C. B. Zeller

Read where? "Solo K" is not a team that's defined in any of the law or regulations. It's just a marketing name. There is such a thing as a "one-participant plan" which means they are eligible to file Form 5500-EZ. A one-participant plan includes a plan that covers only a sole proprietor and their spouse, partners in a partnership and their spouses, and (new starting in 2020) 2% shareholders in an S-corporation and their spouses, children, parents and grandparents. Any plan adopted by an employer which has no non-highly compensated employees will be exempt from most testing, which is the real benefit of a "Solo K" plan anyway. So go ahead and adopt a regular 401(k) plan and don't worry about it.

Are the plans part of a required aggregation group? (The answer is yes if both plans cover any Key employees, which they probably do. It's also yes if they are being tested together for 401(a)(4) which it appears they are.) I agree with your conclusion. If an employee was eligible to defer but has not met eligibility for the DB plan then they need the 3% DC top heavy minimum, and if they have not met statutory eligibility then they can be disaggregated on the general test and so would not need to receive the gateway.

If we're talking about participant elections, and not just plan documents, don't forget about 1.401(a)-21.

VCP can give the plan relief from operational issues. In other words, if the VCP is granted, the plan can't be disqualified for allowing the distribution to be treated as a CRD even though it was paid in 2021. I don't believe that any IRS departments outside TEGE are obliged to honor the VCP though. Meaning that there is no guarantee that the participant would be allowed to treat the distribution as a CRD on their taxes.

Agree with Bill. I would cite DOL reg 2510.3-3(c)(1) which says "An individual and his or her spouse shall not be deemed to be employees" - it says nothing about their children.

Yes. Limiting compensation is a qualification requirement under 401(a)(17). Close, but yes. It is not technically a forfeiture. The correction under EPCRS is to move the excess amounts (plus earnings) to a suspense account. The suspense account must be used to fund future employer contributions (as opposed to a forfeiture account, which can be used to pay plan expenses). No further employer contributions may be made to the plan until the suspense account is exhausted. If the failure is insignificant, you can self-correct. If it is a significant failure, it would have to be corrected under VCP since it is past the 2-year window.

What does the plan document say? If it says that benefits with a present value less than $5,000 will be paid out in a lump sum and the participant cannot elect another form of benefit, then you do not need to provide the alternate forms and relative values since the participant could not elect them. If the plan permits the participant to elect a life annuity or other form on small benefits, then you would have to provide them with the disclosures necessary for them to make the election.

Not sure if I entirely agree with Bill on this. The right to receive your distribution at a particular date (e.g. upon attainment of age 59-1/2) is a protected right. There is an exception written into the regs that says hardship distributions are not a protected right, so I agree you can limit those to >$500 or eliminate them entirely. But for other in-service distributions you may have an issue. There might be a de minimis clause somewhere that says you can eliminate the right to distributions of less than a certain amount, I don't know.

The only thing I can think of that might stop you would be the rule that says you can't aggregate 401(k) plans that use different methods for testing, for example you can't aggregate a safe harbor plan with an ADP-tested plan. But I don't think having different safe harbor match formulas falls into the category of different methods, as both plans are still using the safe harbor match. I think you are ok. The amount of benefits is an issue for nondiscrimination testing. Since no HCEs are benefiting, the nondiscrimination test passes automatically. The law says a plan may not discriminate in favor of HCEs - it says nothing about discriminating in favor of NHCEs. So no issue here.

The final regulations for qualified plan loan offsets were published and made effective Jan 6, 2021, that might be what you were thinking of. https://www.federalregister.gov/documents/2021/01/06/2020-27151/rollover-rules-for-qualified-plan-loan-offset-amounts

My first thought would be that of course the plan is exempt from 401(a)(26), since there is an exception for plans that do not benefit any HCEs and if the plan is restricted from benefit accruals due to its AFTAP then no HCEs are benefiting so the exception applies. But if you look at the reg (1.401(a)(26)-1(b)(1)), it says that the exception applies to a plan other than a frozen defined benefit plan which benefits no HCEs. If no one accrues a benefit then you have a frozen plan for this purpose and the exception does not apply. Since no benefits are accruing in the current year you would have to satisfy 401(a)(26) with respect to the plan's former benefit structure, in other words, on an accrued-to-date basis, which could still potentially fail.

I can't think of any reasons to use the last day of the year as an entry date that aren't abusive. But I have seen plans that say something like the entry date is the 3-month anniversary of your hire date. So if you were hired on September 30, you would legitimately enter the plan on December 30. Back to the original question - since they were hired in 2020, I would see if I could treat them as otherwise excludable and thereby avoid addressing the problem entirely.

I don't see why not. It sounds reasonable to me and I don't read anything in the law that would prohibit it. But wouldn't it be cheaper just to pay the top heavy minimum?

The plan can eliminate loans for all participants, even current participants, at any time. As you say it is not a protected benefit under 411(d)(6). If you eliminated them just for newly eligible participants I think you would have a problem since loans must be available on a reasonably equivalent basis to all participants.

The compensation ratio test would only be needed if you want to exclude commissions from comp on the ACP test. If you are using total comp in the ACP test then it doesn't matter how you define comp for the match formula.

Ok. My previous statements stand then. Maybe the actuary or someone familiar with the details can walk you through the calcs on this particular test.

Does copy-and-pasting an unsourced quote 2x in the same post make it more true? What's your stake in this? Do you just have it out for teachers? Edit: I see you cleaned up your post. Still, I am curious about the source of the Q&A and comment that you posted. If you truly believe that the New York Department of Taxation and Finance are failing to uphold the law of the State of New York, then I would imagine your only recourse would be to sue them in the state's supreme court. Since you haven't been forthcoming about your relation to the topic I don't know if you would have standing to sue. Honestly I am having trouble coming up with a scenario where anyone would have standing to sue, even if your claim is true.

401(k) deferrals are not included in the EBARs, but they are included in the average benefit percentage test. I will ask again, what do you mean by "offset" plan? What offsets are happening in this situation?

Even if it could, availability of an investment alternative is a benefit, right or feature which can not be discriminatory in favor of HCEs.

What does this mean? Are you doing a floor-offset plan? Yes, the owner's son has to be included in the general test, even if he gets no accrual in the cash balance plan. Consider amending the 401(k) plan to not provide the safe harbor non-elective contribution to HCEs, then he won't receive an allocation at all and his EBAR will be 0. Also see if you can use component testing to put him in a rate group tested on allocation rates, preferably with some older NHCEs whose EBARs aren't helping the owner. It's possible, if you can use component testing, but not guaranteed. If the plan will be exempt from PBGC coverage then their profit sharing contribution will probably be smaller than they are used to due to the combined deduction limit.

Another vote for your interpretation. If you want additional support, this is in the preamble to the 2001 new comp regs: https://benefitslink.com/src/taxregs/1.401a4-8-final.html

There it is again. It's not tax-free, because the distributions are still subject to federal income tax. Some states have no income tax at all. If the individual retired in one of those states, would you go around claiming that they got a tax-free retirement plan? Of course not, because they would be paying the taxes they are supposed to, which happen to be zero at the state level. Same in this case. This is deliberately misleading. The author is using a term established for federal tax law purposes and saying that it should apply to the state. What's your stake in all this, if I may ask?

Combined. You can use one partner's net earned income to substantiate a contribution for the other.

Contributions to an HSA are tax-free if spent on qualifying expenses. Many people use them as a retirement savings vehicle. Individuals with income less than certain thresholds do not have to pay income tax in that year. If such an individual contributes to their employer's Roth 401(k) plan, they could have a tax-free retirement plan. There are other, further contrived examples, but I contest your assertion that there is no such thing as a tax-free retirement plan. I perused the publication and it is pretty clear that NY taxpayers can subtract pension payments from NYC Teachers’ Retirement IRC 403(b) plan from their income. I am not an expert on NY state tax law so there may be some subtlety in there that I did not pick up on. I agree with QDROphile, NY state is free to implement their tax law however they see fit, without regard to whether it makes sense to commenters on an internet message board.

Contributions to a profit sharing plan have to be "substantial and recurring." A 401(k) plan is a profit sharing plan, but a MPP is not, which is presumably why shERPA recommended it.