Participant in a 401(k) Plan takes a participant loan and then goes on military leave. The participant subsequently has a termination of employment from the employer who sponsors the 401(k) plan from which the participant loan was taken. Per 414(u)(4), the plan may suspend the obligation to repay the loan during which the employee is performing service in the uniformed services. Loan policy does not permit terminated participants to make ACH payments, allows participants to suspend payments during military leave, and upon termination loan is due payable unless part of eligible rollover distribution. What happens if this participant terminates employment while on military LOA with an outstanding loan?

First possibility: Participant may still suspend the obligation to repay for the period of the military service. Once military service ends, the participant would then fall under the normal rules for a terminated participant with an outstanding loan. (FYI loan policy states upon termination loan is due payable unless part of an eligible rollover to another plan).

Second possibility: Participant is treated as a terminated employee and by the terms of the plan, the loan would be due and payable unless part of an eligible rollover to another plan.

"(b) Military service. In accordance with section 414(u)(4), if a plan suspends the obligation to repay a loan made to an employee from the plan for any part of a period during which the employee is performing service in the uniformed services (as defined in 38 U.S.C. chapter 43), whether or not qualified military service, such suspension shall not be taken into account for purposes of section 72(p) or this section. Thus, if a plan suspends loan repayments for any part of a period during which the employee is performing military service described in the preceding sentence, such suspension shall not cause the loan to be deemed distributed even if the suspension exceeds one year and even if the term of the loan is extended. However, the loan will not satisfy the repayment term requirement of section 72(p)(2)(B) and the level amortization requirement of section 72(p)(2)(C) unless loan repayments resume upon the completion of such period of military service and the loan is repaid thereafter by amortization in substantially level installments over a period that ends not later than the latest permissible term of the loan."

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Small client has closed his practice and was never enrolled in EFTPS. Two participants have elected a lump sum (total taxes of about $2,000). Normally taxes are paid with a 945 form. The accountant asks why we must wait until January 2019 to submit the check and 945 voucher. Can the 945 be filed early?

What's the latest on the potential requirement for small medical plans to be required to file 5500 starting with plan year 2019?

A profit sharing plan issues loans in 2017 to two participants, both of which exceeded the maximum amount. We just found out when we received the year-end data. The plan has an in-service distribution provision at age 60. For one participant, who is younger than age 60, the loan taken was for $50,000 but the maximum amount was $15,000. The other participant, who is older than age 60, took a $13,000 loan but the maximum amount was $10,000. The client does not want to file a VCP application.

For the younger participant, we advised that the 2017 Form 1099R be issued now for $35,000. This is a deemed distribution. The participant will continue to make the scheduled installment repayments until he repays the $15,000 plus interest. At that point, if he defaults on the remaining $35,000 there will be no tax consequences since it's being reported now. Obviously, there can't be any withholding now since it's after the fact but according to the EOB if the deemed distribution occurs at the time the loan is actually made, the plan is required to withhold against the loan proceeds. Any real problem here?

For the older participant, we think there are two options. The $3,000 excess can be treated as a deemed distribution, and we would follow the same procedure as above. Alternatively, the excess can be treated as an actual in-service distribution. In that case, the plan would modify the loan agreement and only carry a loan receivable of $10,000. But again there would be the issue of missed withholding. Any opinion on whether one of these options is preferable to the other?

A husband and wife each operate their own consulting business. There are no other employees in either company. The husband has maintained a solo 401(k) for some time and the wife would now like to join. Do controlled group rules enable her to participate in the solo plan or would she need to be an employee of the husband's business?

An employee has met the eligibility requirements (age 21, 1 year of service, semi-annual entry dates) and has not contributed to date. This individual is no longer working full-time; he has become a part-time employee. Can he now be excluded? The document excludes "part-time, temporary or seasonal employees, i.e., employees whose regularly scheduled service is less than 1,000 Hours of Service during each 12-month eligibility computation period."

Have a welfare benefit plan funded from general assets of sponsor; over 100 employees. We believe no audit is required; all we file are the 3 pages of the 5500, with no Schedule H or Schedule C. Sound OK?