Tom Poje

as a wild guess, since you said 'shares' it sounds like an ESOP of some type. it is possible some shares are 'tainted' and other shares are not. by 'tainted', I mean one of the owners put his shares into the plan and received a tax deduction, and therefore he is not able to receive any of those share if there are forfeitures or distributions which get reallocated.

Bird - actually, efficiency was the goal. once you have entered the comps you don't have to reenter them again every year. you have something that can be updated rather simply each year. you could easily modify future comps to assume a salary increase. etc.

I think in Shakespeare's story McDuff kills MacBeth because of the insistence of working on a plan that had eligibility like that. guess Pmacduff wants to continue that? At least the line "Double, double toil and trouble; Fire burn, and cauldron bubble." implies such headaches! (hey, it's Friday, best I can do on the spur of the moment.)

ok, modified my indexed limit spreadsheet to now include a calculation of soc sec. all you have to do is enter your DOB and the most recent comp entered. then enter your comp history. after that, the spreadsheet needs to be updated each year with the most recent avg wage (govt releases every year late oct) , the latest taxable wage base, and you latest comp. I've tried some different scenarios and have been able to produce the same results found at https://www.ssa.gov/planners/retire/AnypiaApplet.html well, ok, since I am not rounding, my results might be a $1 more or so. and once you have your historical comps entered you never have to do that again. they used to send you an annual statement listing all your comp, now you have to go out to the website to get this every year. found this quite interesting how it is actually calculated. and it is not: have soc sec taken out and then never see again. at least not yet. ok, if you are really young I might not have extended my fields far enough. indexed limits and soc sec.xlsx

well, the regs have §1.401(a)(9)-5 Required minimum distributions from defined contribution plans. Q-1. If an employee's benefit is in the form of an individual account under a defined contribution plan, what is the amount required to be distributed for each calendar year? (b) Distribution calendar year. A calendar year for which a minimum distribution is required is a distribution calendar year. If an employee's required beginning date is April 1 of the calendar year following the calendar year in which the employee attains age 70 1/2, the employee's first distribution calendar year is the year the employee attains age 70 1/2. If an employee's required beginning date is April 1 of the calendar year following the calendar year in which the employee retires, the employee's first distribution calendar year is the calendar year in which the employee retires. In the case of distributions to be made in accordance with the life expectancy rule in §1.401(a)(9)-3 and in section 401(a)(9)(B)(iii) and (iv), the first distribution calendar year is the calendar year containing the date described in A-3(a) or A-3(b) of §1.401(a)(9)-3, whichever is applicable. Q-4. For required minimum distributions during an employee's lifetime, what is the applicable distribution period? A-4. (a) General rule. Except as provided in paragraph (b) of this A-4, the applicable distribution period for required minimum distributions for distribution calendar years up to and including the distribution calendar year that includes the employee's date of death is determined using the Uniform Lifetime Table in A-2 of §1.401(a)(9)-9 for the employee's age as of the employee's birthday in the relevant distribution calendar year but maybe who ever told you otherwise can point to 'attained age of prior year as long as you are consistent' I might not change the way I calculate things, but I'm willing to put it in the back of my mind as an option if it exists.

lets change your question a little to being 600 hours in a 6 month period. Fred works 520 hours first 6 months. he works 520 hours the next 6 months. as long as your document also contains language that lets anyone into the plan who completes the 1000 hours in a 12 month period you should be ok. this is, at least I think, default language in most plan that use an hours requirement for a shorter period of time. FT William document has the following NOTE: Hours of service failsafe: if B.10a.vi - B.10a.viii is selected and the Plan uses the Hours of Service method, the service requirement under B.10 shall be deemed met no later than the end of an Eligibility Computation Period during which the Eligible Employee completes 1,000 Hours of Service; provided, that the individual is an Eligible Employee on the applicable entry date.

the notes I have from the Coverage and Nondiscrimination Answer Book are as follows: Q 12:43 A plan has the option to use either prior year testing or current year testing—any such a change would constitute a discretionary amendment. Therefore, in the case of switching from current year testing to prior year testing (or vice versa), such amendment must be adopted no later than the last day of the plan year for which the amendment is effective. [Rev. Proc. 2005-66, § 5.05(3)] If the plan changed the HCE definition (for example, making a top-paid group election), the amendment might have to be in place earlier to avoid a Section 411(d)(6) cutback in accrued benefits .............. The reason the top paid group election 'might' have to be in place earlier is because of things such as a plan that has 2 allocation groups, one HCE and one NHCE. if you change the election now and have it effective for the current year, then someone who was an HCE suddenly is an NHCE, and that would could result in an allocation cut back. now, can you change it if it is solely for purposes of the ADP test and no one is getting cut back?

you can always test on DOP compensation. this comes up quite often in cross testing as well. person enters midyear, receives a top heavy, but you can still test on a definition of comp that satisfies 414s. so it sort of doubles the e-bar wouldn't surprise me if you have done cross testing and this happened.

the QNEC is what is needed to pass testing, so based on whatever comp you used on the test (unless I suppose you have a document that says base it on full year comp. but using your example of a 72% QNEC (=$2000) so that would mean a comp of 2777.77. lets say that is one months comp. so for the year that would be 33,333.33 in comp so now I give him a 6% QNEC based on full year comp which = 2000 and since I use comp from DOP he still ends up at 72% for testing. Personally, I would also make the plan safe harbor beginning next year so top heavy is not issue if no other contributions are made and no ADP testing.

let's say ee makes $1000 month. if you are testing using comp from date of participation, and you give a 2% QNEC is $20. Now when you run the test based on comp from DOP it would show as 2% (20/1000) on the test. hmmm. first year of plan, plan fails ADP test. this smells like plan would also end up being top heavy, and you have to use full year comp for top heavy, even if not all of it is a QNEC

The FIRE Production System will be down from 6 p.m. ET December 8, 2017, through January 7, 2018, for yearly updates. A controlled launch is scheduled for January 8-10, 2018, from 8 a.m. ET to 4 p.m. ET. The FIRE Production System will be available on January 16, 2018. An alert will be posted on the FIRE webpage if the system is available prior to January 16, 2018.

so send them the info from the IRS website and tell them gently and kindly they need to change their understanding of how catch ups work. the idea is avoid 'stepping on toes' in an angry manner or anything like that good luck and much success.

if the plan imposes a cap of 15% and she is age 50 or older she should be able for catch up this is from the IRS website https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-catch-up-contributions Individuals who are age 50 or over at the end of the calendar year can make annual catch-up contributions. Catch-up contributions up to $6,000 in 2015 - 2018 may be permitted by these plans: 401(k) (other than a SIMPLE 401(k)) 403(b) SARSEP governmental 457(b) Elective deferrals are not treated as catch-up contributions until they exceed the limit of $18,500 in 2018 ($18,000 in 2015 - 2017) or the ADP test limit of section 401(k)(3) or the plan limit (if any).

even if he defaulted on a loan, that loan continues to accrue interest (on paper) so when if he tries to take a new loan that counts against his outstanding balance, so it might be a moot point anyway if he can fund a plan this way.

The ERISA Outline book has the following note: chapter 6, section VII part D.2.e.6 Roth accounts....separate account requirement is necessary for the tax rules that apply to distributions from Roth accounts....However, there is no language in IRC section 402A to treat the Roth account separate form the rest of the participant's account balance. Thus, the Value of the Account Balance will include the designated Roth account. ......... so using that logic, step 1. determine min distribution, take the total account balance including roth now you know how much the minimum is. after that, there appears to be no requirement for 'separate' accounting by the way, can you imagine the fun if you applied separate accounting to all accounts? I have to take $500, but I am 0% vested in match so I really take less because I'm not entitled to some of that due to vesting. part of the problem, I think, arises from the fact if you have after tax balance they are suppose to be done pro rate when you get distributions. and obviously Roth is a type of after tax. but it isn't quite the same. I recall a few years ago at an ASPPA conference some asked about running an ADP test and using Comp less deferrals, which, as such, was testing on 'taxable income'. so do you treat Roth the same way. the IRS response was something like, well the intent is to exclude all deferrals, so don't worry about it of course such responses might not actually reflect an actual treasury position, but as far as I know everyone subtracts all deferrals.

or, as the preamble implies, if you don't take advantage of the ability to defer on draws then it won't be an issue because you will know what your income is because you waited until the comp was determined.! a quick (but not exhaustive search on the internet has the following comments) I couldn't find any that indicate deferral have to be in earlier than April 15 (or later with extension) the only caveat any of these make is 'if comp is known' then it has to be in within a few days. which, I guess, if you defer a % and you are taking a draw you would need to put in, but I suppose your election could specify 'not on draws' This rule applies, even if the amount of your earned income is not determined by the end of your entity’s tax year. This election timing rule means that you must make your deferral election without knowing for sure how much compensation you will have for plan purposes for the plan year. Deferral Deposits The above rules also apply to deferrals made by any self-employed person. Generally, the date the clock starts ticking is the date your distributive share of earned income is determined. If you defer from draws or guaranteed payments, the clock starts ticking for those deferrals on the date the draw or guaranteed payment otherwise would be paid to you. http://ebrworld.com/deferral-election-and-deposit-rules-for-the-self-employed/ Is there a deadline to make salary deferrals into the Individual 401k? For a sole proprietorship, partnership or an LLC taxed as a sole proprietorship the deadline for depositing salary deferrals into the Individual 401k is generally the personal tax filing deadline April 15 (or October 15 if an extension was filed). http://www.individual401k.com/contribution-limits-soleproprietorship.html With the "individual(k)," a sole proprietor can make salary deferrals up to $18,000 and contribute up to an additional 20% of net self-employment income -- for a maximum contribution of $53,000 in 2015. There's also a $6,000 catch-up contribution for those age 50 and older. Contributions are tax-deferred and tax-deductible. And you can take loans from your account just as you can with a traditional 401(k). The 401khelpcenter.com has a list of financial firmsproviding 401(k)s for sole proprietors. You must establish your plan by December 31 and fund it by April 15. https://www.kiplinger.com/article/retirement/T047-C000-S001-do-it-yourself-retirement-plans.html From the Department of Labor’s perspective with respect to determining late deposits of employee deferrals, deferrals for self-employed individuals must be deposited as soon as they can be reasonably segregated from the business’s assets. The DOL’s safe harbor for plans with fewer than 100 employees also applies. Therefore, as long as the deferrals are transmitted within seven business days after the amounts became payable, the contributions are deemed timely made. From the IRS’ perspective, in no event can the deferrals be deposited after the deadline for filing the business’s tax return, plus extensions. http://www.napa-net.org/news/technical-competence/case-of-the-week-salary-deferral-elections-for-the-self-employed/ Employee Deferral In the case of a sole proprietorship, a business owner under the age of 50 may make employee deferral contributions up to $17,500 for 2013 (an employee over the age of 50 may make a $5500 annual catch-up contribution for an annual deferral contribution imitation of $23,000). An Employee must elect to make the employee deferral contribution by December 31 of the year. However, the employee deferral contribution can be made up until the tax-filing deadline. http://www.irafinancialgroup.com/wp/solo-401k-contribution-deadline/

and if it turns out Sched C income is less than 10,000 or even negative, then what?

I don't think it matters if the owner elected a $ amount or percentage. even the preamble to the regs has (emphasis mine) One commentator asked for clarification of the interaction between these timing rules and the rule under the regulations that treats a self-employed individual's earned income as being currently available on the last day of the individual's taxable year and whether this last day rule precludes a partner from making elective contributions during the year through a reduction in the partner's draw. The restriction on the timing of contributions is not intended to prevent a partner from deferring amounts that are paid to the partner throughout the year on account of services performed by the partner during the year, and the final regulations have been modified to clarify this point. However, self-employed individuals who take advantage of this opportunity to defer amounts during the year must make sure that the amount contributed during the year will not exceed the limits (such as the limits of section 415) that will apply to the individual, based on the individual's actual earned income for the relevant period. ........ I read that to say you can take advantage of things and defer before your actual income is determined, but there is no requirement to do so. the final regs merely clarified the fact you don't have to wait until the last day of the individual tax year (but apparently you can).

code section 401(k)(12)(D) simply says "...each employee eligible to participate.." since a terminee is no longer eligible to defer, I would understand that to mean they are no longer participating, don't need to make an informed decision, etc even though for purposes of the 5500 they are a participant.

If it helps, here is how one write up describes it https://www.irafinancialgroup.com/solo-401k-contribution-deadline.php Sole Proprietorship Employee Deferral In the case of a sole proprietorship, a business owner under the age of 50 may make employee deferral contributions up to $18,000 for 2017 (an employee over the age of 50 may make a $6,000 annual catch-up contribution for an annual deferral contribution imitation of $24,000). An Employee must elect to make the employee deferral contribution by December 31 of the year. However, the employer deferral contribution can be made up until the tax-filing deadline. The employee deferral contribution can be made using pre-tax and/or after-tax (Roth) funds. .................... so I'm not sure your deferral election can be "Whatever amount such that when the top heavy test is run the plan will be less than 60%", that is not definitely determinable. I guess you could specify an exact %, e.g. "so that the top heavy % is 55%, but never more deferral than permitted by the regulations for the year" arguably, since the deferral is required, even though not deposited by 12/31 would be included in the test (as opposed to a discretionary ps contribution, which in your case there are no plans for any way).

by the way, if that 2% had to be a QNEC as well, you wouldn't be able to impute disparity on any of the NHCE contribution when testing!

you did not say if plans passed testing aggregated or unaggregated. 1.401(k)-1(b)(4)(iii)(B) last sentence "you can not aggregate a plan using the ADP safe harbor provisions with a plan that is using the ADP test" so it would complicate things, because how you test plans for coverage also requires how you test for nondiscrimination (and vice versa)

just to make sure on the terms excess contribution is failure of ADP test, which, based on your notes is what you are referring. excess deferral would be someone going over the deferral limit for the calendar year.

I know hurricane relief provided for easing rules on hardships distributions and loans, and filing deadlines for the 5500. and minimum funding as well, but I don't recall the combination of minimum funding and hardship distribution and applying it to minimum distributions nor did I see it listed under the 2 announcements I looked at. in fact, the relief is to take a loan by 1/31/18 or a hardship by that date which would be an additional type of distribution one could request. I don't understand why taking a required minimum distribution would be delayed to that date as well, but maybe I missed something. or haven't been able to find it in any search I just did.

smells like a system to get around covering folks under qualified plans. sounds like such employees are for all practical purposes leased employees Under Code section 414(n), a leased employee is defined as a person who provides services: To a recipient company pursuant to an agreement between the recipient company and the leasing organization, On a substantially full-time basis, and Under the primary direction or control of the recipient company. https://www.irs.gov/retirement-plans/employee-plans-compliance-unit-epcu-leased-employees