Basically

Yes. The plan was established in 2023 and so far only deferrals have been made. So far the plan is 39% top heavy Big question... IF the plan is solely HCE employees and we only allocate an NEC for the owner, will that pass? Does that work? (and I get, once the plan is TH which will be the following year probably we will need to give all eligible EEs a 3% TH minimum

I will in the end... I just happened to do it this way to see what might happen True, and the plan will most likely become TH eventually. IN that case, the non-key HCEs would only need to get the 3% TH minimum... no 5% gateway test, right?

Doing a proposal: I have this plan... all of the EEs are HCEs except for a couple of NHCEs that don't work more than 1,000 hours (at this point) I put the owner in group 1, the other HCEs in group 2 and the NHCEs in group 3. (Remember, Group 3 typically don't work 1000 hours so they aren't eligible for the NEC) I made the owner max out, gave the other HCEs nothing and as I said, the NHCEs just aren't eligible (at this time). Ran the general test and it passed. Great huh.... or am I missing something? If I'm not missing anything then all I need to worry about in the future is if an NHCE works more than 1,000 hours they need to get a contribution Thanks

Title says it all... the first year of the plan the only employee with 1,000 hours is the owner. File a form 5500-EZ and then the following year switch to a 5500-SF?

Thank you. The employer reached out to me and said to hold on, they were going to bonus the employee some $$ to help him out.

As my mom always said to me... Tough Beans. Got it. Thanks

A participant's wife is applying for SSDI. In the meantime the participant wants to take a hardship distribution of close to his plan balance. He has roughly - 1/3 ROTH deferral account 1/3 SH Match 1/3 PS 100% vested in all accounts. 1 - I would think he qualifies for a hardship dist... right? 2- If the dist happens, he must cease his deferrals for 6 months? Was that repealed? (well, you would think if he needs the $ he would stop deferring) 3- Taxes must be withheld (20%) and the 1099R would be coded as premature so will be subject to the 10% excise tax. What am I missing?

Question... if they made the election before the end of the year and then when all the dust settled they decide they don't want to go through with the full amount... they decide they want to reduce what they thought they wanted to ... is that ok?

A client received a letter that I have never seen. The notice tells them that the IRS has made changes to the form 5500 and as a result the client owes $49,500 + interest (see attached). What is this?

Just a simple clarification... A client with a 5 participant 401(k) plan asked about the mega backdoor roth option. I explained that every year we max out the plan to the 415 limit, there is no room for a voluntary after tax contribution. Can she convert the PS contribution to ROTH each year with an in-plan conversion?

Really? That's ridiculous. I assumed the agents in both audits were local. If we can't arrange a time that works I guess we will reach out to the supervisor. Thanks!

In the past 2 weeks 2 clients have received plan audit notices. Thankfully they are only PS plans, nothing more. But get this....I just received a call from the 2nd client who got the audit notice. He is in the hospital following a blind fall down the stairs in the dark in the middle of the night. He is in rehab with a concussion, 2 fractured vertebrae, and cracked ribs. Poor guy, he just retired last month! 80 years old! So he called the agent conducting the audit explained the situation and requested the audit be postponed and the agent said no! He said to give someone power of attorney. Is it unreasonable to request the audit be postponed? Is this normal that the IRS would not grant a postponement based on these circumstances?

A plan came to me asking what is the next step. They received an IRS notice with a penalty. A response was sent in April 2023. The IRS never responded and no follow up notices were ever received. Should the client assume the IRS closed the case? Should they call the IRS?

So in the end there is no such thing as a defer only plan. There could always be an instance where a THM is required. 3% at that. Brings up waiving out of the plan all together. If the girls waive out would I need to worry about THM?

Here is the situation.... EE1 = 100% Owner (HCE) EE2 & EE3 = daughters... HCEs by attribution? EE 4 ~ 6 = Employees who earn on average $500k+ (HCEs) Owner only wanted a defer only plan... didn't want to make any kind of employer contributions, no SH or PS. If daughters are HCEs due to attribution and don't defer then no ADP problem.

I understand that a participant can opt out of the plan . And that if they do they can not return. If a participant opts out, they no longer are part of plan testing.... correct? EDIT: I meant "Waive out" And Dang... meant to mention this.... This guy has 2 daughters. Would they be considered HCEs due to attribution? I'm guessing they are both older than 18. My thought was they may screw up testing so have them waive out... take them out of the equation. But if they are HCEs by attribution then no issue if they defer very little or nothing at all.

Thank you!

I think I did it. Here is what I did.... - Had to give it to all who deferred, even if they were not employed on the last day of the plan year (same as a regular ADP SH Match) - It was a "discretionary" ACP Match (SH) - It was a 100% match of whatever % I needed to eat up the $4300 overage (0.373%) I ran all my tests and came through with a Pass!

Thank you... I will explore the document. Appreciate your help! Learn something every day 🙂

This plan is a SH Match.

This is probably stupid but this client deposited $4,300 too much. They asked if they could allocate it as a PS contribution instead of returning it to the company. The plan is a straight SH Match, they don't make PS contributions (it's allowed, they just don't). Problem is, 5 participants who don't defer would receive the PS contribution. No big deal. But the plan has individual brokerage accounts at American Funds. Each of these 5 participants would need an account of which their balance would range from $125 to $236. Hardly worth it..agree? Could these 5 participants share one pooled account? Would it be best to just pay the overage back to the company? Thanks

My understanding is he has a Roth IRA. If he satisfies the 5 year rule in the plan and rolls the Roth money into an existing Roth IRA then he is all set. Honest, doesn't make sense to me a new clock would be started if he rolled Roth money out of a plan into a new Roth IRA... It's Roth already. Oh well. Knowing that he may close the plan soon (within 5 years) he would be better off taking a distribution and converting it to Roth outside the plan. Start the clock outside the plan so he doesn't have to re-start the clock. Make sense?

5 year rule - The Mega Roth scheme where a participant puts in a voluntary contribution and then converts to ROTH immediately starts a 5 year period. For this guy, because the money has been in the plan for more than 5 years already, when it converts to Roth will he have a 5 year rule attached to that money?

He's thinking the plan may close before the 5 years is up. May just be easier to keep the money outside the plan Thank you for the link.

A single member plan (62yo participant) wants to take a distribution from his plan, pay the taxes outside the plan and put the total rollover into a Roth IRA. Can that happen?