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Match Question - LLC Taxed as Partnership Owned by 3 S-Corps.
Malcolm posted a topic in 401(k) Plans
The plan sponsor for a law firm 401k plan is set up as an LLC taxed as a partnership - equally owned (1/3) by three different Affiliated/Participating employers all taxed as an S-corp. The LLC employees a few non-owners, and each of the 3 S-corp partners are 100% owners of his or her respective firm. Since the three affiliated, participating employers (S-Corps) pay their owners W-2 compensation, the W-2 compensations are eligible for deferrals and contributions for the plan. For Pre-tax deferral contributions, payroll deductions are withheld for the owners (W-2 comp) and funded by the individual S-corp. It's a Safe Harbor match plan with a Plan Year/annual determination period for the match. Since the pre-tax deferral contribution will be deducted via payroll and funded from the owners' individual S-corp, does the corresponding Safe Harbor match need to also be funded from the individual S-corp. - or does the match need to be funded by the LLC taxed as a partnership? -
I have a situation where the prior year profit sharing calculation missed giving a contribution to an eligible employee that should have entered the Plan. The normal correction method is to do a make-up contribution for the prior year plus earnings. Total contribution due is approx $1k. However, I have an extra issue with this Plan. It is a partnership subject to the self-employment calculation. To be technically correct, 2018 should be redone adjusting the contributions/plan compensation of the partners in 2018. That would cause many more problems, i.e. amendment of the partnership return, the individual returns of the partners. Would it be more practical to factor it into the 2019 partnership calc along with the staff ER contributions for 2019? -
Hi to All, In calculating the potential maximum contribution for the partners in a LLC, which number on a K-1 for Form 1065 is used as the equivalent of a regular employee's W-2 wages for purposes of calculating a contribution? We are working on a plan where a prior administrator in past years has used Item 14A, "Self-employment earnings (loss)" as the magic number for the year upon which to make calculations. We'd like to know if this is the correct approach. Maybe I should clarify that Item 14 does not automatically come with the letter A attached. Whoever prepared the form has put that in there, which according to the list of codes, means that the number is ""Net earnings (loss) from self-employment". Thanks as always for your comments.
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Filing for excise tax refief for missed RMD (through VCP) and struggling to correcting answer this: At least one affected participant is either an owner-employee (see IRC Section 410(c)(3)) or, if the plan sponsor is a corporation, a 10 percent owner of such corporation." Plan sponsor is a partnership. Some partners are professional corporations. Affected participant is the 100% owner of her P.C., which is less than a 10% partner of the partnership sponsoring the plan. For 401(a)(9), she is a 5% owner because Section 416 is cross referenced for that determination and those rules apply ownership test separately for members of the affiliated service group. But it isn't clear to me whether the VCP form question is intended to refer to the partnership that sponsors the plan or would include owners of the P.C.s that are members of the affiliated service group (and related participating employers in the plan). I'm not seeing an answer in either the form or the definition in 401(c)(3). There is no reference to 416 so I am inclined to apply the ownership test only at the partnership level. Can you offer any insights?
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2 S corps own a medical practice as a partnership Each S Corp receives distributions and a K-1 from the practice which 100% of the distributions are invested back into the practice Each S Corp pays the owners W2 salaries Do I use only the W2 compensation (paid by the S Corps) for retirement plan purposes, or do I have to add in the K-1's that the S corps receive regardless of it being given back to the practice?
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401(k) Plan sponsored by LLC taxed as partnership. When computing (1) the 1/2 Self Employment Tax offset and (2) the resulting "plan compensation" for allocation purposes, are Box 14 code A Self Employment Earnings first reduced by the Box 12 Section 179 Deductions before computing the Self Employment Tax? I do not see this reduction (adjustment to Box 14 SEI) on Schedule SE (Form 1040) in the computation of the self employment tax. Thank you
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I hope I can find an answer to the following scenario: A partnership establishes a SEP for the partners and the plan calls for the partnership to contribute the maximum allowable amount for each partner. Partnership contributes 20% to each of the five partners. However, each partner has differing unreimbursed partner expenses that may reduce the max contribution amount on an individual partner basis. These UPE are not reported to the partnership. I think that each partner is required to determine if they have excess contributions and remove those contributions and associated earnings from their account. However, this can result in differing contribution rates for the individual partners so that one partner might end up with a 7% contribution rate and another maxes out his contribution at 20% because he had no UPEs. Is it the responsibility of each individual partner to remove the excess contributions caused by the UPEs or is the partnership somehow responsible for recalculating the percent contribution based upon the individual partner UPES to determine the lowest percentage allowed that would equalize all the partners percentages. It's a tough question for the partnership, but does occur fairly frequently. I would appreciate any guidance from the group. -
A plan is sponsored by a partnership of 75 partners. It is a safe harbor nonelective (3%) 401(k) with profit sharing. A handful of partners are leaving the organization over the next few months. If their earned income is all deemed to be paid on the last day of the taxable year (12/31/16), then they would have no earned income while still "employed" by the partnership, and thus no safe harbor nonelective contribution for the year. Is that treatment correct, provided no plan provisions to the contrary? I know this has been discussed previously, but I don't think I will be able to find it until BL offers a "Remedial Search 101" webinar. -
Situation: husband and wife are co-owners of an LLC taxed as a partnership. They take draws, not W2s, and there are no other employees. LLC Operating Agreement splits income 10/90 between the two. They set up solo401k. Question: if the partnership contributes 20% of its profits to 401k, does it split up the contribution between the partners 50/50 (if that's what in operating agreement) or 10/90 according to the partnership share? Is there a problem if income is shared 10/90 but partnership contribution to 401k is split 50/50?
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For plan years after 2012, does the new additional medicare tax reduce a self-employed person's earned income for retirement plan purposes?
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Here’s an interesting compensation question: Partnership 1 is owned by Company A, Partnership 2 and Person C. Partnership 2 is 100% owned by Person C. Partnership 2 received a K-1 from Partnership 1 Person C receives a K-1 from Partnership 1 Person C receives a K-1 from Partnership 2 Retirement plan is sponsored by Partnership 1 Partnership 2 is not a sponsor of the retirement plan (neither is Company A). The CPA believes that “pension law” dictates that the K-1 pass-through income from Partnership 2 onto IRS form 1040 Schedule E for Person C should be included for Plan Compensation purposes. My gut feeling is that Person C nor Partnership 2 are adopting employers to the plan and only the K-1 from Partnership 1 is Plan Compensation and only their K-1 from Partnership 1 is eligible Plan Compensation subject to the an EIC. If Partnership 2 adopted the plan too, that seems to resolve this question going forward except Person C’s ownership in Partnership 1 would only total 34%. Should the K-1 self employment income from Partnership 2 be included in the eligible plan compensation? Thanks
