Will.I.Am

I have a 401(k) plan that covers a family group (Father, Mother, children). The entity is a partnership (parents are the owners) and they will pay the kids a wage until they are 18 years old and have the children participate in the 401(k) plan. When a child turns 18 they will setup an S corporation for the child and setup a separate 401(k) plan. My question is this separate 401(k) plan for the child's S corporation (this plan only covers the child) a "one-participant" plan and can it wait until it has $250,000 to file a 5500-EZ? Or, does the family attribution of the ownership of the child being attributed to the parent's cause the plan to not be a "one-participant" plan? I am pretty sure the child's entity would be in a controlled group with the family partnership but since the plan only covering the child's S corporation is the plan a one-participant plan?

Under the old rules (pre-Secure Act), if you wanted to start a brand new SH plan the plan would have to be in effect for three months in the initial year. I assume this rule is still valid for safe harbor match plans but what about Safe Harbor nonelective 401(k) plans? Can you now adopt a safe harbor nonelective plan in December of its first year with the new changes of the secure act? Or does the 401(k) arrangement still need to be in effect for 3 months for either type? I just want to know if the ability to retroactively amend the plan to be safe harbor up to 30 days before the end of the plan year (and even after the year is over if 4% contribution is used) under the secure act applies for the first (initial) plan year?

Hey Luke, Yes you are right. the doctors get their W2 compensation from their s corporations. Sorry it took me a while to respond. I am a CPA and we have been really busy with this PPP stuff that has been going on. Thanks,

Hey Luke, That makes sense; thanks for the response. For determining HCEs and key employees for the greater than 5% ownership test, do you think I should be conservative and say each owner doctor owns 100% and not 4.55%? Fortunately, I think all the doctors are paid over $125,000 so they are HCEs regardless but for key employee status and just in case the doctors drop their wages below the $125,000 level, I just want to know what ownership percentage I should use? Thanks,

Do you take into account the excess match contributions in the ACP test?

I have a C corporation which is a hospital and employs hospital staff (PAs, non-owner doctors, etc.). I then have a separate partnership which was setup as a billing entity and bills the hospital for services (1099 income); they try and zero out the c corporations income each year by having the partnership (billing entity) bill the C corporation. The owners of the billing partnership are 22 S corporations (4.55% each) which are owned by 22 individual doctors who provide services to the c corporation hospital. The owners of the C corporation hospital should Theoretically be the 22 owners of the s corporations but they have told me they haven’t been the best at keeping its ownership up to date (I probably need to ask them who the actual owners are) when new partners are admitted to/removed from the partnership. The 22 S corporations and the C corporation are the only entities with employees and are the only entities covered by the plan; the billing partnership isn’t covered by the plan. Here are my questions: 1. Are the S corporations and the billing partnership b-organizations to the C corporation? This would make them an affiliated service group with no A organization, right? 2. What ownership percentage do I use for determining if the 22 owner doctors are HCEs? 4.55% or 100%? I assume 100% because each of the 22 owner doctors own 100% of their own S corporation and each S corporation participated in the plan.

My question is if a plan has involuntary cash-out provisions set at $5,000 or less and the timing of distributions in the plan document is immediate (meaning as soon as administratively feasible), will the plan sponsor/plan administrator (in all of our plans the plan sponsor is the plan administrator, we are just a service provider) be in violation of their plan document if they aren't processing involuntary distributions (meaning they aren't reaching out to the participant) and they are just leaving the money to sit in the plan? I would think they wouldn't be following their plan document; however, I read the following in Notice 2005-5: Q-9. If a plan that provides for mandatory distributions does not make a distribution to a participant who fails to affirmatively elect direct payment or a direct rollover for a mandatory distribution on or after March 28, 2005, because the plan administrator has not sufficiently established administrative procedures that allow the plan administrator to accomplish the automatic rollover of a mandatory distribution by that date, will the plan be treated as failing to operate in accordance with its terms? A-9. No, a plan will not be treated as failing to operate in accordance with its terms (including the automatic rollover provisions) with respect to mandatory distributions merely because it does not process mandatory distributions for which the participant does not affirmatively elect direct rollover or direct payment due to a lack of sufficient administrative procedures for automatic rollovers, including establishing individual retirement plans to accept automatic rollovers, provided the mandatory distributions are made on or before December 31, 2005. any insights?

I have a question. The Erisa Handbook tells you that you need to combine the match under both the safe harbor formula (basic formula; 100% of first 3%, 50% of next 2%) and the discretionary match to see if it meets the ACP safe harbor requirements. I don't really understand why. Basically I want to know if someone defers 5% and a plan does the basic safe harbor match formula but also wants to do a 100% of the first 4% discretionary match, would ACP testing have to be done or does it meet the ACP Safe Harbor Requirements? I guess my question is do you apply the 6% rule (matching contributions may not be made with respect to elective deferrals in excess of 6% of comp) independently to the discretionary match, or do you have to combine the safe harbor and the discretionary together and then apply the 6% rule?

I have a question. The Erisa Handbook tells you that you need to combine the match under both the safe harbor formula (basic formula; 100% of first 3%, 50% of next 2%) and the discretionary match to see if it meets the ACP safe harbor requirements. I don't really understand why. Basically I want to know if someone defers 5% and a plan does the basic safe harbor match formula but also wants to do a 100% of the first 4% discretionary match, would ACP testing have to be done or does it meet the ACP Safe Harbor Requirements? I guess my question is do you apply the 6% rule (matching contributions may not be made with respect to elective deferrals in excess of 6% of comp) independently to the discretionary match, or do you have to combine the safe harbor and the discretionary together and then apply the 6% rule?