FORMER ESQ.

And this is why this forum is excellent. Thank you!!

The way I interpert the Treasury Regulations is that a proposed amendment (tested independently) must be non-discriminatory in timing or effect. That is, even if the plan passes its annual non-discrimination test (by including the higher benefits from the amendment) that does not mean that the amendment itself is non-discriminatory. So, if the amendment increases HCEs benefits, but NHCEs are not receiving any increase, I would take the position that it is discriminatory. Would love to hear from others.

Both Paul I and Peter are giving you the proper framework. Please be cautious. A third-party administrator should not be giving "advice" on how a client allocates income between the K-1 and W-2. Only the accountant or the client's tax/legal advisor should opine on that and in each case, they are constrained by their own standards of practice.

Terrific! Option one.

Working 6 months with 150 hours in each month is 900 hours. So, you require 900 hours in 6 months? Does your plan have a failsafe that regardless of this eligibility criteria, if the employee works 1000 hours in 12 months of service, they enter the plan on the next following entry date?

The record keeper made a mistake in assisting the client in administering the plan. That's it. One cannot categorize all vendor mistakes as the exercise of an ERISA fiduciary duty. It's not supported by case law. It's not supported by reality.

There it is...the fiduciary argument. Try again. Not going to happen.

Ummm...what exactly is the record keeper's duty under ERISA? Why don't you answer the question?

Huh? Please elaborate on the recordkeeper's duty under ERISA. Duty in what capacity?

One more item I just noticed--non-equity partners do not typically receive a 1099. They get a K-1. Are you sure this guy is not a profits partner? You are calling him a "partner." Get this issue resolved first. Because if he is in fact an profits partner, then all bets are off in what I previously discussed.

I assume you meant the Form 1099-Misc as an indpendent contractor. My opinion (not giving out advice) The law firm and title company are a controlled group. The individual sole prop (where the plan is to be sponsored) is not part of that CG. However, be very careful of a possible ASG. I would advise the client to get ERISA counsel involved and get an opinion. With respect to the ASG issue, I don't see an ownership relationship between the individual and the law firm or the individual and the title company. This would eliminate an A-Org and B-Org, but there is always the management type ASG depending on the type of services the individual is providing to the law firm. Also, don't forget the "catch-all" anti-abuse provisions under 414(o). In my experience, I have not seen the IRS try to apply that provision, but that is just my experience.

This would not be a controlled group post SECURE 2.0 unless one spouse is an employee of the other's company, is on the board or similar governing body (if applicable) or "participates" in the management of the other spouse's company. If not a controlled group, I would look at the affiliated service group rules, and determine if at least one of the entities constitutes a "service organization" and there is a service relationship between the two entities.

Thank you for this information. My comment still stands, which is that the estate is the designated beneficiary, and amounts from the plan can only be distributed to the estate, not an IRA. The estate can elect to take the whole account balance or receive the RMDs over time pursuant to the RMD rules that apply. In either case, amounts distributed are taxable income to the estate (or if applicable to the beneficiary).

I am assuming that the plan document provides that in the event the participant dies without a designated beneficiary and is not married, the designated beneficiary is the estate. The estate is not an individual or an eligible rollover recipient. So, this is not an inherited IRA situation. Amounts cannot be distributed to an IRA account. They must be distributed to his estate. The RMD rules apply. Specifically, the "at least as rapidly" rule would apply in this case. Amounts received by the estate are taxable to the estate (or beneficiaries, if passed through).

That's correct--11(g) amendments can only be used to fix coverage, non-discrimination and minimum participation failures.