setting up a new plan

Hi

Did not have to deal with one of these in many years so a bit rusty on the process.

Everything is on a calendar basis.

Joe and Mary are 50/50 partners of a law firm - no other employees. They both get K-1s. Let's call this LawLLP. All they have is a SEP.

July 1, 2024 they will go their own separate ways.

Joe sets up a PLLC (filing as a sole-prop). He will bring in some of the clients from LawLLP. Is this an ASG issue?

Joe wants to set up a DB plan for 2024.

Can he:

1. Use prior service and income (limited to 5 past years) to start the DB effective 7/1/2024 (ending 12/31/2024 for a short plan year) so that he can have an AB as of 7/1/2024 for pre-funding?
2. Assuming that he can, plan year must start on 7/1/2024 to avoid Mary to be involved in the DB, correct?
3. What needs to be pro-rated, if anything? His net c will be 200k and he wants to put away as much as possible. Of course it will depend on what can be used from prior firm.

What else am I not asking or thinking about?

Thank you all.

Any takers???

No takers?

On 5/30/2024 at 5:56 PM, Jakyasar said:

July 1, 2024 they will go their own separate ways.

No expert I, but I wonder if the quoted sentence refers to a business dissolution or a marital dissolution?  Or if it matters?  Or did I misread something?

Are Joe and Mary willing to help each other out as each of them moves forward?

If yes, would they consider structuring an amicable parting of ways where Joe effectively is continuing the existing business as a PLLC and Mary is spinning off her practice?

It is a dissolution of biz partnership, nothing to do with marriage (they are not married)

They are going their own separate ways - 2 separate entities.

Any other comments?

Consult an ERISA attorney.

It will depend on whether or not LawLLP is a predecessor employer with respect to Joe's PLLC, within the meaning of 1.415(f)-1(c). This is a facts-and-circumstances determination, so BG's recommendation may be apt if there is any ambiguity.