Jakyasar

Hi A sole prop can now set up a 401k plan retro to 2023 and make a deferral, correct? No employees and must be set up prior to 4/15/24 (no extension allowed) SECURE 2.0 - effective date was for plan years beginning after 12/29/2022 Am I wrong?

Neither does Datair, I am told but the issue now becomes, if you do answer what will they do and if you do not answer what are the consequences.

Hi Preparing my first 5500 for 2023. I heard some mixed comments about completing the new compliance questions. I am answering them but wanted to check what others think out there. No multiple employer plans. Thanks

Addendum, under 412d2, phew

Hi It has been many moons since I have done one of these under ... drawing blank Given that amendments now can be adopted after year, if I want to increase deduction for 2023 and sign the amendment by 3/15/2024 (2 1/2 months), could it be just an amendment or still an election needs to be made under ... drawing blank (I think it 412c3 or something like that) Thanks

265k

Hi Thanks for the input. Employee is key for 2024 because had enough salary for 2023 and also an officer. Otherwise, i agree that they need top heavy minimum for 2024.

Having a discussion about the following: Combo DB/401k plan, top heavy For 2023, owner and spouse are the 2 participants in the 401k and only owner is in the DB (spouse does not work enough hours to be eligible - assume all kosher). They hire an employee who will become eligible in both plans as of 1/1/2024. Employee makes big bucks in 2023 therefore HCE for 2024. During 2024, employee will be 20% owner (not as of 1/1/2024 though). Let's say employee will be a 20% owner on 3/1/2024. DB plan has 0.5% of pay formula and states all top heavy is provided under 401k plan. Employee will be in the DB plan for 2024 so no 401a26 issue. 401k plan's top heavy provision states for both key and non-key. For 2024, owner defers max and employee will not defer. There will be no PS allocation. Employee is not excluded under the 401k/PS categorically. So, does this employee need to get any kind of top heavy allocation for 2024? What am I missing here? Thanks

As per above comments, to keep thing simple, can't you just have a special eligibility amendment for this particular employee assuming that he is uniquely qualified like a job category or something like that?

Hi Setting a new plan effective 1/1/2023 and want to exclude service prior to inception for vesting purposes. Prior plan was terminated during 2017, all assets distributed in 2018 (10/15/2018) and final 5500 was filed in 2019. If I recall correctly, year of termination should be used i.e. 2017 and therefore plan termination was more than 5 years since 1/1/2023. Thus, the new plan can exclude YOS for vesting prior to 1/1/2023. Agree? Happy holidays to all.

I have not done one but, Datair has the capabilities of the conversion. Keep in mind that A+B method should be used where is the converted opening balance and B is the additional pay credit. FTW document supports this as well.

Hi DB plan, one lifer, EOY val. Plan is slightly underfunded but creating a large required contribution which will make it over funded. Can I switch to BOY val with the above status? Thanks

Likewise

The problem, which I think, no ownership in the Husband LLC (or payroll) so probably will need to rely on ASG. I will discuss the payroll option (I agree is the cleanest way but what is the minimum payroll to make it CG/ASG, Hmmm) It is not for my comfort, it is for them and make sure that I can properly/correctly administer the plans. I have no issues with multiple SB's. But it is one 5500SF, correct? Thank you for clarifying the SB/MB confusion on my part. Sorry for these questions as I never dealt with this in my career.

One more Q. Effective 1/1/2024 no longer CG. When does it need to be fixed so that continues to be a CG (or ASG)? For example, if no action is taken till March 1, 2024, can 2024 still be CG/ASG with the assumption that January and February will be a multiple employer plan?

Follow up Q If CG is not an option (some cross ownership), would ASG be ok i.e. some cross biz? Thinking of legitimate ways of doing this and keeping them as a single employer.

Thank you for your input and confirmation, happy and healthy New Year and holidays

Hi Bill Thank you for the input which I assume is effective for 2024, correct? Assuming that we cannot force the CG issue, I am assuming we enter into the multiple employer arena, correct?

Hi Husband LLC (filing as an S-Corp and owned 100% by Husband) Wife LLC (filing as a sole-prop) Neither entity have employees. No ASG issues. They have children under age 21 Setting up DC and CB plans for 2023. They are both adopting the plans. Husband LLC will fund his own portion of the DC and CB and Wife LLC will fund her own portion of the DC and CB. My understanding: For 2023, they are a CG so can file as a single employer using 5500-EZ and also can use Schedule SB, correct? For 2024, they are no longer CG as SECURE 2.0 removed the under age 21 issue based on 1563e (finally). How do they need to file for 2024 and also do I need to use SB or MB? This is a first for me. Thanks for your comments.

When you say separation, is it a divorce? Are they already legally separated? A good lawyer will tell you what can be done. Or, draft a legal agreement (assuming no QDRO will be issued) that provides how the assets will be divided upon a divorce. Such a sticky situation.

Also, add that there will be fees deducted from the IRA for maintaining it

Of course, the CB does not benefit the owners on a maximum level where all little guys get a minimal benefit, right? You have to be very careful with BRF issues. ErnigeG explained quite well however, make sure to read what the plan document states for death benefit, generally should state face amount+PVAB-cash value. One correction, PS 58 cost.

71,779, depending on what actuarial assumptions you use for the CB, may not generate an AB that is at 415 limit however, since you know that for 2023, 71,779 is the max 415 limit, you can simply stick to it but can deposit more and apply for future years, 404 certainly allows it. But the client will need to be explained that, just because they put in more than the 415 limit does not mean what they deposited can be paid out. Big difference between increasing the hypothetical balance versus increasing the contribution under 404. My 2 cents are always deal with deductible limit first and then increase the pay credit in the future to match. FWIW

I have dealt with this numerous times when the client said "I do not like it". My response was, "you knew this and were told minimum 3 years (some push to 5 years), committed to it in writing." "If you want to shut down because you do not want it and not stick around for 3 years, then either go away or provide me a letter stating that you are voluntarily terminating the plan against TPA's advice and take full responsibility for any action that may be brought against you by the IRS". As an alternative, I tell them to freeze the plan, stick around for another year or so and then terminate but no guarantees that IRS, upon an audit, will be happy about it. Of course, a financial instability that can be backed up is no issue, easily defendable, life happens. This biz became the ultimate CYA.

First distribution year was prior to 2022.