C. B. Zeller

Is the coverage ratio for each rate group equal to at least the midpoint between the safe harbor and unsafe harbor percentages?

Didn't you say it was the owners who made the contribution in question? Why wouldn't they know where their own contributions came from? There should be documentation from the institution that distributed the assets in this case.

1.401(m)-2(a)(2)(i) specifies that the ACP is calculated to the nearest hundredth of a percent. So as long as the sum of the ACRs for the contributing HCEs (also calculated to the nearest hundredth of a percent) doesn't exceed .03%, you have .03% / 7 = .004286% which rounds to 0.00% and the ACP test passes!

No comment on the nondiscrimination issues, but if the plan is a small plan, then amendments adopted in the last 2 years which increase benefits for HCEs may not be included for purposes of the maximum deduction. See 404(o)(4)(A).

They can count it as an annual addition for 2018 as long as it is made within 30 days of the deadline for making a deductible contribution for 2018 (e.g. their tax deadline for 2018). See 1.415(c)-1(b)(6)(i)(B).

To clarify slightly, the RBD is determined based on the plan year ending in the calendar year in which the employee attains age 70 1/2. It is not based on whether or not the person actually owns 5% on the date they turn 70-1/2. If the 5% owner in question is turning 70 on or before June 30 of this year (assuming plan year is calendar year), then they will turn 70-1/2 during 2019. They were a 5% owner with respect to the 2019 plan year, so 2019 is a distribution calendar year for them and their RBD will be 4/1/2020. If their 70th birthday is between July 1, 2019 and December 31, 2019, then they would have until December 31, 2019 to dispose of their ownership interest to avoid being subject to RMDs.

How about a retroactive amendment to allow distributions at 59-1/2?

IRS Rollover Chart

Rev. rul. 2007-43 defines the applicable period: So it does not appear that there is any basis for using a period shorter than a full plan year for determining whether a partial plan termination has occurred. Note that turnover rate >20% only defines the presumption of a partial termination. Whether or not an actual partial termination occurred is based on facts & circumstances. The best way to handle the situation might be to have the employer adopt a resolution explicitly stating that they are treating the period between 1/1/2019 and 4/30/2019 as a partial plan termination and any participants who were involuntarily terminated during that period will be fully vested.

Only if the distribution is a qualified distribution, meaning that is it made after both a) the end of the 5-year period beginning on the first day of the year of the first Roth contribution, and b) the employee attains age 59-1/2. This is debatable.

Simply being a controlled group does not automatically make them eligible to defer in each other's plans. They would each have had to adopt the other's plan in writing. If that is the case, then I agree.

The qualification failure is a simple fix. The plan made an in-service distribution that should not have been permitted. You can self-correct under EPCRS by having the participant repay the amount to the plan. See Rev. Proc 2018-52 6.06(4). Correction principles also require that the underlying problem which caused the failure be addressed. In this case that would mean that the client stop performing their own ADP tests and leave it to the qualified professional going forward.

Line 4 on the 5500 is used to report a change in the name and/or EIN of the plan sponsor. Note that it is the plan sponsor's EIN that should be used on the 5500. Maybe there is something I don't know about the multiemployer plan world but usually the plan sponsor is not the trust. See the instructions for line 2 for the definition of plan sponsor. The EIN for the trust is probably reported on Schedule R of the 5500 as the payor that paid benefits.

If the Form 1065 was already filed then the deadline to make a contribution deductible for 2018 was March 15. Amending the form now would not extend the deadline. Interestingly (and somewhat off-topic), I was told by an IRS auditor that filing an extension for your tax return does not extend the deadline if the return is actually filed before the unextended due date. For example, your deadline is March 15, you file an extension on March 1, file your return on March 14, and deposit your contribution April 1, the contribution is not deductible on the return. However if you had simply waited a few days to file the return it would have been ok. His reasoning was that the extension filing is only a request to extend the deadline, and if the return is filed timely then the request does not apply.

In Excel go to Options > Formulas and check the box for "Enable Iterative Calculations" to save your F9 finger.

You can do the ACP test either on just the after-tax employee contributions, or on the after-tax contributions plus the match.

Many plans specify that a 0% vested participant is deemed to have received a total distribution immediately upon termination. In that case you could reasonably not include them in the participant count, even if their account has not been physically moved to forfeiture by the end of the year. However it's probably easier for recordkeeping purposes to continue counting them as a participant until their account is physically moved to forfeiture.

Are they relying on the 410(b)(6)(C) transition rule? If so they can not significantly change benefits during the transition period, other than by reason of the change to a controlled group. If, for example, they were doing deferrals only in one plan and profit sharing in the other, I would not suddenly start doing the profit sharing in the first plan. If they were maxing out in both plans prior to the change, then they should be ok to max out this year in whichever plan they want.

Assuming both children are over 21, there is no controlled group. Attribution for controlled group purposes is determined under the rules of sec. 1563, which says that ownership is attributed between parents and children (and grandchildren) only if the person being attributed the ownership otherwise owns more than 50% of the entity. There might be an ASG, which uses the sec. 318 attribution rules, if either of the businesses are service organizations.

There were some good ideas in this thread last year:

This is no longer true in 2019. Final regs are still MIA but see https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-hardship-distributions#4

Safe harbor nonelective and profit sharing are tested together so you can not use the profit sharing entry date.

You didn't specify but I'm going with the assumption that payroll is biweekly: 1/11, 1/25, 2/1, 2/15, 3/1, 3/15, 3/29, 4/12, 4/26, 5/10, ... (A) Failure first occurred: 1/11/2019 (B) Last day of the three-month that begins on (A): 4/11/2019 (C) First payment of compensation made on or after (B) 4/12/2019 (D) Plan sponsor notified of the failure by affected eligible employee: 3/27/2019 (E) End of month after the month of (D): 4/30/2019 (F) First payment of compensation made on or after (E): 5/10/2019 Earlier of (C) and (F) : 4/12/2019 Correct deferrals need to begin no later than 4/12/2019.

Which organization is the FSO in each group? If D is the FSO for both then you treat all 3 companies as a single ASG. Otherwise you have two separate ASGs and D is a member of both. Here are the examples from Prop. Reg. 1.414(m)-2(g)(3), which hopefully makes things clearer: Example (1). Multiple First Service Organizations. (i) Corporation P provides secretarial service to numerous dentists in a medical building, each of whom maintains his own separate unincorporated practice. Dentist T owns 20 percent of the secretarial corporation and accounts for 20 percent of its gross receipts. Dentist W owns 25 percent of the corporation and accounts for 25 percent of its gross receipts. (ii) Considering Dentist T as a First Service Organization, the secretarial corporation, P, is a B Organization because 20 percent of the gross receipts of the corporation are derived from performing services for Dentist T of a type historically performed by employees of dentists, and 20 percent of the interests in the corporation is owned by Dentist T. Accordingly, Dentist T and the corporation constitute an affiliated service group. (iii) Considering Dentist W as a First Service Organization, the secretarial corporation, P, is a B Organization because 25 percent of the gross receipts of the corporation are derived from performing services for Dentist W of a type historically performed by employees of dentists, and 25 percent of the interests in the corporation is owned by Dentist W. Accordingly, Dentist W and the corporation constitute an affiliated service group. However, this affiliated service group does not include Dentist T even though the secretarial corporation, P, is a B Organization with respect to both dentists. Thus, there are two affiliated service groups. Example (2). Multiple B Organizations. (i) Doctor N is incorporated as Corporation N. Secretarial services are provided to Corporation N by Corporation Q. Corporation N owns 20 percent of the interests in the secretarial corporation and provides 20 percent of its gross receipts. Nursing services are provided to Corporation N by Corporation R. Corporation N owns 25 percent of the interests in the nursing corporation and provides 25 percent of its gross receipts. (ii) Considering Corporation N as a First Service Organization, the secretarial corporation, Q, is a B Organization because 20 percent of the gross receipts of the secretarial corporation, Q, are derived from performing services for Corporation N of a type historically performed by employees of doctors, and 20 percent of the secretarial corporation is owned by the owner of Corporation N. Accordingly, Corporation N and the secretarial corporation, Q, constitute an affiliated service group. (iii) Considering Corporation N as a First Service Organization, the nursing corporation, R, is a B Organization because 25 percent of the gross receipts of the nursing corporation, R, are derived from performing services for Corporation N of a type historically performed by employees of doctors, and 25 percent of the nursing corporation is owned by the owner of Corporation N. Accordingly, Corporation N and the nursing corporation constitute an affiliated service group. (iv) For purposes of section 414(m), there will be considered to be one affiliated service group consisting of Corporation N, the secretarial corporation, Q, and the nursing corporation, R.

Be careful if the plan's top heavy ratio is >60% - allocating any additional contributions or forfeitures beyond the safe harbor will trigger the top heavy minimums. This could come into play if there are non-key HCEs who are excluded from the safe harbor, for example.