CuseFan

If it ran through regular payroll period then additional payroll and income tax withholding associated with the extra payment for the loan could be taken from his remaining regular wages.

The average benefits percentage test is a coverage test, which requires you include 401(k)/(m) amounts/benefits in determining an AB% for the Employer's group of plans. Then if ESOP satisfies nondiscriminatory classification and safe harbor percentage, and the AB% > 70%, the ESOP passes coverage on its own. What clearly can't be done is say that the ESOP and 401(k)/(m) together covers > 70% and so passes ratio percentage test. If the ESOP service provider is showing that, it's time to look for a new provider, but hopefully they are simply showing the scenario portrayed above.

This is perfectly fine provided the amounts are treated as compensation (for all purposes) to the son - which would be the case regardless of status of HCE or NHCE.

Thanks CBZ, I was going to repeat that. Send, withhold taxes if required, re-issue checks if necessary, issue 1099-R's and repeat annually - that is the plan's obligation. A letter/notice to participant from the IRS might change his/her disposition but until then, the plan needs to comply even w/o cooperation.

1120S is a sub-S return, so it appears this is a sub-S corp in which case only the owner's W-2 compensation is considered and any profit/loss pass-through on the K-1 is irrelevant to his compensation.

Thanks Tom. I thought "long-term part-time" was defined as >500 hours in three (consecutive?) years. For DBers - permanent relief for frozen plans, including 401(a)(26) now as well, and for those in the small DB/CB space, the ability to adopt a new plan after year end before tax return due date. Yay, Christmas and New Year's Eve with the family again (hopefully)!

ok, so I just saw in another thread that SH matches, if determined on payroll period basis, must also be deposited on an accelerated basis (end of next quarter I believe was what was noted) - but still, determination timing and deposit timing are different.

So I look at that language and it says when the Employer is allowed to make contributions, which to me means when they are allowed to deposit - and Employers can deposit on a payroll period basis and calculate/determine on a plan year basis and true-up after year-end, or they can calculate on a payroll period basis but not make the deposit until tax return due date, can they not? The way plan provisions are spelled out here is important. Usually, the general reference is to the plan year, in which case I think you are bound to do a plan year calculation (so year-end true up) unless the document specifically calls for the determination/calculation on a payroll or other time period basis. Again, deposit timing is not determination timing, in my opinion.

or the CBP contribution would be limited to 6% to come in at/under the 31% combined deduction limit

Agreed, and using accrued to date methodology would seem the most logical.

Each separate matching schedule must pass BRF testing (which can be done by satisfying the safe harbor nondiscriminatory classification ratio percentage of the average benefits test).

Agree with J, and if wife has 3 or fewer employees, the DBP can be limited to the owners, just need to be wary of combined plan deduction limits in addition to (of course) gateway and testing.

seconded

I think ESOP Guy's initial response was spot on. You can tell a former employee that you have no record of any further benefit due them from the plan, insinuate that they have been paid out, ask them to check there records and hope they go away - and most often they do. But if they don't, 100% burden of proof is on the sponsor - so whenever someone (client or co-worker) asks how long a PLAN SPONSOR should keep records, my answer is always FOREVER. And there is no reason not to convert old paper records into electronic copies and retain. The big problem is that plan sponsors can't jump in their Deloreans and go back to the 70's and 80's and restore the paper records they lost/destroyed prior to the electronic age, together with their impression that their providers were responsible for maintaining all those records. For some, it could be costly case of wishing they'd known then what they know now.

Yeah, kind of like college athletics recruiting - or apparently now just college entrances.

correct - employees get income (and tax w/h) reported thru w-2 but non-employee directors must be reported thru 1099.

No, you misunderstood, sorry if I wasn't clear. GTL taxable is part of W-2 pay and is included if the plan does not further excludes fringe benefits, but is excluded if the definition excludes fringe benefits. And thanks, hoping to get a crack at #1 seed Gonzaga, but Baylor will be a tough game. Hoping I can last the game tonight as it's way past my bedtime! At least this year we didn't have to sweat getting into the tournament!

Bird tweets wisely.

"Adult Son" doesn't really matter here, but you do have two owner-employees (each owns 10%+) which I think allows you to file an EZ (or not file if assets less than $250k) - i.e., Title 1 exemption. I'd be wary of what the "real estate investment" was to make sure no PT issues, e.g., they didn't contribute the family lake house, summer camp, time share, etc.

GTL taxable is included in W-2 but is also a safe harbor exclusion there from. I would not exclude "pay in lieu" as a fringe - it's cash comp.

Yes, I would still say it is a fringe benefit and exclude on that basis.

So this was initially a 125 deferral that counted as compensation once already, in 2017, but was refunded as taxable income in 2018 because of a test failure? I think you have to exclude, yes on the basis of a fringe, but also because you'd otherwise be including the same amount as compensation for two years.

Based on the history, if the employee worked every January and the expectation was for that to continue, then I would say action by either party to severe that expectation - Employee decides not to work next January, Employer decides we don't need this person this year - results in separation / retirement. This issue comes up with hospitals and their per diem or on-call staff. How long not working, not being called in, turning down calls, etc. becomes a separation? Again, I think a year of severance initiated by either party, unless an authorized leave (but even those are usually limited to a year) is safe to constitute and should generally constitute a separation. Just my humble opinion. Not that is may really matter in this case, but is this person still considered eligible to defer and included in the ADP test?

Regarding coverage - if a person is eligible to make a salary deferral in a plan during any part of the year they are considered benefiting under the section 401(k) portion of the plan (and also included in the ADP test). Therefore, if there were employees who transferred between A & B and were eligible to defer in each plan at some point during the year, they benefit in each plan, that is if you are looking at the full year and not doing a year-end snap-shot.

I agree 100% of zero is zero and that is both his 402(g) and 415 limit with respect to this plan. Maybe it is helpful, and maybe not, but I always say first: what does the document say, if anything? I would think (hope) that the document would specify the order of correction.