Qualified replacement plan related - QRP

[Jakyasar]

Good morning

Drawing a blank here.

Can QRP be used to satisfy 3% non-elective safe harbor (or even safe harbor match)? This is in addition to profit sharing allocation that will be provided as well.

Thank you

[CuseFan]

I don't think you are precluded from doing so but remember your transferred excess assets are required to be allocated (reasonably) ratably over 7 years or less.

[Jakyasar]

Oh yeah, never forgetting, thanks

[Jakyasar]

A rhetorical follow up question.

Assume 1 lifer and age over 50. A sole-prop earning 500k of net schedule c.

Assume the plan has 401k+3% non-elective SH+PS provisions.

QRP allocation will be 58k (1/7th).

Wants to deduct something for 2021.

SH  8,700 - covered by QRP

PS  49,300 - covered by QRP

Can he do 6,500 as 401k deferral catch up? This would be deductible?

If yes, what does he put on the deferral election form?

Thank you

 

[Bri]

Well, I don't think you need to actually put SH provisions into a one-man plan, but if he wants to burn off the 58,000 of transferred assets, then sure, he can put 6,500 as his deferral election some time in the next week or so.

[Jakyasar]

It is actually a plan with other participants but wanted to check on how it could be done for the owner.

So would need a deferral election form stating $6,500 and execute by 12/30/2021, correct?

[Bri]

That's what I'd tell the guy.  And they'll be 415-limit catchups so not in any of your testing.

[Jakyasar]

Agreed and thank you, happy holidays