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rocknrolls2 last won the day on September 5 2016

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About rocknrolls2

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  1. A client sponsors a 403(b) plan for its employees. However, there are no HCEs who are eligible to participate in it. Does the plan still have to satisfy the universal availability requirement?
  2. Client X is a 501(c)(3) organization that maintains a 403(b) plan for the benefit of its employees. Up to now, the plan merely provided for a discretionary nonelective employer contribution. X wants to amend the Plan to allow employees to make elective deferrals and receive matching contributions with respect to the deferrals. A copy of the plan document has been requested from X. In the meantime, the Summary Plan Description already provides for elective deferrals and the SPD is given out to the participants. Assuming that the plan document does not provide elective deferrals, is there an operational violation because the SPD provides for elective deferrals, even though none have been made and even though all employees have been told that there are no deferrals under the plan?
  3. Company X maintains a defined benefit plan with a traditional formula based on final average compensation. Participant A has completed 32 years of service with X and is within months of reaching age 65, the plan's normal retirement age. Can A file a disclaimer with the Company X plan administrator and therefore give up his/her right to receive benefits under the Plan? Is the disclaimer rule available only to beneficiaries and not to participants? Why or why not?
  4. Mr. Bagwell, I am assuming that the account is not a forfeiture account but simply a non-allocated account. The name given should not matter at the end of the day. Another possible name is a suspense account. Regardless of what you call it, the IRS basically requires almost all dollars in a defined contribution plan to be allocated among all participants as of the end of each plan year. In order to take less than fully vested matching contributions out of the non-allocated or suspense account and treat them as qualified nonelective contributions, the plan document would need to be amended to provide that a contribution must be nonforfeitable at the time it is allocated to a participant's account NOT at the time the contribution is initially made. If the plan is amended in this manner, and based on the IRS proposed regulations, such an amendment could be given retroactive effect, you could take amounts out of the non-allocated or suspense account and allocate it as a qualified nonelective contribution to the accounts of certain non-highly compensated participants.
  5. One of my clients is having their 401(k) plan audited by the IRS. We are close to concluding Audit CAP with a certain operation error that was discovered during the audit and the agent has asked us to extend the limitations period. I arranged to have the necessary forms (Forms 56 and 872-H) signed by the client and sent to the IRS. The agent has gotten back and says that they want an extension for the next succeeding year, which we are inclined to grant them. The only problem is that I cannot locate a link to the Form 872-H on the IRS website or on any of the Google searches I have run. Could someone please help by providing a link to the form. The version that was signed for the earlier year was last updated in April 2012.
  6. I received an interesting question on whether state mandated short-term disability benefit payments should offset a qualified plan's definition of compensation. My gut feeling is that since most compensation for such purposes is driven by employer-provided payments via its payroll system, and such amounts are or are not subject to federal income tax withholding, that the state mandated disability benefit payment should not even enter into the compensation definition in any way and therefore, should not offset the employee's other compensation which is taken into account for qualified plan purposes. I know that the mandated benefit is taxable to the employee to the extent that the employer paid the premiums for the benefit. However, this should not affect my conclusion on whether such payments should offset the employee's compensation for qualified plan purposes, or am I missing something?
  7. THE first, foremost and most important question is: what does the Plan say? That will control the "RIGHT" answer all the time. In all likelihood, I would suspect that $50,000 would be the right answer, but check the Plan document first.
  8. I am preparing a determination letter request for a defined benefit plan restatement under the third (and last round) of Cycle A. The IRS website on Employee Plans states that such plans that have risk transfer language need to disclose such language, the location of the language in the Plan document and certain other information. In this case, the client adopted a lump sum window in 2016 for term vesteds only, so that the Notice 2015-49 restriction and arguably the need to make a specific disclosure in the dl submission would not be required. I am still inclined to do the disclosure only in hopes of getting a favorable caveat on the point in the ultimate determination letter. What are other folks doing for these types of windows?
  9. AdKu, it would help to know whether Owners 1, 2 and 3 are related in any way. Under the IRS regulations, depending on the relationship, the interests of certain related parties may be disregarded which would have the effect of increasing the percentage owned by Owner 1 and could cross the controlled group threshold. If 2 and/or 3 are the children of Owner 1, then I would need to know their ages.
  10. If the pension fund was using the deferrals from 2010 to cover certain past payrolls, then the trustee(s) or whoever is running the financial end of the fund is committing a fiduciary breach. Either the pension fund, the trustee or whoever directed the money to be applied in the manner in which it was applied have to make up for the error. They would need to deposit the funds with earnings to the affected employees' accounts (even if there is not currently any for one or more employees). I am assuming that "we" is the employer. There is a risk that the delayed discovery of this by the employer could result in co-fiduciary liability to the employees because the employer has effectively enabled the person(s) in question to commit the fiduciary breach. You should investigate to see if the Labor Department's Voluntary Fiduciary Correction program is available to correct this error and how it coordinates with EPCRS on the IRS side. As to how to approach this, contact the persons involved and tell them that they have committed a fiduciary breach and have to rectify it. If they don't, the employer is in a difficult position because if it sues the persons in question, they will likely defend by citing the co-fiduciary liability provisions of ERISA. If you report it to the DOL, there is also a risk that they could look to require the employer to pony up a part of the liability, particularly if the persons in question have limited assets or are otherwise insolvent. Obviously, if the missed amounts and earnings do not add up to a lot of money, then you can posture this more aggressively. The worst possible scenario is if the employees in question sue and they have wind of what has happened. Good luck.
  11. Alternatively, the Plan could define eligibility for a disability retirement benefit by reference to eligibility to long-term disability coverage under the employer's long-term disability plan.
  12. Thank you for your response, Kevin C. I was also of the view that the plan would not remain a safe harbor plan in the year of the spinoff. Did you want to provide a response to my initial question of whether the spinoff could be done? If you respond, I will provide you with my thoughts on this issue.
  13. In addition to the above questions is the question of whether the remaining employers in the safe harbor 401(k) plan can still utilize the safe harbor, both in the plan year in which the spinoff occurs and going forward.
  14. Thank you for your response. What if the employer decided not to change anything in its safe harbor 401(k) plan but it instead wants to take the account balances of the employees in the subsidiary and spin them off to a newly established 401(k) plan that will be subject to ADP/ACP testing? Assuming that the plan passes coverage and the ADP/ACP tests are satisfied, would this be a permissible alternative? If this approach is taken, do the rules on the mid-year changes and the timing of supplemental notices applicable to safe harbor plans in general apply for this purpose?