CuseFan

Exactly - so no deduction, but could do VAT up to 415 limit, do an in-plan Roth conversion (plan document needs to have Roth provisions) and then voila, you have your back-door Roth that everyone seems to be clamoring for these days. This is one of the rare instances it works (owner/HCE only plans). And at age 42, I would say there is certainly value for the owner in Roth.

You never need to restate a terminating plan but you do have to make sure it is up to date at termination. The pre-approved plan providers have interim amendments for terminating plans, the issue is knowing whether these cover everything through your termination/distribution date if such extends beyond the cycle restatement date. I deal with DBPs, and those interim amendments are usually sufficient - I expect DCP amendments would be as well, assuming you don't blow well past the cycle date. All that said, restating gives you absolute safety in that regard.

Agreed!

No, I think you have it well thought out - the double deduction design will not work. Yes, adding a calendar year PS 401k will work provided the noted 6% PS limit to avoid combined plan deduction limit. Do they not want a 2020 deduction or do they think they missed their chance? If their extension goes to 9/15 they can adopt a DBP for calendar 2020 and file an amended return to claim the deduction, we had a new client specifically do that.

If the above is not available, I would suggest a resolution adopted by the person or entity with the current authority to appoint or replace the trustee, that authorizes and names a successor/contingent trustee in the event the current trustee dies or becomes otherwise incapacitated, and have such successor/contingent trustee sign an acceptance of this. Then make sure a copy of this is kept with permanent plan records and given to vendors as may be needed.

YES - all service within the control group must count for eligibility and vesting whether earned at a participating employer or not.

What does the plan document say? Always the first source, right? Many pre-approved documents I've seen that have the under $5k default rollover provision also give the PA discretion to adopt procedures to implement default rollovers for balances less than $1,000.

The instructions are clear - they want hi-3 average for a DBP (checking 415 limit) and if the benefit is based on something different then you need to attach a separate schedule that shows the compensation upon which the benefit is based (so they can spot-check that).

Was there a service agreement and were those services paid for?

Yes. I deal with DBPs where the distribution provisions/timing for termination before retirement can and often are different, do you not have those different options in your PSP?

Tentatively I say yes but a better way might be to include such provision in an appendix/addendum.

I don't think you can ignore that prior service or start the vesting clock anew for the new CBP, at least for anyone who was in the prior plan.

Exactly - and what I am telling everyone is that this only works for two types of plans: 1) HCE-only plans that do not need to test and 2) very large plans that can pass ACP testing with the VAT contributions. If your plan(s) is(are) in between, fuggetaboutit!

You and I are partners and trustees of the plan - I terminate and initiate a distribution of my total benefit and leave you with less than your total benefit, are you happy? Is that fair? Even owners and HCEs are entitled to and afforded some protections by these rules.

I think you're OK, and if the deferred bonus does not vest until the end of the 3-year contract and is paid at timely thereafter (within 2 1/2 months or tax year-end), you have a short-term deferral and don't really have to deal with 409A at all.

Yes, your prorated 401(a)(17) compensation limit for the 10-month short plan year would be $237,500. The plan document should have language similar to this in the definition of compensation, as related to the compensation limit: If an Annual Compensation period consists of fewer than 12 months, the Annual Compensation limit is an amount equal to the otherwise applicable annual compensation limit multiplied by a fraction, the numerator of which is the number of months in the short determination period, and the denominator of which is 12.

For a short plan year the 401(a)(17) compensation limit and 415 limit are prorated 10/12. I'm not sure, but I thought a partner's earned income is deemed to all be earned on 12/31, so you don't prorate income for a short year but you limit the income according to prorated limit.

Yes, provided coverage passes, as you note. Also, as ESOP Guy pointed out in responding to another post, such an amendment could create a partial termination. So you kick these employees out of the plan prospectively but may have to fully vest them at 1/1/2022 in whatever account they have accumulated and then track those inactive accounts until there is a distributable event.

So to piggyback Bird - you don't need a separate statement showing all the brokerage account information but do need to communicate those necessary annual items that might otherwise have been on a statement.

Loans are part of the participant's account balance, (usually) just a directed investment, so I don't know how that can be "on the fence" in terms of statement presentation. However, if they get an annual statement on just their loan from some source, you're probably covered. You mention brokerage statements for those fully vested - so you give statements off your system for those not vested but then stop once they're vested? That seems odd. Also, does the obligation to tell someone they're fully vested go away after you tell them once? I don't know, but just throwing that out there as well. As you note, lifetime income disclosures will likely change that landscape regardless.

Correct, not an issue to exclude HCEs prospectively. But if this person was in the plan for one year and created a failure, how did you deal with that? Or did you pass on average benefits but the plan sponsor would prefer not to incur the expense of having to run that test each year?

My position is that we inform the client (on the record for CYA purposes) of the reasonable compensation requirement and that it is up to the client, hopefully with formal input from their accountant and/or legal counsel, to determine reasonableness. If it flies (with or without subsequent scrutiny) then great, and if it doesn't you have the "I warned you/I told you so" in your defense - not that a legal defense is needed. And YES - that is always sound advice!

His TPA is wrong.

I see that. Will be interesting to see how far he gets.

When did compensation and contributions cease? I think that would be the relevant end date for testing.