (including extensions thereof). Note: This is tax filing deadline, not when you file.

Personally, I don't see the risk/reward benefit. The maximum match/non-elective contribution is 3%. How much difference can there really be making employer contributions during the year vs. at tax filing time. Fine for W-2 employees or yourself as an S-Corp share-holder employee. You have a direct calculation from the W-2 wages. For someone taxed as a sole proprietor or partner, it just makes no sense to me.

One additional wrinkle. The minimum participation standards are maximums. Make sure the plan document (I don't know why) or more likely the adoption agreement didn't reduce/eliminate these. Mainstream providers handle this differently. Fidelity allows you to select this in their adoption agreement. Vanguard states; "There will be no age and service requirements under this Plan" in their adoption agreement.

Part of the confusion comes in, because there are two separate issues of "control" involved. Control of the 403b and an employer controlled by the participant The participant is in exclusively control of the 403b, except when the participant has a > 50% ownership in another employer. In that case the 403b is considered maintained by both the participant and the controlled employer. This is what leads to the aggregation of 403b and solo 401k/SEP IRA plans. Even though the regulations state; (regardless of whether the employer controlled by the participant is the employer maintaining the section 403(b) annuity contract). I can think of no case where a participant can own a 403b eligible institution. If your employer has a 403b and a 401k, you should have one 402g limit and two 415c limits.

Doesn't CFR 1.415(f)-1(f) imply that the 415c limit does not apply in this case. Normally this is referenced in regards to a 403b participant in conjunction with a personally owned business retirement plan (solo 401k or SEP IRA). The 403b is considered a plan of the participant and must share a single 415c limit with the solo 401k/SEP IRA. But it does say; "the participant, and not the participant's employer who purchased the section 403(b) annuity contract, is deemed to maintain the annuity contract, and such a section 403(b) annuity contract is not aggregated with a qualified plan that is maintained by the participant's employer."

Even if it was not rolled over, there is no requirement that a plan has to remove excess deferrals. Some plans generally will only remove excess deferrals when the excess actually occurred under their plan. I believe the thinking is that it wasn't an excess deferral when the participant separated and why should the plan have the administrative burden of correcting an error of the participants own making. Their view is that it is the responsibility of the later plan to remove the excess deferral, because it occurred on their watch. Question? Would a plan of a previous employer ever process an excess deferral request prior to the end of a year based on a participants projection of excess deferrals based on their deferral rate at the new employer? I've never seen a plan require proof of the excess deferral and amount, just routinely process based on the requested amount and plan provisions. However, this typically happens after the W-2s have been received.

My thoughts in bold. Please elaborate. Under what circumstances would a one-participant plan ever have a vesting schedule?

I am going to make a different observation from the CPA and TPA points of view. I am simply an employer (myself) of a one-participant 401k plan. I appreciate the knowledge and experience of the members of this forum. It is primarily intended for professionals, but unlike some other professional forums, they are willing to share with everyone. Which I find extremely helpful, because as has been pointed out one-participant 401k plans are 99.9% the same as full blown plans. With that said, I think the TPA viewpoints expressed in this thread are a little over reactive. It seems like the majority of replies here are assuming that we a talking about investment only accounts in conjunction with separate plan documents with no support from the financial institution. These absolutely require a TPA. But... From the OP's posts, I rather think we are talking about standard protype backed plans marketed by mainstream providers. Therefore, I am assuming we are talking about a standard prototype one-participant plans from a financial institution. Even the main stream providers differ in the level of services they provide. Some only act as custodian, leaving the the trustee and administrator choice to the employer. Some extend that to provide trustee services. They vary in the level of record keeping they provide. They all leave the administrator choice to the employer. Sure the principal can specify a third party administrator (and if necessary trustee), but the vast majority of such one-participant plans are operated with the principal acting possibly as trustee, full/partial record keeper, and/or full/partial administrator. We can argue whether that is a good idea or not. Unfortunately, the providers market these plans as nothing more than a SEP IRA with the possibility to increase your contributions, by adding employee deferrals if you haven't otherwise used up that space. The reality is that most people with one-participant 401k plans operate in blissful ignorance. So a knowledgeable CPA can provide useful services in contribution calculations, record keeping, and administrative advice. This is certainly better than what currently happens with the majority of one-participant sponsors being relatively clueless of what lies beneath the surface of their plans. However, my experience and anecdotal evidence leads one to conclude that many CPAs are also clueless in even the most basic issues. As a corollary, there have been a lot of inferences based on facts not in evidence. Given my assumption. 1. Every provider I am familiar with; monitors LRMs revises/restates the plan document when required. All that is required by the administrator is to timely provide amendment certification and complete a new adoption agreement in a timely basis. I have only needed to do this twice in the last dozen years. 2. Yes, controlled groups and affiliated service groups are complex and I would consult a retirement plans professional. However, all that is necessary is to know the basics to know you need assistance when the circumstances arise. 3. Most providers track contributions and earnings by account type. Some will track 402g and 415c limits. 4. Unless I am mistaken I don't believe the issue of in-service distribution prior to 59.5 has anything to do with pre-tax vs. post-tax. My understanding is that all deferrals and their earnings regardless of type and non-vested employer contributions can not be withdrawn prior to 59.5 even if the plan allows in-service distributions. Vested employer (pre-tax) contributions and earnings can be withdrawn prior to 59.5. 5. All one-participant employer contributions are fully vested. 6. There is no anti-discrimination testing. So my opinion is this. If and only if we are talking about standard prototype plans at a major provider, there is no reason why the OP can't provide value add to their clients on these plans. At some level this is not that much different than the services a CPA provides on other areas of tax law. Provided the CPA acquires the necessary knowledge. The plain fact is that plan sponsors are simply not going engage a TPA for a mainstream provider one-participant 401k. At the end of the day are they better off with the assistance of a reasonably knowledgeable CPA or flying solo?

If you are a sole proprietorship and you file on a Schedule C, then you are self-employed. The "Deduction Worksheet for Self-Employed" is applicable to you, but is only used to calculate and possibly limit the employer contribution. The employee deferral + catch-up contribution is only limited by the requirement that it can not be more than 100% of (net business profit - 1/2 SE tax). There is no reduction I am aware of that can reduce this. On Form 1040 line 29 the self-employed health insurance deduction can be reduced by (line 27 1/2 SE tax + line 28 retirement plan contributions), but not the other way around, although you can voluntarily reduce the retirement contributions to max the health insurance deduction. So if you have sufficient net self-employment income, there should be no reason that you can not make the full employee deferral + catch-up contribution + 20% of the net self-employment income from the worksheet..

The first reply outlines the exact basis for retirement plan contributions. With a corporation, distributions (S-Corp) and Dividends (C-Corp) are not compensation and can not be the basis for retirement plan contributions. Note: The employer contribution must come out of corporate income net of expenses including payroll. Are you really a C-Corp and not an S-Corp? It is unusual for just an individual owner. You are double-taxed on both profits to the corporation and dividends to the individual. Yes, you can retain earnings and it is better to account for large inventories.

I didn't see this posted in any other forum and this seems the best place to post it. In case you didn't read the bulletin, the IRS has released RP 2016-47. This provides for self-certification for a waiver of the 60-day rule, based on 11 enumerated reasons. https://www.irs.gov/uac/new-procedure-helps-people-making-ira-and-retirement-plan-rollovers https://www.irs.gov/pub/irs-drop/rp-16-47.pdf No more PLRs for these 11 reasons. Also, since they probably vetted all the prior PLRs for legitimate reasons, I think the future success of a PLR for another reason will have a low probability of success.

That certainly makes sense for after-tax contributions, but while employed Roth (like all deferrals) cannot be accessed at all before 59.5 and then only if the plan allows in-service withdrawals.