CuseFan

Thanks everyone for your valued opinions. My only thought about it being gray rather than black or white was what if the sponsor (or a third party) did a diligent search and chose the TPA independently first and then such TPA offered free or reduced fee payroll services to their new client and there is documentation of such process? What if 401(k) fees were the same whether free/reduced payroll services were accepted, would that matter? I'm definitely not arguing for this, but if alerting a fiduciary about a potential breach (whether client or prospect) and calling out service providers that are facilitating such breaches, I would want to know if there is a fact pattern where this would be permissible. Ultimately, I would steer fiduciary to qualified legal counsel but business owners usually need a very compelling push to incur such legal fees.

I've been asked a question that I don't think is black and white but certainly smells funny if not outright bad. Start-up payroll/TPA companies appear to be offering free payroll services to companies that move their 401(k) plans to their TPA arms. Is this a fiduciary breach by the plan sponsor? Maybe, or with certainty? If the primary (any?) decision criteria to move the plan is the unrelated benefit to the plan sponsor and not solely in the best interest of plan participants, then that is clearly a breach, is it not? But does the mere appearance of a conflict of interest (and breach) mean that there is one? Would a participant even know? Would this even be discoverable upon a routine audit? Or are these types of arrangements littering the skies flying under the radar without scrutiny? I remember reading either something similar a few years back, where some economic benefit is offered to the employer if plan administration is moved, and thought the opinion or consensus then was it didn't pass the smell test. Thoughts and opinions please.

Agreed, and from what I had heard, failure to have the audit completed on time is not reasonable cause for late filing.

NHCE? Why is there even a limit? What about a retro amendment to remove the limit (for NHCEs)? If you refund I think you exclude from ADP test if NHCE but not if HCE, but don't know that part for sure.

Refreshing to see these occasional pop-culture (or should I say pops culture?) references which are lost/useless when chatting with our newer employees. Thanks

agree with your assessment

Damn, I opened a hundred packs of bubble gum and not one Joe Schlobotnik!

My position is that you need a current amendment to go from $1k to $5k to be able use the SECURE 2.0 jump to $7k and 2026 amendment. My reasoning is if the plan only has $1k then does have the default IRA rollover provision? (certainly there is no IRA provider) I don't know if the anti-cutback rules give you that. Maybe basic plan documents are generic enough in that regard that it's covered. Anyway, I'm in the conservative camp with B, especially for DBPs where the plan's cash out threshold also ties in to QJSA requirements.

Or, if there are non-owner HCEs and want to provide SH to them, you can also limit SH to non-Key employees.

I'm fairly sure #1 is no. Not sure about #2. Saw some ASPPA presentations that say compensation from all related employers is used for testing, HCE determination and deduction limits. But IRC 404 says for self-employed compensation is net earned income from the trade or business upon which the plan was established. I think the safest way to proceed is establish DB retro to 2023 with both entities adopting, determine DB NARs and MVARs using total eligible compensation from both, determine EBARs using compensation from just the adopting employer, and apply 6% limit using the same. Then have owner adopt DC for SE business in 2024. It is not optimal but still likely substantial opportunity retro for 2023 and better than waiting until 2024.

I understand Roth is ultimately taxable, but if profit sharing at first, is it not subject to the 25% deduction limit that would otherwise apply? Or are you assuming based on the numbers above that it's an issue in this case? I think the simplest way (and what gets done the most? opinions?) is contribute VAT and then do immediate in-plan Roth conversion before any investment experience, leave in the plan as Roth and not even bother with IRA.

What both our esteemed colleagues said - plan document must accommodate, subject to testing unless HCEs plan only, and too late for 2023.

Agreed. Once we got to "not treated as a separate participant" that all fell in line.

Love navigating the gray! The early termination for a business transaction such as selling the business should not be a concern unless the transaction was foreseen at the time the plan was established. That is, I would not start a plan effective 2023 if I had a contract to sell the business in a specific year in the not too distant future. Retirement is a trickier situation, as people plan to retire at a certain age all the time but then keep working for various reasons. Is having employees a positive or negative factor where the owner has plan for 2-3 years and then retires? Was it just a short-term tax deferral for the owner or did employees actually benefit? A lot of sides to the arguments and a lot of angles from which to approach accommodating the objective. If no employees to worry about, why not start the plan for 2023 and then freeze after 2024 or run it active another year or two at minimal earnings/compensation before ultimately terminating after 5 or more years? It doesn't get you to the presumptive 10 years but gets you closer - I intended longer but income dropped after 2 years so I froze and then after a few more years I decided to retire. BUT, your responsibility is to communicate the rules and various options and let client decide how to proceed given the risks.

The answer is yes, one DBP can cover them both, but the question is whether you have a single employer plan of a control group or affiliated service group (in which case you HAVE to have one plan covering both) or a multiple employer plan for which your reporting is a little different. If you don't have a CG under the new rules or an ASG, but want one, have one make the other an employee for a nominal salary.

Thanks, and that certainly leads to one interpretation over the other.

DBP with limit on lump sums (PVAB < $50k) In a separate interest QDRO, would this apply individually to the participant's and AP's respective portions or to the pre-split benefit in total? Checking if the plan's QDRO provisions have any exceptions to that LS limit, but looking for opinions in case there are no exceptions. I can see both sides - AP is treated as a separate participant with separate benefit, so apply separately, but the flip side is if total PVAB is >$50k, say $80k for example and participant can take a $45k LS and AP a $35k LS, then the plan will have been forced to pay a LS total on the one (albeit split) benefit in excess of the plan's $50k limit.

1) Yes, there could easily be ASGs between his SE business and the other entities in which he has an ownership interest. Assuming yes likely means no solo DB/CB on his SE income unless none of those entities has employees (unlikely, otherwise no need to ask your questions). Before jumping to the desired outcome of no ASGs and the ability to do a solo plan, I agree that getting a legal analysis and opinion is the smart thing to do and I would not, as a practitioner, to proceed in implementing such an arrangement for him without that. 2) Assuming no ASG, a solo DB/CB would not be aggregated with 403(b) for 415 as different plan type, nor deduction because there is no "employer" deduction in 403(b) attributable to the employee.

correct

This is not an official opinion but I tend to agree with you. I cannot remember ever doing an SMM for compliance provisions on an accelerated for basis for a terminating plan. Usually if anything that impacts administration and a participant's benefit - timing and/or form - there is some other place where that gets communicated, such as a notice of plan benefits and/or a distribution election package. The relevant provision affecting participants are the RMD ages, and if you're dealing with only DC plans or small DB plans that are likely only paying out lump sums then those don't matter at the plan level - they'll get all that from the IRA provider.

https://www.nfp.com/insights/what-is-the-real-deadline-for-making-plan-contributions/ Here is a great article on all those rules. For-profits have 30 days after the tax return due date including extensions for a deposit to be considered an annual addition for the prior year. Tax-exempt entities have 9 1/2 months after their fiscal year end, which is 10/15 for calendar fiscal years (be careful if plan and fiscal years are different, and which is your limitation year). In your situation, an August deposit poses no issues if your relevant years (plan/fiscal/limitation) align.

Is there an election required? It doesn't have to be through payroll withholding, I thought for VAT the person could (if desired) actually just write a check and give to trustee and/or PA saying "here is my VAT contribution for PY XXXX", provided 415 is not exceeded.

NQ plan distributions from an employer for which he continues to work? If plan permits he could defer receipt of payments not due within the next 12 months, providing such complies with 409A. This is compensation to him, not self-employment income for which he could do a solo plan - unless he was not an employee but a contractor service provider (then and now) with deferred compensation from the service recipient.

Congrats & Enjoy!

Exactly, that sort of issue occurs very infrequently in my experience.