CuseFan

We have a couple of clients that will do an ad hoc retiree COLA every 3-5 years and I think one client that actually has a built in COLA, also very rare. And then there are a few more clients that have done maybe one or two COLAs over the course of our long-term relationship. I don't think you could find a publicly available resource that provides data on this - you may be able to find a survey or two somewhere that tracks but whether access to such would be free, who knows? This is something you basically have to consult on from experience and (as you've requested) the experience of others that you can glean. Good luck!

Read the document, there are BIS rules that apply to eligibility as well and which should be spelled out therein. But the first eligibility computation period starts on first hour of service (hire). Where you go from there - again read the document.

So you have two separate issues - plan compliance and DBPW compliance. If the Plan excluded HCEs from participation, w/o specific exception for those subject to prevailing wage, then they should not be in the plan and those contributions should be forfeited. That takes care of plan compliance. I expect the Plan has provisions for inclusion of ineligible employees by mistake. Now you have a DBPW compliance issue, which you need to satisfy by paying these employees cash compensation or some other permissible DBPW benefit. If the HCEs legitimately remain in the Plan and get these contributions, then you need to look at all the available avenues for passing 401(a)(4). You don't say how you are testing and failing, or by how much, so it's difficult to suggest a course of action - cross-testing, restructuring, 11(g), and whether you also have coverage issues, can satisfy gateway, etc. but you can and should look at all if necessary.

Yes, that can be done and I've experienced personally. We were part of A, and a group was spun off and sold to B. We were terminated and eligible for distributions from A but would forfeit non-vested balances if we did so immediately. However, our future service with B was credited for vesting with A (an amendment was needed I'm sure) and once we attained full vesting of benefit from A, could withdraw entire amount.

Try pricing/buying an annuity contract for the equivalent benefit that also includes the lump sum option, I think you'd find similar cost if you could even find a provider.

My understanding is that you cannot make that change mid-year.

I would say it is compensation. Consider the PPP loans which are forgivable and turn into grants - money is used to pay employees, does not directly come from employer's pocket, other than it came through on its way from the government. But to the employee it is just pay. In your case, it's extra pay, hazard pay, whatever you want to call it - but it's hitting the W-2 as wages so it's plan compensation unless otherwise specifically excluded.

Depends. If there was a compensation history that established a reasonable 415 limit, then yes.

It's in the ASPPA member education section - you need to have an ASPPA account to access and it's not a free session unless you have the ABG affiliation for free on-demand access to recorded sessions - at least that is how I came across it.

Agree - very confusing post. Generally, if an item is "earned income" and subject to SECA then it can count toward retirement plan compensation. However, just because someone counts something for SECA doesn't mean it was done properly (like rents or capital gains) and should be considered compensation. Darrin Watson has a GREAT ASPPA webcast session on Earned Income which has been recorded and which I highly recommend to anyone who deals with small plans for self-employed people.

Had a client audit a few years back that was a target audit (SH 401k plans) and they have groups as opposed to individual groups and auditor did ask for the documentation for authorizing the allocation amounts for each group. Now here is where it gets weird - this was large medical practice that also had a cash balance plan aggregated with the SH/PS cross-tested for nondiscrimination. Since this was a limited scope/target audit, the IRS agent didn't want to have to deal with the combined testing and running it past his actuary, so he asked me to show him the cross-testing for the SH/PS portion alone, which I was happy to provide and of course passed with ridiculously high percentages.

You need an actuary (preferably), or a TPA that then outsources/contracts with an actuary (clunkier). This firm would provide required plan document and required annual actuarial valuations. There would also be an annual government filing that they would do but depending on the circumstances might be very simple such that you could also do yourself. You would be trustee, so wherever you went to custody the assets wouldn't matter much, so choosing the least expensive reputable financial firm makes sense. Going to such a firm for everything, in my opinion, would be a mistake Note that as an S-corp, only your W-2 pay counts as wages for pension purposes, so lowballing your pay to avoid FICA and Medicare taxes also lowers your potential pension. If you have employees there are lots more rules to follow (hence, go to a qualified actuary or TPA who does a LOT of these plans). If you are the only employee it's a little simpler, but if you already have another plan like a profit sharing 401(k) or a SEP then you have some deduction rules to navigate and issues if using SEP -5305 document.

I think the IRS could challenge this on the basis of the "permanency rule" as this is not a change in the business that was unforeseen at the time the plan was adopted. Employer would be attempting to get short term (1-2 years) tax deferred contributions to take advantage of a one-time windfall, which is exactly what the IRS frowns upon. Might they slip it through, sure, but as a practitioner I would not recommend. Unless you adopt the plan and then freeze it after year two and then maintain it for a number of years after before terminating.

What is the objective? Are they trying to enable this HCE to retire earlier than otherwise anticipated, and is this at normal retirement (where they otherwise expect the person to work beyond NRA) or an earlier age? Stuff like this is often done as part of an early retirement window, but an ERW has to be nondiscriminatory, you can't just do for this one HCE. However, the plan could possibly be amended to increase this person's benefit to accomplish the objective provided the plan's benefits overall can (after the amendment) satisfy nondiscrimination testing. Depending on the plan's formula, you often need to also provide a minimum benefit for NHCEs to pass testing. We see this more in taxable entities than the NFP world.

Unresponsive participants can only be turned over to PBGC as missing if they are under the cash out threshold or they did not accept their lump sum payment. From MP-100 instructions: Who counts as missing In general, a distributee is considered missing if, when the plan closes out, the plan doesn’t know the individual’s location (e.g., if a notice from the plan is returned as undeliverable). For purposes of these instructions, we use the term “Unlocatable” to describe a distributee in this situation. P 1F P 2 An individual is also considered missing if: • The individual’s benefit was subject to a mandatory cash-out under the plan’s terms and the individual did not return the necessary paperwork providing instructions about how the payment should be made (e.g., by check or as a direct rollover to an IRA); or • The individual did not accept a lump sum payment, whether elected voluntarily or subject to mandatory cash-out (see “Unaccepted lump sum payments” below). We use the term “Unresponsive” to describe a distributee in either of the two situations noted immediately above. Note that a distributee may be both “Unlocatable” and “Unresponsive.” Maybe a letter explaining how the benefit will have to be turned over to an insurance company will get the participants off the snide. This is the biggest pain for small CBPs. Even if the balances were $50k you'd have trouble finding an insurer, and the premiums would likely be 120%-140% or more of the current account balance.

Backdoor Roth via traditional IRA - OK, provided it was thru non-deductible IRA contributions and all conversion rules followed. Agree with David that it could be time for a DBP, especially if this is a solo/no employees situation.

You request repayment. If not repaid, you inform that excess was not eligible for R/O and you issue corrected 1099R if needed. If not repaid, sponsor (or a third party, if responsible) makes plan whole for the amount that should have been forfeited rather than paid.

From IRS website. I think you have an excess 402(g) salary deferral because that cannot exceed compensation/earned income. The $18,000 deferral is taxable income in 2018 and only the $327 is taxable income for 2019. Yes, you also exceeded 415, but I believe this correction comes first. Timely withdrawal of excess contributions by April 15 Excess deferrals withdrawn by April 15 of the year following the year of deferral are taxable in the calendar year deferred. Earnings are taxable in the year they're distributed. There is no 10% early distribution tax, no 20% withholding and no spousal consent requirement on amounts timely distributed.

Truth is stranger than fiction, for sure, and I bet there have been a lot of "interesting" stories arising out of that situation.

The ARA requested auto ext to at least 2/1 for DBP because of the extended contrib deadline and reporting issues associated with those made between 10/15-1/1. If and when this might happen is anyone's guess at this point.

Yes, still HCE, there is no legal requirement to provide an inheritance and once an adult there is nothing for the parent to dis from owning, i.e., no support obligation. Allowing this situation to make the son an NHCE would simply create all sorts of potential abuse, which is questionable here in my mind - if relationship is that strained, why is son still working for parent?

You should be asking an accountant (or your accountant) rather than a forum of retirement plan practitioners, IMHO.

Don't think so. File final EZ and make sure that plan document is up to date for current law (not just latest cumulative list).

Thanks for correcting me B. So that piece of advice was worth the price paid - nothing!

Interesting how TPAs will shy away from the word "legal" so as not to imply that they have attorneys on staff but have no qualms saying they do actuarial work even though they employ no enrolled actuaries. What is the difference between outsourcing the legal document, which is what you do by licensing pre-approved plan products, and outsourcing the actuarial valuation and Schedule SB (or the signature thereof)?