CuseFan

If you can somehow get those excess PS reclassified, maybe you're OK, but I would not tell anyone that I think such strategy would hold up under audit. I'd say we can try but you're playing audit roulette for three years on this, at least that's my opinion. In these cases, I'll usually present limiting total deduction to the 31% and then carry forward remaining CB deduction to the next year properly limiting the PS to 6%. Depending on CB contribution and deduction funding cushion, sometimes it even takes a second year to catch up. This just follows the fact pattern, I don't see a legitimate basis for being able to reclassify a contribution that was made as a deductible profit sharing contribution as something different - and certainly not as VAT contribution when no such designation was made when contributed.

What does the plan say on allocating forfeitures? Also, remember that forfeitures count as annual additions under 415 and a person without 415 compensation for a given plan year has a 415 limit of zero.

I think a per diem classification exclusion may be possible depending on facts and circumstances. These can be very different, in my opinion, than the typical part-time, seasonal or temporary employee that may be routinely/regularly scheduled to work X hours a week, or X full weeks over a summer, or just for the holiday season. Usually, PDs in my experience are on-call for ad hoc employment assignments as needed to fill in various gaps on an as needed basis, covering sick/disability leaves, maternity leaves, vacations or whatever. A PD on a longer term assignment could even work 1000+ hours, and I've seen others that show up with 8 hours worked and still others that may not work at all for a year or two (but not be terminated in payroll). I think this is very prevalent in larger medical services employers, which do not usually like to extend benefits to this group. Depending the size and scope of your situation, a larger environment may need further analysis of facts and circumstances as well as legal counsel input but a with a smaller company and a less significant PD population it might be easiest and safest to err conservatively and include as LTPT.

I won't go into the could have should have scenarios as it wasn't your client at the time. What we have often done is have the Plan Administrator write a letter to the claimant saying that the letter from Social Security indicates that you may have a benefit due from the plan, not that you do indeed have a benefit due from the plan. Our records indicate that the plan had been terminated (add year) and all remaining benefits due were paid out at termination with no further benefits due. If you did not receive your benefit at that time, you likely elected to receive it earlier or it may have been involuntarily paid as mandated by the plan if it was a small account balance. We have no record of you having a current account in the plan and ask you to review our historical bank, IRA, brokerage and other financial records for your payment. Sometimes this is enough to jog their memory or otherwise make them go away satisfied that they did some time ago get their money. If not, then things can get tedious, trying to secure prior bank records, old 5500's and the like to figure out when the person might have been paid and chasing down the proof it was paid. Good luck, these are not fun to deal with.

agreed - and you cannot do the 401(k) term/SIMPLE start-up in same year.

Sorry, I know managing a huge union fund and population is no walk in the park, and I did not read the article, but as an old timer the connection between teamsters and dead people collecting pensions struck me as humorous. So, to keep it going, I wonder how many of them voted on Tuesday?! I know the real gist of the article was the failings of a government agency, but making fun of that is like shooting fish in barrel.

Wait, teamsters and possible pension fraud? Never would have crossed my mind in a million years, where is Jimmy Hoffa when you need him? If I end up next to him in the next few days you all know who did it - you won't find me, though, but if you a paint imperfection in the NY Giants or Jets logo in the Meadowlands end zone, that's probably where I'll be - LOL!

We've seen clients exceed that limit and run a carryforward balance deductions, or others pay the excess as W2 and currently deduct rather than contribute. This is where you put your consulting hat on as there are other (welfare) benefits where D-B prevailing wage fringe amounts can be directed. We've also done CB to cover a floor of like the first 5% of pay of D-B PW. One of the complicating issues there is if someone's PW is less than the 5% credit they still get the 5%.

If they are Directors and getting paid fees for that but aren't employees, they should be getting 1099 income and could do their own plans off of that.

I think this is a big deal and the first question to be answered. Regardless of how they income reported to them or why it's W2, the fact appears to be that they are not providing ANY services to the employer and so even if you can argue it's plan compensation the IRS would say it doesn't matter because they have 415 compensation of zero. If they can substantiate services of some sort that's a different story and maybe it's untracked hours (or salaried hours or some equivalence) instead of zero hours. Otherwise, they're just on the payroll getting a paycheck for nothing, which if I'm the IRS I'm also questioning whether that is a legitimate deductible business expense. Sorry, seem to be in pessimistic, devil's advocate, argumentative mood this afternoon.

Yeah, I was a little curious on the timing of the question given the 5500 filing deadline had passed (unless not a calendar year plan or disaster area extension) and someone already answered it and filed accordingly - thinking maybe you/they were looking for reassurance on what was already done. If 2022 5500 does not show zero ending assets (and participants) then there is a 2023 final filing due and without extension would have been due 8/31, before an extended 2022 return, talk about a conundrum!

The loan limit applies within a controlled group of employer's retirement plans, so I think he is OK. I know there is some aggregation if the person is the business owner on the 401(k) side because he is also considered the "owner" of his 403(b) but not sure if that is only a 415 issue. If he is an owner I'd dig deeper, otherwise I think he's good to borrow.

Agreed, especially if interns are students - a two-year internship is not "forever" even though maybe longer than the norm, the client's initial phrasing was misleading. Sounds like it's all squared away now.

If the legal documentation said they were merged 12/31, then for that brief time in 2023 you had two trusts but one merged plan, I think you're good.

John, that was my first thought - are they truly interns or is that classification being used to exclude part-time employees who may ultimately work 1000 hours? I guess someone might intern at the same company for their entire college career, or maybe the employer's industry is one where long term internships are normal (but isn't that more apprenticeship?) - and do these "interns" usually get hired into benefit-eligible positions or are they longer term term temporary labor? Probably not the TPA's concern here but certainly a situation I'd call a head-scratcher.

Probably OK but if the terminating plan has excess assets that are being allocated remember to include those in the benefits when coordinating 415 limits with new plan. Also, if you were and/or will be aggregating with a DCP to satisfy coverage and nondiscrimination, they need to have the same plan years so it might be cleaner to terminate 12/31 and start new plan 1/1. I assume this is likely an owner-centric plan and the owner(s) want to roll lump sums and self invest, settle the liabilities and risk thereon, otherwise simply freezing traditional formula and converting to CB would save a lot of time and expense.

As J noted - not only CAN they do this, they MUST do this.

Like most open ended questions the answer is it all depends. What is the objective - rewarding/sharing in profits, retention/competitive comp & benefits package? What is the industry, how much does the person make, what can the employer afford to provide? If the employer provides other substantial benefits on the health and welfare side, maybe a SEP or SIMPLE IRA or 401(k) plan with a match is appropriate. If the employee is invaluable, say hired to run someone's business for them, then maybe a 401(k) with a substantial profit sharing is appropriate, or even a defined benefit plan if $60k-$70k in annual retirement isn't enough, although if the owner is also an "employee" then this may or may not be possible depending on circumstances. Answers to those two questions at a minimum are necessary and you ask for "best options" - for the employer or employee or blending the needs for each?

Forgetting about the short plan year and termination for the moment, what if the PYE and valuation date was 12/1 instead of 12/31. Would your MRC due date still be 9/15 or 8/15 (8/16)? I think it's the August date. So in your situation I think it's due 7/7ish. Also, why risk a late contribution for 8 days over an interpretation question/gray area?

Yes. I believe a submitter who is not the plan sponsor must be authorized to practice before IRS (but do not know this for certain). If not, they could prepare the submission for the plan sponsor to file. Good questions, never thought about it. My thoughts are about this in general, not your specific inquiries. If the practitioner was at fault and is proposing an aggressive remedy that is not a standard correction and which would limit the correction cost for which it is presumably responsible then I'd say that is a conflict and must be disclosed to the client. If the at fault practitioner is doing the correction work w/o fees to avoid incurring another professional's costs, maybe that could be a conflict. However, any instance where the correction is routine and mandated, whether completed by an at fault practitioner or not, I don't see where there would be any conflict. My general thought, if a practitioner made a mistake they need to make it right. These are my personal opinions. I have no answers or opinions on your other specific questions.

Yes, I don't see why not if BRF satisfied.

Maybe the IRS's AI is too much A and not enough I.

Thanks Bill, I never knew that - I learned something new today so you can teach an old dog new tricks! Of course no guarantees I'll remember that months from now when it happens again.

Sorry, without the need to aggregate.

Provided each plan can satisfy coverage without the need to aggregate then you can test separately for nondiscrimination.