FORMER ESQ.

I'm with @Paul I on this one. It's not really a "supply side" issue. Employers are offering retirement plans, but most of the retirement plans have a heavy employee funding component (e.g., 401(k) plans) and US workers have less and less additional income to save for retirement when they are worried about paying rent/mortgage and buying food.

Under EPCRS, a plan sponsor may retroactively amend its plan document to allow for Roth source rollovers so as to "match" the plan's actual operation with the document. However, the retroactive amendment cannot otherwise be discriminatory under 1.401(a)(4). It's the 1.401(a)(4) issue that I would examine if the employee in question is an HCE.

Assuming the employer has a 12/31 PYE and FYE and has filed a Federal income tax extension for 2025, then: Any amount not contributed by 10/15/2026 is not deductible for the 2025 tax year. Any amount not contributed by 11/15/2026 is not an 415 annual addition for the 2025. The 415 part is where this gets tricky, I would be careful on this. The SH contribution (assuming it is a SH NEC or SH Match with annual contribution) must be made by 12/31/2026. If not, you have a qualification failure that must be fixed under EPCRS. The Gateway and TH contributions (and PS contribution in general) must technically be "allocated." I don't think there is an actual contribution deadline for these contributions (like there is for the SH). Of course, this is an academic point because not making the contribution that has been "allocated" constitutes an operational failure that must be corrected. Also, the real enforcement mechanisms to ensure timely contribution are the 404 deduction/ 415 annual addition rules.

After several months of hard work, I have designed A.I. that gives a structured analysis of affiliated service group and controlled group determinations under Section 414. The level of reasoning provided cannot be matched by ERISApedia, Chatgpt, Claude, etc... The program thoroughly analyzes all aspects, including entity and family attribution to the "judgement" issues such as what constitutes "performance of services", "services organization", "regularly performing services" are analyzed. The program gives a structured layout of the issues involved, the facts pointing in one direction or another, and probability of affiliated service group status. When facts are missing or incomplete, it still provides an analysis with differential outcomes. The program has been trained with over 500 real life affiliated service group scenarios that I have analyzed for it. It is currently going through beta testing. Of course, ERISA attorney analysis would be required to confirm the analysis, but it will significantly reduce ERISA attorney time. Before starting on the project, I should have asked how people in the retirement industry would view such a product. But, it was such a neat experience for me that I decided to create it anyway. At the very least, I could use it myself. What are your opinions?

I second your opinion. Assuming the plan covers only the children, under Section 1372(b), applying 318 attribution, each child is deemed to be a 100% shareholder of the S-Corp.

Any eligibility classification that is a proxy for imposing a service requirement violates 410(a) on its face. Your eligibility classification of hourly employees is fine so long as there is a 410(a) failsafe language (e.g., hourly employee credited with 1000 hours of service would be eligible). Also, don't forget that the LTPTE rules would have to be an exception to the hourly exclusion unless you want to deal with missed deferral opportunity issues later.

Why do this when you have time to retroactively amend (assuming the plan year end is 12/31)?

Extremely likely this is a 4975(c)(1)(D) prohibited transaction. See also DOL Opinion Letter 2011-4A.

If its a SH plan, IRS Notice 2016-16 Section IIID applies to your facts. You have some time, but must act.

If Company A's resolution/amendment to terminate its 401(k) plan was executed prior to the effective date of the stock acquisition (A acquires B) then the successor plan rule would not prohibit distributions from A's plan on account of the A plan termination.

What is the client trying to achieve here?

If you take a look at Section 3 of Appendix B in the EPCRS, it notes that the earnings rate to be used is generally the "investment results that would have applied had the failure not occured." I read that to mean the actual overall earnings rate for the plan. I think it is a reasonable position to use the .88%.

No, you don't need to understand who owns the PE. It's basically an fund that invests in (and restructures) relatively mature cash-flow positive companies. PE (and its managers) are subject to Federal securities rules (primarily the 1940 Investment Advisors Act). What is important is the PE's percentage of ownership in the attest and advisory entities. The ownership percentage is important for determining Affiliated Service Group relationships. You are correct that they are not using the proper terminology. It's not a controlled group, and almost every PE I have worked with takes the position that the controlled group rules (i.e., 414(b) and 414(c)) do not apply to a PE structure because the PE is not a trade or business, but rather an investment vehicle.

She owns 100% of her Sole Prop, and 80% or more (I assume) of her own "small practice." This is a controlled group under Section 414(m). Don't confuse the 414 rules, which tell you "who is the employer" with the "same trade of business" rules which tell you whether different streams of earned income may be combined for purposes of determining "plan compensation."

Unfortunately, PE investment in professional services is becoming more prevalent. PE's wish to gain a foothold in a new class of investments (because they are not happy with not owning everything) and the owners of the professional service firms seek some cash liquidity. For CPA firms, the business is splt into two entities: The auditing business (the attest side) and the advisory business. The advisory business can be 100% owned by the PE, but under state law, a non-CPA (such as a PE) can only own a certain percentage of the attest business. For your purposes, as TPA, the question is whether the attest and advisory business are under Section 414 common control? They are likely not part of the same controlled group because under state law the PE likely cannot own 80% or more of the auditing business. BUT the two entities are likely part of the same affiliated service group. The attest business being the FSO and the advisory business being the A-Org.