Basically

I hate when I am asked this question. A participant wants to take a distribution. He is only 58 so he will be hit with a pre-mature dist penalty (1099-R code premature). But simple question... if the doc allows for in-service distributions is there any reason he can't?

A Dr. has a plan. He is a sole member entity. He took a position with a larger medical practice starting Jan 1, 2023. He fully funded his plan for 2022. There is no reason we need to keep the plan open past 12/31/2022, right? The 2022 contribution money is in and now want's to roll everything out and into an IRA to close the plan before the year end so he doesn't have a 2023 administration. No problem right? - Roll everything out into the IRA - Generate a 1099-R for the rollover - File a final form 5500-EZ for 2022 Thanks (There is so much good info to learn when you start clicking on posts in all message board areas! I find myself getting into topics that I did not intend to and before you know it you have forgotten why you are here)

That's great, thank you.

So this comes down to ownership attribution. And in my situation, when Mr. and Mrs. Smith (who are owners) hire Bobby Smith (son), he is also an HCE due to attribution. That would be great news because I can press again that a 401(k) is the way to go due to there being no NHCEs (because they just want to defer, or make a nominal match like a Simple). I can frame it to them that a NEC could be totally discretionary. Can't get any more flexible. For my own knowledge, ownership attribution doesn't go up, a parent of an owner who works for the business wouldn't be attributed ownership because their child was an owner of the sponsoring business. The parent would just be an employee. I knew this. I tell Solo clients that it was just a way to sell small plans to individual consultant type businesses.

But if a child was hired (is an employee) then there would be a NHCE. The child was thrown into the mix last Friday, not part of the original scenario. Oh wait, this is new to me. What difference does the entity type make? Is it ff the entity is an S-corp and there were owners and a child, the child would be deemed to own the stock of the owners therefore making them an owner?

DANG! The advisor is back on the Simple 401(k) plan. I guess a child of the owner will be an employee. I am still going to do my best to convince them the Simple might not be the best option. Just want to get my facts straight. I appreciate everyone's help. So if they go Simple 401(k): Because it is a Simple 401(k) they will need to complete a 5500, correct? and because there will be an employee other than owners, a 5500-SF? Same 5500 rules as a qualified 401(k)? It will be a Simple 401(k) so no employer non-elective contributions, just the Simple match or Simple NEC, correct? Because just the Simple match or Simple NEC there is no testing. It's like a SH plan. Appreciate it.

Wow, thanks for all the priceless advice. Yes I am no attorney and Yes I certainly do not want to be mixed up in a mess and potentially liable. I did pass along the fact that a QDRO is required. I did point out that otherwise there is no distributable event. I was thanked and now await whatever comes next.

You both are correct. I tend to want to help out too much. I'll pass along that a QDRO is needed otherwise there isn't a distributable event. Thanks for the sound advice.

Ok so you are pointing out that the QDRO is required, that without a QDRO there is not a "distributable event". Looking at a QDRO that I received for a different plan makes me think. Is there a boiler plate QDRO, a fill in the blank template? Could that be used by the soon to be divorced couple and submitted to the court, signed by both parties in front of the court, then signed and ordered by the court and then time stamped by the court. Make it all official? If you didn't catch on, they are trying to save some $

Got a call from a client. He and his spouse are getting a divorce. It is amicable so he intends to give 1/2 of his plan balance to her, no problem. They don't want to pay for the attorney to draft a QDRO. Couple of questions: Do they need to wait until the divorce is final to complete the distribution? Probably, just in case they reconcile because then the payout would have been premature. Do they need a QDRO? The distribution election form is asking for the QDRO checklist. Just maybe have them create a statement stating that the account is being split due to a divorce and have them both sign it in front of a notary? Thanks

I ended up convincing the FA that the SoloK would be the best option. At first he didn't feel comfortable. I explained that the business with 3 partners could be a Solo and would be eligible to file an EZ. I cut and pasted the EZ rules from the instructions and he came around. Thanks for chiming in!

Really, huh. and I see there are some likes and even a chuckle. I am by no means pushing this product, I was asked and so I looked into it and am inquiring. The FA says this would be for a business with 3 partners. I read, Simple IRAs do not allow ROTH deferrals. True? I'm guessing because the match or nec is pre-tax. For a Simple 401(k), the contributions are not deposited into IRAs but rather an investment account. If that is the case, can a Simple 401(k) have 2 accounts for each participant, one for ROTH deferrals and one for the employer contribution?

I understand Simple IRA plans. Setup is an IRS form 5304 or 5305 depending on where the money is invested. Contributions are put in an IRA in the participant's name. I don't handle them. So what is a Simple 401(k)? Basically a 401(k) with only a 3% match or a 2% NEC? For setup I see on the ftWilliam system there is a toggle to designate the 401(k) as a Simple A 5500 is required. A 5500-SF? Same filing deadline? You have to pull together all the financial info to prepare the 5500, Is an annual report prepared, participant statements? Is it really just a "vanilla" as it can get 401(k) with Simple IRA eligibility requirements, no testing, no PS contribution?

Thanks for the reply. So terminate the Simple now (before 12/31/2022) and roll all monies into IRAs. Then setup a 401(k) plan for 2023. Easy peasy like that? I tend to overthink things that I understand.

Timing is everything A CPA has asked me a question. His client has a Simple plan and I guess they want a 401(k) plan. I know that you can not fund both plans at the same time (and dare I go further, you can't even have both plans in existence at the same time?). They want to terminate the Simple and establish a 401(k). If they funded the simple during 2022 they can not adopt a 401(k) until 2023 (correct?) He is concerned about the Secure Act, a mandate on funding a 401(k) into next year. Did I miss something? I'm going to ask him what he means. This in my mind shouldn't be difficult. Maybe he is reading into something too much?

Yup... thanks AnnCK!!

That's a great link! Thanks. I'm going to inform the client what ESOP pointed out. Unfortunately I get to involved and try to help the client. It's black and white as stated above.

Client is telling me he has 60 days to roll it into another tax deferred investment. Is it the fact that the paper trail would show he cashed it and took receipt that is the fault in his understanding? Could he put the money back but just can't recoup the 20% withholding?

I don't know why this guy is doing it but here is the scenario - - It is a single member plan - He is still working and would be a participant - He wants to pull say $10K out BUT he said he may put it back in The plan would need to generate a 1099-R for the distribution, I mean after all money was paid out. He tells me he is "rolling it over". Let's say he pulls the money and decides to put it back into the plan in a month. No 1099-R was prepared because it's not time to. Do I prepare one and code it a Rollover because he took a payout from the plan and then put it back into a plan (be that his own). As for putting it back, he's a single member plan with less than $250K, no EZ to file. Record it as a rollover contribution on the books and call it a day?

Yes. Can it rollover from itself? and then there is the question of a 1099-R

If a participant takes a distribution but then returns it to the plan within 60 days, Can they do this? Would a 1099-R need to be generated for the original payout? or can it be considered a wash? I recall that if someone takes a payout and never cashes the check then deposits the check into an IRA then it's an IRA rollover. A clean transaction. Am I mistaken, can they cash the check and then eventually roll the total amount into the IRA within 60 days and still get the rollover benefit?

Yes you are right... last day doesn't matter here. And Damn, I asked this question before. EZ Eligible Thanks Bri for responding

I'm sorry, I'm horrible at searching for the answer. If a small business (husband and wife) in Alaska bring in employees to help during the summer and those employees are leave never satisfying the eligibility requirements (1 year, 1,000 hours, last day) , can this plan still be considered owner only and file a form 5500-EZ?

Sorry, forgot about this issue. I appreciate the help! figured it out with help from ftWilliam. Eligibility issues have many moving parts.

huh, so if the plan was cross tested it potentially would pass 410b? Put everyone in their own group,