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Found 24 results

  1. Hi all, We have a client implementing a 6-month accrual rule for their Cash Balance plan and would like to have the same 6 month requirement for their Profit Sharing Plan. Is it even possible to have a 6-month elapsed time rule in place of the normal 1000 hours? Haven't seen anything yet on this issue.
  2. Development company with around 50 employees in California. All of the employees would be considered NHCEs as none of them have any company equity and do not make more than $120k (Besides the CEO). All other employees would be NHCE because of this. Would like to set up a new comparability profit sharing program where the employees who did well on their projects (All NHCE) can be set to one "group" on the new comparability profit sharing plan and have the highest % rate. The HCE (CEO) would be set to the lowest % rate (1%) and thus, the remaining other employees would meet the gateway test if they were set as 0.35% (1/3 of HCE). Would this setup satisfy the cross-testing requirements along with any other requirements? Basically looking for a method to utilize profit-sharing but provide as much % possible to the employees excelling at their projects and providing as close to 0 as possible for other remaining employees (Which would include the CEO). Any advice would be appreciated!
  3. 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?
  4. One of our current plans is asking about the possibility of adding a Cash Balance to their existing Safe Harbor 401(k)/Profit Sharing Plan. They are a medical practice with 115 participants. 10 Doctors and 105 non highly's. They currently have a SH Match with a Profit Sharing in place to maximize the Doctors allocation. They are wondering if it would be possible to add in a Cash Balance plan for the Doctors as they wish to put away a higher annual contribution. I do not have much experience with CB plans so i am wondering if this is possible? And if so how many of the NHCE's would need to be included in the CB? Also of note, they may be merging with a group of 4-5 other medical practices a couple of years down the road possibly becoming a controlled group. The other practices have plans in place however I don't know if any of them are CB plans. I know that they all have 401k plans in place but i don't know if any of them have CB plans as well. What type of issues if any could arise in this situation?
  5. A client with a 401(k) plan has only 3 participants, consisting of himself as owner, his wife, and one rank and file employee. I am just now finding out that the owner and the rank and file employee are employed by the sponsoring corporation, while the wife is technically employed by her own LLC. For many years all 3 of them received deferrals, Safe Harbor, and profit sharing contributions. However, for 2017, they want to give only the wife the profit sharing contribution. I say this is discriminatory and they can't do that. The CPA says that because the wife's contribution is made by her separate LLC and not by the sponsoring corporation of the plan, it's ok for her to have a profit sharing contribution while the rank and file employee does not. I am thinking that the sponsoring corporation and the LLC are a controlled group belonging to the husband and wife and that they are still running afoul of non-discrimination rules. I am also thinking that a participating employer addendum to the plan's adoption agreement should have been in place for the LLC all these years. 1) Can they give the wife a profit sharing contribution and nothing to the rank and file employee and 2) Can a retroactive participating employer agreement be created dating back to the time that the LLC started making contributions on her behalf? Thank you for any comments!
  6. I have a plan that has held a life insurance policy for only 4 participants for many years. They would like to terminate the polices, just get rid of them and take whatever the value is to themselves (they want the cash). Our record-keeper is telling us that in order to cancel the policy they HAVE to deposit the funds into the plan and then follow the plan document as far as being able to actually take the funds themselves. In this case, you have to either terminate employment or be 59 1/2 take a distribution, per their plan doc. However, we were told by the outside insurance agent that they could take the cash and be taxed on it, as normal. I just need guidance on how to get a life insurance policy out of a plan - when the participant is under 59 1/2 and still employed?? It is possible, right?? TIA!
  7. I have heard of plans which only have annual valuations holding a certain percentage of plan-year distributions in escrow until the next valuation date, at which time the escrow can be released after adjusting for gains or losses during the period between valuation dates. Has anyone seen any official IRS word on such procedures?
  8. Plan compensation is W-2 plus deferrals and excludes fringe. The Employer decided to do a profit sharing for 2016 and calculated the profit sharing on the gross compensation. Out of 300 employees, only maybe 60 "could" be affected as they had some other pretax items come from their pay. I would say most of the employees still received the correct profit sharing because the w-2 pay plus deferrals was the gross compensation. If anything the 60 get a little more than they should have.(Got* not get.) edited Auditor is bringing this scenario up as a topic of interest. The employer is looking to me to help ease the audit question. I don't find this to be that objectionable. Should I? Let me know your thoughts on this.
  9. Company A just bought a bankrupt company's assets. A new company is created out of the bankrupt assets: Company B. Company B is a single member LLC owned by Company A. The employer is wanting to keep Company A 401(k) separate from Company B 401(k) plan. Easy enough to set up the new Company B 401(k) and move forward. Both plans are going to be setup with same plan year ends and the same plan provisions. The potential difference is profit sharing contributions per plan. Plan A might be 5%, Plan B might be 0 or 2%, or whatever based on their own profitability. If I understand this correctly, as long as each plan satisfies coverage (410b), each plan can do whatever they want for profit sharing. Here are some numbers.... Company A: Non excludeables NHCE 468, Benefiting NHC 426, Non excludable HCE 27 Benefiting HCE 25 Company B: Non excludeables NHCE 90, Benefiting NHC 80, Non excludable HCE 2 Benefiting HCE 2 Company A coverage: NHCE 426 of 558 equals 76.34, HCE 25 of 29 equals 86.21, 88.56% Passes Company B coverage: NHCE 80 of 558 equals 14.34, HCE 2 of 29 equals 6.90. 207.89% Passes 1. Is my math correct? 2. If so, test separately, profit share each company separately. Am I missing anything obvious?
  10. The client is part of a PEO which handles all the HR functions and paid through PEO. Employees can make 401(k) contributions to PEO calendar year 401(k) Plan. The client sponsors a separate PSP for employer contributions. The PSP is an off-calendar year plan that uses calendar year comp for contributions and testing. The PSP contribution is cross-tested. I believe I need to include the 401(k) contributions for non-discrimination purposes and the 401(k) account balances for Top Heavy Testing. Is that correct?
  11. When drafting a board resolution that indicates the amount of an employer's discretionary profit sharing contribution, is there any compelling reason (legal or practical) to list the amount to be allocated to each individual employee? I have someone who wants it done that way and I don't think it makes much sense. Any thoughts?
  12. A plan sponsor has a Cash Balance Plan and 401(k) PS plan with a 3% safe harbor allocation. The PS plan has a cross-tested allocation with 7 different allocation groups. The plan was not designed to have one group per participant because the plan sponsor is a Partnership and the IRS has stated that this may not be appropriate (separate discussion). The two owners and two employees are included in the CB plan. 4 additional NHCE employees are excluded from the CB plan, but are included in the 401(k) PS Plan. The special gateway is 7.5%. For the 4 employees NOT in the CB plan, they receive the 3% safe harbor plus 4.5% profit sharing to meet this gateway. The 2 employees in the CB plan only need 2.7% in PS to pass testing. This leaves employees in the same PS allocation group receiving different PS percentages (4.5% vs. 2.7%). I would not have thought that this was okay because the 401(k) plan document states that all employees in the same group should receive a pro-rata allocation with the group (i.e. same %). Are there special rules that allow us to give differing % in the same PS group if it is merely bumping up the allocation for some employees to meet the minimum gateway? If we are allowed to give different percentages, does it require an 11(g) amendment? Our actuary says no, but I am not 100% convinced.
  13. FACTS: - The Plan is a 401kPSP with 3% Safe Harbor NEC - It's the 2015 Plan Year - Employer business and 5500 returns were on extension to 9/15/2016 and 10/15/2016 respectively - Business returns were filed in June, deducting the Employer SH contribution In August, the Employer decided to contribute PS for the 2015 plan year QUESTIONS: 1. Is there any reason the PS can not count as a 2015 Annual Addition? It was deposited timely (before due date of tax return) for 415 and therefore seems it should count as a 2015 Annual Addition even though the employer failed to take the deduction for it on the 2015 employer return 2. Since the 2015 Business Returns were actually filed PRIOR to (the deadline to file and) the employer's decision to make this 2015 PS contribution, no deduction was taken on the 2015 returns -- Other than the 25% deduction limitation for 2016, is there any reason the employer can not deduct the 2015 PS on his 2016 business return (along with any other 2016 employer contributions)? The employer does not want to amend its 2015 tax return if it can be avoided. 3. If for some reason the deduction of the 2105 PS can not be taken on the 2016 return, can the 2015 PS be recharacterized as 2016 PS? Thank you
  14. What's the deadline for making a profit sharing plan contribution for a calendar year plan for a nonprofit org? Is it the same as for profits?
  15. I have a 401k plan. The owners do not contribute. Is their profit sharing amount for the owners who are 50 and over limited to $53,000 or can they add the catch up amount to that?
  16. 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?
  17. I have a new plan, started by a 75 year old owner, in 2014. He had no account balance as of 12/31/2013, and a $2,000 account balance as of 12/31/2014. He is required to take an RMD for 2015, but can he postpone the first RMD to April 1, 2016, even though he is 76 years old in 2015 and not 70-1/2?
  18. Example: 4 family members own a s corp biz (mom, dad and adult children), no other EEs. They currently pay the same salaries for all 4 (~30k/yr). They sold the assets of the business (~1.5M) early this year but retain the entity, which is now flush with cash. Just over 1M is not basis so subject to form 1231 cap gains.In order to minimize cap gains, we are considering a combination of 1) reallocation of equity (gifting some by parents to children using small part of lifetime gift exemption before eoy to keep cap gain liability at 15% (they should have gifted the equity before the sale but besides the point), and 2) starting a k/ps/cb plan to reduce AGI from 1120s, but naturally considering adjusting comp before eoy to get to funding levels for the ps/cb that make sense. Since the income of the business was minimal (sold early in the year), they will show significant loss of income in the business due to ER contributions to owners for ps/cb plan. However, they own several other businesses (no EEs other than the same owners) that will pay a management fee to the original co or the original may just become a holding co for the rest, to be determined, but income will flow into the entity after this year. My question is: 1) is there a limit to deductibility for ps/cb plans for an all owner/family relation company w no other EEs? 2) can losses due to contributions be carried forward like other corporate losses? Thx!
  19. If I have a controlled group of companies A, B, and C, all participating employers in Plan X, is it possible to design it so that each separate company can make a different discretionary profit sharing contribution (or none) based upon how well that company does? Without QSLOBS. Thanks
  20. Can you set up a profit sharing only plan (not 401k) in the same year that a SIMPLE plan exists? I know you can't have a 401k and SIMPLE in the same year but I was wondering if it made a difference if the second plan was employer only contributions? Thanks
  21. I was told an EA conference speaker mentioned that when applying the 31% deduction limit for a combo plan, that you can only use the participant's compensation if they are receiving an employer contribution in either plan. For example, I have a plan that is not Top-Heavy and they are not giving the HCEs an employer contribution in either plan but they are able to contribute 401(k). He is saying I would not be able to include their compensation when calculating the deduction limits. I wanted to use the 6% limit on the profit sharing contribution. The HCEs are not excluded they are just in their own class and get 0%. Would I not be able to use their compensation in calculating the maximum deductible contribution?
  22. I have a client who has a combined PS/DB plan. There are terminated participants who are getting a Gateway contribution. The client wants to pre-pay the Gateway contribution on the PS side using the forfeiture account every time someone terminates vs. waiting until the end of the plan year. Is this allowable? So for instance, someone terminates on 4/11/15. He wants to give them their 5% and then process their termination. Thank you-
  23. I have a potencial client that would like to start a plan for 2014. If the two owners they maximize their profit sharing (52,000), do I need to factor that in when calculatin Top-Heavy status or 2015 since it won't be deposited until next year. I know we add back 401k receivables. I know the plan will be TH in 2015 for 2016 but I wasn't sure if it will be TH in 2014 for 2015. thanks
  24. Hi, I have a non-profit who is wanting to make an non-elective contribution however they are funded by a grant which restricts them from paying bonuses from the grant money. I do not believe Non-Elective contributions are considered bonuses since there is no "achievement of objectives" associated with the contribution as the below grant language indicates. I also believe that Non-Elective contributions are benefits to employees which helps with employee retention. Does anybody have any good references that I can provide to the client so they can be more at peace with making the non-elective contributions? I have found the DOL's definition of a profit sharing plan and no where does it state bonus plan. Grant's Exclusion of Executive Compensation In setting or approving base compensation and benefits, the Board of Directors shall consider the market rate for the role and skill level of the individual to perform in the role as well as the notional projections included in the proposal submitted on behalf of Company A. Executive bonuses shall be awarded by Company A's management or the Board of Directors based on the achievement of objectives as set forth by management or the Board. However, no bonuses paid to Company A's executives will be funded from appropriated funds, but only from Program Income as defined by Circular A-110, e.g., membership fees to Company A.
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