C. B. Zeller

I would think you would use the greater of the elected flat dollar amount or the auto-escalated percentage, computed each pay period. For example, it's the participant's 2nd year so their auto-escalation rate is 5%. When they first became eligible, they elected to contribute $50 per paycheck and have not made an affirmative election for the second year. Week 1, their pay is $1200. 5% of $1200 is $60, so their contribution is $60. Week 2, their pay is $900. 5% of $900 is $45, but they affirmatively elected to have $50 withheld, so their contribution is $50. For the participants who want to defer the annual limit, they will already be making an affirmative flat dollar election each year, so the auto-escalation will not apply.

Sounds like VCP to me. Good luck.

A QRP or qualified replacement plan is a way of avoiding or reducing the excise tax on reversions when a plan terminates with assets in excess of the maximum that can be paid out. Do you have an existing defined benefit plan that you are terminating? Without all of the relevant info, no one here is going to be able to give you meaningful advice. All 401(k) plans are profit sharing plans ... but not all profit sharing plans are 401(k) plans. Section 401(k) is a "feature" of some profit sharing plans that allows elective deferral contributions. There is no such thing as a "Solo-K" plan. There are profit sharing plans, with or without a 401(k) feature, that cover only the owner. These plans are exempt from Title I of ERISA, including the annual filing requirement with the DOL. There is an IRS filing requirement however.

I would be worried about the contingent benefit rule of 401(k)(4)(A). The CODA is not qualified "if any other benefit is conditioned (directly or indirectly) on the employee electing" to defer. The investment direction is so closely tied to the deferral election that I would not feel comfortable allowing this.

I did not say roll over the entire amount, I said cash them out. Rollover does not have to be made available for distributions <$200. If rollover is not available then the notice is not required. 1.401(a)(31)-1 Q-11: Will a plan satisfy section 401(a)(31) if the plan administrator does not permit a distributee to elect a direct rollover if his or her eligible rollover distributions during a year are reasonably expected to total less than $200? A-11: Yes. A plan will satisfy section 401(a)(31) even though the plan administrator does not permit any distributee to elect a direct rollover with respect to eligible rollover distributions during a year that are reasonably expected to total less than $200 or any lower minimum amount specified by the plan administrator. The rules described in §31.3405(c)-1, Q&A-14 of this chapter (relating to whether withholding under section 3405(c) is required for an eligible rollover distribution that is less than $200) also apply for purposes of determining whether a direct rollover election under section 401(a)(31) must be provided for an eligible rollover distribution that is less than $200 or the lower specified amount.

I promise no keyboards were harmed in my mathematical excursions!

This is the key - your tax burden is higher solely because your account balance is higher. If you had invested that income and earned $100 in the market you would owe capital gains tax on it. Since plan earnings are taxed as normal income, not as capital gains, it is taxed as income when withdrawn from the plan.

Thanks Larry - I worked out the math on it using actuarial notation a while back, just to prove it to myself. I found it to be a very useful exercise.

Your taxes will be higher with the loan, but solely because you invested a portion of your account in an investment with a higher rate of return which resulted in your having a larger benefit at the end of the year - not because of anything intrinsic to the nature of the investment as a loan.

Not even the interest is double taxed. Let's say on 12/31/2019 your account balance is $50,000. During 2020 your account experiences a rate of return of 5% and there are no contributions. Your balance on 12/31/2020 is $52,500 and you immediately take a distribution. Your taxable salary for 2020 is $100,000 so your total taxable income for 2020 is $152,500. Now let's say you take a loan on 12/31/2019 for $10,000 at 5% interest, payable as single installment in 1 year (ignoring the quarterly requirement for simplicity). On 12/31/2020 your account is $42,000, plus you make your single loan repayment of $10,500, then take your distribution of $52,500. Once again your taxable income for 2020 is $152,500 - exactly the same as without the loan. If the interest portion of the loan repayment were pre-tax, then the taxable salary would have been only $99,500 and the total taxable income would be only $152,000 - less than without the loan.

Why are you rolling over the small balances instead of cashing them out? Balances under $200 do not even need to be provided with the special tax notice.

No, participants are not double taxed on loans. I'd be happy to prove it mathematically if you like. Even though loan repayments are made with after-tax money, the loan withdrawal, unlike a plan distribution, is not taxed.

There is something called a Qualified Separate Line of Business which would allow you to disaggregate the plans and test them individually, but each QSLOB must have at least 50 employees (plus other requirements) so that is not going to help you here since B has only 20 employees. If each plan satisfies minimum coverage separately, then you are good.

AAA code of conduct (which is incorporated by reference in the ARA code of conduct), Annotation 10-5:

Refinancing involves replacing the original loan with a new loan - usually to get a new interest rate or add additional funds. Re-amortizing an existing loan without adding additional funds and at the loan's original interest rate in order to keep it in compliance does not, in my opinion, constitute refinancing.

You didn't mention ownership percentages - but I'm going to assume that we're dealing with an ASG between the partnership and the two corps. 1. The compensation that is paid to the two dentists for their personal services is the W-2 income from their respective S-corps - so that is their plan comp. 2. If the correct compensation had been used in past years, would the plan have satisfied all applicable requirements, e.g. 401(a)(4)? If so then no correction is needed. Most likely you are fine, since you were probably using a lower number than their true comp for past years, and having higher HCE comp would typically help testing.

It sounds like this is a regular occurrence, and from your description the employer knows it is a problem. It also sounds like the employer has not taken any steps to remedy the underlying problem since they are aware of it and allow it to continue happening. In order to be eligible to use SCP, a plan administrator "must have established practices and procedures (formal or informal) reasonably designed to promote and facilitate overall compliance in form and operation" (Rev Proc 2019-19 4.04). I think they might not meet that requirement.

The IRS takes no position on it - the bond requirement comes from Title I of ERISA which is under the purview of the DOL. A plan which covers only an owner and their spouse is exempt from Title I and thereby bonding requirement. A plan which covers only an owner and their mother does not fall under this exemption and therefore is subject to Title I and everything that comes with it, including the bonding requirement.

That is still the definition of "standard interest rate" in 1.401(a)(4)-12

The recipient's mailbox may be full (or close to full) and the added size of the attachment could cause the message not to be received. PDF files are a common vector for transmission of malware and viruses. If the sender's PC is infected, they could be unwittingly transmitting the infection to the recipient. These both seem like very remote possibilities. The size of a properly created PDF is usually not more than a few dozen KB, and the second threat can be reasonably mitigated with appropriate security measures.

You are correct that the 25% limit applies alone to the DC plan when the DB plan is covered by the PBGC. The DB plan is still subject to its own limit, so they can can only do "as much as they want" to the extent they do not want to do more than permitted under 404(o). Assuming the DC plan is a profit sharing plan, they of course have to have some profit left over after the DB contribution in order to make a contribution to the DC plan. If they do, they can contribute up to 25%.

This comes the safe harbor of 414(n)(5). What it is saying is that, if the leased employee is covered by the leasing org's MPP (which meets the requirements given), then you do not have to treat them as as leased employee of the recipient org (your client), but solely as an employee of the leasing org. In other words you can disregard them for plan purposes. I've never asked a client about it because it seems unlikely (to put it mildly) that a leasing org would sponsor such a plan.

20% withholding is mandatory on eligible rollover distributions. 3405(c) A hardship withdrawal is not an eligible rollover distribution. 402(c)(4)(C)

The regulations are explicit that an HCE's excess contributions are included in the ADP test. See 1.401(k)-2(a)(4)(iii)

The ADP test includes 402(g) excesses for HCEs. So, you will calculate the amount of his refund including the entire 402(g) excess. Any additional excess that remains in his account after the ADP refund is distributed is irrelevant, since 402(g) excess can not be corrected after 4/15.