Nate S

Since this is a takeover and 2021 hasn't been done, I'm assuming it's an EOY val, with a fixed dollar accrued benefit? BOY is usually preferred for this strategy, but without an income history there is a little bit of leniency to project the 415 comp limit. However, if the business growth has not been as stellar as expected, resulting in an appreciable 415 comp average; in year 4 this falls apart and you'll likely end up overfunded and 0 contribution. This may then start a seesaw effect because now you should end with an appreciable average compensation, but it can take until year 6 to flatten out. I.e. year 4, no contribution, creates compensation average; year 5, possible contribution, if so then same average compensation; year 6, no contribution, but now have average compensation based on 2 years; level results from now on. Also, this can be used when insurance will be a major asset, yes you still have a low compensation average, but your assets level may be depressed until year 3 when the cash values start to accelerate. Then your contribution swings are more level since you aren't so overfunded.

Sorry, it doesn't work for employment verification. It's only verifying the information that has been submitted on the worker's behalf by the non-profit immigration agency the coyote delivers the undocumented to. That way, he can get paid once they start telegramming their paychecks back home. So the employer gets their labor, the IRS and SSDI trust get paid by someone who will never file to collect, and a concrete company in Mexico gets paid to build their family home. Everyone wins!! ...Until they get a girlfriend and/or find the local dive bar; then the cops are invariably involved somehow, and eventually ICE comes knocking.

Yep, those. Has passed a DHS audit too. Illegal/Undocumented matters not when "valid" paperwork can be presented. And let's not forget that ERISA is blind to legality, if they're determined (by the Employer) to be an eligible employee, the Plan has to benefit them. Might need to engage a different custodian for the IRA, or open an appropriately titled brokerage account.

Who then actually is the Employer? If the work for the affiliate is indistinguishable from that of the parent, or the work is for the benefit of and under the control of the parent, then they would be considered employees of the parent. Whose name is on the paycheck? No corrective action is necessary then, the Plan is operationally correct.

Is it non-taxable regardless or can it optionally be treated as taxable? We have several partnerships and sole-props who could be profitable if so, and for most the cash flow is irrelevant; but the subsequent deductions and investment opportunity would be invaluable.

Because it doesn't work; a family member has been hiring "known" illegals for years, but they provide the necessary documentation to have a proper I-9 on file. Likely already has an ITIN; you don't need a SSN for employment. In this day of id theft, it maybe wiser for anyone, even citizens, to obtain an ITIN for employment purposes; especially considering how many places an employer then broadcasts an SSN to.

Yes. https://benefitslink.com/boards/index.php?/topic/21009-new-business-first-plan-year/ First, we have to recognize that we are only talking about ER allocations, obviously the deferral portion cannot be any earlier than the adoption date. Next, SECURE added the ability to adopt a new plan after 12/31. The IRS has already commented that a new entity may establish a Plan that uses a full 12 month period for both 415 & 401(a)(17) purposes. Therefore if the Sponsor could setup a new plan to accomplish the same goal, why could they not amend the existing Plan to do the same?

Oops, good catch. Make sure the 410 failsafe is not in the plan either.

I'm talking about the fact that you can't early entry a HCE, if you don't also early entry any nonHCE's who would otherwise qualify under the same conditions. It appears that was done here so likely ok. BRF then gets checked, "Different rights or features exist if a right or feature is not available on substantially the same terms as another right or feature" under the classification test. This would be considering only that group of participants that the BRF applied to.

The amendment needs to be non-discriminatory, that does not necessarily mean 401(a)(4), it usually means benefits, rights, & features. While you can early enroll any non-hce on an ad-hoc basis; HCE's must be enrolled with all other non-hce's that would otherwise enter under the same service conditions, including part-timers!!

The Plan would need to use actual service as the default, and elapsed service if actual is not readily available. Otherwise the elapsed service gives him a full year of service every year and he is not excludable.

You may do either. John's allocation will be via an 11g amendment and therefore must be 100% vested. Check to see if the sponsor is ok with benefitting him, sometimes terminated employee's leave on bad terms and the sponsor is not willing to give them any additional monies.

If a 5500 was never filed before, or you previously filed a 5500ez, then you would need to file a final 5500ez via https://www.irs.gov/node/51641#RP-2015-32 If you previously filed a 5500-SF, then you may use the DOL's DFVCP

If they had originally remained employed until the next available entry date and had meet eligibilty, then they are immediately eligible upon rehire, second example. If as of the next available entry date after termination they would not have been eligible, then they need to complete the eligibility requirement as of the next entry date after rehire first example. Double check that contiguous service is not required.

I would agree its eligible compensation, but we're well past the time-frame for it to be counted as 2018 income for 415 purposes. I would treat the deferrals, under the election in place for 2018, as 2021 deferrals, and the applicable 2018 match or ER discretionary(with lost earnings) as a 2021 QNEC. Still terminated and with zero hours of service so can be excludable.

Lol, 64K question right there! The IRS says a meaningful benefit is .5%, but does that mean $500 this year and $2k next year based on the market ICR if compensation is the same? Doubtful. What has the experience of the plan been; is it long enough to determine a low-variation midpoint? Is it an older population whereby a 1st segment rate may be appropriate, or younger and thereby 3rd segment? The EA would be in the best position to comment, and can better guide the sponsor to make that determination.(testing is not an actuarial function btw, but the EA's judgement is the most relevant)

What are the 3 lines of business? Do either hold any designations or advanced degrees used in those businesses? What are the corporate entities and what are the taxable entities?

I agree that Joe likely needs to benefit because of the B&C group, which is why he needs to notify the EA for (a)(26) purposes. However I don't see an A&B&C group because if the spousal exception holds then Joe is 0% in C and Mary is 0% in A.

Do any of the entities receive more than 50% of their gross income from passive investments? A&B(Joe) and B&C(Mary) may be controlled groups through the respective attribution of B, I would make sure the EA is aware of this for Mary's DB. And have you ruled out affiliated service groups? There are no exceptions to spousal attribution under IRC 318.

Making a modification such that you lose reliance upon a pre-approved document's opinion letter is not an operational failure that requires correction through VCP. It merely makes your document an IDP. And, there is no requirement that a document be pre-approved or have received a determination letter at all, only that it incorporate the required regulatory/legislative items in a timely manner. It may be prudent that a lay-Sponsor use a pre-approved document, or obtain a determination letter, but neither is a qualification requirement. Here, you would only have an operational failure if the administration of that modification resulted in a regulatory violation.

Sorry, just re-read your original comment about short-service employees to pass testing, I would wholly agree in context of an 11g amendment. Although seeing as how the IRS dislikes ROBS plans, but hasn't done squat about them; I wouldn't lose any sleep about an overreaching opinion (Gold, 2004) that they don't have the compunction to put into a formal ruling or procedure. Besides, the Gold memo highlights plan designs that operate in that fashion on a gross basis; not one-off situations that occur infrequently, or when the majority of the non-highly paid employees are benefiting at a level that is otherwise non-discriminatory.

The prudent course of action would be to test by following the plan document provisions and testing regulations. As the exclusion of pre-entry compensation is a 414(s) safe harbor, the IRS can dislike it all they want but they can't do squat about it.

Obviously the TPA doesn't need it described this way (hopefully...); I would hazard that it's an attempt to make the Individual Allocation option more readable in the SPD.

once late, it counts back to the un-extended filing deadline, even if you filed an extension (essentially the late filing nullifies the extension). So it is $250 a day for 75+ days, but that's just the IRS, the DOL penalty can be much more punitive, from the IRS Fix It Guide: The IRS penalty for late filing of a 5500-series return is $25 per day, up to a maximum of $15,000. For returns required to be filed after December 31, 2019, the penalty for failure to file is increased to $250 a day (up to (150,000). See IRC Section 6652(e). The DOL penalty for late filing can run up to $2,529 per day, with no maximum. File through DFVCP immediately!! At $2,529 per day, that "one day" late filing now costs up to $189,675!

EPCRS and the ADP test are blind to whether a deferral is pre-tax or ROTH eligible, and combine all deferrals into one calculation. The QNEC is an employer allocation(and therefore pre-tax); it will go into an 100% vested Employer source(even if the Plan does not have another Employer source the document allows for QNECs by default), not the deferral source. If the ADP is 2.25% then 25% is .5625%, doing both as you describe would be a 50% QNEC.