CuseFan

Exactly, although I would expect an IRS agent to recognize that situation on their own.

And whether or not taxes have been filed is irrelevant regarding the make-up of lost earnings as I do not believe such is deductible.

Think about it....if that were the case then EVERY large plan that terminated would be filing an SF for their final year filing. So, terminated plan with 20,000 participants and $1B in assets at BOY, but zero and zero at EOY, sure, go ahead and file an SF and see what happens. Sorry for the sarcasm, but common...I'd be telling client to keep a close watch and that new TPA.

I think it's an overpayment under the terms of the plan and should be repaid. I do not see a reason the plan cannot and should not accept a check for $1,000 + earnings as repayment. Just be sure to document everything and make sure whoever is responsible for 1099 reporting has all facts as well.

Yes, unless you can use full year comp rather than DOP comp for your testing.

That was my very first thought, regardless of all the other issues. A RK that administers a plan to their conveniences/policies in contradiction to plan participant's best interests and IRS/DOL laws and regulations does not deserve this client's business. If they can't properly handle small accounts then they need to limit their clientele to plans w/o such, IMHO.

PSP = 401(a), would also include a DBP.

I am of the opinion that if still a partner in the partnership and still receiving earned income from the partnership, then still employed.

Restatement of terminating plan is not required but plan must be up to date for all laws (including SECURES, CARES et al) - so best way to ensure that would be a cycle 3 restatement. Not sure on timing, if you do before you distribute assets I think you're safe. Do not think stock or asset sale matters.

No and no - but potential coverage and nondiscrimination issues if they do not, depending on size of PR workforce relative to non-PR workforce. If you need a PR provider we have a group within our practice that specializes.

Interesting - those are typically issues addressed in a DOL audit rather than IRS audit. I can see the "communicated to employees" concern, especially if a relatively new plan or recently new participants - but if IRS wants proof plan sponsor handed out SPDs years ago then I think they may be overreaching. An affidavit, as Peter noted, certifying they have distributed SPDs might be the best they can do - how do you prove I handed you some papers a couple of years ago? Unless an employee can locate their SPD and attest to its receipt.

You're good, ignore the software.

only if allocation rates are broadly available, which may be your case

All the time

So each agent is a self-employed contractor. I suspect the group has some control on daily leased employee activity but any one agent most likely does not. Also, that employees are employed by the insurance company and not a PEO/employee leasing company leads me to conclude they are (still) considered employees of the insurance company. The alternative - you have a group of shared employees among a number of different self-employed agents which would be extremely messy. And in first paragraph you say agents want their own plans but then ask if these others should be included in the plan. Each presents a different premise - individual 401(k) plans or a multiple employer plan.

Set up 2022 with traditional DB counting past service.

I'd still be inclined to include. And I question the zero hours. If the person was being paid for accrued vacation that was not taken, are not those hours required to be credited? What about someone on paid leave who doesn't return and ultimately terminated while never providing services during the year but had compensation and hours credited? I'm not looking to go to the mat on this, just raising some questions.

Are you sure, and what platform do you use? Our FT William adoption agreement has the following: 6. Method to fix Code section 401(a)(26) and section 410(b) coverage failures: a. _ Corrective amendment under Treasury Regulation section 1.401(a)(4)-11(g). b. _ Apply Section 4.01(c). Personally, we prefer to use 11g amendments rather than be locked into a specific failsafe action.

If it's an owner-only plan and you want to guarantee maximum benefits all along the way, use a traditional formula as CBZ noted. Actually, even with employees who you want under a CB design, you can have a traditional DB and CB mix. Otherwise, set the CB credit at the entry age max for your defined NRA (62 or 65) and periodically amend/update the formula as desired w/o being locked into increases. The owner can always use the funding rules/max deduction range to increase actual contributions, they just don't automatically go to owner (right away). Then pick and choose optimal occasions every few years to allocate additional amount(s) to owner(s) when testing demographics are most favorable. DB/CB plans have much more flexibility than utilized by those who want them to act like DC plans as much as possible.

Isn't it the buyer who pays the sales tax? But then the hassle is for the plan to collect and remit. I know when you buy a car from an individual you don't pay sales tax to the person but have to pay the sales tax when you go to register it. Might there be a similar mechanism available here?

That was my first thought. Being young, his DB 415 max contribution won't be huge but will be better than a DC. If he has already established a three-year compensation history with his LLC around that $100,000 figure (ignoring SE adjustments for simplicity), then he could probably do $75,000+/- to a DB. However, without an increase in LLC "compensation" to increase his 415 average compensation he would hit 100% FAE 415 limit in 4-5 years - but maybe out on his own by then or a co-owner in his current employer with possible CB there. A lot can happen in 5 years and in the meantime he has saved $300k-$400k on a tax deferred basis, more than $20k (approx) DC annual available on $100k SE net income. Also, at that age and income, I'd look to maximize Roth in any way I could.

Is this a DC or DB/CB plan? If DB, be careful this is not (or doesn't start) a pattern of amendments of such nature and frequency that in practice creates what IRS might challenge as a discretionary plan and/or potential non-compliant CODA.

And Larry Starr posted this from Derrin's book. The emphasis of the relevant text for you is mine and so the answer to your question is no. Posted May 29, 2018 Derrin Watson's book Who's The Employer deals with all these issues. From the book: Q 10:21 How are the Code §404(a) limitations on deductibility applied to controlled groups? Ask the Author. Click to work with project folders. Click to add personal annotations/notes. This answer applies only to controlled groups, but not necessarily to other related employers. See Q 12:7 for discussion of deductibility in common control situations. See Q 13:24 for a discussion of deduction limits for affiliated service groups. If two controlled group members jointly maintain a qualified plan, the limitations of Code §404(a) relating to the deductibility of contributions are applied as though all controlled group members maintaining the plan were a single employer. [Code §414(b)] This differs from the other applications of the controlled group rules discussed above. For purposes of Code §415, for example, all employers in the group are aggregated, whether or not they cosponsor a plan. But for two employers in a controlled group to be aggregated for deducting contributions to a plan, they must both sponsor that plan. Example 10.21.1 Nina, Pinta, and Santa Maria are all members of a controlled group. Nina and Pinta jointly sponsor a profit-sharing plan covering their employees. Santa Maria does not participate in the plan. Chris works for all three corporations, and receives $40,000 compensation from each (total $120,000). He is the only participant in the plan. The Code §404(a) limit on deductible contributions is $20,000, which is 25% of $80,000, Chris’ compensation from Nina and Pinta. His compensation from Santa Maria is excluded because Santa Maria did not maintain the plan. Example 10.21.2 Oscar Corp and Meyer Corp are in a controlled group. They jointly sponsor a defined benefit plan and a profit sharing plan. Col. Mustard works for both companies and participates in both plans. Since they jointly sponsor the plans, Code §404(a)(7) limits the deduction to the greater of 25% of compensation or the required defined benefit contribution. Example 10.21.3 Assume the same facts as Example 10.21.2, except Oscar Corp sponsors a defined benefit plan for its employees and Meyer Corp sponsors a defined contribution plan for its employees. Since neither cosponsors the other’s plan, the two companies are separate under Code §404. Accordingly Code §404(a)(7) does not limit the deductions. This would also be true in a common control or an affiliated service group situation. In theory, the Code §404 deduction limit is allocated to the employers according to regulations. However, in the more than 40 years since ERISA, the Treasury has yet to take pen to paper (or pixels to screen) to compose those regulations. Absent those regulations, there is a single Code §404 limit that each employer uses.

If multiple employer plans then the deduction rules apply separately to each entity, so control group question is the key, I think.

This is an awesome question! Unfortunately I do not know the answer but am curious enough to look into - are they a control group or does the spousal separation exception apply to them, making these multiple employer plans? I don't know if that affects the answer, whatever it may be, but having all the relevant facts is important.