Jakyasar

Your guess is as good as mine.

Thank you for the input

Hi Question for 401 gurus. Non-HCE participant deferred $8,000 on 2022 w-2 (1,000 per paycheck) and terminated after 8 paychecks. Just found out that they deposited another $1,000 without a paycheck i.e. $9,000 was deposited during 2022. As only $8,000 was on the w-2, how is this corrected? Earnings are pennies as all invested in cash. Thanks

I do not see how retroactive termination is possible. no paperwork in place. As Tom said, 1 year rule would not have been satisfied but it is a moot point, you do not have a resolution to terminate going back to 2021. You mentioned the plan is frozen for some years now. Let's assume hard freeze and no 401a26 issues (you mentioned not covered by PBGC so may have issues, up to the actuary to decide/test) Given no benefit accruals and severe underfunding the only cost is usually generated thru amortization of shortfall. Did they try the new 15 year amortization schedule as it would reduce the required contribution somewhat? Just my 2 cents.

If this is for 2022, I do not know the answer but if for 2023, you can simply amend one of the plans now and be done with.

Hi Someone I work with told me that line 19 - discounted contributions - attachment is not required unless the plan is subject to quarterly payments i.e. if less than 100% funded in the prior year. I reread the instructions on SB and seems to be supporting this. I always attach to avoid any misses. Any comments are appreciated.

Allow me to take it up a notch and make an argument - good or bad From FIS attachment Paul provided "In Private Letter Ruling 201229012, the IRS ruled that a plan does not include the compensation of a participant who is only eligible for the elective deferral portion of the plan (i.e., not benefiting under the nonelective or matching portions of the plan)." In literal reading, it states that "the participant is only eligible for deferral" i.e. excluded from PS portion of the plan. If I read this literally, I agree that the compensation is not included in 404 On the ASPPA-ASAP, last paragraph, 6th line from the bottom, it states "401k only participant". Again, in literal reading, possibly excluded from the PS allocation. Let's keep in mind that a PLR is an opinion and not the law and specific to a certain plan. Just playing both sides here. IMHO, always provide a minimal allocation, whatever you are comfortable with but definitely not $1 unless the salary is $10 or less.

I do not think 404n states that, it simply say, deferrals are not part deductions (n) Elective deferrals not taken into account for purposes of deduction limits Elective deferrals (as defined in section 402(g)(3)) shall not be subject to any limitation contained in paragraph (3), (7), or (9) of subsection (a) or paragraph (1)(C) of subsection (h) and such elective deferrals shall not be taken into account in applying any such limitation to any other contributions.

Hi Sorry if was asked before. DB/DC plan combo, covering 2 owners only (no PBGC). Each has 100k of salary DC plan has 401k and PS provisions only - no SH match Owner Joe has deferral and PS Owner Mary has only deferral and no PS What salaries are included to determine the maximum 6% PS deduction? Assume DB contribution is 500k so will never satisfy 31% rule. Thanks

Tx Lou

Hi I am sure this is the first time it is happening New client (husband & wife only) set up a DB plan for 2022 and literally signed the documents yesterday. No need to file 5500 forms but do I need to file PBGC for 2022? Yes, they are covered by PBGC. I was told that they had SEP all this time. Yesterday, before preparing the documents, found out that they have a solo 401k plan and not a SEP. Caught it in time to set the plan # properly for the db plan. Deduction is not an issue. Solo 401k plan has 800k in assets and never filed 5500 forms - this plan is with a reputable brokerage house. Did a bit of math and figured out that they exceeded 250k 7, may be 8 years ago and no one told them that they had filing obligations, quelle surprise! Other than filing with DVFC, anything else I should be aware of? Do not care about the documents etc as I am not taking over the plan, just helping with the 5500 forms? Thanks

Hi Recently applied for a coverage determination with PBGC for the following LLC filing as a s-corp Owner is Joe owning 100% and Mary (spouse of Joe) is the other employee, no ownership. First determination said that the LLC is not a professional entity. Second determination was for substantial ownership and it was determined that 1563(e) does not apply. The LLC is not treated as a corporation under 1321(d) thus Joe's ownership interest cannot be attributed to Mary and that Mary does not meet the definition of a substantial owner. Also indicated that Mary is not a substantial owner as only Joe owns 100% of the LLC. Interesting, right? Now, for determining HCE status, do we agree 318 steps in here i.e. I do not have to run non-discrimination testing? Top heavy is not an issue as providing way over the limit. Thanks

Hi For an s-corp that is owned 50/50 by 2 unrelated partners (no other employees), trying to determine if 5500-EZ is ok to file - I think it is but wanted to double check. What say you? ----------------------------------------- From 5500-EZ instructions Who can file 5500-EZ 2. Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC §1372(b), as a partner); and 3. Does not provide benefits for anyone except you (or you and your spouse) or one or more partners (or partners and their spouses). From IRC §1372 (a) &(b) (a) General rule For purposes of applying the provisions of this subtitle which relate to employee fringe benefits— (1) the S corporation shall be treated as a partnership, and (2) any 2-percent shareholder of the S corporation shall be treated as a partner of such partnership. (b) 2-percent shareholder defined For purposes of this section, the term "2-percent shareholder" means any person who owns (or is considered as owning within the meaning of section 318) on any day during the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock possessing more than 2 percent of the total combined voting power of all stock of such corporation.

Unfortunately, there is no such evidence, at least none that was presented to me. I am aware in some instances, there was a resolution or certificate of actions with the intent of setting up a plan and the document being signed later. But not sure about the circumstances. I do not like it though. Not sure what they decided to do. Thank you all again for your input.

Thank you both for your input, I am in 100% agreement.

One thought, how about VCP?

In total agreement on that. I guess no way out of this.

This is not one of those situations where self-correction can be applied, correct? I already mentioned attorney was looking for some options I did not think of/know.

If this was discussed before, my apologies. This is unchartered territory for me. Helping a CPA friend. For a new db plan effective 1/1/2022 that is still not adopted as of today. One of his clients deposited 200k into an account by 4/18/2023 and filed the 2022 tax return without an extension. I do not understand how the broker accepted this deposit without an executed plan/trust document. This client's actuary either never told him about the document deadline or did not do it or dropped the ball or there was a miscommunication, who knows. I do not have all the facts. So, the bottom line, there is no plan document signed by 4/18/2023 and prior to any deposits. Apparently, the actuary is now trying to file form 5300 for an "advanced determination on the qualification of the plan", whatever that means. Are there any corrective measures that can be done here? Assume no resolution was signed by 4/18/2023. Thanks in "advance".

Logically (if there is one), as long as the plan is active (as of disqualification date), shouldn't the SB be done, even if for a short year? Also, what is the harm doing one other than paying an actuary? Was this plan covered by PBGC? If yes, how is PBGC taking this? As Luke said, does the plan cover and non-substantial owners? If yes, what happens to their benefits? Thinking out loud.

RIP Tom Finneran. He had a session on this a few years back with Jim Holland.

Oh yeah, East coast/West coast, 2 different schools. 15k is assumed to be actuarially adjusted. I do not believe that the amount should not be adjusted. You got paid a LS 15 years ago which should not be the same value today. The question here would be how to adjust it from 15 years ago to the date of 415 determination i.e. what actuarial assumptions. This is another unresolved discussion. I am approaching from the most conservative angle i.e. using 100% of pay limit aka 24.4k and reducing it by 15k (prior distribution) and applying 417e@73@5.5% and coming up with the most conservative 415 LS, IMHO. Tx for your comments

Hi First thanks for the link. I am quite aware of the MASD issues but that is not what I am trying to understand here. The question, simply put, which method do I use for determining the remaining AB, based on 100% of pay or AE of 415 dollar limit at attained age? I am leaning on 100% of pay, to be very conservative. In my case, it is fine but if someone wanted to push the limits, would the dollar limit be reasonable? The rest is he said/she said.

Hi Might be a stupid question, also made up numbers to understand the method. Assume all calculations are for 2022. 73 year old has a prior db distribution, let's say $15,000/month after all actuarial calculations. done many many moons ago. The new salary average for 2022 is $24,444.44/month - 100% of compensation limit (385k+290k+305k averaged) 415 dollar limit is $30,000 - made it up. What is his 415 maximum AB? 1. Is it $24,444.44/month less $15,000/month i.e. $9,444.44? OR 2. Is it $30,000/month less $15,000/month i.e. $15,000/month? If it is (1) then the 415 LS would be $9,444.44 * APR @ 2022 417e table @73 @5.5% (assume plan AE assumptions provide much higher LS)? What am I missing here to determine max 415 AB and LS? Thanks

Do not remember but cycle 3 may have some adjustments/limitations to certain formulation. Just because it was allowed in PPA document does not mean it is in cycle 3. Check with the vendor.