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Message Boards Digest

October 10, 2019

Here are the most recently added topics on the BenefitsLink Message Boards:

Dalai Pookah created a topic in Defined Benefit Plans, Including Cash Balance

Employee Was Rehired Into New DB Plan Late in Year

DB plan established in 2017. Employee worked for employer 2007-2015. Employee rehired 9/1/18. Therefore, enters plan 9/1/18. Since employee won't have 1000 hours in 2018, is that employee treated as benefiting under the plan? If not, then is an 11(g) amendment required to bring in employee to meet 410(b)([currently, 4 HCE-1 excluded, and two NHCE-counting the rehire)? Here, 410(b) would be 50%/75% = 67%. I don't see any relief from Treas. Reg. §410(b)-3. I don't think that an 11(g) amendment could be made to merely apply the 1-year holdout rule, which would make the rehire wait until one Year of Service has been met (which, then avoids the dilemma. Am I missing something here?

Number of replies posted  2 replies      Number of times viewed  33 views      Add Reply
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spiritrider created a topic in 401(k) Plans

'Employer' Contributions Made Via Salary Reduction?

It seems to me that I remember seeing 401k plans where there were "employer" contributions by salary reduction. However, I can find no cite or reference for this. The employee signs a employment contract that specified that they would not receive a percentage of their compensation. It would instead be deposited into the 401k plan and not considered an employee deferral. Essentially, the employee is making the contribution, but it is not employee deferral and it is not a contribution from employer funds. Can anyone provide a cite to some authority on this?

Number of replies posted  6 replies      Number of times viewed  98 views      Add Reply

LZ created a topic in Defined Benefit Plans, Including Cash Balance

Should We Start a Defined Benefit Plan?

I'm an S Corp owner. My company was incorporated in 2018. It was an LLC before that. My husband and I have received W-2 income since 2018 of around $150,000, but dividends for this year will be about $400,000. We had a profit sharing 401k plan last year. Only my husband and I are eligible to participate. [1] Should we implement a defined benefit plan for the larger tax deduction? [2] How much can we have put into a DB plan? I know we will need an actuary if go forward. Both of us are 54 years old this year. Any advice would be greatly appreciated.

Number of replies posted  8 replies      Number of times viewed  75 views      Add Reply

Derek K created a topic in Retirement Plans in General

Starting a SEP-IRA at My New Sole Proprietorship, After Terminating My S Corp's 401(k) Plan

In April of this year (2019), I terminated my single-owner S-corp and its 401k (filing a final 5500-EZ, etc.). I rolled the Solo 401k funds into an existing IRA. I then moved from NY to FL and opened a new business, operating this time as a sole proprietorship. I contributed to the Solo 401k in Q1 before dissolving that business, but I contributed only $31.5k ($19k employee deferral plus $12.5k employer contribution) -- short of my limits for a solo 401k or a SEP-IRA otherwise. I planned on opening an SEP-IRA starting in 2020, but I'm finding I'd like to maximize deductions for 2019 more than I expected. (I had more taxable events than planned.) I'm wondering whether it would be legal to open a SEP-IRA for the sole proprietorship for the 2019 tax year. Vanguard says I can't have two plans (401k and SEP-IRA) in the same year due to the same ownership/control of the two companies. When I asked them to point me to something official to back up that position, they just vaguely pointed me to IRS Publication 560, but I can't find anything about multiple plans there, other than 5305-SEP requirements which shouldn't apply (as the 401k was terminated, and the 5305-SEP instructions specify 'presently maintain'; plus, that's just for using the form, not SEP IRA qualification itself). Can you point me to an authoritative source?

Number of replies posted  2 replies      Number of times viewed  62 views      Add Reply

Sixpack created a topic in Defined Benefit Plans, Including Cash Balance

Correcting a Pension Deposit Error

I have a case where the contribution to satisfy MRC in a pension plan was deposited in error to the client's profit sharing plan. We can't seem to agree on how to correct it. EPCRS doesn't seem to cover it. The minimum funding deadline has passed (9-13-19) and the deposit was made timely but to the wrong plan. It seems the deposit to the PSP should be transferred directly to the pension plan and recorded as the minimum funding contribution, but we don't see any guidance to support this approach. Alternatively to return the contribution to the corp then pay it over to the DB but then would it be considered late. What's the proper correction?

Number of replies posted  0 replies      Number of times viewed  21 views      Add Reply
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