metsfan026

Sorry for all of the questions lately! Here's the rough situation: Total Normal Cost (which is the minimum contribution) - $120,000 Maximum Deductible Contribution - $25,000 (due to positive asset performance) So, does this mean that they can't deduct the entire contribution or can they still take just the required minimum contribution and nothing more? Thanks in advance!

Can someone please direct me to the regulations that state what the maximum pay credit per year can be in a Cash Balance/Profit Sharing combo Plan? Taking over another case where they added the owners spouse onto the Plan, and the 401(k) + Profit Sharing + Cash Balance credit exceeds the salary they are giving her. Just wanted to make sure what they were doing was alright (they are the only two participants, so there aren't as many testing issues).

I think that's what the prior people had been doing, but I haven't reviewed it yet. Generally 7.5% is the "safe harbor" number, isn't it?

Perfect! Yea, everyone is going to get about 6% into the Profit Sharing. I just wanted to make sure their Profit Sharing also gets included in the Rate Group testing (EBAR) since they weren't included in the Cash Balance

Have a new client where they have both a Cash Balance and Profit Sharing Plan: Profit Sharing is immediate entry Cash Balance is 21 & 1 (1/1 & 7/1 entry dates) So we have people eligible for the Profit Sharing and not the Cash Balance. When we do the testing for both plans (like the Rate Groups), do we include the people who are in just the Profit Sharing Plan? I just wanted to confirm, because those profit sharing contributions significantly help the testing. Thanks in advance!

Quick Question: Company A - Husband owns Company B - Wife owns, currently all work done for Company A The plan is for Company B to start expanding and doing legal services for additional clients. What is the fallout for setting up separate plans for Company A and Company B? Can they do it, or do we have an affiliated service group issue?

This is a multiple employer plan. So it would be for that one employer to use to offset contributions?

Thanks everyone! I just wanted to confirm, the investment earnings can be used as a forfeiture (more or less) and can be used to pay Fund expenses? Just wanted to make sure before I reported to the Trustees.

I'm going to scratch this, as our document doesn't appear to allow entry into the Cash Balance Plan until 1 year of service. Therefore, the only thing that will be included for 2021 is the Profit Sharing and the person will enter the Cash Balance the following year. They'll be included in the testing, but not receive a Cash Balance.

Perfect, thank you! So if we elect to exclude pre-entry compensation, therefore any testing (including the EBAR calculation) will be based on that salary? I just wanted to be clear, since this plan is allowing entry first of the month following the completion of six months (so we have someone entering the plan on 11/1/21)

I'm having a tough time finding it in our document, but are you allowed to exclude compensation received prior to becoming a Plan participant in Cash Balance Plans (specifically in the EBAR calculation)? We have it set that way for the Profit Sharing Plan, just wanted to see if we could for the Cash Balance as well? I'm leaning no, but wanted to confirm.

Just as a followup, the thinking now is that the partner is being paid via 1099. Is it an issue to then have the partner create his own S-Corp and have his own solo plan, using the income that was paid to him via 1099? Sorry for all the questions, just not a scenario I'm familiar with.

Good morning, I have a potential new client where all of the employees (owners and non-owners) are paid via a K-1 (or so I've been told). A few questions: Can this be included as income for a retirement plan? If yes, I assume the fact that it's a K-1 income doesn't change that all employees would have to be included (someone is making the argument that since it's K-1, we could set up a plan just for the owners. I disagree, but I wanted to confirm) Thanks everyone!

Have a multiple employer plan where one of the employers inadvertently contributed for an ineligible participant. This was discovered in an audit, so the money had been invested and there was investment income. So what happens to that income? I believe the Fund can return just the contributions and keep that interest to use towards Plan expenses (self-directed accounts, so we know exactly what interest was earned). Is that accurate? Thanks everyone!

Is anyone familiar with the NYS Comprehensive Contraception Coverage Act? I know the act allows for coverage of a contraceptive for 12 months at one time, but is it required that insurance companies comply? Or is it optional, where it can be allowed but it doesn't have to be? Thanks in advance!

Ha! Honestly, I understand the theory behind the rule but I'm not sure I agree with it. Makes it harder for two young parents, who are successful and run their own businesses, to create plans that work for their companies.

The problem is the goal is to only cover the wife (who is the sole employee) in the Cash Balance Plan. There are 6 eligible employees from Company 1 (1 HCE and 5 NHCE). Wouldn't excluding all 6 fail the testing, even though they'd be benefiting under Company 1's plan?

Thanks! That's extremely helpful. So if Company 2 wanted to do a Cash Balance Plan, they essentially couldn't because they'd have to include all the employees of Company 1?

I didn't think this was an issue, but the client was told something by a friend so I wanted to be clear: Company 1 - Owned 100% by husband (wife not on the books) Company 2 - Owned 100% by wife (sole employee) She was told that since they have minor children, this would be a controlled group and needed to be tested together. I didn't think so, but I just wanted to be clear. The only complication is that Company 2 is a law firm that does do work for Company 1. I'm not sure that it's the sole work that they do, but while that could create issues it shouldn't be a controlled group issue. Thanks in advance!

Good evening all! I just got a new lead where the income from the LLC comes solely from their investments in crypto currency. Is this an issue when starting a plan for the LLC? Or as long as they are reporting the income on a K-1 through the LLC, it shouldn't matter? I just wanted to make sure before writing the Plan Document. Thanks!

I don't think 414s is going to be an issue. The biggest exclusions are bonuses for two HCE (for example, someone made in excess of $300k but the bulk of it was through a bonus therefore the usable salary is around $130k). Because of that the HCE percentage is around 69% while the NHCE is 92.80%. Since the NHCE are benefiting more, I'd think it would pass the testing. So with that in mind, putting the exclusion as "All Non-Base Pay" should be acceptable for IRS standards?

Would it be safer to say: All participant subsidies (Health, Travel, Moving, Entertainment, etc.) Just trying to figure out the best way to word it in the document that avoids any issues, but covers what the client is looking to do

Their base comp is labeled as "Regular Compensation" on their payroll. So should we say somewhere define "Base Pay" as the "Regular" compensation line item on payroll?

Good afternoon! Generally when we put in exclusions from compensation in the document we state specific items to be excluded. I have a client that basically wants the document to state that compensation excludes "All Non-Base Compensation". Would this type of generalized exclusion be viewed as acceptable by the IRS? The software would support it, under the "Other" exclusions. Thanks in advance!

Thanks everyone! Was just reviewing our document software to amend the Plan to allow and it states that the participant has to be at least 62-years old, but it sounds like that's been lowered? Our document software also seems to indicate that it's a monthly benefit, but can it be a lump sum?