Basically

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,

This is a vanilla PSP plan. Here is what I have: June 30 FYE Integrated 1,000 hours and last day requirement 4 participants One participant is throwing a wrench: Hired 1/1/2020 1st year of service 1/1/20 ~ 12/31/2020, worked 1,000 hours Enters the plan on the next entry date (semi annual) - 1/1/2021 Received a 6/30/2021 contribution based on his 1/2 year salary Here is my problem: He terminated 2/17/2022 For 6/30/2022 year end he has 1,000 hours but was not employed on the last day of the plan year He is the reason for the 410b failure. He does not meet the continuing eligibility requirement rule. Why do I need to include him?

New plan last year. Getting a feel for the business. 2 employees have recently terminated. The office manager said that sometimes these guys quit but come back later. Plan is a SH match. Payout is immediate. I can make sure they are whole with regards to the SH match so their payout is complete and final. But what if they come back? There would be no forfeiture because it's a SH plan and everything is 100% vested They could put their money back if it is within 60 days (right?) If they come back before a year has passed there is no break in service so they would be back in. Am I good with regards to my understanding? Thanks

Thanks for the responses. Here is what I did. first, I had the plan designed as "automatically passes TH test" . I have designed SH plans that way, but this is not a SH plan. Just a PS plan. I eliminated that and the system made corrections. Second, one employee technically was terminated (retired) 11/30/2020. He received a year end bonus that payroll counted as 2021 compensation. So he is removed from the equation. Third, the last employee was given a 3% TH contribution. Still employed as of the end of 2021 but below the hours requirement. I learned he should still get the TH minimum. Make sense?

yes... last day is a requirement.

I have a plan. It's top heavy. All eligible employees receive at least an 18% contribution. When I run the tests I am failing TH. How can I be failing a TH test? Eligibility is 500 hours. 2 employees work less (much less). To pass 410b I had to override and let 1 of them in. What more needs to be known?