CuseFan

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

Agreed, and personally, I would not include. Parallel question - if plan accepts rollovers from employees before becoming participants and an employee does such a rollover but was not a participant as of EOY, would you include them?

Both the AA and the BPD comprise a plan sponsor's plan document. Therefore, to the extent a provision is delineated in the BPD without any corresponding AA selection, the BPD governs and should be followed. Not everything can/will/need to be outlined/selected in the AA and anything that is not expressly provided in the AA via a permissible selection is subject to any BPD mandates.

Maybe a stupid question, but did you look at the average benefits test for coverage of the small plan? If yes, and that does not pass either, is there a defined failsafe in the small plan's document? If not, could an 11(g) amendment to the small plan allow for change in testing method to enable aggregation? Regarding #4, yes, aggregation is for coverage, nondiscrimination and BRFs, all or nothing.

Another thought, as the old partnership is remaining open, is there possibly an ASG for a brief period and, if so, does that link prior and new/current plans together for 415 purposes in perpetuity? It looks like much more of the gray area is leading to connecting the plans and a 415 offset.

I'll play devil's advocate to be feisty and get you riled up. Apologies in advance. Excluding NHCEs from a 401(k) plan might be advisable where they do not work 1000 hours ever for YOS eligibility but the plan wants eligibility determined on elapsed time. Of course, as soon as one NHCE becomes non-excludable you have a coverage failure. We see NHCEs excluded from small employer DB/CB plans many times when aggregated with DC to satisfy coverage and nondiscrimination AND the DB/CB covers enough HCEs to satisfy minimum participation. BUT I agree with your WTF, and would grill the drafters of these plans as to HTF they satisfy coverage, nondiscrimination and for the DB minimum participation.

If your service is used to calculate the benefit then you can use it in your testing.

I don't know. The other issue, still have an initial 415 limit of 1/10 the dollar limit as of 1/1/2023 and 12/31/2023 (assuming it's higher than prorated comp limit), which could make defining the OAB and ongoing credit a challenge.

Immediately, would be my guess. Then the issue becomes one of prudency for maintaining a non-diversified fund. I recall a large employer court case of a similar nature, don't remember the companies or how it resolved, but this is not a unique issue.

You can start with an opening account balance for a past service benefit, but past service is limited to a safe harbor of 5 years, otherwise must be nondiscriminatory. However, you need to align the DCP and test balances accumulating from the same date. Note that if you use prior service to "dilute" current high HCE credits, the impact of that dilution decreases dramatically each subsequent year, so it's not the best longer term strategy to pass testing. That said, it might be a quick fix for year one and possibly year two testing, if you're using an OAB to bump HCE(s) up or waiting on young new NHCEs to become eligible and help pass annual accrual testing.

Tax-exempt entities do no have deduction limits but individual 415 limits apply.

True, and good point.

Great point - all HCEs means no coverage or ADP testing issues but if top-heavy because non-owner/non-key HCEs do not defer or do not defer enough, then they must get a THM from the employer.