Basically

I just need some clarification. I know how to do the calculation. The profit figure to use is line 7 of the Schedule C? Line 7 profit multiply by 1402(a)(12) deduction (.9235) calculate and deduct FICA calculate and deduct MED Back into plan contribution Add it all up and the result is Line 7 Right? I want to explain it succinctly to the financial advisor.

Yes, totally agree.

So it's a plan design decision. It's allowed, just has to be written in the document. I will check the document. As a default I'm sure that is how I have it. Thanks

I think this might be a no brainer. But then there are so many nit-picky rules. A potential new client is asking questions. Within the email I received there is a bullet item "Rollover funds entirely". I asked for clarity, wanted to know what the intention was. I know they can't just dig into their plan balance and roll out employer contributions whenever they want. That said, if they rolled money into the plan into a designated rollover account from an IRA or a balance they had as a participant in another qualified plan, can they take a distribution from those plan accounts at any time? Thanks

Got a call from a CPA who asked if there is a rule that eliminates the IQPA audit rule for a plan that has more than 100 participants. He said this plan is a SH plan. I told him I didn't think there is any relief. Am I mistaken? Anything?

Is this obvious? RIA sends clients to his insurance business and visa versa? Or is that fine. It's all about providing a "service"... Like a doctors office and a medical billing company. One can't exist without the other. Thanks Zeller, I guess I didn't go as deep as page 45. I'll take a look

Based on the response from the client, there is no control group issue. ASG.... there could be but I need to better understand how to determine if one exists. My head is ready to explode reading about and just scratching the surface of FSO, A-org, B-org and what it all means. Is there a grid or something somewhere that I can use to input all the players to help determine my answer?

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?