Contribution in Year when all regular employees left

[drakecohen]

Sole Proprietor MD with 4 regular employees all in a Profit Sharing Plan. Practice sold on 9/30/13 in an asset sale.

As of 12/31/13 none of those 4 employees are on his payroll. Is there anything precluding him from make a 2013 Profit Sharing contribution only for himself?

[Lou S.]

Only IRS non-discrimination tests.

Can assume that all 4 employees are all NHCEs and since the practice was around for 9 months in 2013 that all 4 likely worked more than 500 hours and must be included in the denominator of your 410(b) testing?

[QDROphile]

What are the terms of the plan with respect to allocation of contributions? What is the status of the business (did the MD effctively terminate the same as the other employees?

[masteff]

What does the plan say? Does it have a last day rule?

http://benefitslink.com/boards/index.php?/topic/54054-profit-sharing-wants-to-add-end-of-year-employment-rule/

[Lou S.]

Even assuming the plan has a last day rule if any NHCE worked more than 500 hours you can't possibly pass IRS testing without allocating some contribution to the NHCEs because your ratio percentage for the year is going to be 0% and I'm not aware of any testing magic that can make 0% pass when you have at least one NHCE included in the denominator of your test.

[masteff]

Lou - I'm firmly in the plan sponsor camp of hiring experts such as yourself when it comes to testing. I don't doubt your statement re: testing.

I was pointing more toward the question of whether excluding the other employees would cause an anti-cutback problem: http://benefitslink.com/boards/index.php?/topic/17851-change-to-allocation-method-after-year-end/ I don't know the definitive answer off-hand so I was pointing to the question rather than stating it.

[david rigby]

What is the status of the business (did the MD effctively terminate the same as the other employees)?

This is a great question. Due to some action(s), is it possible that the plan is terminated automatically under its own terms?

[drakecohen]

What is the status of the business (did the MD effctively terminate the same as the other employees)?

This is a great question. Due to some action(s), is it possible that the plan is terminated automatically under its own terms?

This is a real life situation and the MD retired as of 9/30/13. He sold his practice and I'm not sure of the fate of the other 4 employees , if that affects anything, but they are definitely off his payroll. The accountant is now doing his 2013 taxes and wondering if there's anything he can put in for the final year that could only go to him since as of 12/31 he is still employing himself.