Jump to content

Leaderboard

Popular Content

Showing content with the highest reputation since 04/20/2024 in all forums

  1. Michael B. Preston, who was an enrolled actuary, was a giant in the pension field. He contributed so much to the employee benefits community. He posted 6,569 messages onto these message boards since he joined in 2001 (!) -- questions, answers and comments that helped to inform and educate hundreds, perhaps thousands, of his peers. They're all still here and on the search engines, so his wisdom and humor will continue long into the future. During the 1990s, Mike was a system operator of the PIX ("Pension Information eXchange") BBS (i.e., a "bulletin board system"). PIX basically was a server running proprietary software on a particular dedicated personal computer that had a dedicated telephone number. Members would use their PC (and a modem) to connect via a long distance phone call, so that the latest discussions could be downloaded for reading and for adding comments. Later, when the World Wide Web became popular and PIX closed, Mike become an active participant and later a "moderator" on these BenefitsLink message boards. An outstanding servant and leader in his profession, Mike was awarded the Edward E. Burrows Distinguished Service Award in 2017 by the ASPPA College of Pension Actuaries, which is "presented annually to a pension actuary who has gone above and beyond in forwarding ethics, education, beneficial legislation or regulations that enhance the private pension system or the professionalism of enrolled actuaries within the private pension system." We will miss him so much!
    11 points
  2. Yes. Safe harbor non-elective is considered to be the same as profit sharing for 410(b) and 401(a)(4) purposes.
    7 points
  3. F Suzuki

    Mike Preston

    It’s with sadness that I learned about Mike Preston’s passing when Linda called me yesterday. Anyone who was fortunate to spend any time with Mike, knew he was truly a unicorn. Technically brilliant, razor sharp intellect, generous, open and honest (even on uncomfortable subjects), always supportive, witty (very dry). I always enjoyed hearing him laugh! As I look at the comments on Benefitslink, and having shared news with other colleagues, I heard the comment over and over again “Mike saved my bacon!” Rather than repeat his expertise and prowness to which all have provided testimonials, I wanted to share some stories of Mike. Mike, always a fan of the keyboard shortcuts, would do his best to get me to follow his lead. As an exercise, he gave me an excel spreadsheet to do some calculations on. I was so slow using the mouse instead of the keyboard strokes, that he never asked me to do that calculation again. He never gave me any grief about this and I continued to work with him for the next 9 years. Looking back on that, he was fully supportive and allowed me the freedom to show my abilities, even though they differed from his. When Sal Tripodi was touring, a group of us would gather together to socialize, enjoy an adult beverage and have discussions about movies. When Mike joined us, he would initially try to engage Sal in more shop talk. We would tease him and ask him what movies he’s seen. We finally got him to engage on the movie “Crouching Tiger, Hidden Dragon”. That was a pretty fun moment when he was describing the fighting scenes to us. Mike was also a fan of the Sopranos. Mike would start grooving and moving to “Woke Up This Morning.” While they were traveling they asked me if I would record an episode for them. I remember Linda telling me that the tape also included some of my girls tv shows that included the Bernstein Bears, etc. She said Mike was wondering if I was trying to send him a message. We laughed at that. When my wife and I started our journey to begin a family, Mike and Linda were fully supportive. As I would later find out, Mike and Linda went down a similar journey without success. Without Mike and Linda’s full support, we would not be parents of twin girls. I feel fortunate that Mike and Linda have met my girls and know how much their support means to us. Mike, you will always be in our hearts. I’m thankful for our time together. Frank Suzuki
    7 points
  4. I don't think it's a coincidence that your set of roles for this hypothetical adviser matches with the list of persons described in Circular 230. With regards to providing written advice to a taxpayer, Circular 230 § 10.37(a)(2)(vi) instructs that a practitioner must "Not, in evaluating a Federal tax matter, take into account the possibility that a tax return will not be audited or that a matter will not be raised on audit." I read this, perhaps expansively, to mean that a practitioner may not discuss the subject of "getting away" with questionable transactions. Under that guideline, I would find it inappropriate to discuss the capabilities (or the lack thereof) of the IRS to detect this issue. Even were I not myself subject to Circular 230, I would still not discuss it, as the only possible result of bringing it up would be to serve to encourage them to illegally treat the distribution of excess deferrals and earnings thereon as a qualified Roth distribution. My job is to help my clients get the tax results they desire, within the bounds of law and regulation.
    6 points
  5. Is there anything in this particular plan document that says a loan becomes payable in full immediately upon the employee becoming a union member (or more generally, transferring to an excluded class of employees)? Usually I would only see that kind of provision apply upon termination of employment, but I suppose it could happen. Absent that, I don't think so. The employee continues to repay it through payroll deduction (assuming that's what the loan policy says). Transferring to an excluded class means you are not entitled to future contributions. Loan repayments are not contributions.
    5 points
  6. (and hopefully the plan's document "guarantees gateway" as needed for those with only the SH allocation prescribed)
    5 points
  7. I've had this discussion over the years with several people and do have some thoughts to share. first, if the plan and/or QDRO procedure provides for a freeze, I think the plan terms control. Of course, if the participant must receive a distribution (e.g., an RMD), the plan can't interfere with those legal limitations or mandates. Of course, the purpose of a freeze for a divorce is to protect the nonparticipant spouse, who is presumed (whether it is accurate or not) to be a nonworking wife, if the participant is dastardly and wants to drain the account before she can get a hold of half his account. While I have all kinds of thoughts about stereotypes, paternalism, and the like, I agree with David Schultz about it not being the plan's place or responsibility to control the participant's behavior. Further, in many (if not all) jurisdictions, when you file for divorce, the court issues a court order requiring the couple not to impair any potential marital assets. So, usually, once the divorce is final, the participant is likely in contempt of court if he or she raids the plan, and there are remedies for that which the court can impose. The former spouse has no rights at all to the participant's plan interest in absence of a QDRO. And, the Supreme Court said in one case that it is inappropriate to use a QDRO to state that the spouse has no rights to the participant's account, as that is the status quo. So, if you do put a hold on the participant's account, when does the hold end? When the participant shows you his/her divorce decree? that requires a sharing of information that is really not the business of the employer/plan administrator. And, if it is decided in the first five minutes of the divorce process that the nonparticipant spouse is not interested in sharing in the participant's benefits, the presumed protection of the nonparticipant spouse is not needed. So, from a practical standpoint, the plan administrator really doesn't have access to or shouldn't have access to enough information to know when the hold should be started and when it should end. For no other reason than the practicality of the hold (or lack thereof), I recommend that they plan only place a hold on the account during the period between the provision of the proposed QDRO to the plan, and the determination by the plan that the QDRO does or does not quality. The nonparticipant spouse should use his or her lawyer and the courts to control the behavior of the participant vis-a-vis their marital assets.
    5 points
  8. I think the fundamental question is: Is there ANY language in your plan documents that authorizes the Plan Administrator (or any other party) to freeze a participant's account based only on knowledge that a DRO is being discussed? In most states, the filing of a divorce petition results in an automatic stay preventing the parties from unilaterally taking/transferring marital assets. If the participant does something improper - prior to the plan being aware of an actual DRO - then the court can deal with the participant's improper actions. It isn't the plan's place to intervene; the court can do that. The plan's duty is to follow its terms and provide benefits to participants, not to protect either party in a divorce proceeding. My belief is that such freezes are an operational failure (not acting within the plan terms) and potentially a fiduciary breach. I'd tread carefully (or preferably not at all).
    5 points
  9. Below Ground

    Mike Preston

    While I did not know Mike personally, I did benefit from exchanges with him. My prayers and condolences go out to his family.
    5 points
  10. The QACA safe harbor contributions themselves cannot use 6-year graded vesting. But, there could be other employer contributions such as profit sharing that could use that vesting schedule.
    4 points
  11. Tom Veal

    notifying PBGC

    If the plan has reached the point of filing a Standard Termination Notice, you must inform the PBGC that the enrolled actuary's certification of sufficiency (Schedule EA-S) is no longer valid. The plan sponsor should then initiate a distress termination by issuing a new Notice of Intent to Terminate to participants and to the PBGC (which is a recipient of NOIT's in distress terminations but not in standard terminations). If the Standard Termination Notice hasn't yet been filed, the PBGC doesn't yet know "officially" about the termination. A distress termination NOIT should be issued. It goes without saying that you should apprise the PBGC personnel with whom you have been communicating about the client's altered circumstances.
    4 points
  12. If those 401(k) successor plan rules did not apply to owner-only plans then they could circumvent the pre-59.5 in-service distribution prohibition rules at will. Unless there was some specific investment he could in IRA rather than 401(k), what was purpose for terminating in the first place? If no other distributable event per RBG, I think he must wait 12 months from the distribution.
    4 points
  13. truphao

    Mike Preston

    I second that. This is a huge loss to the retirement benefit practitioners community. Let him rest in peace and condolences to his family.
    4 points
  14. Belgarath

    "JUST DO IT"

    I'm sure Nike has this trademarked or something, but it would be fun to have this on our client engagement letters - the endless amounts of time we spend because the client is trying to "get around" something they have to do, or won't do what we tell them to, etc., etc. - wouldn't it be great if we could contractually point to "JUST DO IT!" Just one of those pleasant daydreams...
    4 points
  15. There is no change to the question asking about the number of active participants. There is a new line item (6g(1) on the 5500, 5c(1) on the 5500-SF) which asks about the number of participants with account balances at the beginning of the year, and that new item is the one used to determine whether the plan is required to have an audit.
    4 points
  16. Also, you don't fully describe the error, in particular the errant contribution. If the error was not made, would that have resulted in more of a contribution allocated to other participants (we contributed $X to be allocated to those eligible based on pay) or simply would that contribution amount not been made at all (we wanted to contribute X% of pay for those eligible)? If the former, then the defect likely warrants correction where someone (employer, TPA, shared) makes the plan whole by funding, and then such is allocated. If the latter, participants have not been harmed, this is simply an inadvertent error the plan sponsor can choose not to recover.
    4 points
  17. 1. you can't make it more restrictive retroactively. We are past 2/1/2024 so that ship has sailed. Pick a date in the future. And depending on the circumstances, an amendment can make someone no longer eligible, but that's a whole other conversation. 2. to apply or not apply to existing employees depends on how the amendment and document is written. I've seen it done both ways.
    4 points
  18. Each covered service provider is responsible for disclosing to the plan sponsor of any fees it receives from any source other than from the plan sponsor. If the broker account provider is receiving payments from the participants' accounts or from investments held in the participants' accounts, then the broker account provider is responsible for disclosing all such fees to the plan sponsor. If all of your fees are paid by the plan sponsor, then you have nothing to disclose. https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/fact-sheets/final-regulation-service-provider-disclosures-under-408b2.pdf
    4 points
  19. If they were all NHCEs you can probably self correct by retroactive amendment to conform the document to the actual match contributed for the Plan year if they all got more than the match formula even if it's not uniform since with will clearly be non discriminatory if the extra natch only when to NHCEs.
    3 points
  20. Luke Bailey

    Plan term - vesting

    As C.B. Zeller implies, you have to read the plan document because there is a small chance that your plan contains a 5-year suspense account provision instead of a cash-out and buyback provision, in which case you would have to vest the suspense account. Also, you do not provide a full description of potentially important facts. If the individuals were a substantial portion of the workforce and they terminated in connection with a winding down or shrinking of your business, you could have what is called a "partial termination" that would require full veting.
    3 points
  21. Ha, let's hope that practitioner weighs in to set us all straight, Kenneth. Agreed, the distributions already made will just be recharacterized as taxable income. Here's an overview of the approaches that I've posted: https://www.newfront.com/blog/the-dependent-care-fsa-average-benefits-test Correcting an ABT Failure Where HCEs Have Already Exceeded the Reduced Limit In some situations, employers will not discover an ABT failure in time to impose a reduced HCE contribution limit prior to HCEs contributing to the dependent care FSA in excess of that limit. For example, suppose the ABT pre-test results show that HCE elections must be reduced by 20%, resulting in HCEs who elected the $5,000 maximum having to drop to $4,000. If those HCEs have already contributed $4,375, there is a $375 excess that must be made taxable income before the last day of the plan year. There are two basic approaches to converting excess HCE dependent care FSA contributions to taxable income: Refund/Return: The employer can distribute the excess contributions back to the HCEs through payroll as taxable income subject to withholding and payroll taxes by the end of the year, thereby reducing the amount available in the HCEs’ dependent care FSA account balance. Note that this approach will not work for HCEs that have already received reimbursement of the excess amount. Recharacterize: The employer can recharacterize the excess contributions as taxable income subject to withholding and payroll taxes without directly refunding the excess to HCEs. The downsides of this approach are that the employer will need to a) take the withholding and payroll taxes from other income, and b) inform the HCEs that they may take a distribution of the excess contributions (which no longer have pre-tax status) from the FSA without the need to submit qualifying dependent care expenses. With either approach, the employer will need to coordinate with the FSA TPA to ensure proper administration of the correction. As always, the employer will need to take action before the end of the year to ensure a passing result as of the last day of the plan year.
    3 points
  22. Belgarath

    IRA $$ Stolen

    Other than asking a good CPA... Perhaps this will help a bit? And I believe you can maybe deduct a theft loss on a Form 4684? But this is way out of my area of knowledge. My deepest sympathy to the poor lady with a loser of a Son. Theft losses A theft is the taking and removal of money or property with the intent to deprive the owner of it. The taking must be illegal under the law of the state where it occurred and must have been done with criminal intent. The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.
    3 points
  23. It is fair to recognize that for excess deferrals that are not a 401(a)(30) violation (i.e. the excess is not known to the plan), the participant has the responsibility to report the excess and to choose how much of the excess is in each of the plans. It the participant does not provide this information, neither plan will know about the excess and each plan will not be able to account for the amount of the excess. Each plan doesn't know what the plan doesn't know. If the participant does inform a plan that it holds an excess deferral, then that plan's recordkeeper should ask for information about the amount of the excess and the type of deferral (pre-tax or Roth) that is in that plan. Then recordkeeper should properly account for the excess going forward. Note that the reg says "For this purpose, if a designated Roth account includes any excess deferrals, any distributions from the account are treated as attributable to those excess deferrals until the total amount distributed from the designated Roth account equals the total of such deferrals and attributable income." If there is no separate accounting, then the first dollars out are a refund of the excess plus earnings and are not eligible for rollover. (This is similar to what is done for RMDs.) As evidence that @Lou S.'s odds on how this is reported are fairly accurate, I observe that I have never seen a conversion data request that asks for the amount of excess deferrals that are in a participant's account.
    3 points
  24. imchipbrown

    Mike Preston

    Breakfast will always be chancy without Mike pulling my bacon out of the fire. RIP Mike 🙏
    3 points
  25. Peter Gulia

    Mike Preston

    In this morning’s psalms and canticles, I’ll include prayers for Mike Preston and his family.
    3 points
  26. Pension Nerd

    Mike Preston

    My sympathies to Mike's family and friends. He was always someone whose responses I knew I could trust. I always was proud of myself when his response was what I thought might be the correct answer! He will be sorely missed.
    3 points
  27. See Reg. 1.402(g)-1(e)(8)(iv): "(iv) Distributions of excess deferrals from a designated Roth account. The rules of paragraph (e)(8)(iii) of this section generally apply to distributions of excess deferrals that are designated Roth contributions and the attributable income. Thus, if a designated Roth account described in section 402A includes any excess deferrals, any distribution of amounts attributable to those excess deferrals are includible in gross income (without adjustment for any return of investment in the contract under section 72(e)(8)). In addition, such distributions cannot be qualified distributions described in section 402A(d)(2) and are not eligible rollover distributions within the meaning of section 402(c)(4). For this purpose, if a designated Roth account includes any excess deferrals, any distributions from the account are treated as attributable to those excess deferrals until the total amount distributed from the designated Roth account equals the total of such deferrals and attributable income." Short version as I understand it: Excess Roth deferrals and related income are taxable and cannot be rolled over. Shorter version: less like a loophole, more like a snare.
    3 points
  28. Ilene Ferenczy

    Mike Preston

    So very sorry to get this news. Mike Preston was one of my favorite people in the industry. When we both practiced in Southern California, we spoke often, and he was always kind, always patient, always ready to explain to a nonactuary what I needed to know. When I attended actuarial sessions and discussions he led at ASPPA and other conferences, I was always impressed with his knowledge and leadership. My heart goes out to his wife, Linda, and their family. I will miss him!
    3 points
  29. Separate penalties for each plan filed under the DFVCP program.
    3 points
  30. Absolutely. Given the 9/15 drop dead date, we work backwards from there given the situation (solo plan, few employees, larger plan) for the time needed to complete the valuation, establish the trust/custodial account, execute plan documents, draft and review plan documents and come up with our approximate due date for the client to engage us for a prior year effective date. Don't want a sales rep selling a 2023 plan on 9/13/2024!
    3 points
  31. Lou S.

    Schedule C income

    Well the DB plan has a minimum required contribution which may be larger that the Schedule C net income. In that case your income for the year is $0 (probably) and you may have a nondeductible required contribution to the Plan. Depending on when it's deposited you might be able to kick the can into next year by designating different years for MRC and deduction.
    3 points
  32. If I'm not mistaken I believe court cases have sided with participants, if they have proof they were in the plan, where the plan sponsor has not retained records to document the entitlement to and payment of benefits. I also think what DOL may view as a reasonable record retention and destruction policy would be much more stringent than what a plan sponsor or practitioner may consider. This is my non-legal practitioner memory from reading stuff over the years, and maybe my contextual memory is incorrect.
    3 points
  33. cathyw

    Loan from contribution

    I may be conservative on this, but I always advised clients that if a business owner took a loan from the plan with the intention of loaning those funds back to the plan sponsor, and then immediately did loan the money to the company, the IRS would have a very strong case to claim that this was an indirect loan to the plan sponsor which is a prohibited transaction. At a minimum, the business owner (after taking the loan from the plan) should loan a different amount at a different time and under different repayment terms if trying to establish that these two transactions were independent and totally separate.
    3 points
  34. Sounds like there's no "cash" to begin with.
    3 points
  35. Yes, two year cliff vesting is allowed for safe harbor QACA matching and nonelective contributions.
    2 points
  36. Nope....controlled group....
    2 points
  37. Here is a link to a case with similar facts: https://www.taxnotes.com/research/federal/court-documents/court-opinions-and-orders/individual-not-liable-for-taxes-penalties-on-ira-distributions-obtained/1psdb I don't think the participant would be entitled to a theft deduction. The tax basis in the IRA is considered to be $0 since the income has not been subject to income taxes - unless there are non-deductible contributions.
    2 points
  38. The PEO situation should not be confused with the rules which require those who have met the definition of Leased Employee to be counted as employees of the plan. Within the definition of Leased Employee is the exception for the leasing agency which provides a 10% money purchase benefit. A PEO should not be viewed through the Leased Employee rule lens. That will take you down the wrong path. A PEO is considered to be the employer for payroll purposes (paying wages and filing Form W-2) and it may sponsor a MEP which its clients adopt as participating employers. However, the PEO's client (here, the laundry) is considered to be the employer, too. This is a unique concept of co-employment that is widely misunderstood. The laundry is the employer that provides the workplace, the direction and control of the employees. It also is the sponsor of a retirement plan for those employees -- as a participating employer in the PEO MEP. The portion of the MEP that covers the laundry is a plan in the controlled group with the original S-corp. Just take it from there and apply all the controlled group retirement plan rules to the S-corp plan and the laundry's portion of the PEO MEP.
    2 points
  39. Barbara

    Mike Preston

    So sorry to hear this. He will definitely be missed. Condolences to the family.
    2 points
  40. AndyH

    Mike Preston

    Very sorry to hear this. Mike was a really important resource and contributor for a long time and could always be counted on to keep wayward commenters on their toes and in check! But he’d apologize for his sometimes abrupt “online personality” in person. They didn’t make two of him! He will be missed.
    2 points
  41. Thanks. Yes, Nationwide is a mess. I called lot of places, finally one place (Nationwide Branch Office in Chicago) help me out and I got the check yesterday.
    2 points
  42. CuseFan

    Mike Preston

    So sad - and a huge loss to the profession. Rest in peace brother.
    2 points
  43. David Schultz

    Mike Preston

    I absolutely learned more than a few things from Mike Preston. He was kind and intelligent, but not in the least bit pretentious. This is sad news indeed...
    2 points
  44. I read it as having to be an actual dollar amount-- IRS Notice 2002-45: https://www.irs.gov/pub/irs-drop/n-02-45.pdf An HRA is an arrangement that: (1) is paid for solely by the employer and not provided pursuant to salary reduction election or otherwise under a § 125 cafeteria plan; (2) reimburses the employee for medical care expenses (as defined by § 213(d) of the Internal Revenue Code) incurred by the employee and the employee’s spouse and dependents (as defined in § 152); and (3) provides reimbursements up to a maximum dollar amount for a coverage period and any unused portion of the maximum dollar amount at the end of a coverage period is carried forward to increase the maximum reimbursement amount in subsequent coverage periods.
    2 points
  45. It has been happening a lot and that is the exact approach we have been taking - just throw all the entities into the Plan, check the CG box and change the adopting ER/main entity to be the most recent one. It requires participation/joinder agreement for other/old entities.
    2 points
  46. Yeah I think it's borderline and could reasonably be interpreted as a change in residence each time depending on the specific facts and circumstances. Here's my thoughts I've posted on this issue: https://www.newfront.com/blog/spouse-relocates-outside-u-s-moves-u-s-2 Spouse Moves Into Country In this example, the employee’s spouse is moving into the country from an area where the plan does not provide full coverage. The employee’s spouse therefore will have a change in residence affecting eligibility for the plan. This means that the employee may change his or her election to cover the spouse upon the spouse’s change in residence to the U.S. Spouse Moves Out of Country In this example, the employee’s spouse is moving out of the country to an area where the plan does not provide full coverage. The employee’s spouse therefore will have a change in residence affecting eligibility for the plan. This means that the employee may change his or her election to revoke coverage for the spouse upon the spouse’s change in residence outside the U.S. What is a Change in Residence? There’s no formal definition or exact timeframe to determine “residence” that applies here. The analysis is based on all facts and circumstances. In other words, if the spouse is going somewhere on vacation, there’s no permitted election change event. If the spouse is changing residence for some period to the foreign country, then relocating to reside back in the U.S., there will be permitted election change event upon each event. This isn’t very precise, but it’s also generally not an issue in practice. The employee will certify to the change in residence in most cases, and there is no reason for the employer to question that certification unless the employer suspects fraud. Fraud would likely only be an issue if the employer had reason to believe that the dropping/re-enrolling request was really a based on the spouse’s short vacation.
    2 points
  47. Sure, but a plan set up as late as October 15 will have some sort of a problem, since the minimum funding was due September 15.
    2 points
  48. If the distributee was not the beneficiary: A transfer of plan assets to a party in interest might be a prohibited transaction. ERISA § 406(a)(1)(D), 29 U.S.C. § 1106(a)(1)(D) https://uscode.house.gov/view.xhtml?req=(title:29%20section:1106%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1106)&f=treesort&edition=prelim&num=0&jumpTo=true Was the aunt a party in interest? Unless the aunt was the employer’s employee or had some connection to the plan or the employer, the aunt might not have been a party in interest. ERISA § 3(14), 29 U.S.C. § 1002(14) https://uscode.house.gov/view.xhtml?req=(title:29%20section:1002%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1002)&f=treesort&edition=prelim&num=0&jumpTo=true This is not advice to anyone.
    2 points
  49. Lou S.

    Loan from contribution

    That's how I see it. And remember the MRC needs to be funded in cash. I would think that even the IRS bought the "memo" argument they might challenge the MRC as being in the form of a Promissory Note instead of a cash contribution. Just another argument for having a clean paper trail of events.
    2 points
This leaderboard is set to New York/GMT-04:00
×
×
  • Create New...