Sue B

Client has a SH match in their 401(k) plan. 1 - Could they change to a 4% SHNE for 2021? 2 - Could they change to a 3% SHNE for 2022? Thanks!

I understand, thanks for your input! I appreciate it.

Yes, the retired owners were the Plan Sponsor and Trustee. If it gets expensive, does that fall to the retired owners? the TPA? The PBGC, for the benefit amounts?

In addition, the business is now gone - it shut down when the owners retired, and the plans were terminated. If the 2 employees are due a benefit, where would it come from?There's no longer any company assets?

The valuation reports show that the job classes for these two employees are excluded, but the doc does not (and the SPD is generated from the doc). This could be 6 figures in terms of contributions, which of course would be required to be made up. Does the TPA have any financial responsibility for this? The data was provided cleanly, and clearly included these two employees, and the client was told that they could be excluded year over year.

My client is being audited by the IRS because their CB and PS plans are terminating. The TPA excluded 2 NHCEs from the CB plan "because that's what the prior TPA did", and it passed the numeric testing, but the plan document never stated that these two people should be excluded. These 2 employees were included in the PS plan, and received benefits every year there. Both plans are terminated, and assets are distributed. The IRS is asking where the benefits are for these 2 employees, because the document doesn't exclude them. The TPA isn't sure why they were excluded, but they were, and everything passed testing. But the document doesn't exclude them. What can the client do, short of going back and calculating what the benefit would have been if they were in there and dumping that into an IRA?

I have an owner-only plan that has no 401k provision, it's pure profit sharing. He W-2's himself $20,000 per month, so he's paid himself $140,000 so far this year. He would like to contribute $30,000 to his profit sharing plan for 2021 this week. His current TPA is telling him that he needs to wait until after the end of the year; that "the rules say" he can't fund it during the plan year. I've never heard of this - is there anything in the regs that disproves this? Thanks in advance - Sue

Our client had a cash balance and profit sharing plan effective 2015. There was no 401(k) component, it was all employer money. In 2020, they had an offer and thought they had sold their business, so they terminated their plans effective 12/31/2020 and assets were distributed. The deal fell through, and they'd like to put in a new CB and PS plan as of 1/1/2021. Their payroll company is saying they can't do the PS plan, because they need to wait a year due to the successor rule. Is this true, if there was no 401(k) in the original plan? Thanks - Sue

True, Company A ceased to exist on 2/1. 9 companies all merged together to create NewCo, and each of the 9 will continue to be responsible for their own cash flow, with the results rolling up into a consolidated financial statement. So NewCos financials are going to be the sum of 9 separate financials. NewCo would need to be the sponsor due to controlled group rules, but Company A could be responsible for the contribution and could be allocated the corresponding deduction?

I have one small organization, Company A, that merged with 4 other organizations for a new controlled group company NewCo effective 2/1/2020. Company A has a cash balance plan, and as of 12/31/2020, Company As cash balance plan will be terminated, and NewCo will have a CB plan for the whole CG as of 1/1/2021. Company A would like a full accrual for 2020, resulting in a 120k contribution. They are doing their 1/1-2/1 short tax year filing now, and wanted to know how to put the contribution on there if it hasn't been made yet. My thought is on the final 2020 filing, they change the plan sponsor to NewCo on Line 4, put all of the 2020 PY contributions on the SB, Company A pays all of the contributions, and NewCo allocates the deductions to them within their financials. Does that sound accurate? If they've made any contributions to date, could those be deducted on the short tax year filing? Thanks for any help!

Calendar year profit sharing plan, yes. And calendar year pay.

Our client terminated their SIMPLE plan effective 12/31/17, and started a profit sharing plan on 1/1/18. They would like to make a contribution this week to the profit sharing plan for 2018, and they've already funded their 2017 SIMPLE. Their fiscal year is 3/1 through 2/28. Are they able to deduct both the 2017 SIMPLE contributions and the 2018 profit sharing contribution on their 3/1/17 - 2/28/18 tax filings? They are two distinct plan years, but would be deducted in the same tax year. Thanks for any insights -