Good afternoon folks - new to the boards.
I've received inconsistent responses to an issue I'm facing, and interested in the expert opinions found here on the board.
I have a Solo 401k/profit sharing plan for my business, which includes my spouse and me. In 2020, I added a DB Cash balance plan. We have both contributed the max employee deferral for 2020, including catch-up contributions. Typically throughout the year, we contribute 25% of compensation to the plan as the profit sharing contribution, rather than waiting until the end of the year.
We continued this practice even as we were exploring the adoption of the DB Cash balance plan, which we adopted prior to year-end 2020.
We now find that we have made profit sharing contributions in excess of the 6% limit for combined DC/DB plans, when considering the minimum funding contribution for the DB plan will be in excess of 25% of compensation (we are both over 55). I had hoped that since we were in the same plan year, and the contributions affect both my spouse and I equally, that we could transfer the amount exceeding the 6% of employer profit sharing contributions to the DB plan as part of the minimum funding DB contribution for the same plan year. However, it appears more likely that we need to keep the contributions and any earnings in the DC plan, and report them via 5330 to liquidate against future year contributions.
Has anyone dealt with a similar situation, and what was your solution? Ideally, I'd hope to transfer the excess 2020 profit sharing contribution to the DB/Cash Balance plan as part of the minimum contribution for 2020, as a correction. Open to any suggestions (the one I'm taking for sure is to let someone handle this going forward as it's too much to do this and run a business).
Thanks in advance -
