C. B. Zeller

Does the union plan cover any key employees? If so, then it's part of the required aggregation group. See 1.416-1 T-3.

No This is also not correct The maximum deduction is equal to the greatest of: The minimum required contribution under section 430, Funding Target + Target Normal Cost + Cushion Amount - Assets, or If the plan is not subject to section 430(i), Funding Target determined as if the plan were subject to 430(i) + Target Normal Cost determined as if the plan were subject to 430(i) - Assets The cushion amount is equal to: 50% of the funding target, plus If plan benefits are based on compensation, the amount that the funding target would increase if future compensation increases were taken into account If plan benefits are not based on compensation, the amount that the funding target would increase if expected benefit increases for succeeding years were taken into account, based on the average annual benefit increase over the last 6 years

B might be a 1361(b)(3) qualified subchapter S subsidiary, aka Q-sub. If that's the case I believe the plan would be PBGC exempt but I would still recommend going through the determination request to be sure. In my experience they get back to you pretty quickly.

You need to talk to your actuary. Sounds like that is the case, but I would need to see the full valuation results to say for sure. Assuming we're talking about 2021, there are only a few days left to adopt an amendment that could be taken into account for the 2021 valuation. Better decide quick!

NEC = Non-Employee Compensation If someone is receiving one of these, then they are not an employee. Not an employee means they are not eligible for the plan.

As David correctly notes, the maximum deductible contribution is equal to the greater of the minimum required contribution, or the amount otherwise calculated under 404(o). However, this question disturbs me a little. The actuary who calculated the maximum should be aware of this rule and shouldn't have provided you with a maximum smaller than the minimum. I have to wonder if the actuary did take that into account and the maximum is correct, and you are misinterpreting the results. The minimum is not equal to just the target normal cost - if the value of plan assets (reduced by any credit balances) is greater than the funding target, the minimum required contribution is equal to the target normal cost minus the amount of such excess. Assuming no credit balances, if the value of assets is more than $120,000 greater than the funding target, then the minimum would actually be $0. With the current difference between the ARPA segment rates and the un-stabilized segment rates, it should be very rare that the minimum required contribution dictates the maximum deduction.

7.5% is the maximum that a combo gateway percentage can be. It can be 5%, 6%, 7% or 7.5% depending on the highest aggregate normal allocation rate for any HCE.

This is different from what you said in your original post, which was that counselors are excluded from participation as a class. If they are eligible, but simply never meet the annual allocation conditions, that changes the situation quite a bit. Going back to condition (iv) I think the word "solely" may still foul things up for you however. I think you might be misunderstanding how the otherwise excludable testing option works. You take ALL employees who have not met the minimum age and service requirements of 410(a) (1 year of service/1000 hours and age 21), and treat them as if they were a separate plan. The disaggregation group would have to satisfy testing on its own. As long as nobody in that group is an HCE (which is unlikely, as HCE status is based on prior year's compensation, and an employee who worked enough in the prior year to earn above the compensation limit has probably met the 1000 hour requirement and would not be otherwise excludable), then the disaggregation group automatically passes coverage testing. See 1.410(b)-2(b)(6). The remaining non-disaggregated population would then be only those employees who have met 1 year and 1,000 hours of service and age 21. If none of those employees are excluded under the plan then the coverage test passes.

I suspect this is shorthand for saying that the participant (and spouse) did not waive QJSA before the benefit commencement date, therefore the benefits commenced in the form of a QJSA on the benefit commencement date. Many defined benefit plans, especially cash balance plans, offer a lump sum as an alternative form of benefit. That's why IRC 417(e)(3) exists.

Another suggestion—likewise not advice—would be to distribute the refund from both the pre-tax and Roth sources in the same proportion as the employee's contributions for the year. That should avoid any appearance of preference towards one or the other.

Under 1.410(b)-6(f)(1), there are five conditions that must be met in order to treat an employee as excludable: i. The employee does not benefit for the plan year, ii. The employee is eligible to participate in the plan, iii. The plan has an hours of service or last day requirement in order to accrue a benefit, iv. The employee fails to accrue a benefit solely because of the failure to meet the hours of service or last day requirement, and v. The employee terminates employment during the plan year with no more than 500 hours of service. "Plan" for 410(b) purposes means after the application of the mandatory disaggregation rules, so not the entire plan, but just the matching or profit sharing portion of the plan. See 1.410(b)-7(c). Leaving condition (iv) aside, the counselors in your example satisfy condition (i) and (v) but not condition (ii), and condition (iii) is also not satisfied. Therefore the counselors cannot be treated as excludable for purposes of the coverage test. However, the plan will likely satisfy the coverage test by disaggregating the portion of the plan covering otherwise excludable employees, that is, the employees who have not satisfied the maximum age and service conditions under 410(a)(1). That will include the counselors and presumably some of the FTEs, however as long as that group does not contain any HCEs it will automatically satisfy the coverage test. For that matter, you haven't said anything regarding the relative number of HCEs and NHCEs in the employee population. You said it is a school, so presumably there are not a lot of HCEs. Would the plan pass the ratio percentage test, even without disaggregation? How about the average benefits test?

Yes indeed - you can't aggregate plans for 401(a)(26), so they would need to have a single plan covering both employers in this case.

The distribution was paid to the participant and was presumably taxable. Why would the IRS refund the tax withholding?

Reason #27 on the Big List of Reasons Why You Shouldn't Use a Variable Interest Crediting Rate.

Assuming that you are just simplifying for the purposes of this discussion - since the net earned income calc is a little more involved than just earned income minus plan contributions - then yes, you are correct. The contribution will reduce net earned income, which will reduce the high-3 average comp for 415. If this is the sponsor's only plan, then you can use the $10,000 de minimis 415 limit (prorated for years of service), which is not much, but it's better than $1,000.

The other option is to have the sponsor make a contribution to get the plan 110% funded.

ASG or not, this certainly appears to be a controlled group. With the wife doing work for the husband's company it is likely that the spousal non-involvement exception does not apply. There is nothing stopping them from setting up separate plans. Are there any employees? If there are non-HCEs then the plans may need to be aggregated for testing.

As it stands, you have a qualification failure because the plan document (which says he wasn't eligible) doesn't agree with the plan's operations (since he received a contribution). If you do nothing, this operational failure will jeopardize the tax-qualified status of the plan. The IRS provides two ways to fix the failure and restore the plan's qualified status: Change the document to match operations, that is, adopt a retroactive amendment to allow this person to enter the plan earlier than they otherwise would have, and the contribution will remain in their account; or Change the operation to match the document, which would mean pulling the money out of this person's account. Rules for both of these options can be found in the most recent version of EPCRS, rev. proc. 2021-30.

The instructions state "Do not complete [Schedule A] if filing the Form 5500-SF instead of the Form 5500." This is located in the footnotes under the chart instructing you what schedules to complete based on what type of plan you are filing for.

Repayment of a coronavirus-related distribution would generally be treated as a rollover to the receiving plan - is is not subject to limits under 402(g) or 415(c), nor is it deductible under section 404. It would, however, reduce the individual's taxable income for the year of the repayment, or for the prior year if the repayment is made prior to the individual's tax filing deadline for the prior year. Your client (and their tax advisor) should carefully read the instructions to Form 8915-F to understand how to properly account for the repayment of the distribution when preparing their tax return.

Sounds like the notice has old language. For 2019 and prior plan years, a one-participant plan could file on paper using the 5500-EZ or electronically using EFAST2 on Form 5500-SF and checking the box for "one-participant plan." For 2020 and later plan years, a one-participant plan must file 5500-EZ, but it can be filed either on paper or electronically through EFAST2.

I would review the amendment carefully, because this is not necessarily true. Depending on how the amendment was written, someone who was previously eligible but has never actually completed a year of service may need to complete that year of service before they are considered eligible again. Does the amendment explicitly addresses this in any way? Does it say, for example, that anyone who was a participant on any date prior to the effective date of the amendment will continue to be a participant after the effective date? If this person actually did re-enter the plan immediately upon re-hire then you lose the top heavy exemption on the entire plan. All non-key participants who are actively employed at the end of the year will need to receive a contribution of 3% of their full year compensation.

A plan (including a component plan) passes the coverage test if it benefits no highly compensated employees for the plan year. 1.410(b)-2(b)(6)

I agree. See 1.401(k)-2(a)(4)(iii) and (a)(5)(ii).

You can test different groups of employees using different methods if you restructure the plan into component plans. Each component has to separately pass coverage testing.