C. B. Zeller

Maybe you can explain something to me, because I don't see how you do this without it being a cutback. Say the plan covers 10 employees, each of them has comp of $100,000. On the last day of 2019, the plan's allocation formula states that each participant is entitled to a pro rata share of the employer contribution. The employer makes a discretionary contribution for 2019 of $10,000, so under the plan's formula, each employee is entitled to $1,000 of the contribution. After the end of the year, they adopt an amendment to retroactively grant employee Q an additional $5,000 (let's assume coverage and nondiscrimination are satisfied - it's not relevant for my question). What you are saying, as I understand it, is that because there was an employer contribution allocated under the original formula, you can use an -11(g) amendment to "add on" an additional contribution under a completely different formula. The way I'm looking at it, the employer contribution for 2019 is now $15,000. Under the formula in effect on the last day of the plan year, each employee is entitled to $1,500 of the contribution. Under the amended formula, Q is entitled to $6,000 and all other participants are entitled to $1,000. Therefore the amended formula is a cutback for everyone other than Q, and is not permissible. The fact that the employer would not have made the additional $5,000 contribution if not for the amendment is irrelevant (see the 3rd to last paragraph of TAM 9735001).

Larry, I appreciate the feedback. Cunningham's Law at work, perhaps? However I'd like to dig a little deeper. The W-2 safe harbor definition of compensation comes from 1.415(c)-2(d)(4) which says "amounts that are compensation under the safe harbor definition of paragraph (d)(3) of this section, plus all other payments of compensation to an employee by his employer (in the course of the employer's trade or business) for which the employer is required to furnish the employee a written statement under sections 6041(d), 6051(a)(3), and 6052." (d)(3) says sec. 3401(a) wages, plus deferrals. 6041(d) describes who is required to furnish a statement, and the information required to be reported on it. 6051(a)(3) says "the total amount of wages as defined in section 3401(a)." Notably, third party sick pay is explicitly required to be reported on the statement by 6051(f). However, since the safe harbor definition of compensation under 415 refers only to 6051(a)(3), and not to 6051(f), I understand that to mean that third party sick pay is not compensation under this definition. 6052 refers to payment of wages in the form of group-term life insurance.

Not sure that I agree here. 3rd party sick pay is reported on the W-2, yes, but it is not "compensation paid by the employer to the employee" and therefore would not be compensation for plan purposes.

First distribution calendar year is 2018. RBD is 4/1/2019. However participant is not vested at that point so no benefit is payable. As of 12/31/2019, participant has 2 years vesting service and is still not vested. Still no benefit payable. Upon completing a third year of vesting service in 2020, the benefit becomes payable. Exactly when could depend on how the plan defines a year of vesting service, however if benefits commence by 12/31/2020 you should be ok.

I think this can be self-corrected as an "Excess Allocation" under Rev. Proc. 2019-19 sec. 6.06(2). You would remove the money from the spouses' accounts and put it in an unallocated* account. No further employer contributions may be made until the money in the unallocated account is allocated to participants. *The unallocated account is similar to a forfeiture account but is not actually forfeiture. For example, true forfeitures may be used to pay plan expenses, but this unallocated account may not.

Failure to correct a failed ADP test by distributing excess contributions before the end of the following plan year can be corrected by using the "one-to-one" method described in Rev. Proc. 2019-19. Basically, you distribute the excess contributions (adjusted for earnings) and make a QNEC to the NHCEs equal to the amount of the excess contributions - but please read the actual rev proc for details. There is no second-tier tax imposed by sec. 4979. There is a penalty for late filing the Form 5330 and paying the excise tax however. See the instructions to the 5330 for details. The penalty can be waived for reasonable cause.

Notice 2016-16 specifically prohibits a mid-year change to the type of safe harbor plan. You can make this change, but only at the beginning of a plan year.

If you were born born between July 1, 1948 and June 30, 1949, then you turned 70.5 in 2019 and your first distribution calendar year is 2019. RBD is 4/1/2020. If you were born between July 1, 1949, and December 31, 1949 then you will turn 72 in 2021 and your first distribution calendar year is 2021. RBD is 4/1/2022. The only people whose RBD will be 4/1/2021 are non-5% owners who were born 1948 or earlier (age 72 during 2020) and terminate employment during 2020.

This seems like a bad idea if the company has, or ever might in the future, have any employees.

Having formerly written and maintained applications with an Access DB backend, I will say that you probably outgrew it the minute more than one person needed to use it at the same time. That said, there are some interesting document management solutions out there, but as for us, we just use a plain-old folder hierarchy, which used to live on our own file server, and is now on one of the big cloud storage providers. Anything that comes in a non-electronic form gets scanned and saved to the appropriate client folder.

You may be considered a highly compensated employee if you own or are deemed to own more than 5% of the company. "Deemed to own" means you are attributed ownership from certain family members, but you are also "deemed to own" any shares that you have the option to buy, even if you do not actually own the stock. Has your employer granted you any stock options?

One possibility - if the distribution code (box 7) on the Form 1099-R says "M" (it may say "1M" or "7M" or similar) then you have a "qualified plan loan offset" which means you can roll over the loan, thus avoiding current taxes and penalties, by repaying the defaulted amount to an IRA by your tax filing due date. Based on the facts provided, it does not sound to me like you would have a qualified loan offset, but there may be additional facts I am not aware of. Your plan administrator or custodian would be in a better position to make that determination. Form 1099-R is required to be mailed by the end of January. You'll want to make sure they have your right address for this.

Since you said this is for 2019, then you can not do either, since the 2019 deferral limit is $19,000. Assuming you meant 19,000, and also assuming that the W-2 amounts you gave include deferrals, then you can do the first one but not the second one. How would you defer more than you earned?

I think this would violate the contingent benefit rule of 1.401(k)-1(e)(6)(i) - you would be conditioning the right to make future deferrals on having made deferrals in the past.

I agree, with one modification: Chances are the plan year and tax year are the same anyway.

401(a)(31) is a qualification requirement. While not exactly on point, 1.401(a)(31)-1 A-6(b) notes that "A plan will fail to satisfy section 401(a)(31) if the plan administrator prescribes any unreasonable procedure" for electing a direct rollover. Requiring participants to return their forms in less than 30 days could be considered an unreasonable procedure. What does the plan administrator intend to do with the benefits of participants who do not return a distribution form? Roll them over to an IRA provider (e.g. Penchecks)? Consider this scenario: the employer sends out the 402(f) notice on December 16. No response is received and the account is rolled over to Penchecks on December 30. On January 3 the participant returns a completed distribution form electing a direct rollover to another qualified plan. The plan will have failed to failed to comply with 401(a)(31) by not providing a direct rollover to the plan specified by the participant.

I don't think so. You are amortizing 3 separate bases. It just so happens that you have one large positive base and 2 smaller negative ones. The positive base has a smaller duration (in the Macaulay sense) than the negative bases, so it contributes less to the outstanding balance, but a larger payment so it contributes more to the current installment. It is weird but, as you've shown, clearly not impossible. Editing my reply to add that the sum of the outstanding bases, although it is required to be reported on the Schedule SB, is not a number with any real actuarial significance. You can't use it to determine anything useful on its own, which is presumably why you are required to attach the schedule of bases to the SB.

If there were multiple disqualified persons, then each one would file their own 5330.

Looks fine to me. There's no requirement that the sum of the installments be less than the sum of the PV of the outstanding bases for any given year.

The excise tax under sec. 4975 is paid by the disqualified person who participated in a prohibited transaction. The employer who failed to deposit contributions in a timely manner is probably the disqualified person in your scenario, but it will depends on the specifics.

Just a reminder that Key employee is not the same thing as HCE. Keys matter for top heavy. HCEs matter for nondiscrimination and coverage. How many HCEs and non-HCEs are there in each company? If the owner is the only HCE in any of the companies and he is covered, then the plan will have to cover at least 70% of the non-HCEs across all 3 companies, or less if you can satisfy the average benefit test.

If you aggregate for coverage, you have to aggregate for nondiscrimination as well. For coverage, if you are testing a plan (including a plan consisting of two or more permissively aggregated plans) with multiple age and service conditions, you must use the most lenient age and service conditions to determine the coverage group. You can use the otherwise excludable employees rule to disaggregate employees who have not met the minimum statutory age and service conditions and test them separately.

To those who feel that there is some problem with allowing participant loans as a pooled investment, remember that participant loans are also permitted in DB plans.

Do these three PLLCs have anything to do with each other besides the fact that the members used to work together at the same law firm? If they are working together then there needs to be some sort of an umbrella organization, in which all 3 PLLCs have some ownership, and then you will (probably) have an ASG. You could of course also do a single plan as a MEP if there is no ASG. Why can't you just use the adoption date of the new plan as a special entry date?

Is this what you're looking for? 1.401-10(b)(2) If a self-employed individual is engaged in more than one trade or business, each such trade or business shall be considered a separate employer for purposes of applying the provisions of sections 401 through 404 to such individual. Thus, if a qualified plan is established for one trade or business but not the others, the individual will be considered an employee only if he received earned income with respect to such trade or business and only the amount of such earned income derived from that trade or business shall be taken into account for purposes of the qualified plan.