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I have a CPA asking for advice on completing the tax returns for a client who has a cash balance plan (I thought that was a CPA's area of expertise, but I digress). Plan sponsor is a LLC filing as a sole-proprietor. The CPA wants to know how much of the cash balance contribution applies to the owner and how much applies to employees. He is also asking if it is appropriate to report the owners "portion" of the contribution on Schedule 1 of the 1040 while the amount applicable to employees will be reported on his Schedule C. 1. Is it proper to report part of the cash balance contribution on Schedule 1 instead of reporting it all on the Schedule C? 2. If the answer to #1 is yes, how do we break down the cash balance contribution between the owner and employees? I am neither an expert on tax returns nor an expert on DB plans. I tried to figure this out from Publication 560 and it does say "Sole proprietors and partners deduct contributions for themselves on line 15 of Schedule 1" but I'm not certain if that is referring to just DC plans.

I have one small organization, Company A, that merged with 4 other organizations for a new controlled group company NewCo effective 2/1/2020. Company A has a cash balance plan, and as of 12/31/2020, Company As cash balance plan will be terminated, and NewCo will have a CB plan for the whole CG as of 1/1/2021. Company A would like a full accrual for 2020, resulting in a 120k contribution. They are doing their 1/1-2/1 short tax year filing now, and wanted to know how to put the contribution on there if it hasn't been made yet. My thought is on the final 2020 filing, they change the plan sponsor to NewCo on Line 4, put all of the 2020 PY contributions on the SB, Company A pays all of the contributions, and NewCo allocates the deductions to them within their financials. Does that sound accurate? If they've made any contributions to date, could those be deducted on the short tax year filing? Thanks for any help!

Good afternoon to all, I have been asked to research a question presented by a referral source. I do not have any more information that what is presented below: "I have a client who was a W2 employee January - September of this year. His employer did not have a 401(k) plan and he made no contributions to other plans. As of October 1, he changed his status to 1099 contractor for the same company. When he changed his status it triggered deferred compensation, a lump sum of $400,000 which he will receive at the end of this year. For October - end of the year, he will receive approximately $60,000 of 1099 income from the new consulting business. Both the owner and the spouse are over 50 years old. He wants to max out his Owner K to help defer some of this very large tax bill. Can he use some of the deferred comp? Or can only the 1099 income go into the Owner K? Same question for the wife. It was previously stated that she could receive a contribution, but is her limit subject to the 1099 income, or can the deferred comp dollars count?" This is not my area of expertise and while I have a general notion that deferred compensation is not able to be used in retirement plan contribution calculations, someone out there may know of exceptions to this. Any help will be appreciated.

Some participants in ERISA plans have hired registered investment advisors (RIAs) to manage their retirement plan accounts -- selecting investments from the plan's menu, rebalancing the investments, considering in-plan and out-of-plan assets collectively, etc. The plan sponsor/fiduciaries do not endorse any RIAs to plan participants. Assume that the plan sponsor has permitted RIAs to access participants' accounts, and further, to deduct the RIA's asset management fees directly from the accounts. The Deseret Letter (DOL advisory opinion 2005-23A) does not directly address the fee deductions. The question is whether the plan fiduciaries will have co-fiduciary responsibility and liability for ensuring that the RIA's fees were reasonable, and if failure to monitor the fees is a breach of fiduciary duty. Is there any DOL, IRS, or other guidance on this topic? Thank you.

We have a one person DB plan sponsor: FY is calendar. PYE is 9/30/18. He contributed for the 2017 plan year in Feb 2018 and filed his 2017 tax return without extension. Then he made the 2018 deposit in September 2018 before the 2017/2018 PYE. Since he deposited the money during the plan year it will be listed on the 2017 SB but he'll deduct it in 2018. The 2017 PY max deduction doesn't cover the entire amount, but we have room in and time to amend the formula back to 10/1/2017 so it is deductible. We are concerned with the deposits during being split between the 2 tax years. I think that it is ok but would like another opinion.

Employer starts two new plans in 2014, DB and PS. They mistakenly think the DB plan is subject to PBGC coverage. Oops, they find their plan is not PBGC covered and 404(a)(7) applies. Eligible Payroll: $1,000,000 Total contributions, both plans combined: $400,000 PS contribution made during 2014: $100,000 DB contributions: $300,000 made during 2014: $280,000 (covers the MRC) made during 2015 for 2014: $20,000 Amount deducted on the 2014 business tax return: $400,000 (already filed). Recommendations? Can the employer make an election under 4972(c )(7) to avoid the 10% excise tax? Or is the excise tax avoided regardless of this election? Must the 2014 business tax returns be amended? Or does the deducted contribution carry forward into 2015 to count against the 2015 deduction limit? Schedule SB will show all contributions made during 2015. If the employer does not amend the business tax return for 2014, should the Schedule SB also include the $20,000 contribution made in 2015 but deducted on the 2014 tax return?

A client is considering a merger with another client. Each firm has a DB plan and each plan would be fully funded prior to the merger. After the merger, a significant minimum funding contribution would be required. The question is ‘who would be entitled to claim the deduction for that minimum funding contribution?’ Would the successor firm be entitled to deduct the contribution or would that deduction need to flow back to the pre-merger firms? It seems to me that the successor firm should get the deduction. That seems to make sense but its important to be certain and I would like to provide some documentation to support my conclusion. Is my thinking correct and could anyone suggest documentation? Is there a certain way that the merger of the firms and their plans should be structured so the successor firm would indeed be able to claim the deduction? Thanks for any help.

Bear with me folks, my post is a bit lengthy, but I would really appreciate any feedback or insight. Neither the IRS nor PBGC had an answer, so I'm hoping someone here will. I didn't know if should post this on the 401(k) board instead. THE QUESTION: When the employer has both a DB and DC plan and the DB plan goes from being PBGC covered to not PBGC covered , what is the deduction limit for the DC plan? If it helps, keep in mind that the employer had to pay full year PBGC premiums per the PBGC instructions, even though coverage was for only part of the year. My analysis so far: When an employer sponsors both a DC and DB plan, the deduction limit as provided in IRC §404(a)(7)(A) generally applies. This provides in part: 404(a)(7)(A) If amounts are deductible under the foregoing paragraphs of this subsection (other than paragraph (5)) in connection with 1 or more defined contribution plans and 1 or more defined benefit plans or in connection with trusts or plans described in 2 or more of such paragraphs, the total amount deductible in a taxable year under such plans shall not exceed the greater of— (i) 25 percent of the compensation otherwise paid or accrued during the taxable year to the beneficiaries under such plans, or (ii) the amount of contributions made to or under the defined benefit plans to the extent such contributions do not exceed the amount of employer contributions necessary to satisfy the minimum funding standard provided by section 412 with respect to any such defined benefit plans for the plan year which ends with or within such taxable year (or for any prior plan year).” A defined contribution plan which is a pension plan shall not be treated as failing to provide definitely determinable benefits merely by limiting employer contributions to amounts deductible under this section. In the case of a defined benefit plan which is a single employer plan, the amount necessary to satisfy the minimum funding standard provided by section 412 shall not be less than the excess (if any) of the plan’s funding target (as defined in section 430 (d)(1)) over the value of the plan’s assets (as determined under section 430 (g)(3)). There are exceptions to 404(a)(7)(A) outlined in 404(a)(7)©. Paragraph not to apply in certain cases One notable exception is : 404(a)(7)©(iv). Guaranteed plans In applying this paragraph, any single-employer plan covered under section 4021 of the Employee Retirement Income Security Act of 1974 shall not be taken into account. Well, §4021 of ERISA happens to be the part that explains which plans are subject to coverage under PBGC. It is is also known as 29 U.S.C $1321 if someone is having a hard time finding the code reference. This means that the employer doesn’t have to take into account any PBGC covered DB plan when looking at the deduction limit. Per 404(a)(7)(A)(i) the limit for the remaining DC plan would just be the typical 25%. But what is the deduction limit for the DC plan when the DB plan status changes during the year?

Client with an ongoing safe-harbor 401(k) plan is considering putting in a Defined Benefit Plan (no PBGC coverage) with expected contributions above 31% of pay. Any 404(a)(7) issues in the first year with the new MAP-21 and PPA rates? For example, assume two participants in 2014: Salary 401(k) derral safe harbor match A $200,000 $23,000 $8,000 B $30,000 $3,000 $1,200 Under the new DB plan for 2014 the MAP-21 minimum required contribuiton would be $75,000 and the PPA maximum would be $100,000. What would be the maximum allowable combined deduction? Thanks in advance for all responses.

If the 2012 5500 audit for a multiple employer plan is complete, and one of the plan adopters declares a 2012 employer contribution after its audit is finalized, can the employer deduction be included on the 2013 5500 even if the employer takes the deduction for 2012, or must the employer deduction be the same year for the 5500 and the corporate tax year? (assume both calendar year). The Plan Administrator did not want to go through the hassle of appending the audit report.