DTH

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  1. A 457(b) plan requires all employees to make a mandatory contribution of 7.5% of compensation. The employer didn't take the mandatory contribution from a new hire's pay beginning 6/2016. The plan document does have language that the employer can make corrective contributions to the plan. Since employer contributions are added together with employee contributions towards the 457(b) limit, would this also apply to a corrective employer contribution?
  2. It has been my understanding that in order to for a plan to accept a direct rollover of designated Roth contributions the plan must allow designated Roth contributions. The IRS rollover chart points to a designated Roth account, which is defined in the Treasury regulations §1. 402A, Q&A 1, which I interpret to say the plan has to allow designed Roth contributions first. I also think that this concept is reinforced with the in-plan Roth "rollover" rules under §402A(c)(4)(B) where a plan must include a qualified Roth contribution program. I have been challenged that a plan with no qualified Roth contribution program can accept a designated Roth account rollover. Does anyone have knowledge of any IRS guidance that says a plan with no qualified Roth contribution program can [or can't] accept a designated Roth account direct rollover. Thanks.
  3. A 401(a) defined contribution plan has discretionary employer contributions and pick-up contributions. Pick-up contributions are considered employer contributions. The plan failed 415 limits testing. EPCRS instructs to place the excess annual additions into an unallocated account to be used as an employer contribution in the succeeding year(s). Employee deferrals and after-tax contributions can be returned to the participant. Are there any special rules where all or a portion of the excess annual addition consists of pick-up contributions?
  4. Thanks for all the great feedback. I think what the church is trying to do is have the plan document say that 100% of any distribution is designated as housing allowance (unless the church board says its not) rather than the church make a formal designation (e.g., employment contract, church minutes, church budget). I'm just uncomfortable about putting language in the plan.The LRMs are silent.
  5. A church that sponsors a 403(b)(1) plan and wants to add language to the plan document that all distributions to ministers are designated as housing allowance unless the church says otherwise. Treasury regulation 1.107-1(b) requires that the employing church or other qualifying organization must designate the amount of parsonage allowance in advance of payment. The 403(b) LRMs doesn’t have housing/parsonage allowance language. Is it appropriate to designate plan distributions as housing/parsonage allowance in the plan document?
  6. A church that sponsors a 403(b)(1) plan and wants to add language to the plan document that all distributions to ministers are designated as housing allowance unless the church says otherwise. Treasury regulation 1.107-1(b) requires that the employing church or other qualifying organization must designate the amount of parsonage allowance in advance of payment. The 403(b) LRMs don’t have housing/parsonage allowance language. Is it appropriate to designate plan distributions as housing/parsonage allowance in the plan document? Thank you.
  7. I have a plan that was recordkept at Nationwide. The employer had an arrangement between Nationwide and Monumental Life where pre-tax dollars were used to pay for life insurance premiums. The employer is sending us a contribution file asking us to carve out the premiums from these contributions and send it to the insurer. Does anyone have any experience with this arrangement? Are you treating the life insurance premiums as annual deferrals under the 457(b) plan? If yes, do you have a life insurance provision in the plan document?
  8. Plan says that benefits shall commence and be made in accordance with the RMD rules and that the Participant's entire interest will be distributed, or begin to be distributed, to the Participant no later than the Participant's "required beginning date". The 457(b) plan allows participants who have severed employment 60 days after severance to elect when to begin distributions and in what form. The plan document says if the participant does not make an election the benefit will commence on the participant's required beginning date (RBD). The plan also says that benefits shall commence and be made in accordance with the RMD rules and that the participant's entire interest will be distributed, or begin to be distributed, to the participant no later than their RBD. Does this mean the participant's entire account balance is taxable in the RBD year or that the participant will just be taxed on the RMD calculated amount each year?
  9. Is the 15-year catch-up included in 415 annual aditions? Thanks.
  10. The plan year is calendar, eligibility requirements are age 21 and 1 year of service (1,000 hours) with immediate entry. Subsequent eligibility computation periods revert to plan year. Participant did not meet the requirements during the 1st eligibility computation period (9/23/14 - 9/22/15), but did meet it during the 2nd period (1/1 - 12/31/15). Is his entry date 12/31/15 or 1/1/16? This has impact on whether he gets the 2015 employer nonelective contribution. Thank you.
  11. Plan year is calendar, eligibility requirements are age 21 and 1 year of service (1,000 hours) with immediate entry. Subsequent eligibility computation periods revert to plan year. An employee didn't meet the eligibility requirements during the 1st eligibility computation period (e.g., 9/23/2014 - 9/22/15) but did meet it during the 2nd period (1/1 - 12/31/15). Does the employee enter the plan on 12/31/15 or 1/1/16? This has impact on whether he gets the 2015 employer nonelective contribution. Thank you.
  12. Thank you ETA. I just want to confirm that only the post-88 deferral contributions can be withdrawn without the earnings; pre-89 deferrals and earnings thereon can be withdrawn if the plan allows (i.e., same rules as corporate k plans). Someone is trying to tell me that a governmental k plan can permit deferrals and earnings thereon to be withdrawn no matter when the deferrals were contributed. Thanks.
  13. I believe that a governmental grandfathered 401(k) plan is subject to the same safe harbor hardship withdrawal rules as non-governmental plans. I have someone who is insisting that a governmental plan is not subject to the deferral earnings rule. I looked at the regulations and didn't see an exception. If these plans can permit deferral earnings accrued generally after 1988 to be withdrawn on account of hardship can you please give me a cite. Thank you.
  14. A 457(b) plan has an old vendor that no longer gets on-going contributions other than premiums for life insurance policies. When the plan left the old provider, investment in life insurance was no longer permitted, but participants who had invested in life insurance under the old provider could still keep this investment. Does the plan document drafted by the new provider need to contain a life insurance provision? If no, should the prior plan document under the old provider have a life insurance provision or is the old provider's contract provisions acceptable. Are there different rules for 457(b) governmental plans vs top hat plans? This assumes that investment in life insurance under a 457(b) plan is permitted by state law. Thank you.
  15. I reviewed the FAB Q&A 18 and it is referring to changing 403(b) providers. Non-ERISA plans generally have participant-directed contracts. If the employer allows for another provider, participants would have to direct the old provider to transfer their account into the new provider's contract. In my scenario the employer is not changing providers rather the investment advisor is looking at the investments under one of their current approved providers. The advisor is suggesting to remove a non-performing fund and replacing it with a better one. Affected participants would be notified that the fund is going away and if they don't select another investment, the non-performing fund assets will be moved into a recommended replacement. Would this result in the same (i.e., plan becomes subject to ERISA)? If yes, would a recommendation of leaving the non-performing fund in the investment lineup and add the better performing one. Participants would be notified of the new fund and it would be up to each affected participant to decide to stay in the non-performing fund or move to another fund. I think this may be okay. Lastly, if a fund closes it will need to be replaced. What can be done to keep the plan within the safe harbor? Thank you.