CuseFan

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)?

I responded to your second posted questions first. Bravo! We see very few people in your age bracket thinking about and planning for their retirement. Your biggest questions/issues have already been addressed - you opened a Roth IRA and you have (or plan to) contribute a substantial amount, possibly the maximum, and you are investing, not simply saving. As an 18-year-old you may not have a relationship (or even know) an accountant or investment adviser - if you do, or have access to one through a trusted family member or friend, I would have them review your plans/intentions to either affirm you are on the right track or give you some advice. Even paying $150 or $200 give or take for an hour or two of someone's professional time and guidance could prove valuable to your education. And keep reading and doing your research - maybe some day soon you'll be giving the answers in this forum in addition to asking questions, because the questions never stop (even after 36 years).

Contributions never taxed on distribution as they were never deducted. Unless it's a qualified distribution, which before 59.5 and 5 years established, then earnings are taxed and I think subject to penalty taxes (not sure on that). I also think you must withdraw prorated contributions and income, so I do not think you could take out $20k contrib w/o taxation while leaving the $5k earnings in the IRA. Front loading contributions early in the year does maximize the time and the dollars for earnings potential, but then you are investing a lump sum amount once a year at the same time, which may or may not be the best time to invest, rather than dollar cost averaging throughout the year. You could be in cash/money market in the IRA and then dollar cost average from inside the IRA as well. If you have an accountant or financial advisor that you trust, they should be able to provide definitive guidance on this. This is my opinion and free advice, which may or may not be worth more than you paid. :-)

Technically, probably need to refund the other $62 (plus interest) unless there was an otherwise distributable event, which I assume there was not or the $2970 wouldn't likely have been returned either. In reality, this is probably immaterial enough for the client to ignore, but it should be the client's call, not the service provider.

You don't give numbers - real or relative - but I assume can't be too large since TH. Be careful of coverage, which could require adding back in non-key/NHCEs, and partial termination vesting in addition to general TH issues.

as in what? it can be deposited by 1/1/2021, we've known that for a while. timing of deposit for 2019 tax deduction has not changed. sched SB timing has not been extended. i have not seen mention of potential further guidance or extensions, but i'm not as close to that as some others on this forum.

Also, not that it was a question asked - on what basis did the plan sponsor (and TPA) think it was OK to forfeit the vested balance after a 5-year break? You cannot force out benefits over $5,000 before normal retirement date so unless the participant was missing as of NRD when benefits were due to be paid, and the plan sponsor did a search, this never should have happened. I get that restoration with earnings makes the participant whole, which mitigates the damage I suppose - I assume this was not a participant directed account. It sounds like the plan sponsor knows this was not appropriate and is looking for the participant to essentially indemnify them. As MoJo said, can't be required and even if done voluntarily is likely not worth the paper upon which written.

Unless the DB formula was a safe harbor then yes, you have NDT (what is TRA offset?). The two non-Key employees that are in both plans would need to get 5% TH in DC assuming that plan provides the TH. You also have a combined plan tax deduction limit if they are professional services.

seconded