"Small Corp is wholly owned by Joe. Big Corp is owned 97% by a 401(a)-qualified plan covering Big Corp's employees. Joe owns the other 3% of Big Corp and is an employee of Big Corp. Joe's Big Corp plan account is allocated 1% of Big Corp stock. Small Corp and Big Corp are unrelated in every other way (no services, no options, no family relationships, no possibility of an ASG, management group, etc.). Under the brother-sister stock exclusion rules, stock of Big Corp that is owned by Big Corp's qualified plan is excluded if five or fewer persons who are individuals, estates, or trusts own 50% or more of the vote/value of Big Corp's stock. The regulations do not require that the five or fewer individuals, estates, or trusts own overlapping interests in both corporations, only that five or fewer individuals, estates, or trusts own at least 50% of the vote/value of the corporation whose stock is potentially excluded. (This is confirmed by Who's the Employer as well.) Because five or fewer individuals or trusts (Joe and Big Corp's plan trust) own 100% of Big Corp, it seems that the exclusion condition is met. If so, and all Big Corp stock owned by Big Corp's plan is excluded, Joe is deemed to own 100% of Big Corp. Given that Joe owns 100% of Small Corp, that would seem to make Big Corp and Small Corp a brother-sister group. This outcome seems counterintuitive. Am I missing something?"

"110 people have account balances at 12/31/2023. 100 people get a profit sharing contribution after year-end, including 20 who do not have accounts presently so if I count the receivable-only participants, there are 130 participants. Has the DOL gone to trouble of defining what they mean by 'account balance' and whether or not it includes receivables? Obviously it's the difference between an audit and no audit."

"A sole proprietor has a small loss on Sch C. The plan has no required contribution source. He made a deposit of $7,000 during 2023. I'm thinking with no compensation could he still make a catch-up deferral? Seems he could since that is allowable over plan limits such as compensation?"

"A plan ran ADP testing for plan year 2023 and found that the plan would not pass the ADP test. On March 15th 2024 the plan used the leveling calculation method to determine a refund amount. Then the plan made a benefit correction for this amount which corrected the W2 to reflect the amount added back to their taxable wages. The plan then sent a 1099 R with distribution code 8 for just the earnings since the other amount was processed through payroll. Should the following have been done to correct the failure instead: Prior to March 15th correct the deferrals of HCE's to ensure that the ADP test was passed rather then provide an amount using the leveling method? If an amount was provided via the leveling method should that amount have been taxed in the year 2024 rather then added back to their 2023 W2?"

"Setting up a brand-new plan for a sole-prop for 2023 (will be signed and funded by 4/15/2024). There will be employees hired later this year or next year. So far, only the owner. Q1: Do I need to have EACA provisions (I do not want any in there) even if retro to 2023? Q2: For any possible new employee who may be eligible for 2024 and/2025, does the plan have to have EACA option? Q3: For deferral effective date, I think it should be 12/31/2023, latest possible election date, agree?"

"I have a small size financial employer: owner and spouse plus another employee. They also have what he is calling another individual as a 'statutory' employee that I honestly have never come across before. I had to look this up that a statutory employee is an independent contractor with the distinction being the business pays half of SS and Medicare and the individual pays the other half. If this meets the definition of a statutory employee, then can we not only not provide 401k entry to the individual and do they NOT count against any testing? I.E., with 2 HCEs and 1 NHCE, am I at 100% for 410b or 50%?"