C. B. Zeller

If the initial plan year were a short plan year from 1/1/17 - 11/30/17 then I think the rule under 1.404(a)-14(c)(1) would allow both deductions to be taken for calendar tax year 2017. I agree it's fishy though. You can get a plenty big deduction from a well-designed plan without resorting to these kinds of tricks.

All participants should receive the SPD, and the SPD contains a description of the provision for restoration of forfeitures after re-employment, so yes, they are provided a formal notice.

As long as the match that was earned under the traditional safe harbor is preserved at 100% vesting, I think it is ok.

It should be fine - you can amend the vesting schedule with respect to benefits that accrue after the amendment date. That said, would anyone even be affected by this? Assuming the plan requires 1 year of service for eligibility, then someone hired in 2018 would enter the plan in 2019 while the traditional SH match is in effect and be fully vested. Then in 2020 it would change to the QACA but they will already have 2 years of service, so they would be fully vested regardless. Someone hired in 2019 would enter the plan in 2020 under the QACA and be subject to the 2-year vesting from the start. Obviously the calculation changes if you use more lenient entry than 1 year of service.

Thanks, I appreciate the input.

You subtract out the deferrals before applying the 401(a)(17) limit.

When a plan is top heavy, it is sometimes useful to amend the plan to set a $0 limit on elective deferrals for Key employees. This allows the Key employees to make contributions which will be automatically reclassified as catch-up contributions (provided they are eligible to make catch-up contributions) because they exceeded the plan-imposed limit of $0. Since catch-up contributions are disregarded for application of 416, this is a way to allow the Keys to contribute without triggering the top heavy minimum. I am wondering if there is a way to specify that the $0 limit automatically applies in years when the plan is top heavy, and only when the plan is top heavy. In our adoption agreement (FT William) there is a checkbox in the "Minimum and Maximum Deferral Amounts" section for "Other limitations on Elective Deferrals (specify): ________". I am thinking of putting in that blank something along the lines of, "If the Plan is Top Heavy for the Plan Year, the maximum Elective Deferral contribution for Key Employees shall be $0 for the Plan Year." Possibly also adding "The application of this limit shall not restrict the Key Employee's right to make Catch-up Contributions, if they would otherwise be eligible to make Catch-up Contributions" just to be clear. Any thoughts or opinions on this approach? Are there any issues with determining the plan limit based on the top heavy status? In theory, the plan administrator could know by the first day of the plan year whether or not the plan is top heavy for the current year, and so can adjust the keys' limits if needed. Would this kind of language jeopardize the plan's preapproved status?

2017-57 is about changes in method. You have a change in assumptions. See, for example, Section 3.02(c) Example 3 of the rev proc.

For what it's worth, the 414(m) proposed reg lists "performing arts" as a business that is automatically a service organization. I agree capital is probably not a material income-producing factor. She makes her income off of how many subscriptions she sells, which has nothing to do with the capital investment, for example, how many ingredients she had to purchase to make a given video. Her customers are paying for her, not the thing she produces, and to my mind that is the main difference between a service organization and not. You can argue that she produces videos and sells them, so she's selling a product and not a service, but that's like saying your accountant is selling tax returns.

Is capital a material income-producing factor?

is the HCE who is deferring Key? If not then there is no problem. Otherwise there are a few options I can think of: 1. Forfeit the excess contribution. The participant was not entitled to it under the plan's formula so it can not stay in their account. Could possibly be returned to the sponsor as a mistake of fact, depending on the circumstances. 2. True up the match on an annual basis (if this will help). 3. Make an additional discretionary ACP safe harbor match, if allowed by the plan document. 4. Make the necessary top heavy minimum contribution to the non-Keys.

The definition of "Plan" in 1.401(a)(4)-12: Plan means a plan within the meaning of §1.410(b)-7 (a) and (b), after application of the mandatory disaggregation rules of §1.410(b)-7(c) and the permissive aggregation rules of §1.410(b)-7(d). Once you have permissively aggregated the two plans for testing, they become a single "plan" with a single latest normal retirement age.

If I'm understanding you correctly, the new formula grants an additional 2% of average comp per year of service up to 5 years as long as those years were completed prior to 1/1/2019. Since the formula is treated as being in effect for all plan years, for this purpose the extra 2% per year would be treated as accruing in the employee's first 5 years prior to 2019 - not in the current year.

For purposes of the 133-1/3 rule, plan amendments are treated as if they were always in effect. In other words, the new formula is not tested against the old formula, but only against itself. See 411(b)(1)(b)(i) for reference.

If you wanted to get picky, (2) refers to excess contributions but not excess aggregate contributions. However I think it is reasonable based on the language in (i) to interpret it to mean that the term "excess contributions" in (2) is intended to include excess aggregate contributions. But it sure would have been nice of them to include that one extra word to avoid any confusion.

Yes, but not in the middle of a plan year. You can make the change effective for the next plan year.

Sounds like a missed deferral opportunity to me: https://www.irs.gov/retirement-plans/fixing-common-plan-mistakes-correcting-a-failure-to-effect-employee-deferral-elections

The definition of target normal cost in 430 specifically says that you can include increases in compensation for the current year. However if you are changing the data elements used to determine the current year comp, then that would be a change in method that requires approval as @digger said.

I think the first distribution calendar year would be the year they attain age 70.5 - since the definition does not make any reference to the amount of the accrued benefit or vesting. I think you're probably right about using 4/1/2022, or really 3/31/2022; in effect you are saying that a distribution of $0 per annum commenced on the employee's RBD of 4/1/2020, and that it increases to the amount of the vested benefit during 2021, so the end of the payment interval in the next calendar year is 3/31/2022 and that is when the payment is due. I agree delaying it to 12/31/2022 seems like a stretch.

Paraphrasing, 1.401(a)(9)-6 A-6 says that a benefit is treated as accruing at the time that it becomes vested. Paraphrasing again, 1.401(a)(9)-6 A-5 says that distributions must commence for amounts that accrue after the RBD with the payment interval that ends in the calendar year following the year of accrual. The participant becomes vested at some point during 2021. Therefore the benefit must commence with the payment interval ending in 2022. So in the case of an annual payment, by 12/31/2022, for a monthly payment, by 1/31/2022, and such. With regard to your question about not knowing the actual benefit accrued as of the date payments begin, A-5(b) of the same reg also says (verbatim this time): A plan will not fail to satisfy section 401(a)(9) merely because there is an administrative delay in the commencement of the distribution of the additional benefits accrued in a calendar year, provided that the actual payment of such amount commences as soon as practicable. However, payment must commence no later than the end of the first calendar year following the calendar year in which the additional benefit accrues, and the total amount paid during such first calendar year must be no less than the total amount that was required to be paid during that year under A-5(a) of this section.

Like ESOP Guy said, a QSLOB must have 50 employees. There is an exception to spousal attribution under 1563(e)(5), which says, in short, the spouses must have nothing at all to do with each others' companies. If the exception applies, then the spouses' ownership in their respective entities is not attributed to each other for purposes of determining whether a controlled group exists. If there is no controlled group, then the companies can adopt plans independent of each other.

This might meet the definition of an orphan plan. There are rules under EPCRS for determining a new plan administrator and terminating an orphan plan. See https://www.irs.gov/retirement-plans/plan-sponsor/fixing-common-plan-mistakes-using-epcrs-to-terminate-an-orphan-plan

Loan payments can be suspended during an unpaid leave of absence of up to 1 year. This does not extend the 5 year maximum loan term. The outstanding balance of the loan should be reamortized into level payments upon the participant's return to work.

The 415 limit doesn't change - but catch-up contributions are not considered when applying the 415 limit. You have deferrals of 22,500. That exceeds the 402(g) limit by 4,000, so 4,000 of that is reclassified as catch-up. The remaining 18,500 deferral continues to be counted as annual additions. Then you make an employer contribution of 38,500. Add that to your 18,500 and you now have 57,000 in annual additions. This exceeds the 415(c) limit by 2,000 so 2,000 of your 18,500 deferral is reclassified as catch-up. So you end up with annual additions of 16,500 (deferrals) + 38,500 (employer) = 55,000 which satisfies 415, plus 4,000 (exceeded 402(g) limit) + 2,000 (exceeded 415(c) limit) = 6,000 catch-up contributions.

If anyone is interested in a mathematical analysis of this question, here is something I put together a while ago. Hopefully this puts the question to bed for anyone who is still unconvinced. https://drive.google.com/file/d/1A2V2lkI6r9kL9YQPLA7beRmcmCOwJ6PU/view