Jakyasar

That is also my understanding i.e. must have deferrals option for at least 3 months.

Hi To confirm, if sponsor wants to set up a new 401k plan for 2021, they are late for safe harbor for 2021, correct? Same question for an existing PS plan and wants to add 401k feature for 2021. There is no way to set up any plans that have safe harbor for 2021, correct? Just checking out there. Any 401k deferral will be subject to ADP for 2021 unless they use the 5% rule, correct? Thank you

Hi I was just asked to do a 2020 run for controlled group situation - employers, 2 plans (because the payroll company will not do it - shall not be named) as a favor. Must do it prior to 10/15. No good deed goes unpunished i.e. I just checked all the provisions and unpleasantly surprised. If any of the gurus have some suggestions on testing for top heavy and also coverage, would appreciate it. Plan B is not top heavy but not sure about plan A yet as I am waiting for assets. I also do not know if combined plans will be top heavy - to be determined. Provisions of each plan are as follow: Plan A (Company A's plan) has 3% non-elective safe harbor, 401k deferral and profit sharing (1000 hours and must be employed at EOY). No compensation exclusions. For all provisions, entry date is the month following age 21/1 year service. Plan B (Company B's plan) has enhanced match (100% of elective not in excess of 6% of compensation, 401k deferral and profit sharing (must be employed at EOY - no hour requirement). Only for match, compensation is from date of entry (No way for me get this unless payroll company will provide it). For all provisions, date of entry is the next payroll period (Plan is run by a payroll company so they can do this, I guess) upon satisfaction of age 18/1 year of service. They want to have PS allocation in Plan A and none in Plan B. PS allocation for Plan A is group based i.e. needs to be tested. I need to combine both for top heavy even if each plan passes 410b and 401a4 on its own (they do). Since each plan has different safe harbor assumptions, separately top heavy for each plan is not an issue, one is 3% non-elective and the other one is enhanced match. Do I need to test them all together for coverage and non-discrimination? What would the answer be if If Plan A is top heavy, Plan B is not and combined not top heavy Neither plan is top heavy and combined not top heavy If Plan A is top heavy, Plan B is not and combined they are top heavy What am I not asking properly? I never had to test two DC plans like this. Any words of wisdom is appreciated. Thanks

Why are you expressing the net earned income in terms of deduction? The only deduction you are looking at is the deferral, the rest is simply for 415 limit purposes only. The sum of deferral plus QRP allocation is 58k and you have enough of schedule c income to support this. Assume you have 58k is w-2 of which 15k is deferral, balance 43k is from QRP thus 58k 415c limit. No deduction other than deferral. Am I missing something here?

Yes that was the issue we were discussing last week.

QRP allocation has nothing to do with deduction only for 415c limit unless you are combining deductible contribution with QRP This is easy if you have no rank and file employees since testing might be an issue.

We had this discussion last week for off calendar plans. Not quite finalized, at least to my satisfaction. I personally am not convinced that 9/15 deadline is extended. Others may have different opinions.

I will take a shot at this Assume not age 50. 100k net schedule, could be even lower, say 68k before 1/2 self employment adjustment. 43k non deductible QRP allocation as profit sharing plus 15k as deductible 401k deferral. Total is 58k which is the 415c limit for DC plans. Done.

No, val date was eoy to start with, they just made it as of plan termination date. Also, if they switched to boy because of termination only, is that considered a change?

Hi A curiosity question. I am looking at an SB prepared by another actuary for a terminated plan. It was a calendar plan with val date as of end of year. SB was prepared with 9/30 year end (term date) which is fine. When SB was filed, this val date change was filed as a funding assumption change. Is this correct? Thank you

C.B. and Mike, thank you both for your educational explanation. Very interesting approach.

Interesting, I am curious, is this because a retiring participant or applicable to any participant just because the plan sponsor wants to give more money? Assume that no test is failing, it is just "I like you and will give money even if you are not satisfying the provisions"? What section that allows this, I probably missed it during my reading (sorry very busy with the AFTAPs at this time, limited time to check all) Thank you for indulging my curiosity.

Hi Mike I reread the 11-g regs again and my take is a bit different than yours, as it has been in the past (11-g(2)) however as I seldomly use it (only when the testing fails), it is what it is, no further comments on my end. If I missed anything else, my apologies. Going back to BG5150's explanation to me "But, say a valued employee who was there for many years "retires" in December at age 62 and the owners want to reward her for her service. If the last day is hard coded, they would have to do an 11-g amendment to give her anything". Out of my curiosity and lack of experience in the above situation as explained by BG5150 (may be I am misunderstanding as well), please note that following question. I am assuming that she retired in December but before the 31st. Let's assume that the plan has last day rule and 1000 hour requirement for someone retiring during the year for an allocation. Unless there is an exception for a participant who is retired during the year (like no last day rule and/or no 1000 hour requirement), can you use 11-g amendment and go back retroactively provide an allocation just because the plan sponsor wants it, based on plan allocation provisions assumed above? Again, i hope I did not misunderstand BG5150's explanation, somehow. Thank you.

I guess I do need to revisit. Hardly use it so rusty. Thank you for pointing out.

Now I see where you are coming from and thank you for the explanation. However, I am not sure you can do an 11g amendment just because you want to give a contribution for the 62 year old even if with individual group approach. 11g is a corrective amendment and used if plan fails testing. I agree that additional contribution can be provided if no conditions. Hopefully I did not misunderstand what you are trying to explain. I like passing ABT as it makes 401a4 testing easier to pass, at least for my plans.

BG5150, could you please elaborate on your statement, trying to understand it (sorry late in the day)

C.B., thank you for your comments. I agree with you that there are different opinions out there. Mine is ok to do so as I have no issues with this approach. It is the SECURE act that bothers me i.e. the plan document was not signed by 12/31/2020. After reading the EOB - ERISA Online Book as well (I am not sure if I can quote the section/language here legally), it mentions that IRS's opinion was, 1.404(a)-14(c) will continue to apply (does not say obsolete - states that the language is not significantly different that pre-2008 rules). There is an example showing that 3 different options can be used for my scenario. Also references to the famous Notice 2007-28. EOB Chapter XVI, Part C is the section I am referring to especially 7.a.1. If I am allowed to provide that section, I will do so but need administrator's permission first. At the end of the day, I will discuss in detail with the CPA and the client and explain to them about the law and the "not so clear" interpretation and let them decide.

I went back and reread section 201 of the SECURE act as well as House Committee on Ways and Means and I see nothing saying that plan and tax year have to be the same. I hope others will chime in as I suddenly have a few of these. Thanks

Lou and Bill, right on the point. I did not see anything to the contrary in SECURE but may have missed. Bri, if I understood what you said correctly i.e. deductible for 2021 tax, as sole-props tax due date is 10/15 and so is the minimum funding deadline if the 2020 plan year starts on 2/1/2020 and ends on 1/31/2021.

I am aware of that, my question was about off calendar plan year for a calendar tax entity. Just wanted to see about others' thoughts on this.

Hi A sole-proprietor wants to set up a db plan for 2020. I can technically set up a db plan now starting 2/1/2020 with PY ending 1/31/2021 where minimum funding is due 10/15/2021. Plan document would read income used for the calendar year ending within the plan year. What is your thought on this? Thank you

Yes but can it be reflected on 2020 SB and 2021 AFTAP which need to be certified by 9/30/2021? Unless I am mistaken/missing anything, no.

So, for any calendar plan, 412/430 funding is still due today, at least to my understanding. Any profit sharing can be done later.

Not that I have seen nor anyone chimed in. I am having all my clients making their deposits by 9/15 even if their return is extended. no headaches, no issues. I am also going to have them file their 5500 forms by 10/15. But that is me.

I posed the same question last month and here is the link. I am switching to accrual.