"A sole proprietor showing a loss on his Schedule C. Is he allowed to have a 401K deferral. If he can, what is the maximum he can defer?"

"Company was acquired and they terminated their 401(k) plan. The termination resolution indicates that the plan termination date was 12/30/2021. Must the CYCLE 3 Restatement, with SECURE and CARES Acts Amendment, have been adopted before the plan termination date? Different rules for a stock sale vs. an asset sale?"

"This is for my own personal situation. My wife took a new job this year. The 401(k) plan does not exclude pre-participation compensation from the definition of compensation, and it has a year-end true-up (and a 30-day wait before participation).

By my reading, that means she should have been eligible for match on her whole year's compensation, including before she was eligible for the plan, not just her compensation while a participant. Does that sound right? Or does a plan document not need to exclude pre-participation compensation; it's just assumed by default that pre-participation comp isn't eligible unless otherwise stated?

Note that the plan only matches on the first 6% of deferrals, but she deferred 8% each period after she became eligible. That unmatched extra 2% could've been counted toward her her pre-part comp if pre-part comp is eligible. In other words, if you look at her whole year's comp and her whole year's deferral as a percentage of that comp, you get a bigger total match than you do when just looking at the period after participation.

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401(k) provisions (these come from the full plan document, not the SPD which is pretty silent on most this stuff):

- Provides a Match: 'ACA Safe Harbor Matching Contribution to each Participant equal to 100% of the first 4% of the Participant’s Elective Deferrals plus 50% of the next 2% of the Participant’s Elective Deferrals to the extent that such Elective Deferral amount does not exceed 5% of the Participant’s Compensation.'

- Matching is done by payroll period

- Has a True-up: 'in an amount equal to difference between the Employer Matching Contributions actually made during the Plan Year and the Employer Matching Contributions that would have been made during the Plan Year if the Employer Matching Contributions were made on an annualized basis and not on a payroll-by-payroll basis.'

- Compensation:

'(a) Unless otherwise specified, the term Compensation means Form W-2 Compensation, and includes (i) elective deferrals under a salary reduction agreement authorized in Section 3.2(b) or under any plan described in Sections 401(k), 408(k) and 457 of the Code sponsored by the Employer; and (ii) salary reduction contributions to a cafeteria plan described in Section 125 of the Code and sponsored by the Employer.

(b) Unless otherwise specified, the term Compensation excludes: (i) differential wage payments paid while on active military duty; (ii) post-severance compensation (any compensation paid after the last day of employment); and (iii) the following Code Section 415(h) safe harbor exclusions: [fringe, expenses, relo, welfare pmts]'

- Participation: 'Eligibility for participation shall commence on the Entry Date coincident with or immediately following the Eligible Employee’s completion of the Eligibility Requirements'

-Eligibility Requirements: '[E]ach Eligible Employee who is not a Participant as of the Effective Date shall be eligible to become a Participant on the first Entry Date coincident with or immediately following his or her completion of one month of Service and attainment of age 21.'

- Entry Date: 'shall mean the first day of each calendar month, unless otherwise specified in Appendix B.'

Note that despite being capitalized in the plan document (see the excerpt on Compensation above), 'W-2 Compensation' is not a defined term in the plan doc. [I also think there's a typo in the Match definition. The last reference to Elective Deferral -- 'to the extent that such Elective Deferral does not exceed 5% of the Participant's Compensation' -- should be to 'ACA Safe Harbor Matching Contribution.' "

"If a U.S.-based employer (with existing 401k plan) establishes a wholly owned subsidiary in Puerto Rico, is there a requirement that they set up a PR plan for those employees, and, if they do, is there a requirement to offer same match, PS, etc. provisions?"

"Client's ESOP is under audit. Along with a number of affiliated entities. Due to health reasons clients' former TPA resigned in early 2021 and a new TPA was hired. The auditor has inquired about an alleged $22k contribution in the plan year under audit (2018). However, the 5500 does not reflect any contribution.

I can't seem to reconcile where the former TPA came up with the $22k of contributions. Nor can I reconcile plan stock forfeitures. We have already informed the auditor that a former TPA prepared the annual reports and 5500's. and are working with the new TPA.

I'm well aware that the taxpayer/client may still be held liable for any record keeping fines/tax assessments notwithstanding errors caused by the former TPA.

Would you inform the auditor that there were no contributions and the auditor's report inadvertently stated that there was a contribution? This does not change the participants share account values. Also state that the taxpayer is in process with new TPA to amend the report to properly reflect no contributions. Thoughts and comments appreciated."

"The IRS is auditing a plan client and requesting proof that SPD's were distributed to plan participants. Further, IRS is requesting specific proof that other notices were sent such as benefit statements that are required for DB plans every 3years. This is a small plan and no such proof exists since in most cases the SPD's and other disclosures were hand delivered or sent by regular mail. Participants can't recall specific SPD receipt.

I don't see any requirements under ERISA or the tax code requiring specific proof of delivery of SPD or other disclosures to participants, such as by certified mail.

Further, regarding SPD's, even if the IRS claims SPD's were never distributed, becasue of lack of proof, I don't see any penalties under the tax code or ERISA. The only penalty I am aware of is failure to provide an SPD to a plan participant upon request. No such participant SPD requests were made."