Purplemandinga

I definitely suggested this. Apparently I have offended the accountant by suggesting he is giving bad advice.

Even so, the plan document must be updated to reflect this change correct? If the plan document doesn't allow it then its not an option?

Plan is safe harbor so most he would be prohibited from taking SH sources and earnings on ED. He still has access to the ED but apparently that isn't enough.

Has anyone run into a situation where a client's accountant demands that a 100% owner of a company be allowed to take a distribution of moneys because the client fired himself? They also revealed that the owner is in dire financial straights. This is a SH plan with no hardships allowed. I'm calling BS, and told them to hire an attorney to write us a letter telling us that the termination would allow the owner to take a distribution of plan money. They could also terminate the plan. Is there another way I should be thinking about this?

I'm not seeing an EPCRS solution to a situation where a participant had a 12% deferral rate, subsequently lowered it to 1% but the employer continued to defer 12% from the participants paycheck. Is this a situation where the excess over what was desired to be deferred can be returned to the participant or is the excess deferral over and above 1% stuck in trust?

Thanks!

If the 5500 is prepared on the accrual basis of accounting would a participant have an account balance at year end for the purposes of Line 5c on Form 5500-sf if a participant did not have any money in his/her account as of 12/31 but did have a receivable for a contribution deferred prior to 12/31 that was received after year end?

Thank you both very much. This was extremely helpful. Thank you for the link to the material.

I find myself confused with controlled group determinations that involve trusts. I read everywhere that trusts which have ownership interests in another business attribute the ownership to the beneficiaries. But does the ownership ever attribute back to the grantor? Say if the trust is revocable and thus ultimate control over the ownership still rests with the grantor would the ownership not attribute back to the grantor? Any guidance would be appreciated.

Thank you Kevin ?

I'm skimming the regulations about whether offering different vesting schedules to different groups of employees would need to be tested for benefits rights and features. What I'm reading is that vesting schedules would not need to be tested for BRF. Is this correct? For example offering immediate vesting to HCEs but 6 year graded for NHCEs on the same allocation: (ii)Exceptions to definition of other right or feature. Notwithstanding paragraph (e)(3)(i) of this section, a right or feature is not considered an other right or feature if it - (A) Is an optional form of benefit or an ancillary benefit under the plan; (B) Is one of the terms that are taken into account in determining whether separate optional forms of benefit or ancillary benefits exist, or that would be taken into account but for paragraph (e)(1)(ii) of this section (e.g., benefit formulas or the manner in which benefits vest); or

We have a 401(k) plan which is sponsored by an entity (Entity A). Entity A is owned by 3 other entities (Entity B, Entity C and Entity D) each with the same ownership % of 33.33%. Entity B and Entity D are disregarded entities, Entity C is just another partnership. The plan document does not list any controlled/affiliated group members. Would the individuals owning 100% of the two disregarded entities be able to include the compensation earned from the disregarded entities in 401(a)(17) compensation for the 401(k) plan sponsored by entity A?

Good to know. Thank you!

I'm sorry I should have been more clear. The effective date of the plan was 11/1/2017 and the individual who tested used full calendar year compensation. This is what caused the reduction in compensation available to allocation on.

A plan made a profit sharing contribution to the 2017 calendar year plan that utilized incorrect compensation during nondiscrimination testing. Lets say this contribution was 50,000. When the nondiscrimination was corrected, the correct allocation should have been 10,000. So 40,000 was forfeited for use in future years. The problem here was the tax deductible contribution threshold for 404 lowered to 40,000 from its original amount of 160,000. Is there a way to avoid paying excise taxes on form 5330 for 10,000 of contributions that were over and above the 404 limit?

Yes, his income would be US sourced income.

Thanks Lou S. I'm following but I'm struggling with one part. The owner isn't the direct recipient of any earnings because the C-Corp didn't pay any wages. Why do the self-employment earnings paid to the C-Corp count as earned income of the participant for retirement plan purposes? Thanks for your help!

A Canadian citizen has a 100% ownership interest in a C-Corp which has a 25% ownership in an LLC (taxed as a partnership). The Canadian citizen does not receive a W-2 from the C-corp for wages performed. The C-Corp and the LLC would most likely be an affiliated service group. Could this Canadian citizen participate in the 401(k) plan offered to employees of the LLC? My thinking is no because Canadian citizen would have no wages to defer. If they somehow received a W-2 from the C-Corp then they might possibly be able to participate. Thoughts? Am I looking at this the wrong way? Would the C-Corp be disregarded and I would calculate earned income from the LLC earnings to determine eligible compensation?

We are setting up a money purchase plan for 2018 that will not have actual allocations made to the plan prior to 12/31/2018. The actuary is suggesting that a nominal amount be contributed to the plan prior to 12/31/2018 to establish the trust. Is this a thing? Can someone point me to the regulation or guidance on why this would need to be done? Does it apply to all plans or is it special to plans subject to minimum funding requirements? Thanks in advance

Perhaps this has been discussed here but how would one go about determining whether an entity is a governmental instrumentality or agency? For example, lets say several counties joined together to create a nonprofit authority to oversee solid waste removal or establish a nonprofit rural transit authority. What should one look at to determine whether either of these authorities could sponsor a 401(k) or would be stuck using a governmental 401(a) only plan?

To be conservative I would test each plan separately. Its cleaner and allows for easier preparation of the 5500 participant counts depending on which software you are using.

Thanks guys, I felt uncertain myself and the IRC 401(k)(4)(A) argument really made me question the validity of it. I think the best course of action is to avoid for now.

I would assume that if an employee elects not to defer and receive the prevailing wage contribution then the employee would end up receiving the QNEC as an increase in cash on his paycheck?

So the prevailing wage formula is the safe harbor match formula, but the plan also has a safe harbor match which is offset by the prevailing wage formula. The catch here is the Prevailing Wage contribution is only being contributed to prevailing wage employees who elect to defer. The rub here is our plan document doesn't give us an explicit option to contribute prevailing wage contributions as a QMAC so I'm establishing a prevailing wage QNEC formula that is essentially a QMAC. Wasn't certain if that was kosher or not.

Is there anything that would specifically prohibit the formula for a Prevailing Wage QNEC to be structured as a match? For example if the QNEC was allocated as follows would there be any issues: Employer will contribute a QNEC to applicable prevailing wage employees equal to 100% of prevailing wage employee's compensation deferred up to 3% of compensation deferred and will then contribute 50% of prevailing wage employee's compensation deferred greater than 3% but less than or equal to 5% of compensation deferred.