CuseFan

Agree with Paul I, only her W2 pay from PC S-corp is compensation. If it's not subject to FICA and Medicare (or self-employment SECA) taxes (unless an exempt deferral such as a 125 plan) then it is not earned income and cannot be compensation for retirement plan purposes.

I agree with your thought process BUT as everyone else has opined, such matters are better left for consultation with qualified legal counsel.

So X will no longer exist as of 10/1 as it gets absorbed into Z, is that correct? Or will X now be a subsidiary of Z? You might be OK, especially in the former situation, but not knowing the language of either plan, I'd say it's safer to amend plan X to freeze and have a resolution for that and the merge into plan Z at year-end. Always better to over document in M&A situations, in my opinion. Being on same or different payroll is administrative and not relevant to plan documentation unless specifically referenced in either plan document.

If it otherwise fits within the definition of compensation, then yes, I can agree with that. You can often structure such payments as retention "stay until" bonuses and count as (post-severance) compensation. If the company has a formal/written severance plan and payments are made pursuant to that I think you have a hard time justifying it as compensation regardless when paid, in my opinion. Certainly, I would defer to qualified legal counsel opinions.

How? Brother-Sister relationship exists when two thresholds are met: Common Ownership: the same 5 or fewer individuals own 80% or more of each business; and Identical Ownership: the common owners have identical ownership of more than 50%.

Agree with everyone - and the ESOP Answer Book to which Peter refers is my go to source.

No, severance pay is not considered by the IRS as plan compensation in any manner. It is not considered payment for services. 415 post severance compensation is for payment of amounts after termination of employment to which the employee would have been entitled had the employee continued in employment, such as accrued vacation time, paid sick leave, delayed bonuses, etc. Severance payments would not be made to an employee absent termination and therefore not post severance compensation. This was always the IRS position on severance pay, even before the 415 post severance compensation regulations (which only confused the matter because of the use of the term "severance"), and employer compliance back in the day was inconsistent to be sure.

This is from pre-approved plan document. 2024 is the first distribution calendar year so I think the vested accrued benefit as of 12/31/2024 needed to commence at 4/1/2025, which as you note creates an issue. Maybe someone else sees it differently. (2) Amount Required to be Distributed by Required Beginning Date and Later Payment Intervals. The amount that must be distributed on or before the Participant's Required Beginning Date (or, if the Participant dies before distributions begin, the date distributions are required to begin under Subsection (b)(2)(i) or (ii)) is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. All of the Participant's benefit accruals as of the last day of the first distribution calendar year will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the Participant's Required Beginning Date. (3) Additional Accruals After First Distribution Calendar Year. Any additional benefits accruing to the Participant in a calendar year after the first distribution calendar year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such benefit accrues.

On a lookback year basis or maybe if scheduled salary or full time hourly rate is less than, but any way this does not pass the smell test. Also, are they looking to have this as a SHM 4%? So only covering NHCEs who are least likely to contribute? How else would they expect to pass ADP and ACP?

Can A & C fully fund B to terminate or is that too much cash? A as the fiduciary may try contacting PBGC for consultation on what may be done.

w/o 80% control I don't see how that is possible. If B has no operations then what is it's purpose, is it solely in existence as sponsor of this underfunded DBP? Assuming B has no assets and only DB liability, A or C taking the other's share of B in exchange for a payment covering their newly assumed liability is what neither is willing to do? Or are there other issues with B such that neither A nor C would want full control and responsibility? Why would A or C even want to merge B w/o proper compensation? Is B's plan being funded now at all and by who? Are A & C pumping cash into B solely for this? Is there a reason not to just let the plan "fail" and go to PBGC?

Look at the 436 provisions in the document/AA. From this it doesn't look like you can go back that far and may need an amendment. From IRS Publication 5139: Line c. The plan may provide that benefit accruals that were not permitted to accrue because of the limitation of section 436(e)(1) (described in line IV.d. of the worksheet) shall be automatically restored when that limitation ceases to apply if the continuous period of the limitation was 12 months or less and the plan’s enrolled actuary certifies that the AFTAP for the plan year would not be less than 60 percent taking into account any restored benefit accruals for the prior plan year. 436(i) 1.436-1(a)(4), 1.436 1(c)(3) https://www.irs.gov/pub/irs-pdf/p5139.pdf

Peter, are you asking when the determination of 5% ownership gets made? I don't know for certain, but drawing a parallel to the HCE rules I would say if they are a 5% owner at any time during the applicable calendar year (2027).

It looks like the goal is to cover "direct" owners while excluding other HCEs including spouses and/or children, and only covering the lowest paid NHCEs while excluding higher-paid NHCEs. I think you would have to satisfy coverage via ratio percentage, that this would not be a reasonable classification for average benefits testing. A bigger hurdle may be the IRS anti-abuse rule on including short service NHCEs while excluding other NHCEs. It's facts and circumstances and does not matter if you satisfy coverage and nondiscrimination, I don't believe. I would not recommend such a design unless the facts and circumstances support all facets (primarily the lower paid NHCEs NOT being short service employees compared to the NHCE population).

Lois, that is my understanding and about to opine such until scrolling down to your post. Once the participant dies, if the primary beneficiary is living, that beneficiary becomes the account owner, so to speak, and any secondary contingencies the participant had are moot.

If the documents were written that way.

Remember, each contribution source - 401k, 401m, 401a is a "plan" that must satisfy coverage. If the solo 401ks have deferrals and PS, then adopting 2024 retro PSP for NHCEs fixes the PS but not the 401k. Not sure how you fix the 401k part when the missed deferral opportunity is because there was no plan.

Thanks Corey.

You only need to make sure that no EIN/PN combination is repeated. There is no requirement of which I'm aware that mandates sequential plan numbering.

Was the ASG a relatively new development or does it go back years? If the former, might they avail themselves of the M&A transition rules? If the latter, only fixing prospectively is risky.

Peter, who the heck knows? So many clichés about chaos and ineptitude come to mind I'm just paralyzed by the choices to comment. Maybe things will be different come 2029 if there is still an IRS by then, but thankfully won't be my concern any more.

Congrats on the scholarship, but more so on the decision to further your professional education. Wish more practitioners took that approach and more bosses supported such, evidenced by some of the questions we see on this forum. Even if you do not get that support, attaining a designation (and having a bit of experience) will only serve to improve your personal marketability and, with modern technology and the proliferation of remote work, enable to find the right place to practice and continue to learn and develop with organizational support. I can't opine on either organization's designations but over the years have found ASPPA and it's related entities to be a great resource. I have had less exposure to NIPA. Good luck with your continuing education and your career!

Yes, the cash out threshold is now $7,000 if a plan chooses to implement. Amendment need not be adopted until the end of 2026 but be sure to document the decision and implementation timing because amendment must match operation. Cash out, however, does not mean simply paying a lump sum, it means providing the 402(f) notice and the ability to make an affirmative election (rollover or payout) with at least 30 days to decide, and then making a default IRA rollover if no affirmative election is made within the minimum 30 day election period.

Agreed - this is definitely a compliance consulting project. The first year set up and identification of all relevant issues noted above will be the most involved, then ongoing it's mostly data collection and manipulation. This is not trivial, nor are the ramifications if not done properly, so you should charge commensurately. This is where we as consultants earn our money.

Effen is correct - for benefit determination you need not use consecutive but for 415 FAE hi-3 it must be. Also, and this applies to traditional plans with employees that are integrated with social security, you lose 401(l) safe harbor if you use average of non-consecutive years. We took over a plan where prior actuary amended for non-consecutive years for the client (via an "end around" on the AA) but never told them their safe harbor design went away and they needed to general test.