Jakyasar

A theoretical (but coming up) question as I never had to deal with it before. Client has a straight PS plan, no other provisions. Initial set up was pooled account. A few years later, they wanted to have a participant directed account (because they heard it was better thru the grapevine). Thay asked my opinion and knowing this client, I told them it will complicate their lives but I cannot provide any recommendations on switching. Lo behold, they switched 2 years ago and now they may want to switch to pooled account because too complicated for them to deal with. Hmmm (not saying I told you so). They want to close up the participant directions and transfer all to pooled account. One way to do is leave the participant directed account as is and put in all future contributions into a pooled account but they will prefer dealing with a pooled account only. What issues are they facing, if any? Any BRF issues? Anything else? Thanks

Why would we want to bend over for a client when we know that something is wrong even if we will not be accountable? Let them walk away. Ethics, professionalism as well as E&O comes to mind (you know very well the client will come after you no matter what), not worth it.

I have seen this and IRS was not happy upon an audit. As you stated, it could be BRF issues as well as 414(s) issues.

Thank you all for your input, this was a great dsicussion.

Absolutely correct

Of course I care on the quality of the data I get and question every aspect of it. I agree not to play data police but up to a certain point. At the end of the day, any hiccup will be something I would be dealing with, whether I like it or not. I am not making the client's error/mistake my problem especially after I check and question it. Once I get the CPA involved, I will see what and if I will move forward. I have mentioned the plan document provisions and that needs to be done for compensation recognition.

I am definitely not making a decision and may even walk away

Unfortunately was not provided any info about the flavor. Client is being difficult to provide the information. Waiting to hear from the CPA, if ever. All I got was, they were compensated as 1099 since they are in college.

A client paid their children 1099 i/o w-2 at the suggestion of their CPA, this is for 2025. The children received W-2 for 2024 and at least one them were eligible to participate in the pension plans. I am told to accept 1099 as w-2 (which is the compensation definition in the plan document). How can I accept this, makes no sense? Here is the definition from basic plan document. Checked all the code etc and no reference to any 1099 equivalency. "W-2 Compensation" means wages, within the meaning of Code section 3401(a), and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Code sections 6041(d), 6051(a)(3), and 6052. W-2 Compensation shall be determined without regard to any rules under Code section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code section 3401(a)(2))." Anything I am missing?

Thank you both

With my limited knowledge (or lack of it), was he not supposed to roll into a regular IRA first and then convert?

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?