"Pathology practice LLC owned by 4 doctors, had 12 other (NHCE) employees, operated a lab and sponsored a 401k safe harbor, cross-tested plan. Effective 5/1/2024, the practice LLC sold its business to Hospital, which employed all 12 staff people that had worked for practice LLC. The doctors remain employed by the practice LLC, which contracts their services to Hospital. I have little to no doubt that the practice LLC/doctors meet the IRS definition of 'hospital-based physicians'. One of the doctors bought 1 share of Hospital. So, there is likewise no doubt that an affiliated service group now exists. Hospital sponsors a plan that now benefits the 12 staff employees. It provides a 5%-of-pay profit sharing contribution to all Hospital employees, and sports a 401k safe harbor feature with a safe harbor match.

'Here are some of my questions: [1] The practice LLC's plan can aggregate/is aggregated with the Hospital plan, right? [2] That permits the doctors to make 401k deferrals to the practice LLC's plan, to the 402g maximums, right? [3] Can the practice LLC make cross-tested profit sharing contributions to its plan for the doctors, since the employees of Hospital are receiving an amount from Hospital that serves as a gateway minimum? [4] For 2024, can the practice LLC plan compute profit sharing contributions and apply nondiscrimination rules just to the period of 1/1/2024-4/30/2024 for the 12 employees AND THE DOCTORS?"

[Sponsored]

Join us November 19 for an enlightening discussion on critical retirement legislative issues in the wake of the 2024 presidential election. Preston Rutledge, expert on retirement policy and former Assistant Secretary of Labor for EBSA, will share his insights.

"I've got this auditor on a couple of my large plans who insists on pro rating the final payroll and including that accrual on the 5500 Schedule H and audit report. Example: weekly payroll, final week included on 2024 W-2 is the payroll of 12/28/24. He will prorate the 1/4/25 payroll as 3/7 belonging to 2024, so therefore 3/7 of the deferrals on the 1/4/25 payroll must be counted as 2024 receivables and added to the 2024 reporting. I refuse to add them to my administration, so we've got a reconciling item for that. This is insane, right? I'm no CPA, but I can't find any justification for this. And it adds a bunch of extra work, which is even worse. I'm meeting with the auditor next week, and I'm looking for something I can use to convince him to back off on this. Any suggestions?"