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We have traditionally done Open MEPs this way, but the thinking of setting up a "new" plan for Closed MEPs is that we'll be filing a separate 5500 from the MEP once we spin off. If we treat it as a restatement, wouldn't there be an inconsistency in 5500 filings?

Thank you JackS! Do you see a problem with the plan document stating a "new" plan, and the 10/1 safe harbor deadline for such plans?

If there is a plan sponsor who wants to switch from a Closed MEP to their own plan after 10/1, and they currently have safe harbor status with the Closed MEP, can they maintain that safe harbor status with the new spinoff plan? I have been researching and see mixed opinions, but nothing definite.

I have a question on how to calculate the 25% deduction limit. The IRS says: However, an employer’s deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to eligible employees participating in the plan (see Employer Deduction in Pub 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). My question is - who are considered eligible employees participating in the plan? For profit sharing purposes, does this include employees who were participating during the plan year but terminated before the last day of the plan year, specifically if the plan document states that profit sharing won't be paid to employees not employed on the last day of the year? Thanks!

thanks to all! This was extremely helpful. Apologies for the odd title, the driver of the issue was the desire to perform an equal profit sharing allocation, obviously there is no Roth Profit sharing.

A & B are equal partners and both get a K-1s (traditionally identical) A makes pretax contributions (which are included in box 13 (a deduction) B makes Roth contributions which are included in Box 4 (guaranteed payment) thus A & B end up with different box 14 numbers and thus higher net earnings. When allocating profit sharing, does B have higher compensation then A and thus receive a larger profit sharing allocation? Is there a way not to reach this result?

Trying to figure out if unvested RSUs and/or unvested options are included in ownership percentage when trying to figure out who is an HCE? I can't find any info on it but my guess is no. Can someone also confirm that vested options are treated as owning that stock... Thanks!!

The IRS definition of HCE is: Highly Compensated Employee - An individual who: Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2014; $120,000 if the preceding year is 2015 or 2016), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation. I've always thought that top paid group was calculated without taking the $120K number into account, but based on the "and" in the 2nd bullet, am I incorrect? In other words, if someone makes $80K but is in the top 20% of compensation and you are using the top paid group election, are they an HCE or not? Thanks in advance!

I have a client who, instead of doing a profit sharing or matching contribution for employees, prefers to just pay all plan expenses for them. They want to include mutual fund expense ratios in these plan expenses. My question is, would this be at all possible? Assuming expenses are paid daily out of returns from the mutual funds, is there a way to do a calculation of exact expenses paid at the end of the year, and if so, can the employer legally reimburse these funds into the employee accounts? Thanks in advance for your help!

If a plan currently uses the employer's fiscal year (ex: year end of 2/28) instead of the calendar year as the plan year, what affect will this have on compliance testing, etc? Would there just be an administrative effect in terms of calculating deferrals and compensation for testing purposes, or is there something else I am missing? Will it negatively affect the employer in any way?

This may be an easy question, but one I don't know the answer to. If an employee making $100K becomes eligible for the safe harbor plan on July 1, is his 3% nonelective contribution based on $100K, or $50K?

Thanks, I just did, but it sounds like 406 covers foreign affiliates of an American employer? My question is about an American affiliate of a foreign employer. Please correct me if I am wrong.

Hi, I was wondering if anyone knew whether a 401(k) could be set up for a US satellite office of a foreign company? There is only one US employee, and he is not the owner of the company so I believe a solo 401(k) isn't an option. Thank you!