Jakyasar

Asking for a CPA friend A terminated participant rolls over his pre-tax 401k account and employer account (SH+PS) directly into a ROTH IRA without any conversion during July 2025 and is now concerned about the taxes. As this is out of my knowledge base, what is wrong with this scenario, what should have been done and what should be done now? Thank you

Agree with your analysis based on my research. Thank you

Hi Bill It is 2 separate plans in a combo situation. One plan has top paid election to determine HCEs and the other has lookback election definition.

Might be inheriting 2 existing plans for 2025, one has top-paid and one has lookback definition for HCE determination. Too late to change anything for 2025. Did some research on BL and also Notice 97-45, not sure I located the answer but looks like I can only use "lookback" method. Will be amending to match during 2026. Any comments or cites are appreciated. Thank you

Here are the 2 documents listed under EGTRRA - good luck E TRADE CLEARING LLC INC RANCHO CORDOVA, CA 312C1862701-001 STANDARDIZED PROFIT SHARING M287965 3/31/2008 E TRADE CLEARING LLC INC RANCHO CORDOVA, CA 312C1862701-002 STANDARDIZED MONEY PURCHASE M288129 3/31/2008

Here is a link to the IRS website for the opinion letters. I checked as far as EGTRRA and E*TRADE has PSP and MPP listed. May not help locating the actual documents you are looking for but at least the opinion letters are there. FWIW List of pre-approved plans | Internal Revenue Service

Interesting as a participant directly depositing into the plan.

Agree with Bri and Cusefan. Lending money to the corporation for pension purposes is a very common practice. As the sponsor is a corporation, all contributions must come directly from the sponsor and no one else.

I meant for the new participants who are not eligible for PS allocation.

Even if they do not defer and get a SHM?

Owner only and hit the account 2 months after the distribution occured.

Hi DB plan terminated and did all the distributions during 2026 and also paid the RMD based on account balance method. Now, a small residue ($550) hit the account which is also subject to RMD. It is roughly $20. I cannot remember if there was a de minimum amount that can be ignored? Actual distribution was 2.5M with RMD of 100k. TIA

Perfect and thank you both

Hi Bill Thank you for your input and hope all is well. Agree on your third point. Assume the document states all bonuses are excluded. Let's say as an example (if I understood you correctly) Owner w-2 360k, gets 30k/month paycheck and nothing else. Rank&file employees get 50k w-2 and 10k bonus for a total of 60k Still fails?

Hi I usually do not exclude anything from the salaries but the following came up as never had to deal with. Owner just gets normal salary and never a bonus. All rank&file get salary plus bonus where the total is reflected on gross w-2. Owner wants to exclude everyone's bonus for pension purposes. Does this fail 414(s)? Thanks

Here is a stupid question based on what is being discussed above, just curious as lately I am seeing this more than usual. I am not the police and I go with what the client says (though stupidly question it with the client) Example: December 15th, having an interview with the prospect and saying, I am hiring you effective 1/1/2025 (which is a Saturday) but the first day you can come to the office is 1/3/2025. So, what is DOH for pension purposes? Assume document says for eligibility: Completion of YOS Entry is 1/1 and 7/1 coincident with or next following Hmmmm

Late Friday, brain freeze time Need to check something with the gurus as I have been researching and failing to find. Testing for 401a26 and annual method fails. Software has couple options: 1. Change to average salary (highest 3) and test against annual accrual 2. Change to average salary and use accrued-to-date method (been doing the plan since day one so have all the data) Any issues with either of the above? Also, I could not find anything that would prohibit me testing 410b and 401a4 using different methods than 401a26. Anything I am not able to find? Thank you

Thanks for the advice/warnings, at this time I am researching on what can be done if anything. Nothing would be done without a lawyer.

Agree but wanted to check anyway. Thank you for the reference.

Agree but the CPA is a friend of mine and would like to help out, if I can and with an attorney involved. They know my requirements if they want me involved.

No nothing, zilch, nada was prepared as far as the documents go. No 5500 was filed (yes, required), no actuarial certifications were done (no actuary was involved). They just made the deposits and took the deductions.

During 2020, did a proposal and never heard from the prospect and thought went away somewhere else. Just got an email from the CPA stating that, the prospect has been making contributions and taking deductions with no actuary and paperwork. No 5500 forms were filed but that is the easy part. They are now asking me to fix this. Is this something that can be self-corrected starting with 2020 plan year? Any thoughts/comments appreciated.

Mathematically yes, how about the method, is that acceptable if yes, does it need to be adjusted by any interest adjustment?

Hi Corey, thank you for taking the time with the explanation and warning but my question was about the technique rather than the available options - they are always presented to the clients. I would never let the client go off too easily on any option other than the term, in the least, and always and strongly advise them to choose J&S, if married or have other beneficiary options. David, yes, I am aware of the 12/31/2024 but I was just providing as an example however, thanks for pointing it out, just in case. I am trying to confirm that it is ok the client can get 12x the payment in one shot rather than monthly withdrawals. It is a fight with them and at the end of the day, they do whatever they want despite my written CYA. All I am looking for is some suggestions/comments on the math technique.

Sorry, misworded, what I meant was, getting the RMD all in one shot rather than as monthly benefit, not lump sum per se.