Renee H

The document is not a OOPS document. I use Datair Defined Contribution Pre-Approved Base document #20. I could not find anywhere in the document that makes an exception for owner spouse service requirements. In this case, perhaps an amendment is the way to go. Do you agree?

I have seen this issue in another post, however, it did not specifically address an owner only 401k plan. The employer is a Sub-S Corp with no other employees. The plan requires 1 year of service, 1000 hours with duel entry dates. Is there an exception for the owner's spouse to enter the plan without satisfying the service requirement? Or should I amend the plan to eliminate the service requirement and then re-amend it back if and when he hires a new employee. He is considering a new hire in the next year or two.

Thank you everyone for your responses.

I recently inherited DB/401k combo plans. The company is an LLC and currently has only included the husband's partnership income for benefit purposes (wife has never participated). For 2025, they want to bring in the wife and daughter. Will this cause the DB plan to require PBGC coverage?

Thank you Bill.

Hello. I have a safe-harbor matching 401k plan where the employee satisfied his one year of employment on 11/3/24. The adoption agreement defines eligibility as 1 year of service with semi-annual entry dates of 1/1 and 7/1. This would enter him on 1-1-25. This created confusion with the plan sponsor and, evidently, the payroll company because they deducted a 401k contribution from his December paycheck. I am thinking they need to refund the $170 and issue an amended W-2 for 2024. Is my understanding correct, and if so, does anyone have a better recommendation? Does anyone know what may happen in an IRS audit if they choose to leave it there and not amend the plan to permit it? The deposit was made in January 2025. Thanks in advance for your help!

Thank you very much for your helpful responses. You guys are the best!

I will be setting up a combo Cash Balance/401k Plan between 2 companies and am not sure whether this will be a CC, ASG or Multi ER plan. The business structure is as follows: Company A owned by Brother and Sister 50/50. 5 years in operation Company B is owned by Husband and Wife 100%. 20 years in operation. The owners of Company A are the adult children of Company B. Company B has 1 non-owner employee The two owner groups take W-2 pay from each respective owner company. Beginning in 2024, the parents of Company B will draw W-2 pay from Company A Company A wants to set up the 2 plans with Company B the adopting employer. Is this considered a controlled group due to attribution or is it an ASG or multi-ER plan? The type of business is Property Management and they are affiliated with one another. Thank you for any guidance you can offer in this situation.

Thank you everyone for your valuable input. The compensation in question is for "board of directors" compensation. They do not provide any other services to the company which is why they have zero hours. I do not know why it is reported as W-2 pay as opposed to 1099. It might be in order to cover them on the company's health insurance plan. I will try to find out. They are the children of the owner who passed away. You raise a good question about whether they wish NOT to receive a contribution and also about amending the plan to place all participants in their own group (something I have been trying to get them to change). The plan defines compensation as W-2 pay with no other exclusions. There is an option to write in a specific exclusion. Would it be advisable to amend the plan to specifically exclude compensation that is for directors fees? 1000 hours are required to receive an allocation but I am thinking they need to cover more bases. Thank you again!

I have a cross-tested profit sharing plan whereby the company is owned by 3 siblings who inherited the stock after their father became deceased. 2 of the owners earn W-2 pay but do not work for the company. The PS formula requires 1000 hours to receive a contribution. Since they do not work any hours, can they be legally disqualified from receiving a contribution? This plan does not include a 401k component and is not safe-harbor.

I have a question regarding 2 corporations owned by the same person. Company A is 100% owned by Owner A and sponsors a 401k/PS plan. Owner A is acquiring a new company B with different employees in the same industry. Company B does not currently sponsor a pension plan since it is a new company. Is Company B permitted to establish a separate 401k/PS for the benefit of its employees, or must these employees participate in Company A's plan? Am I correct to assume NDT will include employees from both company's? Company A has 60 employees and Company B will have 40. I'm wondering if there is a plan design available to get around the large plan filing requirement.

I have a takeover profit sharing plan. The owner turned 72 on 12/31/22 and did not take the RMD. My understanding is he should have taken the distribution by 4/1/23. Can someone please explain the consequences of not taking the RMD by the required beginning date and how to best remedy the situation?

This is a continuation of the same PT plan issue. We received confirmation from several agents at DOL that the breach does not qualify for VFCP. The seller filed the 5330's, paid the penalties and restored lost interest. What they did not do is report the PT on the 2019 5500-SF form. My question is should they file an amended 2019 or report the PT on the final 5500-SF form and include an explanation of the breach and how it was corrected (this was already reported in the 5330). The Buyer is giving them the option but would prefer they report it on the final 5500-SF. I would love to hear your recommendations.

In answer to Bri's questions: The suspense account is a separate stock account. The amounts transferred to the sole participant each year met the 415 limit. I'm not sure what is meant by ratable earnings or how they should be applied. The investments in the suspense account have gained over $43,000 as of 12/31/21. It is less now due to market losses.

Thank you everyone for your responses. Is form 5330 used in this case to report the reversion?

Thank you. I pass along this information.

Thank you Peter. The sale concluded in September. The Buyer purchased the stock of the selling company. The Plan was terminated prior to the conclusion of the sale and all benefits will be distributed. There is one owner/fiduciary of the selling company who will be an executive with the buyer's company. He purchased some of the Buyers stock. I do not know any other details with respect to the purchase other than they were requiring the Seller to correct the fiduciary breach by filing the 5330, pay the penalties and restore lost interest. I don't fully understand why they want the Seller to apply for penalty relief through the VFCP and I still don't think this situation qualifies. They may have assumed there was a loan or didn't fully understand the breach, but I doubt that because all of this was communicated to them during the negotiations of the sale. Perhaps you have a better understanding with the additional information I have given you?

I am seeking guidance on whether the Plan Sponsor can submit an application to VFCP for funds that were moved back and forth from the plan to the corporation over the course of 3 years. Turns out one of the owner/trustee was mishandling funds unbeknownst to the other owner/trustees. This is a family business and they trusted him. All funds have been restored and lost interest deposited and excise taxes paid with 5330 forms. The company recently sold and the buyers attorney is requiring they apply for relief through VFCP. She claims it qualifies for this program under one of the 19 categories that states "the use of plan assets for corporate purposes is a prohibited loan to a party in interest." I don't see where she sees this category on the application form. I explained the situation to a DOL agent in Washington D.C. and Los Angeles and both of them told me the application would be rejected if there is any indication that there was fraudulent activity. Is the attorney confused or am I? I would appreciate any comments and/or guidance in this matter.

Thank you for this information.

I have a 1 participant 401k/PS (sole prop.) plan that received 100% of excess assets from a terminated DB plan in 2017. Plan was amended as a QRP. The QRP has been funding the ERPS contribution beginning in 2017. The owner/TEE opted to invest these assets as opposed to keeping them in a non-interest bearing account. Year 7 will be 2024 and based on the MV as of today, it looks like there will still be assets remaining in the QRP. Can someone advise me on what the excise tax will be for any remaining assets that revert back to the ER. Is there anything else I should be advising my client on with respect to this situation? Thank you.

I am terminating a profit sharing due to the sale of the company. This is not a 401k plan and they do not wish to apply to IRS for DL. I was taught to give a 15 day notice to plan participants but can't find the citation. Can someone please provide me with some guidance in this matter?

Thank you everyone.

Thank you. They will return the money to the suspense account. The amount to $5630. The interest rate on this account is .01% or .56 per year. Are you saying a 5330 must be filed to report lost earnings of .49? Am I misunderstanding something here?

It was a cash account.

One of my clients inadvertently moved money from the suspense account to the Employer operating account instead of re-allocating to participants in 2021. Are they now subject to the excise tax or can this be self-corrected by moving the funds back to the Employee profit sharing accounts? If they must pay the excise tax, what is the percentage of the tax?