Basically

Bob owns his own RIA 100% pushing investments. He also owns a 50% stake in an insurance business. No control group. The insurance business has 4 EEs. If they setup a 3% SH 401(k) plan I don't have to worry about Bob exceeding the 415 limit if he maxes out the RIA business. Correct Of course I need to watch the 402(g) limit.

How did you avoid the rules? Amend the eligibility requirements, hours of service?

So can I conclude that what the LTPT rules found in the Secure Act 2.0 are saying is this : If you work between 500~ 999 hours for 2 years then you become eligible to make a salary deferral contribution And... If a LTPT employee does make a deferral we don't need to include them in the ADP test And... they are not eligible for the SH contribution or a profit sharing NEC What it is doing is giving them (LTPT ee's) the ability to put some money away for themself if they want when normally they wouldn't be able to due to plan eligibility requirements? With no real effect on testing? AND, should the LTPT'ee become eligible eventually (because they meet the plan's eligibility requirements due to working more than 1,000 hours) they would enter the plan as normal?

I hear you. I have been telling people they need 2 forms. Figured if I was wrong and could have gotten away with only 1 then all I did was extra work. Appreciate the "free advice"

Sometimes when you overthink something it makes you crazy and unsure of the obvious. I have a participant who has terminated. She had Roth and pre-tax money in her account. Can only one 1099-R be prepared or do I need to prepare one for each money type? Am I reading the 1099-R instructions correctly, do I put the total being distributed in box 1 and in box 5 that is where I indicate her ROTH and/or after tax voluntary contribution distribution? Example... Suzie terminated and took all her money. Her $10,000 Roth account rolled into a rollover Roth IRA. Her $20,000 employer money into a rollover IRA Box 1, total of all distributions - $30,000 Box 2, taxable money - $20,000 Box 5, Roth and after-tax voluntary contributions - $10,000 Box 7, Distribution code(s) - code G and code H Her 1st Roth salary deferral was more than 5 years ago (2012) Or do I need to prepare 2 form 1099-Rs.

So many rules! So is what you are saying is that the in-plan Roth conversion, when it is rolled out of the plan eventually, must be rolled into a "rollover" Roth IRA? AND, if there is an existing rollover Roth IRA established (with it's own 5 year clock) and the in-plan Roth conversion is rolled into it then there is no new 5 year clock that needs to be started for the rollover portion? That is a good work around, that is thinking outside the box if that is what you are saying. Has anyone done this?

Does it matter if after the conversion the plan participant makes regular Roth deferrals into that conversion account? Would it actually be best to put new future Roth deferrals into the conversion account because that Roth account has started it's 5 year rule clock?

Ahh, I get it now. New ROTH IRAs regardless of where the money comes from have a 5 year rule of their own. Even if the money is ROTH money coming from a pension plan, if the money is going into a new ROTH IRA then it will have it's own 5 year rule. Thank you!

Ok thanks for helping. Two things I want to get clear: 5 year rule - So let's say Sue converts her total employee deferral account to ROTH in the plan. She converts a total of $45,000 on 11/10/2023. Her 5 year rule starts 1/1/2023. On 12/31/2027 she has satisfied her 5 year rule requirement. Any distribution from her ROTH account is tax free. But, if she took a full distribution prior to 12/31/2023, and the total distribution was $60,000 (no additional ROTH deferrals added in) then she would have to pay taxes on the $15,000 earnings. And with regards to rolling her ROTH conversion account over to a ROTH IRA , not taxed because it is a rollover to a IRA BUT if the 5 year requirement was not met in the plan then she needs to start all over with the 5 year rule. -> You aren't saying even if she completed her 5 years in the plan that when she rolls her account out into a ROTH IRA she will have that requirement all again are you? For the 1099-R - Box 1 and 2a will both be the same number. They would be different if it was a rollover out and the 5 years wasn't satisfied. Thanks for your help!

I have never been a part of a Roth Conversion. Have a single member plan who has asked if she can do one. The plan document allows for one and I have done some reading. Have I got the process correct? Is there a script/outline somewhere that someone can point me to? In-plan Roth rollovers/conversions have evolved into being the same. In the beginning you needed to be eligible for a distribution and now anyone can convert as long as the account is 100% vested. Right so far? A 1099-R will need to be prepared for the conversion. No actual taxes are withheld yet the participant will need to declare the rollover as income on their personal 1040. No 10% penalty, no 20% Fed withholding. The 1099-R distribution code will be G for rollover (Box 7). Box 1 and 2a will both be the total amount converted. None of the money has been taxed so it all needs to be declared and is taxable. The rollover needs to be put into a designated Roth account. The 5 Year Rule... The 5 year rule starts at the beginning of the first tax year. Each conversion has it's own 5 year rule. If a distribution is taken before the 5 years is up and the account holder is less than 59-1/2 then the 10% penalty kicks in and the whole distribution is taxable If a distribution is taken before the 5 years is up and the account holder is older than 59-1/2 then the 10% penalty does not kick in but the whole distribution is taxable Do I have it right so far? One question I can't find the answer to or am just missing it is "if the plan closes before the 5 years is up and the ROTH account is rolled over to a ROTH IRA, no penalty? All good? but there is still the remainder of the 5 years to go before distributions can be taken tax free?" Thanks

Just to clarify to ensure I have been doing it right, I instruct my clients to get an EIN for their plan (I facilitate this). When an investment account is opened I have instructed the financial advisor to register the account to the plan and use the EIN assigned to the plan. I tell them to NOT use the business' EIN on the investment accounts. Further, when a distribution occurs the plan's EIN is used on the 1099-R, not the business' EIN Pretty logical. All good?

I agree, and thank you for your posts. One thing I need to learn is to pass on a potential client who comes to me with a mess. That said, helping them clean up a mess can be profitable. I need to keep in mind that building a book of business, establishing yourself doesn't happen overnight. Slow and steady wins the race.

When would the "taxable amount not determined" box be checked on the 1099-R? I have a single member plan (Solo) that came to me asking what is involved to terminate the plan. I asked if ROTH deferrals were made in addition to employer. The answer was yes. I was told that all contributions were deposited into a single investment account. Do we need to go back and calculate the earnings for the ROTH money and the Employer money? As I write this, how can he roll his account over to an IRA? He can't roll it all into a ROTH IRA and at the same time he wouldn't want to roll it all into a traditional IRA and lose the tax benefit of the ROTH deferrals. He is facing a conundrum. That said, all I am tasked to do is prepare a final form 5500 and a 1099-R based on the information provided to me. I can (and will) advise what he should do. What he ultimately does is his choice. So, back to Box 2b, do I prepare one 1099-R and check that box? Prepare a letter covering my butt and be done?

I have always understood that a pension plan must have a business to sponsor it. If the business closes then the plan must close. It's as simple as that, correct? A client want's to keep the plan going so that if by chance down the line he want to take a loan he could. I advised him that if he can't keep the plan if he closes his business.

I have a client who owns 2 businesses. Each single member businesses (one is an insurance company, the other investments). He wants to use income from both businesses to enable himself to max out contributions. I prepared a joinder agreement so both businesses can utilize one plan. Correct so far? If he makes a 10% contribution to the plan from Company A does it stand to reason he must make a 10% contribution from Company B? Let's say he does, do these contributions need to be in separate accounts? or at least accounted for separately? Thanks

Got it.

If an employee terminates and comes back 5 months later they really haven't "terminated" in the eyes of the plan, they simply have a lapse in service. It's not until they have been gone for 1 complete year when they can be considered "terminated" and in essence would have to start all over if they were re-hired. Correct? And the break in service rule is an IRS rule? Not an individual plan rule?

Follow-up Do these types of amendments, ones where the HCE chooses to not receive the full SH, can they be written in such a way that they only count for one year and then the plan automatically goes back to normal?? Or is it, amend the plan to reduce the HCE SH percentage for 2021 and then another amendment to put it back for 2022?

I'm sure the business owner will like that answer better. The nature of the business is such that depending on possible future jobs they will need skilled employees to perform the very specialized work. I think she was being nice allowing him to keep his plan balance in the plan. Now that I think of it, to keep a plan clean there really is no place for just being nice. You need to follow the doc and if they have to go , they have to go.

Terminated 2 years ago Balance is in excess of $5,000 (30K) So he needs to be 100% vested. Thanks

A client had an employee who was not paid out for a couple of years (she kept him in the plan thinking maybe some work would come up and he would be back in). Over the summer the employee died. The plan states that vesting does not count if someone dies or becomes disabled. The employee died and had a break in service prior to their death. Is the deceased terminated employee 100% vested? Or do I pay him out based on his vested % at the time he terminated? Thanks

A new client was not taken care of in the past. I went back a few years and discovered that in 2020 the 2 HCEs didn't receive the full 3% NEC. The 2 NHCEs did but not the 2 HCEs. During COVID the business didn't make a PS contribution but regardless of that the plan called for a 3% SH NEC so everyone needed to get it, right? I ask, there is no exception is there? Thanks

So I was confused, brain failure. The SEP-IRA only means that the money is invested in IRAs. It's not an IRA, It's a retirement plan which must comply with the 415 limits. I do understand how multiple plans have 1 limit. Sorry for the lack of consciousness.

Financial advisor asked if this client he has can sponsor a SEP IRA with one of his businesses and a 401(k) with the other? There are no employees.

I was paid 1/2 my fee and she parted ways with a snide email. She claimed that the "bigger" TPAs only charge a fee for the doc when the client is new and then every 5+/- ears when required by the IRS, not including an annual doc fee (duh). She is mistaking an interim IRS snap-on amendment for an amendment created due to her needing to change the plan as a result of hiring an employee and tweaking eligibility and vesting, which is charged in addition to the annual doc fee. She went on to say that they would allow her to file the form 5500 herself but if they did it that would only be $375. I'm guessing there is no testing performed or asset reconciliation. Bottom line is that she isn't comparing apples to apples with these fees. If I am mistaken then I am gouging my clients. The case is closed and her folder moved to the deleted clients folder. An eye opening situation that has prompted new agreements to all clients. A good way to clean out the book of business and maybe even slim down a little to better serve the clients who see value in my service. Thanks all for their insight. Always learning, always welcoming advice.