CuseFan

Agree with Peter. Even if you don't have a PT you could have an operational defect. If the aunt was sole beneficiary to the estate, no harm no foul maybe but Plan Administrator needs to get all the facts (not to mention follow the terms of the Plan).

It sounds like the owner just wants to skip some proper transactional steps and get the cash where it ultimately will end up, and just create a "memo" to document since there wouldn't be the transactional paper trail. I don't know how an IRS or DOL auditor might feel about that and do not think it's a good idea.

Look at eligibility for a CB credit or PS contribution independently to determine whether someone gets either or both, and then apply your gateway requirements, which might result in all being provided through PS. if provisions don't allow for enough to get gateway then you're looking at an 11(g) amendment. Other complicating factors include top-heavy and safe harbor non-elective. All this should have been flushed out when the CB was designed and implemented and PS provisions amended for compatibility. 1) Employed 12/31 but <1000 hours, CB depends on requirement, PS depends on top heavy. If they get anything in either plan then they must get gateway. 2) Terminated >1000 hours, CB depends on requirement, PS nothing. If they get CB they need to get gateway. If PSP has no overriding failsafe language for gateway then you need an 11(g). I like to see CBP with 1000 hour requirement and PS individual groups with no requirements, and if it's a SHNE then that's what you essentially need..

Got it, and for sure a corporate trustee would only accept trusteeship/responsibility for those assets that it also custodied. Here's another thought - if you can find a corporate trustee (recordkeeper?) that also offers a brokerage window, which might also accommodate the ability to transfer existing brokerage accounts' assets in-kind. That doesn't fix the MP issue but does get all assets under one roof/responsibility for simpler admin/reporting but somewhat placates those wanting their brokerage accounts.

Is there any compelling reason to remove the MP accounts prior to consolidating on a platform? They are already dealing with in-service limitations and QJSA requirements on those accounts, I would think that would become easier on a platform unless the provider cannot handle or handle differently than other portions. Note that MP in-service can be lowered to 59 1/2 now too, if that helps. If you really had to parse those out, I think you could spin-off those accounts into a new separate MP plan - essentially reverse the prior merger - and then terminate that plan. Participants would have to waive annuities with spousal consent, but you couldn't force that, and they could roll lump sums as desired into their IRAs or into the PSP.

I would agree with this if was to the exclusion of longer tenured and higher-paid employees, which IRS called out as abusive years ago. However, including everyone should not be an issue. Having fully vested K & SH come with a waiting period so that administratively you are not dealing with small payouts for short service terminations makes sense. MAYBE IRS would take issue if the employer had a lot of annual turnover within that 6-month eligibility period and it certainly wouldn't hurt getting legal counsel opinion of the provision within the specific context of that IRS abusive practice guidance.

Right, accountant will arrive at K1, from which you can derive the SECA deduction in coordination with W2 pay. Of course the contribution amount for the employee allocation is an expense against that K1, so the accountant may be on hold as well. I think the question is, if that adjusted K1 is $100,000, for example, and say the W2 is $50,000, is any employer contribution then split 2/3 self-employed and deducted on 1040 with 1/3 a contribution for the employee W2? That also results in the aforementioned circular calculation as the contribution for the employee is an expense against the partner's K1. I doubt there is any guidance out there and would agree that a proportionate allocation between partner and common law employee contributions is most appropriate. If the employer contribution is base on a percentage, then your calculations are easier as you start with employee allocation and work from there.

Excise taxes are on excess contributions, not earnings. But if you only did a partial correction by 3/15 - not ALL of the excess contributions AND earnings then you have not corrected by 3/15. I think IRS would deem the pre-3/15 payment as a combination of contributions and earnings such that the post-3/15 payment would have a contribution component. For example, if you paid $9,000 of excess contributions by 3/15 and then $1,000 earnings in April, I think you really corrected 90% or $8,100 in contributions by 3/15 and have $900 after 3/15 subject to excise tax. Maybe I'm wrong, but IRS generally does not favor partial corrections.

If the person is not a 5% owner then their required beginning date is generally based on the later of the applicable age or their actual retirement. Plan termination prior to one's retirement does not trigger an RMD based on age alone. BUT, consult the plan document as some plans (but not many) base their RMDs on age alone without consideration to retirement whether or not a 5% owner. and it's 4/1, not 4/30

Peter makes some great points, which brings up an interesting question I have for our group - in your experience, have you any plans with union covered employees that are excluded that have been audited where the agent (IRS or DOL) requested and reviewed the CBA to verify that retirement benefits were subject to good faith bargaining? Curious.

I have been away from this sort of admin for years but my recollection is (1) you can refund excess by 3/15 (avoid excise tax), (2) refund after 3/15 but before 12/31 (incur excise tax), (3) provide QNEC to pass test if current year testing, deposit by 12/31, or (4) if you do not correct by the end of the following year then a permissible EPCRS self-correction method is what you describe in (2). https://www.irs.gov/retirement-plans/401k-plan-fix-it-guide-the-plan-failed-the-401k-adp-and-acp-nondiscrimination-tests

pre-3/15, no excise tax, post-3/15 excise tax

Partners K1 is their income net of partnership expenses but their retirement plan contributions are deducted on their 1040. Without knowing details, I assume a reasonable 415 limit had already been established such that having a very low 2023 plan compensation after all adjustments to and deductions from income does not cause issues there.

For sure. Our organization employs pension-only actuaries, healthcare only actuaries, and XLOS (cross line of service) actuaries who deal with both.

absolutely, should have reiterated that in my response, thanks

If sole prop - no issue, if done by 4/15. Otherwise, special effective date for salary deferrals should be date of adoption or a later date, not 1/1/2023 or 1/1/2024.

From a great Ferenczy article: What is an A-Org? An A-Org is an organization that (1) is a service organization; (2) owns, or is deemed to own, some interest (no matter how small) in the FSO; and (3) regularly performs services for the FSO or is regularly associated with the FSO in providing services to third parties. Whether an A-Org regularly performs services or is regularly associated is a facts and circumstances determination. What is a B-Org? A B-Org is an organization for which (1) a significant portion of the business of the B-Org is performing services for the FSO or related A-Orgs; (2) the services are the type historically performed by employees in the field of the FSO or its A-Orgs; and (3) at least 10% of the B-Org is owned or deemed to be owned by one or more highly compensated employees (“HCEs”) of the FSO or its A-Orgs. Importantly, a B-Org does not need to be a service organization. If the B-Orgderives at least 10% of its gross receipts from providing employee services to the FSO or its A-Orgs, then it is a“significant portion” for purposes of the first test. It could be significant if those receipts are as low as 5%. Looks to me like no ownership overlap no ASG.

I agree, IF there is an ASG but not convinced that there is. Unless it was a management company situation, I thought there had to be at least some ownership overlap.

Governmental? - I'd say it depends on what the plan ultimately says concerning that situation, and if it hasn't happened yet, a good opportunity to consult and make sure that it does address the situation. Tax-exempt top-hat? - Same as above UNLESS the change concerns who the employer is considering as select management or highly compensated, in which case the employee should no longer participate if the employer deems no longer a top-hat eligible employee.

Yes, just do not get benefit of any extensions.

If the plan document allows for such (or is amended for such).

Yes, it's allowed but I think it must be done (plan adopted and deferrals made) by the unextended tax return due date. I believe that's the rule, someone will correct me if I'm wrong. Here is an article stating such. I don't usually rely on Ascensus for technical issues but this agrees with my understanding. https://www.ascensus.com/industry-regulatory-news/news-articles/retroactive-first-year-elective-deferrals-for-sole-proprietors/

I would save all documentation, and then do a typical missing participant search. The plan/plan sponsor/plan administrator hopefully has an administrative procedure for such and if not, now would also be a good time to develop one.

Then it would appear the statutory exclusion for non-resident aliens can be used provided such language is in the plan or, if not in currently, then amended in prior to this employee's otherwise entry date.

Way out of my practice area but I always read these H&W postings because I know you usually respond and I find myself learning something. Thanks