CuseFan

Yes, that is the best approach for sure, the potential challenge getting two medical professionals used to doing their own thing to agree on a unified plan/approach. Good luck!

Statutorily it is permitted but as CBZ notes you need to see what the plan document says.

I think IRS/DOL position would be yes, because the benefit was due and not paid and the plan had the use of the assets. If the plan had actual contact with the beneficiary, had a valid address, SS#, etc. (which should have been collected and verified up front) then why wasn't the survivor benefit just started? IRS/DOL might raise that question as well.

The other problem I see is how this distribution was transacted. Was the employee able to directly request and receive payment after being reported as terminated, without the employer having to authorize payment? Something like this, and maybe the issue with the titling and ownership of the account creates constructive receipt blows up the tax deferral? Also, if indeed a rabbi trust, there should be a trustee who should ensure proper reporting. If the trustee doesn't facilitate W2 reporting then the best practice, in my opinion, is for the trustee to transfer funds to the employer's payroll function for proper reporting. Silly rabbi trusts are not for kids!

Yes, appears this will be ASG. If separate plans, there will be aggregation needed to satisfy nondiscrimination and either the new company #3 will need a plan for this employee or they will need to be covered under the plan of #1 or #2. Maybe have #1 and #2 participate prospectively in plan #3, essentially freezing their respective plans, unless they are similar enough to merge into a single plan #3. Any separate benefit structures, rights or features will need to satisfy coverage/nondiscrimination, which makes keeping an active owner only plan within the ASG difficult.

For LTPT it looks to me like entry date is always 1/1.

Certainly ERISA counsel input would be warranted. As others noted, any prior service component would create discrimination issues, in my opinion, and I think a 2023 short plan year may also be pushing the envelope. A totally prospective plan beginning 2024 would appear safer to me. This wasn't a "I fired everyone so I could start a plan" situation, there was a business transaction and such events regularly give rise to changes in retirement programs.

That is the key difference - in these instances you have unrelated employers, so each is viewed separately. With a CG, it's deemed a single employer.

Related employers are treated as a single employer and you must aggregate compensation from all when applying the limit. You don't calculate a 415 limit separately under each employer or a separate ADP for the employee under each employer, or apply hours of service separately, so same with applying the comp limit.

When the match was made/allocated in part of 2020 it was a safe harbor match and required to be fully vested at that time. Subsequent events may have taken the plan out of safe harbor status but I don't think they change the nature/vesting of the contributions previously accrued. Regarding 2022 treatment, I would see what the VCP filing and amendment says. For example, say a 3% SHNE plan is amended effective 7/1 to suspend the SH contribution. The plan is no longer SH and must do ADP testing, but that doesn't magically shift the fully vested 1/1-6/30 3% SHNE to profit sharing subject to vesting.

First, as always, check the plan document to see if it says what to do regarding incorrect contributions (it may have general instructions as opposed to specific match-related issue). Absent plan instructions, I would forfeit the incorrect excess match and any related earnings, leave in the plan and use according to plan instructions.

Agree 100% with the above: #1 - NO, #2 - YES.

Unless two-year wait, which = full vesting, how was this person not eligible 7/1/2014? With a 4/2013 hire, 1/2015 entry would violate 18-month maximum hold out.

RBG is spot on, compliance testing is accrual basis and aligns with corporate and individual tax reporting. Cash basis accounting just impacts how it all is reported on the 5500.

I think you're OK and do not need to employ the same method. Conversely, you could determine rate groups based on allocations but do your ABPT using benefits.

I don't think state has anything to do with it, and agree with Just. Below are excerpts from IRS website. I have seen people use W2 inappropriately as an easy avenue for payroll taxes and income tax withholding because they don't want the hassle of doing correctly. Also agree you should "punt" to accountant to give you plan compensation. Reporting Partnership Income A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it "passes through" profits or losses to its partners. Each partner reports their share of the partnership's income or loss on their personal tax return. Partners are not employees and shouldn't be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partner. For deadlines, see About Form 1065, U.S. Return of Partnership Income. Is a partner considered an employee? Are partners considered employees of a partnership or are they considered self-employed? Partners in a partnership (including certain members of a limited liability company (LLC)) are considered to be self-employed, not employees, when performing services for the partnership. (Jun 15, 2023)

I agree it's a very rare occurrence for a small business owner not to provide some service to their business, but there are people who simply own businesses they let someone else run. The better example, and more relevant to initial question, is where a minor daughter is given a partnership ownership share but provides no services for the entity.

There are worse words for your fingers to be on autopilot!

Darrin Watson did a webinar on earnings from self-employment a few years back. He stated that net earnings from self-employment (NESE) come from a trade or business in which the self-employed individual's (SEI) services are a material income producing factor. He then gives the following examples: Janice owns and operates a bookstore as sole prop Janice has never worked in the store Instead, she leaves everything to a hired manager Janice pays SE tax on her Schedule C income She can set up a plan for her employees, but she can’t participate she isn’t an SEI Sue has a successful internet consulting business Sue wants to make her 3 year old daughter a partner The daughter receives a K 1 and pays SE tax on her share of partnership income Daughter isn’t an SEI her services aren’t a material income producing factor Just because a person is a partner in a partnership, that in and of itself does not make them a self-employed individual for retirement plan purposes. So I think not only CAN you exclude that person but that you MUST exclude that person as not an employee of the business.

And these are not wages, they are retirement benefit accounts, subject to ERISA and IRS rules (law) and must follow the formal plan document provisions (legal obligation) as noted above. FYI, I suspect that delay in paying out 401(k) accounts is to avoid someone quitting Monday, getting their 401(k) by Friday and wanting their job back Monday. Finally, if you're not planning to roll over your 401(k), 20% will be withheld for Federal tax liability, and your ultimate taxes will include Federal, CA state and if you are not age 55 there is an additional 10% Federal tax.

If 2022 reporting is still fully open (corp taxes, 5500/SB, etc.) and the haircut was agreed to by a generic "to the extent unfunded" then if economically advisable (Paul's questions) I think you're OK. The employer has the discretion to fund and make the "extent unfunded" less or zero. If there was a 2022 amendment and a hard-coded agreement for the haircut, then as previously noted, an HCE-only amendment could be problematic.

100% correct. If retired/separated they'd be eligible for distribution - which they are not. They simply wend from an eligible class of employee to an ineligible class of employee, but they are still employed by the employer (or any control group member) maintaining the plan.

Makes sense. The compensation was made available to the person on 9/29, a date before the effective date of participation which is the earliest date any salary deferral could be effective.

Great explanation Luke. I wasn't 100% sure about the spouse's survivor benefit amount being unaffected by when the retiree claimed, thanks for the clarification. As you both stated so well, then it's a matter of "doing the math" to see where the breakeven point is and then deciding what makes sense for the particular situation. Here, where the retiree may be terminal, it sounds like a no-brained to commence ASAP. I like it when I continue learn things from this forum or confirm things that I thought but wasn't sure. Thanks everyone!

Also note the maximum LS changes depending on when it is paid - and with CBPs that is usually the concern, the maximum lump sum as opposed to the maximum benefit. Effen gave the correct general stock answer and that is the starting point but unless you check all the boxes - 10+ YOP, FAE >= $265K, NRA 62 and distribution at age 62, then you're looking at something different. And if you're looking into the future, then IRS limit increases come into play, as could post-65 actuarial increases. Assemble all the facts and future expectations of the situation you're dealing with and then you can craft an answer/approximation/range that applies most appropriately to that situation.