C. B. Zeller

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.

The only war I'm fighting is the one in my email inbox...

Agreed, if you have an actuary available. With the lifetime income disclosure rules, some people might now be required to calculate present value factors who have not previously needed the services of an actuary.

I posted a spreadsheet in another topic. Feel free to give it a shot. https://benefitslink.com/boards/index.php?/topic/68927-apr-calculator-workbook/

I put together a spreadsheet that will calculate single life and 100% J&S APRs. This was inspired by comments from @401king and others in another recent thread. You must enter the interest rate and age on the Input tab. You can optionally enter an account balance, if you do it will calculate the annuity amounts in addition to the APRs. Important: you must enter the values from the correct mortality table on the "Mortality" tab. The mortality tables are published by the IRS, for example the 2021 table is here: https://www.irs.gov/pub/irs-drop/n-19-67.pdf Use the values in the column labeled, For distributions subject to 417(e). If someone wants to enhance this workbook to automatically pull the 417(e) tables, or the 10-year CMT rates, that would be fantastic. Use this workbook at your own risk. I believe it will generate correct results based on the inputs but I can not be responsible if it fails in some cases. I can not promise that it will not immediately delete all your files and melt your CPU the second you open it, either. Treat it like any other file you would download from an anonymous internet stranger. APR calculator.xlsx

Honestly, it requires an introductory course in actuarial mathematics to understand how to calculate an APR from the underlying mortality tables and interest rates. It's not something that you could just slap down a formula and plug in the numbers and get a result. At best, you might be able to use a spreadsheet to calculate the APRs. But if you just download a spreadsheet from somewhere, is that really different from relying on outside software?

Close Luke....one more section and you would have found it. ERISA § 104(a)(1)

Testing elections are typically independent of plan document provisions. You can allocate a profit sharing contribution based on current year post-entry compensation and then test it using average compensation, for example, if you really wanted to.

EBAR is a term that only applies to testing, specifically to cross-testing contributions on a benefits basis. It is the "equivalent benefit accrual rate." Pay credits in a cash balance plan don't have an EBAR - the accrual rate is determined by the interest crediting rate and the plan's definition of actuarial equivalence. Can you exclude pre-entry compensation when determining the amount of a pay credit in a cash balance plan? Yes - you can make any exclusion you want to compensation for this purpose, as long as your document (assuming you are using a pre-approved document) can accommodate it. Accruals don't have to be based on a 414(s) definition of compensation unless you are using a safe harbor plan design. Can you exclude pre-entry compensation for testing purposes? If you are testing using current plan year compensation (as opposed to average compensation) then yes. This is true even if you do not exclude pre-entry compensation for purposes of determining pay credits. This is not usually something that has to be spelled out in the plan document; it is something you can elect year to year.

Maybe it was too obvious to state, but: The plan has to allow for after-tax contributions The plan has to allow for in-plan Roth conversions If there are any NHCEs, the ACP test will be required (and probably fail)

Assuming calendar year plan, if it's late July and the 5500 hasn't been filed yet, there is no reason not to file a 5558 extension. With that done, if you're a day or two late from the October 15 deadline, the penalty counts days back to the July 31 deadline, so you're looking at a minimum of 77 days late, or a $19,250 penalty. The penalty increase was put in the bill as a "revenue raiser" to offset the loss of tax income from other things they wanted to do, like allow retroactive plan adoption and increase the RMD age.

This is one of the safe harbor allocation methods. If you want to use a preapproved document, make sure the document you're using has it as an option.

If I'm understanding the question correctly, the circumstance is something like this: Participant had a deferral balance of $8,000 and a QNEC balance of $2,000. They experienced a financial hardship of $10,000 or more and requested a hardship distribution of $10,000. The plan only distributed $8,000, even though the plan provisions in effect at the time permitted both deferrals and QNECs to be distributed in event of a financial hardship. The question is, can the $2,000 QNEC balance be distributed now? If the hardship still exists, then I think the answer is clearly yes. If the hardship doesn't still exist, then you would be looking to see if there is a self-correction method available for this underpayment. I don't believe this scenario is explicitly addressed in rev proc 2021-30, so it would be up to the plan administrator to determine a reasonable method of correction. It would seem reasonable to me to distribute the amount now, with earnings, but I am neither the administrator of this plan, nor the IRS.

We considered this internally a few years ago. We ended up abandoning the idea, mostly because we were worried it would send the wrong message to our clients — e.g., my TPA charges me $X for late deferrals, and it would cost me $Y to fix my process and avoid the late deferrals, so if X<Y then just leave things as they are and keep doing them late. As it stands, I think some plan sponsors already engage in this type of calculus, at least with respect to the IRS excise tax. But by continuing to treat late deferrals as an exceptional circumstance, it opens the door for a conversation with the client about the problem and a chance to remind them about their fiduciary duties.

What does this have to do with anything?

Only an S-corp shareholder (i.e., an owner) receives a K-1. The K-1 reflects the pass-through income from the S-corp to the shareholder. This is essentially investment income and can not be used for plan compensation. An S-corp shareholder who is also an employee of the S-corp must receive a W-2. The W-2 compensation is the compensation that's usable for a plan.

No. The mandatory disaggregation rules under the 410(b) regs say that you disaggregate a plan into 3 plans for coverage testing—one for deferrals, one for match, and one for non-elective (profit sharing). This is why safe harbor non-elective is tested together with profit sharing, for example. The fact that different match formulas apply to different employees will be tested in the ACP test.

I believe the answer to the original question is no. 5% owner status for RMD purposes is defined with reference to section 416. 416 says that ownership is attributed under the rules of section 318 when determining who is a 5% owner. Under 318, stock is attributed from a trust to the beneficiaries of the trust, except for stock held by a trust qualified under 401(a).