C. B. Zeller

I did not mean to suggest that March 15, which would usually occur in the 11th week of a calendar year, would be within the "first few weeks" of the year. My reference to the rule was in response to Nate S's comment. Is anyone aware of any situations in which the IRS, either in a ruling or on audit, found that compensation included under this rule was paid too late in the following year to count as the "first few weeks?" I think so. Paragraph (d) provides safe harbors for items included in compensation, and paragraph (e) provides timing rules. I read them as being taken in concert with each other.

Possibly the "first few weeks" rule of 1.415(c)-2(e)(2)?

This means amounts that could be distributed from the plan. For example, 401(k) deferrals if the participant is over age 59½. There are other distributable events for 401(k) deferrals, of course, but those would not generally be of much use in an IRR context. Terminated employees can't usually make rollover contributions, and hardship distributions aren't eligible rollover distributions, for a couple of examples. This is anything that couldn't be distributed from the plan, for example 401(k) deferrals or safe harbor contributions under age 59½ while still employed. If a plan allows a Roth conversion of amounts that are not otherwise distributable, then it has to retain the distribution restrictions that applied to the amounts prior to the conversion. That means, in most cases, the plan will have to track twice the number of sources that they had in the plan before. For example, now they have 401(k), 401(k) Roth conversion, safe harbor, safe harbor Roth conversion, profit sharing, profit sharing Roth conversion, etc. That might be the reason why a particular platform isn't supporting this type of conversion.

As long as the formula is written into the plan doc, then I agree you are good on the ADP and ACP safe harbor.

And you've determined that the spousal non-involvement exception does not apply? 414(b) says: The IRS has produced no such regulations. So, that leaves the allocation of the deduction to some reasonable interpretation of the taxpayer. Anything that's not abusive is probably ok, but I would encourage the sponsor to get advice from their accountant, if not an attorney, before doing anything questionable.

This will NOT meet the requirements for a discretionary ACP safe harbor match. It should be ok for a fixed match however.

Are A and B a controlled group?

The difficulty, of course, is that these elections are not being processed by fifth-graders - they are being processed by computers, which are only as smart as they are programmed to be. Computers generally process numbers as either integers or "floating point" numbers - essentially decimals. While it is certainly possible to program a computer to work with fractions, it is more complex than using integers or floating points, and the person developing the system (or more accurately, the person paying for the development of the system) may feel that benefit of the added precision gained by supporting fractional numbers is not worth it in terms of development and support costs. If we continue this line of reasoning, why stop at fractions? What if I want to designate 1/sqrt(2) of my account to my first contingent beneficiary, and 1-1/sqrt(2) to the second? This amount could be readily calculated, but it would not be reasonable of me to expect the software to support designations made in terms of irrational numbers. Instead I should be prepared to accept an approximation. An approximation that is accurate only to one part in a hundred (whole percentages) is not great, however the information provided in this thread seems to indicate that is uncommon among providers. More common seems to be precision to one part in a thousand (percentage with one decimal place) or one part in ten thousand (percentage with two decimal places), which while not perfect, is pretty good. For an account with a value in the millions, percentage with two decimal places means that the amounts will be accurate to within the hundreds of dollars.

Need an EIN. Do not use a SSN. From the instructions to 5500-EZ

Or better yet, if the tool were open source and its code could be examined and vetted by a range of industry professionals.

If the TPA works mostly (or exclusively) with plans on daily investment platforms, they may have little to no need to deal with 1099-Rs, as those would be handled by the platform. The TPA might be further insulated from the process if they utilize a service like Penchecks for distributions from non-platform plans.

I don't have any experience with this exact situation, but I wonder if you could accomplish it using an automatic contribution arrangement? Obviously it wouldn't meet the requirements for an EACA or QACA but that wouldn't be the goal anyway. The ACA would only apply to the employees acquired as part of this transaction, and the default contribution rate would be equal to the employee's last contribution rate in effect in the acquired company's plan. It might be an issue if anybody in the prior plan had a dollar amount election instead of a percentage of pay election, since I believe an ACA has to use a percentage of pay and not a dollar amount as the default. You might also have to generate customized notices for each employee to specify their default contribution rate. I think you would also be forced to put them in a QDIA, if that wasn't already the plan.

Same to you - enjoy your weekend! And don't forget, happy 48th birthday to ERISA!

Yes, but moreso that H is participating in the management of W's business. I think the fact that they have to have an accountant determine whether it is even reasonable for H's business to pay W's businesses is an indication that the two businesses may not be actually be managed independently. If the accountant determines it is not reasonable, then W's business would be providing services for free, which most rational business owners would not do, in the absence of some outside factors.

Best source I am aware of is the EFAST2 FAQ 33a: (https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/efast2-form-5500-processing.pdf) I don't know if you are focusing solely on signatures required of the plan administrator but, the enrolled actuary's signature on the Schedule MB/SB must be manual, from the Form 5500 instructions: Now I have a question for you - let's say I load a PDF of a document onto my tablet, which has support for a digital pen, and I sign that document using the digital pen on the tablet. If the document requires a "manual" or "handwritten" signature, but states no requirement for ink-on-paper, does my pen-on-tablet signature satisfy that requirement?

Interesting, I will admit I have not scrutinized that section. Still, I wouldn't expect the DOL to have copies of returns that were filed solely with the IRS, for example a paper 5500-EZ that was mailed to Ogden. Is anyone familiar with the process to request a copy of a 5500-EZ from the IRS?

5500-EZ filers are exempt from the requirements of Title I, including the SAR and the public disclosure.

I agree that an individual does not have to be an employee in order to have ownership attributed to them or to have their ownership attributed to another person.

What was involved in checking? If you mean you looked them up on the DOL's website, you won't find them there, because it does not show 5500-EZs. If you believe that the Form 5500-EZ was not filed for one or more years for which it was required, then file the missing forms as soon as possible under the IRS relief program. https://www.irs.gov/retirement-plans/penalty-relief-program-for-form-5500-ez-late-filers

Your numbers appear to be off - 47% + 47% + 16% = 110%. Attribution under sec. 318, used for determining who is a 5% owner for HCE, Key employee, and RMD purposes, among other things, goes from grandchild to grandparent but not from grandparent to grandchild. In your example (notwithstanding the inconsistent total), both Grandma and Mom would be deemed 94% owners (since they are each attributed the other's ownership) and grandkid would be deemed 47% owner (attributed Mom's ownership only).

I think there is a good chance that this activity would invalidate the spousal non-involvement exception, and there would be a controlled group.

I see two issues that you need to address: 1. Coverage test. The employee had presumably satisfied minimum age and service conditions prior to the start of the year. However, because they terminated prior to the effective date of the plan, they had no opportunity to make a cash or deferred election, and therefore would not be considered benefiting for the coverage test. However, I think you can solve this by relying on the daily testing method for the coverage test, as on each day prior to the effective date, there were no HCEs benefiting, and on each day after, HCEs were the only employees. 2. Discriminatory timing. This is a facts-and-circumstances test, but the IRS says that if a plan is adopted, amended, or terminated in such a way that the timing of it has the effect of discriminating against current or former NHCEs, then you have a problem. Adopting a new plan right after the sole NHCE is fired could look discriminatory in the eyes of the IRS. Using a short initial plan year, or an off-calendar plan year, might be beneficial here as that way the former employee was not an employee at any point during the plan year. It's hard to say though because there are no clear rules as to what is discriminatory. Using a short or off-calendar plan year would also let you avoid needing to do a safe harbor plan.

No. Yes.

While you can do this, it's asking for trouble. What will happen is the business owner will sign a 401(k) plan on 12/31 and then go and issue themselves special payroll with some 401(k) deferrals on it. Presumably no one else gets the opportunity to receive some extra pay that they can all of a sudden contribute to the plan. Even if you cook up a way to pass the ADP test (like the one Lou described using prior year testing), you still have a nondiscrimination failure on the availability of the deferral feature. If you are going to put in an 11th hour 401(k) plan, make sure you get deferral elections out to employees, and early enough that they have an effective opportunity to defer.

Agree the existence of an ASG seems unlikely without some common ownership. However, also consider whether or not the doctor might still really be the employer of his former employees. If he is still responsible for hiring, training, assigning tasks, and supervising these people, and if he still has the power to fire them, then he might still be their employer, regardless of who signs their checks.