TN CPA

Thank you - that makes sense and although I have read those instructions more times than I care to admit, I did not notice that last line.

Hello - I have a client with a deferral-only 401k plan. Per the plan document, HCEs are excluded from participating. On Question #14, would this be considered a "designed-based safe harbor method", "current-year ADP test", or "N/A"? The plan is designed to automatically pass ADP testing, but my notes from a CPE class indicate "design-based safe harbor method" is used for real safe-harbor (match and nonelective) plans and not for a plan that is designed via the plan document to pass the ADP test. Thank you for your thoughts.

Hello - Line 14a on the Form 5500 reads "Does this plan satisfy the coverage and nondiscrimination tests of Code Sections 140(b) and 401(a)(4) by combining this plan with any other plans under the permissive aggregation rules?" Y or N. Our software vendor has as the input question "Plan satisfies the coverage and nondiscrimination tests of Code sections 410(b) and 401(a)(4). Y or N. What is the correct answer for a single-employer plan (no aggregation) that does satisfy the coverage and nondiscrimination tests of Code sections 410(b) and 401(a)(4) - but without aggregation? This is a confusing questions and almost reads like a trap

Hello - a client has a new plan with a short initial plan year in 2022. (200 eligible; 20 participant account balances). This plan can use the seven months or less rule for the the audit for the short plan year to be deferred until the following plan year. Since there are only 20 participant account balances (restaurant group), does this mean the plan does not have to have an audit for 2022 or 2023? Thank you for your thoughts and any guidance you may have - not able to locate anything addressing this situation.

Hello - I have a client with an enhanced safe-harbor match 401k plan ($1 for $1 up to 6%.) When negotiating salary contracts for new employees, the client wanted to tell some employees (none are excluded) that their negotiated salary will be reduced by the 6% safe-harbor match as well as the 6% deferral if they sign up for the plan. I told them they can not do that, and as there's not rhyme or reason to the employees that the plan sponsor wants this to affect, it can't really be fixed by excluding a class or some other document provision. The client asked me where these rules are written and to provide in writing. I can't seem to find anything that specifically says a plan sponsor can't reduce an employee's pay in order to receive an employer contribution. (Obviously the salary is reduced by employee deferrals.) Any help with written guidance would be appreciated.

A client who own and runs a small hotel (and is obviously COVID-affected) wants to: 1) take out a $60,000 COVID Distribution, 2) elect to spread the tax out over 3 years, and then 3) repay $20,000 before 12/31/20, another $20,000 before 12/31/21, and the final $20,000 before 12/31/22 so that the entire amount is repaid equally over the 3 year period. If the IRS follows the Form 8915 disaster rules, this would seem to work, but I can't find any real guidance to say that is how the tax process will work. Does anyone else have any guidance or educated opinion? Also, the hardship would normally be subject to 10% withholding. Are there any ways around this for COVID Distributions intended to be repaid? Thank you!

As an additional question to this topic - is there any guidance (other than less than $100,000) to the amount an employee can request for a COVID distribution, assuming they are "affected" and the provisions have been adopted? For example, a manufacturing plant laid off workers for 4 weeks. For the average worker, this might be approximately $3,000 worth of wages, and regular payroll later resumed. We have participants requesting $50,000-$60,000 distributions. Thank you!

Hello - A client has a 401k plan with an enhanced safe-harbor match formula. They have asked to reduce the safe-harbor enchanted match to the basic safe-harbor match for the remainder of the plan year. (Eliminating SH provisions is a top-heavy issue). With the proper 30 day notice and plan amendment, would this be allowed?

Our client maintains a safe-harbor matching 401k plan. A long-time employee (HCE) transitioned to a part-time role and is now working less than 1,000 hours per year. (The eligibility requirement listed in the plan document.) Is this employee still eligible to make 401k deferrals and receive the safe-harbor match or excluded because he no longer meets the eligibility requirements? The document does not address this situation - only that the eligibility requirements are Age 21 and 1000 hours of service. Thank you for your feedback!

I have a client that owns 1) 100% of a Schedule C construction company 2) 50%/ 50% with another partner of a company that runs the management functions of the construction company and 3) 50%/ 50% with the SAME other partner of an unrelated independent living center. The owner wants to set up a deferral-only 401k plan covering the 1) Sch C Construction company and the 2) management company (as an affiliated service group). Does the addition of the management company as an affiliated service group extend the control group requirements to it as well? In other words, by including the management group, are we now required to include the 3) independent living center because it is a control group with the company that was brought in as an affiliated service group?