RatherBeGolfing

If that is what they want to set it up properly on their side, what is the harm? It will take you 5 minutes to prepare the SS-4 and 5 minutes to get the EIN online...

RBD for a non-5% owner who reaches 70 1/2 before retirement is April 1 following the end of the calendar year of retirement (termination). Participant in the example terminated 12/31/16. RBD is 4/1/17

Which electronic delivery rule are you referring to? DOL? IRS?

If corrected by 4/15/2017, the excess is NOT an annual addition. § 1.415(c)-1(b)(2)(ii)(D) Excess deferrals that are distributed in accordance with § 1.402(g)-1(e)(2) or (3) do not give rise to annual additions.

1. A change in the policy does not mean that existing loans are somehow invalid because they don't fit the new policy. The existing loans are contracts between the plan and participant. 2 &3. I agree with ESOP Guy. If the amendment or new policy does not specify how to handle those issues, PA should use discretion and apply the new policy uniformly. On the other hand, it might be better to take care of that in the amendment or write it in to the new policy (not part of the amendment) to eliminate any confusion.

Was it known that he would be an HCE for 2017 when he was allowed to participate in 2016?

If the plan allows for catch-up contributions and the participant elects 7%, and 7% is within the allowable limits for the participant, can you justify not doing 7%? Are the instructions/forms clear on the issue when the participant elects what to defer? If you vendor cannot do what your plan permits, you need a different vendor...

Pizza Pro v. Commissioner – Where Do We Go From Here? Here you go!

DOL Proposed Rule: 60-Day Extension of Applicability Date for Definition of Fiduciary (Conflict of Interest) Rule and Related PTEs

PATH Act (2015). Deadline for filing 1099-MISC reporting non employee compensation moved back to January 31. February 28 is still the deadline for reporting distributions on 1099-R.

Old habits die hard. I know CPA's who do 5500's with a Schedule I just because that is what they have always done. It sounds like you are fine with moving to the SF for 2016. That being said, just because you are eligible for the small plan audit waiver does not mean you are eligible for the 5500-SF. From the 5500-SF instructions (my emphasis underlined)

The way I understand it, you could do an "other" attachment to the 5500 with a statement that an election is made under 4972 that no taxes are owed. This would start the SOL just like filing a "protective" 5330 to start the SOL. The court rejected the argument that NOT filing a 5330 is the same as filing a 5330 showing $0 owed. There was a good ASPPA article on it that I read earlier today, I'll see if I can find it and post the link.

It's the 2016 excess I'm unclear on. If it's taxable in the year of deferral, wouldn't I issue a 2016 1099-R for the deferral and a 2017 1099-R for the earnings? (And another 2017 1099-R for the 2015 excess deferral. "Luckily" no earnings involved.) Lets assume that the participant deferred $20,000 in 2016 (18,000 plus $2,000 excess). The W-2 would show $20,000 in Box 12 since the excess must be reported on the W-2. The excess is not included as wages in Box 1 because it was deferred. The participant has to include the excess as income for 2016 because you can't exclude income in excess of the 402(g) limit. Your basic tax prep software should pick this up assuming the W-2 was prepared correctly. It is now 2017 and you want to make the correction prior to April 15 which means that the excess is taxable in the year of deferral (2016) and the earnings are taxable in the year of distribution (2017). You don't need a 1099-R to report the taxable income to the participant, the W-2 already did that when we reported excess in Box 12. You do need a 1099-R to report the distribution of the excess in 2017, even though it was already taxed in 2016. So you issue the 2017 1099-R with a code P (prior year) to show that while distributed in 2017 it was taxed in 2016. You also issue a second 2017 1099-R for the earnings on the 2016 excess with a code 8 (taxable in 2017). Compare that to the 2015 excess. The same W-2 rules apply, $20,000 in Box 12 which means participant had to include the excess as 2015 income. We have now taxed the excess once. You did not correct by April 15 so the excess is taxable AGAIN in the year of distribution. This is reported with a code 8 on the 2017 1099-R (plus earnings had there been any). The participant had to include the 2015 $2,000 as income in both 2015 (on the W-2) and 2017 (on the 1099-R). The 2016 excess was only included as income in 2016 (W-2). Does that help clear up why you use the 2017 1099 even though it was taxable in 2016?

I agree, those were not the SOLs I was looking for... OP, Indeed, Pizza Pro Equipment Leasing, Inc. v. Commissioner of Internal Revenue seem to be on point here. The SOL that would control is the 5330 SOL, not the 5500 SOL. I agree with ESOP Guy, you owe for all years going back to inception. I am curious though, what was the other site's argument for applying the 3 year SOL? Also of interest would be when that argument was made since the Pizza Pro case is fairly recent.

Was a Form 5500-EZ filed for each year 2015-2007, or did they rely on the under $250k asset filing exemption for any of the years?

Code 8 - Excess deferrals taxable in 2017. The 1040 will depend on how the participant filed and paid taxes in 2015. If the participant did not include the excess as income in 2015, an amended 1040 would be probably be needed. The 2015 W-2 should signal to the IRS to expect a 1099 for the excess since the W-2 shows deferrals in excess of 402(g) limit.

Ha ha, I say the same thing about Florida, but we also have that no state income tax thing :)

We used to do a lot of quarterly testing plans 10 years ago. I don't think we have a single one today. I do see an argument for quarterly testing if you have coverage or ACP test issues.

Thats true

I was going to say the same thing with a small addition. if you can't reverse the payroll or the recordkeeper gives you a hard time, maybe the sponsor can give the participant a small extra paycheck so that the participant has the same "cash in hand".

You always use the 1099-R for the year of distribution. For 2015, the excess could have been distributed prior to April 15, 2016 with two 2016 1099-Rs. one with the excess and code P (prior year) and one with the earnings which are taxed in the current year (2016). After April 15, 2016, the full amount is included as income in the distribution year. The participant therefore had to include the 2015 excess as comp in 2015 since the excess cannot be excluded from comp, and then again in the year of distribution (including earnings) For 2016, you can correct by April 15. You issue a 2017 1099-R with code P and another 2017 1099-R for the earnings. You will issue 3 2017 1099-R. 1. 2015 excess plus earnings. Participant also owes 2015 taxes on the excess if they were not paid but that is a different issue. Taxable in the year of distribution. 2. 2016 excess with code P for prior year. Taxable in the year of excess. 3. Earnings for 2016 excess. Taxable in the year of distribution.

My pleasure

Good question :) I had do some extra reading for this one. It is not exactly on point, but it sounds like you should be able to treat the employee as benefiting with a 0% contribution rate for the ACP test... 2017 EOB (Ch 8, Part B, Item 4)

What was the timeline between the EE submitting the second deferral election and the "excess" deferral? How much extra was deferred?

OP, you were given good advice (limited due to the lack of specificity in your post) by someone who is very knowledgeable in this area. Why would you dismiss it with a comment like that? If you choose not to get an attorney who knows how to handle QDROs out of principle, you probably wont get the resolution you seek. That is pretty much what it comes down to.