C. B. Zeller

Not related to your question, but This is not quite correct. To be a 5% owner you must own more than 5% of the company. Someone who owns exactly 5% is not a 5% owner. 416(i)(1)(B)(i)

The reg section you are quoting is talking about plans that have mandatory employee contributions. Elective deferrals, by definition, can not be mandatory contributions (otherwise they wouldn't be "elective"). I don't see how the vesting provisions you described can be legal in a qualified plan. Do they have a determination letter?

Your use of the term "management group" is confusing, because there is a type of affiliated service group called a management function group, but that is not what you were asking about. I'll refer to the organization with the 50 partners as the partnership/LLC. The short answer is, if they are unrelated employers then separate 415 limits apply. When you say they want to max out in both 401(k) plans, presumably you mean the annual additions limit in both plans, since the 402(g) limit applies on an individual basis. The tricky part is determining if they are unrelated employers. With that many partners, it is unlikely to be a controlled group. It is possible that an ASG exists though. Do any of the 50 partners of the partnership/LLC have any ownership in the network? What kind of entity is the network? Does the partnership/LLC receive any income from performing services for the network? There are probably other relevant questions - determining ASG status can be complex.

If you are over age 59-1/2, the 10% penalty for early withdrawal does not apply. If you meet the definition of a qualified individual under the CARES Act, you can waive the 10% penalty tax (if applicable), plus you can spread the income over 3 years for federal income tax purposes of up to $100,000 of your distribution.

If it was distributed by the plan in 2020, then it is taxable to the participant in 2020 and a 2020 1099-R should be issued. Whether the participant cashes the check in 2020 or 2021 is irrelevant. See Rev. Rul. 2019-19.

They will have a qualification failure and need to correct it under EPCRS. If eligible to self-correct, they have until the end of the 2022 plan year to do so, or longer if it is not a significant failure.

This sentence doesn't make sense to me unless the wife is an employee of the husband's business. Is she?

Not sure I agree. The 30-day advance notice applies when you suspend or reduce safe harbor contributions mid-year. Since the year hasn't started yet, I don't see a problem (employee relations notwithstanding) amending out of safe harbor completely, effective 1/1/2021.

Strictly speaking, the IRS cares about whether you are required to pay a PBGC premium, not whether you actually paid it. Assuming that the plan is paying a PBGC premium if and only if it is required to do so, then you are correct.

The way I usually calculate the max deduction is like this, which works in most situations: Calculate the DB max under 404(o). This is always the DB max, although you might choose to do a smaller amount in order to have a larger result in step 3. Calculate 25% of comp, within the meaning of 404(a)(3). If the DB plan is covered by PBGC, stop here. This amount is the DC max. If the there are no employees who participate in both plans, stop here. This amount is the DC max. Subtract the DB contribution from the amount calculated in step 2, but not less than zero. Add 6% of comp to the amount calculated in step 3. This is the DC max.

No, you have it backwards. If they are exempt (that is, not covered by PBGC) then the combined deduction limit applies. If they are not exempt (they are covered by PBGC) then the combined limit does not apply.

The combined deduction limit of 404(a)(7) applies only when the DB plan is exempt from PBGC coverage. Is the plan covered by PBGC? Before you answer, note that the PBGC's position (stated here) is that spousal attribution of ownership applies only in the case of a corporation. If the business is a sole proprietorship then it is not clear that they would fall under the exemption for a substantial owners plan. They might still be exempt if they are a professional services employer.

That's a fun question! I always wonder when these strangely specific requirements end up in the law, who they were intended to benefit. I downloaded the 2019 5500 data set from the DOL's website and filtered it down to plan type=multiemployer, plan effective date<1970, and business code starts with 232, 236, or 238. There are 537 candidates. Edit: Silly me, I forgot that welfare plans file a 5500 too. Filtered to only include plans that attached a schedule R, it is down to 255 candidates. Edit 2: Since 401(a)(36) only applies to pension plans, filtered out any plans where the characteristic codes did not include a 1, 2B, or 2C. Down to 248 candidates.

It's impossible to know, because it will depend heavily on the interest rate. If your account is gaining 5% a year it would be very different than if it were gaining 2% a year. One thing you could do, if you know you want to take a withdrawal every month for exactly 25 years, that means you will have 12 x 25 = 300 total withdrawals. In the first month, take 1/300th of the account, in the second month, take 1/299th of the remaining account, and so on. The amount of the withdrawal will fluctuate with the gains or losses in the account each month but it will be approximately level. Another option is to look into using your account balance to purchase an annuity.

C/T = what....cross-tested? Please don't make up abbreviations; even if you think it should be obvious, it makes your post harder to read and makes readers spend time trying to figure out what you're asking instead of thinking about the answer to your question. Anyway, what you've suggested sounds fine to me. The only thing to remember is that the gateway applies before you restructure into component plans, so the NHCE in the component being tested on allocation rate still has to get at least 5%. But it sounds like you have that covered.

With SECURE a "no" is mostly the same as a "maybe" - either way you can decide up to December 1 if you're going to be 3% safe harbor for the year. But being "maybe" and providing the notice lets you do a couple of extra things - you can make an ACP safe harbor match, and (if your notice contains the "maybe not" language) you can suspend the safe harbor without the need to be operating at an economic loss. I am having a hard time figuring out when the "maybe not" would ever be useful in this situation, you would have to basically decide in October that you wanted to be safe harbor and then change your mind a couple of weeks later. Preserving the option to do an ACP safe harbor match though is likely worth the effort to provide the notice in most cases. But I wouldn't sweat it if you missed any.

ERISApedia had a webcast a while back with the info you're probably looking for. You can watch the recording for free at https://www.erisapedia.com/webcasts

What does the plan document say?

Yes, there is a controlled group due to the minor child. There would be a controlled group regardless, since they both have ownership in company 1 the spousal attribution exemption does not apply. Husband is deemed to own 100% of company 1.

1.401(m)-2(a)(5)(iv)

I would advise the plan to hire an attorney. This is outside the scope of most plan administrators' expertise.

We've been using FT William for years and it's worked well for us. It integrates with their distribution tracking system if you use that as well.

So, basically it works like this: Step 1: Determine the participant's top heavy minimum. If they are a participant in the DB plan, and they worked 1000 hours (assuming the DB plan requires 1000 hours to earn an accrual), then their top heavy minimum is 5%. If not, but if they are a participant in the DC plan, and they were employed on the last day of the year, their top heavy minimum is 3%. Step 2: Add up all employer allocations from all sources in the DC plan - safe harbor match, discretionary match, QNECs, whatever they've got. If those together satisfy the top heavy minimum (which might be either 3% or 5%, as determined in step 1), then you are done. Step 3: If the top heavy minimum was not satisfied in step 2, add profit sharing until it is satisfied. Step 4: If the participant has any non-elective allocations (SHNEC, profit sharing (including whatever was added in step 3), DB accrual, etc) then add whatever additional profit sharing is needed to get them to the gateway minimum.

Does the plan document say anything about this unallocated account? They would only be able to self-correct at this point if it is an insignificant failure. I can't tell you if the failure is significant or not based on the info provided. If you believe the failure is eligible for self-correction, then the best way to correct would be to put the plan in the position it would have been in had the failure not occurred. In this case that would probably mean allocating the assets to the participant accounts on a year by year basis, or whatever the plan document says was supposed to happen. If you want to try to do something different, like allocating based on current account balances, then VCP is the safest bet.

Huh? What does "he participates only in the dc plan and also in both plans" mean? Are you asking what would happen if he is a participant, meaning he met eligibility requirements, but does not defer? He would end up getting the whole gateway. It does seem counter-intuitive: if he defers 3%, he gets a total 3% employer contribution, from the safe harbor match and nothing in profit sharing. If he defers 0, he gets a 5% total employer contribution, since the top heavy minimum gets provided via profit sharing, and then he has to get the whole gateway. If he defers 2.99%, he gets 2.99% safe harbor match, plus an extra 0.01% profit sharing to meet the top heavy minimum, but now he's subject to the gateway so that 0.01% is increased to 5%, and his total employer contribution ends up being 7.99%.