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As usual, payroll company is wrong; that clearly is NOT the "default" (one would ask "default? Say's who?"). FFCRA paid income is indistinguishable from any other income. Unless the specific definition of comp in some way excludes sick pay, it should be treated the same as any other compensation for deferral purposes. See this from IRS FAQ: https://www.irs.gov/newsroom/covid-19-related-tax-credits-special-issues-for-employers-faqs#special_issues_third-party 54. Can employees make salary reduction contributions from the amounts paid as qualified leave wages for their employer sponsored health plan, a 401(k) or other retirement plan, or any other benefits? The FFCRA does not distinguish qualified leave wages from other wages an employee may receive from the employee’s standpoint as a taxpayer; thus, the same rules that generally apply to an employee’s regular wages (or compensation, for RRTA purposes) would apply from the employee’s standpoint. To the extent that an employee has a salary reduction agreement in place with the Eligible Employer, the FFCRA does not include any provisions that explicitly prohibit taking salary reduction contributions for any plan from qualified sick leave wages or qualified family leave wages.

If you'd like to use an integration level that's less than 80% plus $1 in order to optimize the contributions down to the last dollar, you could use 70% of the Social Security Wage Base (meaning $96,930), which would lower the percentages from 4.1/4.1 down to 4.01/4.01, meaning the total allocations to all employees other than the most highly-paid employee would be about $500 less. No biggie, but fun to know. I came up with these figures by using the little program I wrote a while back (initially using Turbo Pascal purchased from the clearance bin at Office Depot, circa 1992!) -- https://benefitslink.com/m/integ.cgi It solves for the optimal contribution for one or more designated participants, by running through the various possible integration levels, taking into account the way the maximum percentage disparity changes at the various breakpoints. I entered a contribution of $45,377 by trial and error in order to result in an allocation of $18,600 for the top-paid participant. What did others come up with as a total contribution? (Click on image to enlarge.)

SCP is available to correct operational failures and certain plan document failures. An operational failure is a failure that arises when the plan does not follow the terms of its plan document. If the plan is making hardship distributions available in accordance with its document, then there is not an operational failure to self-correct. Violation of the nondiscrimination rules of 401(a)(4) results in a demographic failure, which can not be corrected by SCP. That is as far as I am willing to go with any degree of certainty. Wild speculation follows.... Considering that VCP is a voluntary submission, and the plan sponsor's submission to the IRS must include a proposed method of correction, I think the question is less "What would the IRS ask for" in terms of a correction, but more "What proposal might the IRS find acceptable?" If there were any demonstrable harm resulting from the failure, that would be a good starting point. For example, if an NHCE terminated employment in a prior year in order to gain access to their retirement funds, but might have remained employed if a hardship withdrawal option had been available to them at the time, then maybe the plan could propose making additional contributions to this employee to make up for the plan years that the employee missed out on. It's harder if there are no specific events to look to. The plan sponsor might say that there were no requests for distributions, therefore it is reasonable to conclude that no one would have taken one even if they had been available, therefore there was no actual harm done by the non-availability of hardship distributions, therefore no correction is needed. However this discounts the possibility that the NHCEs might have made 401(k) contributions at a greater rate if they knew they would have access to their contributions in the event of a pre-retirement financial hardship. Therefore the sponsor might be justified in proposing to make additional contributions to each NHCE's account for the period which the failure occurred, to make up for the lost deferral incentive (a term I just made up). Maybe, and this is a real stretch, the plan would consider "invalidating" the hardship withdrawal provision for any years that 401(a)(4) was not satisfied. This might involve requiring any HCEs who received hardship withdrawals during that time to repay those withdrawals to the plan, with earnings. I think this is unlikely to be acceptable since plan correction principles are generally not in favor of cutting back participants' rights under the plan, even HCEs' rights. This an interesting question. Thanks for asking!

The one year rule has never existed in a defined benefit plan. If you read the Code carefully it actually goes much further: effectively a "forever" year rule. The IRS came out with a non-sensical TAM that lowered "forever" to the five year rule, but I won't look this particular gift horse in the mouth. Loosely translated, they reasoned that if a five year rule applies to defined contribution plans it is reasonable for the IRS to apply the five year rule to defined benefit plans, too. But the ruling says that plan provisions can work in favor of the "forever" rule if they chose, so the advice to check with plan counsel is wise. I'll try to attach the TAM. I got a copy of the unpublished TAM from a lawyer at the PBGC about 10 years ago who said that until the TAM was issued the PBGC was bound by the Code (the "forever" rule). I think you will find this in the Code structured as the forever rule is the default, but In the case of a defined contribution plan the five year rule applies. So, DB plans are left with the forever rule. Or at least they were until the TAM. TAM - Partially vested P_1.pdf

Proceeds must be used for "payroll" expenses within 8 weeks, although there are discussions that could get extended. Payroll includes benefits and retirement contributions in addition to wages. Payments to cover health and welfare benefits don't go "to" employees but are made for the benefit of employees, so how would retirement contributions be any different? And if the contribution went to a DB plan it doesn't get allocated to individual employees at any time regardless. However, I would steer my clients to their accountant and/or attorney if they are considering using PPP to fund retirement plans beyond what they would normally fund for the subject 8-week period, like matching and/or safe harbor contributions funded on a payroll period basis. I'm not saying it can't or shouldn't be done, and I am a proponent of serious consideration for doing this - but it is a tax and legal issue without a lot of exacting guidance, so those are the people who should be advising clients on this, not their plan providers or TPAs.

I think by dumb luck you may be OK on this one assuming it's not a DB plan.Based on the DOB they don't turn 70 1/2 until 2019 and the RBD for the 2019 RMD was 4/1/2020. The Cares Act suspends RMDs for 2020 and provides also provides relief for 2019 RMDs with a RBD of 4/1/2020 if they weren't already made.

I assume you are asking who s/b treated at 100% vested on a plan termination? The answer is probably in the plan document, so you will need to read those sections you typically just skim. You will likely get several answers, and therefore, you should consult with an ERISA attorney to provide a recommendation to the sponsor. Definitely, anyone who has not had a one year break in service s/b 100% vested. That means, anyone who worked at least 500 hours in the prior plan year, but check document at the break in service language may be different. Many will argue that you need to vest anyone who hasn't had 5 break years - again, check your document. Some argue that any partially vested deferred vested should be 100% vested, but you should check your document to see if it has "deemed cash out" language. Deemed cash out language would say something like any non-vested participant is deemed to have been paid. If it is a bigger plan, with a lot of terminated participants, you will want to discuss it with the sponsor and the attorney. The PBGC will look at this if they audit, so you will want to document whatever you decide.

If it's an inherited IRA shouldn't the code be 4 - since this is a death benefit payment? But yes the code of 1 is clearly incorrect if he is over 59 1/2.

From the instructions for Line 7(a) Enter the total amount of plan assets at the end of the plan year in column (b). Do not include in column (b) a participant loan that has been deemed distributed during the plan year under the provisions of Code section 72(p) and Treasury Regulations section 1.72(p)-1 if both the following circumstances apply: (1) Under the plan, the participant loan is treated as a directed investment solely of the participant’s individual account; and (2) As of the end of the plan year, the participant is not continuing repayment under the loan. If the deemed distributed participant loan is included in column (a) and both of these circumstances apply, include the value of the loan as a deemed distribution on line 8e. However, if either of these two circumstances does not apply, the current value of the participant loan (including interest accruing thereon after the deemed distribution) should be included in column (b) without regard to the occurrence of a deemed distribution. After a participant loan that has been deemed distributed is included in the amount reported on line 8e, it is no longer to be reported as an asset on line 7a unless, in a later year, the participant resumes repayment under the loan. However, such a loan (including interest accruing thereon after the deemed distribution) that has not been repaid is still considered outstanding for purposes of applying Code section 72(p)(2)(A) to determine the maximum amount of subsequent loans. Also, the deemed distribution is not treated as an actual distribution for other purposes, such as the qualification requirements of Code section 401, including, for example, the determination of top-heavy status under Code section 416 and the vesting requirements of Treasury Regulations section 1.411(a)- 7(d)(5). See Q&As 12 and 19 of Treasury Regulations section 1.72(p)-1. The entry on line 7a, column (b) (plan assets at end of year) must include the current value of any participant loan included as a deemed distribution in the amount reported for any earlier year if, during the plan year, the participant resumes repayment under the loan. In addition, the amount to be entered on line 8e must be reduced by the amount of the participant loan reported as a deemed distribution for the earlier year.

I believe it to be technically possible, but not recommended. Depends on whether the TPA is performing the "recordkeeping." As I said, I don't recommend it.

I agree with Kevin C. You need to remember that permitted disparity is the lesser of two times or the base + 5.40% in your case. You need to do some basic algebra. You also need to make sure that your understanding of what is in the plan document is accurate. Let x be the allocation rate. x times $106321 + 2x times $173679 = $18600. Solve for x. x = $18600 / ($106321 + 2 times $173679) = 4.09981506748163%. If x > 5.40%, the maximum excess percentage, then you need to change the first equation to x times $106321 + (x + 5.40%) times $173679 = $18600 and solve for x a second time. To give you something to check against, your second employee should be allocated $12,040.28. That assumes that I didn't err.

With an integrated allocation, the excess percentage can't exceed the lesser of the base percentage or the maximum percentage. 1.401(l)-2(b)(2). You will need to do slightly under 4.1% + 4.1% of the excess to get the owner to $18,600.

If you’re crowd-sourcing a survey, here’s some background information about how a pension might affect Pennsylvania’s unemployment benefits. (I have never worked with, and did not check, any of this information.) Here’s the agency’s unofficial explanations: “Pensions: Pension payments may be deductible from UC if (1) your [a] Base-Year [or chargeable] employer has contributed to or maintained the pension plan, and (2) your work during the Base Year increased the amount of, or affected your eligibility for, the pension. (See your Notice of Financial Determination and accompanying insert entitled ‘Explanation of Your Notice of Financial Determination’ for complete information about your Base Year.) If your employer was the only one who contributed to the pension, 100% of the prorated, weekly pension amount is deductible. If you contributed in any amount to the pension, 50% of the prorated, weekly pension amount is deductible. Pensions are deductible from weekly benefits on a dollar-for-dollar basis. The following payments are NOT deductible, however: . . . . A lump-sum pension payment, if you did not have the option of receiving monthly or periodic payments. A lump-sum pension payment that is deposited (rolled over) into an eligible retirement plan, such as an IRA, within 60 days after you received the payment. In other words, you can avoid having your UC benefits reduced if you roll over your pension to save it for retirement. If you roll over only a part of a lump-sum payment, that portion of the lump-sum that is not rolled over is deductible. https://www.uc.pa.gov/unemployment-benefits/handbook/Pages/How-Weekly-Benefits-May-be-Reduced.aspx “Pensions and retirement payments are deducted from UC if a base-year employer maintained or contributed to the pension plan and base-year employment affected the claimant's eligibility for, or increased the amount of, the pension. Fifty percent of the pro-rated, weekly pension amount is deducted if the claimant contributed in any amount to the pension plan. If the pension is entirely employer funded, 100 percent of the pro-rated, weekly pension amount is deducted from UC. Social Security and Railroad Retirement pensions are not deducted from UC benefit payments. A lump-sum pension payment is not deducted from UC, unless the claimant had the option of taking a monthly pension. In addition, a lump-sum pension is not deductible if the claimant ‘rolls over’ the lump-sum into an eligible retirement plan such as an Individual Retirement Account (IRA) within 60 days of receipt.” https://www.uc.pa.gov/unemployment-benefits/Am-I-Eligible/benefit-eligibility/Pages/Miscellaneous.aspx Here’s the statute: Pennsylvania Unemployment Compensation Law § 404 [unofficially compiled at 43 Pa. Stat. Ann. § 804]: https://govt.westlaw.com/pac/Document/N5CD19402BE8711E6996BCDAA9D9C062F?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default) And the regulations: 34 Pa. Code § 65.101 to -.108 https://www.pacodeandbulletin.gov/Display/pacode?file=/secure/pacode/data/034/chapter65/s65.101.html&d=reduce 34 Pa. Code § 65.102(k)(3): “If a claimant does not roll over the entire lump sum into an eligible retirement plan, as set forth in paragraph (1), the Department will determine the amount to be deducted from the claimant’s weekly benefit amount by dividing the amount of the lump sum payment that is received by the claimant by the total amount the claimant could have received had the claimant opted to take the entire lump sum available to the claimant. That quotient represents the deductible share of the lump sum pension amount received by the claimant. The claimant’s unreduced monthly pension is the amount the claimant could have received each month had the claimant opted to take periodic payments in lieu of a lump sum. The Department will calculate the deductible portion of that unreduced monthly amount by multiplying it by the quotient representing the deductible share of the lump sum which is received by the claimant. Using the deductible amount of that monthly pension, the Department will compute the prorated weekly deductible amount in accordance with § 65.108.” 34 Pa. Code § 65.105: “Lump-sum retirement payments. (a) When a claimant receives a lump-sum payment in lieu of a periodic pension payment, the prorated weekly pension amount which the employe could have received will be deducted in accordance with § 65.108 (relating to rules of attribution). (b) When a claimant cannot receive periodic pension payments and must take a mandatory lump-sum payment, no pension deduction will be made. (c) When a claimant receives a deductible lump sum payment and transfers only a portion of that payment into an eligible retirement plan within 60 days of receipt, the remainder of the lump sum payment which is not transferred into an eligible retirement plan will be deducted, along with any other deductible pension payments made to the claimant under § 65.102 (relating to application of the deduction) and § 65.108. 34 Pa. Code § 65.108: “Rules of attribution. If a pension, retirement, annuity or other similar periodic payment deductible under section 404(d)(2) of the law (43 P.S. § 804(d)(2)) is received on other than a weekly basis, the amount to be deducted will be prorated as follows: The claimant’s monthly pension is the amount the claimant could have received each month had the claimant opted to take periodic payments in lieu of a lump sum. The Department will use the deductible amount of that monthly pension, convert it to a yearly amount, and divide by 52. If not a multiple of one dollar, the Department will determine the prorated weekly deductible amount of the pension by rounding to the next higher multiple of one dollar. The weekly benefit amount payable to the claimant will be reduced, but not below zero, by the prorated weekly deductible amount of the pension, in accordance with section 404(d)(2) of the law.

Thanks, Larry, for Googling PRN for the rest of us ASPPA has this article on its home page right now: https://www.asppa.org/news/correcting-plan-loan-failures-qa-sporadic-loan-repayments This only applies if the employee continues to be an employee, as opposed to an independent contractor. If they are no longer an employee then it is like any other termination of employment; generally (but not always, read your loan program) the outstanding balance of the loan becomes due immediately and if not repaid, would be offset. If the participant is a qualified individual under the CARES Act then they could presumably postpone their loan payments.

I think you should tell us what PRN means; don't assume abbreviations are understood. Do like they do in good reporting; expand it the first time; your reader shouldn't have to google it to understand your question. Google shows this: p.r.n.: Abbreviation meaning "when necessary" (from the Latin "pro re nata", for an occasion that has arisen, as circumstances require, as needed). So, this is the problem of an employee who has quit working (let's say he retired) but comes back sometimes to help out. Each time he comes back he is a rehired and needs to be treated as such. If he is past NRA, then he's also going to accrue benefits in almost every plan, regardless of the number of hours he works. You need to treat him as a rehire, and depending on the amount of time between his termination date and his rehire date, you act accordingly on the loan. QED!?

Any contributions made must be first applied to the prior year's funding deficiency. The sponsor has until 1/1/2021 to satisfy the MRC for 2019, however no contributions can be applied to the 2019 MRC until the 2018 deficiency is eliminated. So they have to come up with both the amount for the 2018 deficiency, plus the 2019 minimum by 1/1/2021, or they will have a deficiency for 2019.

I am going to start with one of your last questions/issues. I work for an ESOP TPA firm and our installment forms are very clear if you do not return a form in the future years you will get sent an installment sent to the same address and in paid the same way as the prior year. On the last part it means if you asked for your installment to be sent to xyz IRA and never return a form after the first one all the installments after that will be sent to xyz IRA. You, or someone at the company, is the Plan Administrator not the recordkeeper/TPA. I recommend you speak to your ERISA attorney. if they agree the plan can have the forms say all future installments will be paid as the previously returned form demand it changes. You drive how the plan works not the TPA/recordkeeper. If the person's balance is over $5,000 you can't force them out of the plan. it is just how the law works. You can force them out of the company stock while their balance stays in the plan. This is called segregation in this business. If your plan allows for it, and if it doesn't talk to your ERISA attorney to get it amended, you can set up a method that allows you to sell the people out of their stock and into cash based investments. They key here is to give the plan flexibility. See if your attorney will allow the plan to be written such the company decides who much cash it wants to put into the ESOP to segregate the accounts and describe the method to do so. Pro rate is the most common method. For example, if there is $100,000 of shares in terminated employees accounts that can be segregated and the company is only prepared to put $50,000 in cash to fund segregation using a pro rata method all the terminated employees would be forced to sell 50% of the shares in their account. You can use other methods than pro rata. We have clients that sell 100% of the stock from the person with the oldest termination date for example. You go from oldest to newest until the cash runs out. You just have to make sure the method isn't discriminatory. A good ESOP TPA can guide you through this. You will find many of the people start taking their payments if they know they are going into a cash based investment vs the company stock. After all they can invest in mutual funds and so forth in an IRA with more control if they do so. There are a number of issues you need to investigate before you do this that is too long to write here. For example. by making them sell the shares and putting them into some kind of cash investment your company has made an investment election for these people. That means there is a fiduciary liability regarding the investment choice. Not saying that is a deal breaker as segregation is common in ESOPs. I am just saying you need to be aware of the risk when making the choice of investment and pick one that helps mitigate the risk. Search the NCEO and ESOP Association's websites for the word "segregation". You will get a large number of hits for information . This is the closest I will do to a "sales job" on this board as that is frowned upon here. Is your TPA/recordkeeper one that is known to specialize in ESOPs? I am a little surprised that they haven't brought up segregation. If not, I recommend you get one that is an ESOP shop. They can do other types of plans- the company I work for does. But ESOPs have enough unique situations I think you need an ESOP specialist to help guide you through these kinds of situation/planning opportunities. Lastly, I would recommend you attend your local ESOP Association chapter meetings- when we are allowed to have conferences and meetings again! Also, NCEO has weekly webinars. The NCEO also has a large conference in April. There will be breakout sessions on segregation at most conferences. You can learn a lot and speak to other ESOP companies that have done segregation. If you aren't a member of the NCEO and ESOP Association you should think about joining to access these benefits and learning opportunities. There will be a wealth of other sessions on ownership culture, repurchase obligations. what to do if you find a mistake...... Sorry if this was a little long.

Should be spelled out in document, but if you're using 100% of the TWB as integration level then - If the base percentage is less than 5.7% than the base percentage and excess percentage will be the same. If the base percentage is greater than 5.7% than the excess percentage is 5.7%. Dose that make sense or are you having problems backing into the base percentage to max out the owner? Also if the contribution is "small" and your plan is top-heavy make sure non-key's are getting TH minimum. There are a couple of mathematically equivalent ways to think about it but I like to think of it as Base % * compensation capped at 401(a)(17) + Excess % [(compensation capped at 401(a)(17) - Integration level) * minimum of (base percentage or 5.7%)] 5.7% can be reduced if you are using integration level other than 100% of TWB.