CuseFan

No issue, and that is most efficient manner to handle. There is no need to switch to a different plan and no sense in having a second plan unless of course you have significantly more income now and adding a defined benefit plan to increase deductions makes sense.

Assuming 50% or more owner of business he sold, he has an annual aggregated 415 limit with any other "business" he owns 50% or more - including self employment income - so without a doubt he absolutely cannot do SEP in same year on that income.

True, but those limits are the lesser of $54,000 or 100% of pay, so an employer contribution of 35% or 40% of pay would not be out of the question. HOWEVER, tax exempt entities must also pay reasonable (total) compensation and report their officers' total pay on their 990s, so a sizable employer contribution on top of significant pay for a NFP executive might draw attention for excessive compensation.

Transition rules allow coverage to be determined separately as long as the plans don't amend eligibility or benefits, so yes, 7/1/2017. Participation agreement for B should have been adopted by 7/1/2017 for 7/1/2017 effective date if B wanted its employees to be able to defer as of that date, otherwise they can't defer until it's signed as B still has no plan until then. PS for B should not be effective until 7/1/17-6/30/18 PY, the retro entry doesn't apply for the 4/2016-4/2017 YOS and a 7/1/2016 entry as B's employees were not eligible then. Remember, these are two different situations here: (1) B's required inclusion for control group coverage and nondiscrimination, and (2) B's adoption of A's plan as a participating employer.

Yes, that is exactly my point.

Are you really changing/transferring plans? Or are you really just looking to change funding vehicles/recordkeeper/vendor? When a 401(k) plan moves from Fidelity to Vanguard you don't (or shouldn't) create a new plan and do a plan to plan transfer, what makes this situation any different?

How many active HCEs are left in the DBP? It may make more sense to amend DB do that HCEs are no longer eligible and, depending on the situation, try to make them whole via enhanced profit sharing or NQDC or a combination thereof.

Agree with those opining that remaining payments go to beneficiary's estate. Note that a contingent/secondary beneficiary designation by the participant would provide for a beneficiary to the remaining payments in the the event the primary beneficiary predeceased the participant, not to be a next in line - i.e., pay P, dies, pay B1, dies, then pay B2.

I can't answer your question, but if the person was a partner then he is considered self-employed and his profit sharing contribution essentially comes out of his earned income. Unless all the receivables, buy-outs, etc. have been reconciled, couldn't the final profit sharing be accommodated with other final accounting issues? it doesn't cost the firm because it's really self-funded, and allowing could head off a legal action (whether founded or not).

No, and probably because it's difficult to win a lawsuit against poor decision-making. If there wasn't an IPS and the fiduciary(ies) lacked a process which led to the poor decision, then maybe there is more standing to sue. Or to put it bluntly - it's easier to sue (and win, or at least settle) against the unethical (conflict of interest) than the stupid. Also, since the unethical situations usually involve significantly more dollars, they draw the plaintiff attorneys and the real reason for these lawsuits - attorney fees. However, that said, these high profile lawsuits have brought attention to abuses and contributed to lower fees in the industry which means more money for people's retirement, and likely much more collectively than what the classes reap from their lawsuits.

I don't see any reason you cannot use that income for determining this person's 415 100% of comp limit, in addition to his pay from the company.

Now if you can train oompa loompas to do ADP testing...that would make everyone's life easier.

dude, you crack me up - that's priceless!

Why does the match have to be determined so late? Timing of determination (calculation?) vs. timing of deposit (and deduction) are two different things. Auditors are correct in wanting to book as an accrual on 2016 F/S because it's based on 2016 deferral activity. If the plan sponsor is not determining - i.e., deciding on if and how much the match for 2016 will be until November 2017, then I think there is an issue with it being a 2016 contribution (based on 2016 deferrals) at all. I think the discretionary match must at least be declared well before then.

If the spouse is the designated beneficiary they have until the participant would have attained age 70 1/2, so the 5-year rule doesn't apply unless the plan simply had that requirement without the spousal exception. Regardless, as stated above, this unresponsive person cannot hold the plan termination hostage.

Happy Birthday! They say 59 1/2 is the new 39 1/2!

Congrats MP, always glean something useful from your posts.

Correct - plan's get DQ'd not employers or control groups.

You can, as part of an employment agreement which defines the total compensation package, provide that a person's base pay is permanently reduced by X amount which will be contributed as an employer contribution on the employee's behalf. Like plans that require employees to contribute as a condition of employment - the amounts do not count as deferrals. However, providing annual discretion - which if you do with matching contributions that indirectly provides discretion - then I think you have a CODA instead. Unless with a match the maximum is assumed and "charged" whether he gets it or not. Much easier to defend at the start of employment (or plan) - the total compensation package is X and it is comprised of base pay A, retirement plan contributions B and H&W benefits C plus whatever incentive pay is earned. If there's a waiting period then define up front these components before and after, because doing it only when the person becomes eligible looks more CODA again. Of course, if someone takes a lower comp because of these "employer provided" contributions that are subject to a vesting schedule - that's another complication. In summary: defining the total compensation package by component in employment agreement at employment commencement - good - reducing a participant's pay arbitrarily to pay for his matching contributions - bad.

Hopefully he had no employees. I guess if he files bankruptcy the plan assets go to zero - and I would terminate and file a final return.

Nicely crafted. Although you can pay life and disability insurance with pre-tax dollars, I don't believe you would want to because that would make any benefits paid under those policies taxable (unless under the $50k coverage exclusion for ER provided GTL). There are administrative costs with a cafeteria plan, so the message to the employer can't be pure payroll tax savings. Having a cafeteria plan may be an advantage - or disadvantage not having one - when trying to attract and retain employees, especially for a small business and even more so if the small business does not offer a retirement/401(k) plan. If you can point to local competing employers who may have these plans, that could help as well. You should also research and present the tax savings that could be available to the owners on their own benefits under the arrangement, rather than reference "special rules" - if you can demonstrate that they can save both at the business and personal level you have a stronger case. Good luck

Thanks M - I was not aware of this special rule, it makes sense (score one for the government!), and is helpful to know.

Excellent point. Here's to continued Congressional gridlock that prohibits tax reform/simplification and keeps us all in business!

That is my understanding as well, but doesn't answer the question in-service withdrawal questions. I would defer to the original (MP) document and if it didn't allow for those dollars I would not allow under the new merged plan.

When was the amendment prepared and adopted? If it was after 11/30/2015 then it was not permissible because no matter how you slice it there is a PY that began 11/29/2015, so the only way to change to a fixed 11/30 PYE was to amend on or before 11/30/2015 and to have a two day short plan year. I'm not aware of any exception here that would allow you a 367 day plan year - same with 5500. My burning question is whether this was a conscious decision by the plan sponsor (doubtful) or an oversight by the TPA? That sort of specific language is tough to miss. Was is it just TPA laziness? Remember, people, certain plan provisions are there for the benefit and convenience of the plan sponsor and its participants, the convenience of the TPA is secondary.