C. B. Zeller

You can make 1/1/19 an entry date for employees who completed 1,000 hours during the prior 12 month period, regardless of the fact that the company was not in existence for the entire 12 month period. You could also let all employees who were employed on 1/1/19 enter on 1/1/19 who are reasonably expected to complete 1,000 hours of service during a 12 month period.

Not sure I understand the question - does the plan have different match formulas for pre-tax and Roth deferrals? Generally the deferral percentage for purposes of calculating match would be (pre-tax + Roth)/comp.

My understanding is that if you are allocating to individual groups and testing using permitted disparity on allocation rates, the integration level for testing must be 100% of the TWB. Option C is to adopt two separate plans with different allocation formulas for the two groups of employees.

You can self-correct by retroactively amending to allow 3 loans. Rev. Proc. 2019-19 addresses this.

If both plans satisfy 410(b) separately (considering only the employees benefiting under that plan as compared to all the nonexcludable employees of the controlled group), then they do not need to be aggregated for nondiscrimination.

You should call the IRS auditor and explain the situation. They should be able to advise you how to proceed. You might need a letter from the sponsor stating that you prepared the Form 5500 for the year under inspection, but you should be able to represent the plan as an unenrolled return preparer.

A single-member LLC (or sole proprietorship) doesn't "issue" a schedule C, the schedule C is part of the member's (or sole proprietor's) 1040. So if this person had income from their company, and didn't file a schedule C, how are they reporting their income for tax purposes?

You're unlikely to be able to do that on a preapproved document. Also keep in mind that the availability of a rate of match is a benefit, right or feature which must be tested under 401(a)(4). Would both companies pass 410(b) if tested separately? If so, adopt separate plans for each.

1.401(a)(26)-7(c) and 1.401(a)(4)-11(g)

Were they formerly a 5% owner? If they were a 5% owner during 2016 (since that was the year they turned 70.5) then they have to continue taking RMDs, even if they later became a non-5% owner.

This is what the proposed hardship regs have to say on it, and as far as I know this is still the only official guidance on the matter: The changes to the hardship distribution rules made by BBA 2018 are effective for plan years beginning after December 31, 2018, and the proposed regulations provide that they generally would apply to distributions made in plan years beginning after December 31, 2018. However, the prohibition on suspending an employee's elective contributions and employee contributions as a condition of obtaining a hardship distribution may be applied as of the first day of the first plan year beginning after December 31, 2018, even if the distribution was made in the prior plan year. Thus, for example, a calendar-year plan that provides for hardship distributions under the pre-2019 safe harbor standards may be amended to provide that an employee who receives a hardship distribution in the second half of the 2018 plan year will be prohibited from making contributions only until January 1, 2019 (or may continue to provide that contributions will be suspended for the originally scheduled 6 months).

Does the plan document address this at all (e.g., a fail-safe provision)?

Yes, as long as the safe harbor notice states that the employer may amend the plan to reduce the match, and notice is provided at least 30 days in advance of the change. However the ADP test will be required for the year.

I'm willing to bet that your plan document, especially if it's a volume submitter document, excludes from participation "employees classified as independent contractors" (or similar language). This means that the plan does not cover employees who are classified (correctly or not) as independent contractors. This exclusion results from the famous Microsoft decision. I'm also willing to bet that your plan document doesn't define compensation as the amount reported on the W-2, but as the wages required to be reported on the W-2, a.k.a. information required to be reported under sections 6041, 6051 and 6052. So regardless of whether or not the employer actually provided a W-2 to the employee, if the wages should have been reported on a W-2 (because the person was an employee and not an independent contractor) then it is still plan compensation. But I think you're missing the point. The issue of employee vs independent contractor status goes well beyond implications to the plan. As ESOP Guy said, you do not just get to decide that someone is an employee or an independent contractor. See this page for starters, especially the section titled "Consequences of Treating an Employee as an Independent Contractor" : https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

Not true. There are many other threads on this topic. Advise her on the topics that you are qualified to advise her on, and advise her to consult an expert on anything else. Someone "advised" her to change how she is being paid after all.

A participant who met the plan's age and service requirements can be treated as excludable with respect to coverage and nondiscrimination testing if they: terminated with <500 hours of service, did not benefit under the plan, and did not benefit solely because they terminated with <500 hours of service. #1 clearly does not apply since they worked >500 hours, so we already know that they must be included in the test. #2 does apply since they did not receive an allocation under the plan; note that for this purpose "plan" means the disaggregated portion of the plan being tested - deferrals, match, and employer nonelective contributions each constitute a separate "plan" here. #3 also does not apply, even though they are not benefiting, you said they are part of a group which is designated to receive no employer contribution, therefore they fail to be not benefiting solely because they terminated with <500 hours, therefore they must be included in the test.

When is the change supposed to be effective? If it's starting the next plan year then go ahead. If it's supposed to be mid-year then you are out of luck. Notice 2016-16 specifically prohibits mid-year amendments that reduce the number of employees eligible to receive a safe harbor contribution.

In this PLR (no reliance, of course) the IRS found that only those participants who actually received allocations other than elective deferrals would have their compensation taken into account for determining the deduction limit.

Rev. Rul. 65-295 Where a profit-sharing plan provides that a terminating employee does not share in the employer contributions for the taxable year in which such termination occurs, the compensation paid such terminating employee in such taxable year may not be included in the total compensation paid or accrued during the taxable year for the purpose of determining the limitation on deductions provided in section 404(a)(3)(A) of the Internal Revenue Code of 1954.

We have been looking at it for a while now and just recently decided to go ahead and buy it. Our primary use case is to replace insecure email for transmitting sensitive info like SSNs and banking info. We are still in the process of getting it set up so I can't comment on sponsor engagement yet, but I can tell you that Holly at FT William has been extremely accommodating whenever we have had questions or feature suggestions.

When you are testing the plans together, what you are really doing is treating the DB plan and the employer non-elective portion of the DC plan as a single plan for testing purposes. Is the employee benefiting under that combined "single" plan? The answer is yes if they have an allocation in the DC plan or an accrual in the DB plan (or both). Are they included in the benefiting group for purposes of the coverage test? If they are benefiting, then yes, unless they are part of the plan being disaggregated for some reason, for example, an otherwise excludable employee. Can they be excluded from the nondiscrimination test? Not if they were included in the benefiting group for the coverage test.

Ouch

Thanks for the reading material - I will see if I can find something that applies.

Full distribution, meaning a total distribution of the participant's account? I assume the 5,000 and 3,000 numbers are rounded off? The distribution was in 2018? Has the participant filed their 2018 tax return yet? If so they will need to file an amended return. Report what was actually withheld. Since there will be 2 forms, I would report the full amount of the withholding on the form with the code 7 and 0 withholding on the form with code B. When the participant files (or amends) their tax return, they will get a refund of any excess amounts that were remitted to the IRS.

Plan sponsor has an ownership interest in an IRA provider. Can they force out (terminated <$5k) participants into IRAs with that provider, or would that be a PT? I remember reading about a PTE that would allow banks to force out participants in their plans into IRAs held by the bank, but my search skills are failing me at the moment and I can't find it again. If I'm remembering correctly it would seem to be relevant guidance.