Leaderboard

There is what's required, and then there is what's wise. Send them some type of notice.

I read it as 2 actives had under 500 hours and only 1 of those actually got the contribution. So that would be the missing guy. (I might even confirm that the 500 hour requirement is specifically applicable for terminees rather than actives as well, since a "standardized" plan would typically be written that way.) Could also jump down the rabbit hole and ask if the PS allocation rate was higher than 3% to begin with. THM of only 3% can pass coverage but could be a 401(a)(4) problem especially if cross-testing not available.

The other one who is employed on 12/31 but not reaching the 500 hour allocation requirement isn't getting the required TH minimum is my guess.

You can't really "fail" the top heavy test. The plan is either top heavy or not top heavy. If the plan is top heavy, then you have minimum allocation and vesting requirements for non-key employees. That's it. So when you said you are "failing" top heavy, what do you mean? Is your system telling you that the minimum allocation requirement isn't being satisfied? If so, did the report from the system identify which non-key participant(s) are not receiving the minimum allocation? How is the 18% of pay contribution calculated? Are there any exclusions on compensation (including pre-entry compensation)? The top heavy minimum is 3% of total annual compensation without any exclusions.

The only two things I can think of is that you have someone eligible employed on the last day to whom you aren't allocating a TH contribution or you have someone receiving an allocation based on their date of participation comp and (for whatever reason) that allocation isn't 3% of their full year compensation.

Your situation is no different from simply contributing too much to the "side fund" (if you are old) or the regular investment account. That is indeed a possibility, but (highly) unlikely in my experience.

I head the Illinois CPA Society Employee Benefit Plan committee and this very topic came up in our July meeting. A committee member actually performs 3 zero asset audits each year. They contacted Marcus Aron of DOL directly and he informed them that the audit had to be performed, pretty much following the guidelines that Peter outlined above.

That was my assessment too but wanted to be sure I wasn't missing something.

Considering 46 billion added to current enforcement spending, I'd be surprised if some didn't trickle down to TE/GE. Not holding out hope that someone will actually answer phonecalls when a client gets an IRS love letter though...

Agree that having knowledgeable attorney opine is optimal choice but without overlapping ownership - doctors don't own any portion of hospital and hospital doesn't own any portion of doctors' practices - then I don't think you have an issue. I don't think the hospital could be a management company because the "back office" management services it provides to the doctors would be a sliver of its revenue. It is fairly common to see independent contractor doctors providing services to/through hospitals and many of these doctors have solo plans. But certainly it is worth consulting qualified legal counsel so everyone can sleep at night.

I'll assume that any seasonal employees who already are eligible for the plan will continue to be eligible. So this is a mid-year enhancement. Furthermore, we're enhancing eligibility, which is not part of the required content of the safe harbor notice from Treas. Reg. Section 1.401(k)-3(d)(2)(ii). Sure, you can make this amendment effective mid-year and don't need to circulate a new notice (although one would think the employer would want to promptly communication the plan enhancement). Notice 2016-16 governs the situation.

An efficient way to do this is for the healthcare lawyer handling the physician’s negotiation of his service agreement with the hospital to bring in her employee-benefits partner or, if the firm lacks an employee-benefits practice, to bring in another firm to add that knowledge.

You have a 415 excess or a 404 nondeductible suspense account issue.

Yes. The insurance policies are plan assets and the premium payments are contributions. Reimbursing them from anywhere is not ok.

I think what Bri is pointing out is that you don't have to use the W-2 or FITW safe harbor. If you use the general definition of comp it should include, because foreign pay generally counts. See Treas. Reg. 1.415(c)-2(g)(5).

I provide no advice. The plan’s administrator with its lawyer, and the independent qualified public accountant (IQPA) with its lawyer, might consider these steps and others. The plan’s administrator prepares a complete set of the plan’s general-purpose financial statements according to generally accepted accounting principles. One imagines most (but not necessarily all) amounts would be zeroes. The notes to these financial statements would include (at least) required explanations and other points. The IQPA reads the plan’s governing documents. The IQPA reads the employer’s business-organization documents to get reasonable assurance that no contribution was declared. If a bank or an insurance company set up an account, will the qualified institution furnish a certification to confirm the plan’s zero assets and that no money or property was delivered for investment? Absent a certification the IQPA may rely on, the IQPA performs such audit procedures as the IQPA finds appropriate to get reasonable assurance that the plan has no asset and has no contribution receivable. For each audit procedure the IQPA ordinarily would perform regarding another retirement plan, the IQPA records in the IQPA’s work papers why the procedure was unnecessary in this plan’s circumstances. The administrator signs a management-representations letter to state facts the IQPA reasonably requests to be confirmed. The IQPA reads the management-representations letter to find that all requested facts are stated. The IQPA reads the administrator’s Form 5500 report and schedules to find that these are logically consistent with the plan’s financial statements. The IQPA writes and delivers its audit report. The IQPA writes and delivers the after-audit communication required under generally accepted auditing principles.