PowerCPA

Oh, I should have mentioned that all non-HCE employees are considered participants in the ESOT whether they work for the ASC or the OC because of the affiliated service rules.

Agreed...I didn't have much info at the time. Arrangement is that operating company (OC) contracts with an administrative services company (ASC) for the provision of management and administrative services. OK so far as long as the amounts paid are reasonable for services provided, etc. That's a whole other issue. ASC is owned100% by an ESOT. Owners and other HCE's are excluded from participation in the ESOT. ASC lends money to owner to pay premiums on a life insurance policy on the owner and owned by the owner. Loan is secured by cash surrender value and death benefit of the policy, however the owner can cancel the policy at any time. Down the road, at retirement or liquidity event, the loan is valued at between 10-15% of the outstanding loan balance since the owner can cancel it at any time (along with other valuation discounts) and the only thing the ASC would get is the CSV. Since the ASC's only asset is the loan, it's value is also is also discounted at the ESOT. Bottomline is the rank and file receive about 15% of the assets originally put into the 100% owned company. I see all kinds of issues but the main one that jumps out at me is the fiduciary responsibility of the ESOT trustee (who is probably the business owner!). Prudent investment to put 100% of the assets of the ESOT owned company in a loan where the only collateral is the CSV and death benefit but the DB can be cancelled at any time? And when you know there will be a 85%+ discount down the road???

Anyone familiar with a tax strategy using an ESOT? Gist of the strategy is payments are made to an administrative services company (S corp) owned 100% by an ESOT. No income tax due at the ESOT level obviously but then they say only 15% of the profits are allocated to the rank & file. That's the part I'm struggling with as I would assume allocations would need to be based on compensation???

I'm looking at a presentation from an actuarial firm that suggests a 12/31/18 FYE taxpayer set up a CB plan with a 11/30/18 plan year end. The contribution for the 11/30/18 plan year end can be deducted on the 2018 tax return as long as it's made by extended due date. Nothing new there. The suggestion is to fund the plan year beginning 12/1/18 before 12/31/18 so that amount could also be deducted...giving two years deduction in 2018. Of course, all later years would be "normal" Any thoughts/comments on that? The actuarial firm also promotes what I think is a very aggressive 401(h) plan so I'm a bit leery of anything they show. Thanks,

Anyone know of plan document software that provides for 401(h) accounts in a money purchase plan? I'm striking out everyplace I've checked. Thanks!