Can a 401(k) plan with a SHNEC also have an integrated Employer nonelective contribution allocation?

Can the SHNEC be used as part of that integrated employer nonelective contribution allocation?

Thanks.

S-corporation - management company - 4 equal 25% owner-employees. No other employees. Now, I know they are not subject to Title IV due to the exception for a plan covering only "substantial owners" under 4021(b)(9). But it got me to thinking, what if they hired an employee - does this qualify as a "professional service employer?"

This seems to get a little gray due to the "...but is not limited to..." clause in 4021©(2)(B).

The "conservative" approach would be to say PBGC coverage required. And of course we could ask the PBGC if it ever happens, which isn't likely at this point. I just wondered if anyone had encountered a similar situation, or had seen any guidance on such a situation?

As I think about it - the "conservative" approach from a PBGC coverage point of view might be considered aggressive from the IRS point of view, in that the combined plan deduction limits wouldn't apply if it is PBGC covered. So checking with the PBGC and getting an opinion from counsel would be absolutely necessary here, I think, if it ever actually came up.

If I define disability in a DB plan as having the same meaning as the company's long-term disability plan (as in effect at the time of the event giving rise to disability) and subsequently the company changes the long-term disability definition (not subsequent to the injury, but subsequent to the effective date of the definition), is this a prohibited cutback under 411(d)(6)? The problem is that the current LTD definition is a pretty low standard to clear, and I could foresee them changing it in the future to raise the bar a bit. Is that a cutback?

At first thought, it would appear you are not cutting back anything that the participants are guaranteed already, as the definition is as it is in place at the event. But then I thought that could apply to anything. You cannot say "you are guaranteed whatever benefit we determine at the time." Thoughts?

PS Plan which indicates no allocation requirements for actives, but a 500 hour requirement for terms. The client wants to add a straight last day rule. When must this be amended to avoid a cut-back?

I think that as long as no one has worked 500 hours it would be OK. I see it like a "modified last day rule." IF it was a regular last day rule, we all agree the plan could be amended now to change the allocations. So if no one has worked 500 hours, and no one has worked on the last day, then no one has accrued a right to the allocation yet.

Thoughts?

Tax-exempt employer has a defined benefit-type SERP for an employee. Naturally, it is subject to Section 457(f). As of the date of termination of employment, the present value of all of the accruals under the SERP have been included in income under 457(f). What remains is a stream of payments for life which would be taxed in accordance with the Section 72 rules. If employer buys an annuity contract that will provide those payments and distributes the annuity contract to the employee, will that be an impermissible acceleration under Section 409A? Assume the cost of the annuity contract is greater than the amounts previously taxed. Alternatively, assume that the employee agrees to take an annuity contract that is purchased for the exact amount already taxed. To the extent that the period annuity payments under the contract are less than the amount earned under the SERP, the employer would pay the employee the difference each month out of its general assets.

Large employer has a health plan. 80% of the employees are in a self- insured plan while the other 20% are in a insured plan.

The self-insured plan: The insured plan: Consists mostly of salespeople

80% employer contribution 20% employer contribution

20% employee contribution 80% employee contribution, however if the salesperson sells more he can get a higher employer

contribution

Can this employer have their employees pay for their contributions pre-tax through a Section 125 Plan?

Thanks,

ty2433

Large employer has a health plan. 80% of the employees are in an a self- insured plan while the other 20% are in a insured plan.

The self-insured plan: The insured plan: Consists mostly of salespeople

80% employer contribution 20% employer contribution

20% employee contribution 80% employee contribution, however if the salesperson sells more he can get a higher employer

contribution

Can this employer have their employees pay for their contributions pre-tax through a Section 125 Plan?

Thanks,

ty2433

Looking through 1.401(a)(4)-8(b)(1) I found the method for calculating the gateway amount, but I could not locate any passage that describes the requirement for the gateway to be given to every NHCE who is being allocated any employer contribution, even if they wouldn't normally be eligible for a profit sharing allocation due to a 1,000 hour requirement (e.g., when participants must be given a minimum top heavy allocation). Does anyone know where in the regs this can be found?

Large 401(k) plan Sponsor submitted a file to the investment company (also a directed Trustee for the plan) for corrective distributions. Later that day, it was discovered that 3 of the people listed were catch-up eligible for a portion of the amount and the investment company was notified of the changes. The investment company confirmed that they would process the corrected amounts.

Several days later (and before the 3/15 deadline), one of the 3 participants called the contact person at the Sponsor to tell him that he received a larger check than anticipated. Note the investment company did not notify the Sponsor of this error. Turns out all three participants have cashed the checks and the investment company is saying they will issue two 1099Rs - one for the smaller corrective distribution amount, and the second one for the extra amount, coded as "E", excess annual additions. Somehow this does not seem right. It seems correction should be the investment company's responsibility.

What would be the best way to fix this?

Thanks for your insights!

If a person holds an ownership interest of greater than 5% in a Company, but the person is not an employee of the Company, and he or she does not receive a salary /guaranteed payments from ABC Company, Is this person required to take an RMD from the Company if he or she meets the RMD requirements?

I thought for purposes of section 401(a)(9), a 5-percent owner is an employee of the company and in this situation since the person is not an employee of the Company and did not receive a salary/guaranteed payments from the Company he or she would not be required to take an RMD from the Company.

A participant in a 401(k) plan passes away, leaving her account balance to her spouse as her primary beneficiary. The spouse is 71, the participant was only 63. The spouse wants to leave the account in the plan as a means of deferring RMDs until the deceased would have reached 70 1/2.

The spouse is asking for the account to be retitled in his name so that he can make investment changes. First, as a non-participant, non-employee of the plan sponsor, can the deceased's account be retitled in the name of their beneficiary?

Can I allow the beneficiary to gain access to the account using the deceased's information (i.e. SSN) in order to make investment changes?

Can the beneficiary name their own beneficiaries if the account remains in the plan? Or will the account go to the deceased participant's contingent beneficiary(ies) if the primary beneficiary passes away before it is distributed from the plan?

Any thoughts are greatly appreciated!

It was originally distributed prior to 3/15, but it had to be re-issued after 3/15 due to it being lost.

I assume a conservative approach is to pay the excise tax, since the date of the check is after 3/15. Though I'm sure an argument can be made if there is proof that an original distribution was made prior to 3/15.

Does anyone know if the IRS has issued any informal guidance in terms of how an auditor would treat this situation?

I think that if an employer purposely blew up a SIMPLE IRA today to move to a 401k plan the 2013 YTD contributions would become "illegal" and need to be dealt with but prior year money is not "disqualified".

What happens if the employer has a SIMPLE 401(k) and wanted to amend it today to take it out of SIMPLE status? Are the only consequences that the plan loses the ADP/ACP and Top Heavy exemptions? Do we have to do anything with or otherwise be concerned about the 2013 YTD contribtuons?

Thanks

If a person holds an ownership interest of greater than 5% in ABC Company, but the person is not an employee of ABC Company, and he or she does not receive a salary /guaranteed payments from ABC Company, Is this person required to take an RMD from the ABC Company if he or she meets the RMD requirements?

I thought for purposes of section 401(a)(9), a 5-percent owner is an employee of the company and in this situation since the person is not an employee of the ABC Company and did not receive a salary/guaranteed payments from ABC Company he or she would not be required to take an RMD from the ABC Company.

Can an employee be terminated for making false allegations of HIPAA violations? Employee's spouse posted on social media that spouse's HIPAA rights had been violated by employer. Employer contacted employee to conduct investigation. Employee not cooperating. Employer wants to terminate employee. We are in a right-to-work state so we know we can terminate for any reason, but would like to ensure we are not violating any applicable law. The only thing I can think of is employee could claim discharge was retaliatory. Have no evidence that employer violated HIPAA. Any thoughts?

Plan failed ADP test, one of the 10 HCEs had some of their salary deferrals returned to pass the ADP test. When performing the ABPT test for the X-testing can i use the corrected salary deferral for that participant or must i use the original deferral amount? Thanks.

In order to comply with IRC 401(a)(9), a defined contribution plan has a provision which requires the entire interest of an employee's account to be distributed not later than the required beginning date. The plan does have language providing for payment of RMD's under IRC 401(a)(9)(A)(ii), but operationally the plan does not make RMD's (i.e., the enitre account balances are distributed prior to the required beginning date). I know this is strange. I've never encountered it before.

An employee (non 5 % owner) in the plan described above turned age 70 in August 2012. He applied for a distribution in November 2012 and requested a direct rollover of his entire account balance. The employee reached age 70 1/2 in February 2013 before the distribution had been made (the reason for the delay was the participant's failure to properly complete some forms). Now there is an issue as to whether the employee can rollover the entire account balance.

The plan is taking the position that the entire account balance can be rolled over because the entire account is being distributed prior to the employee's required beginning date in accordance with IRC 401(a)(9)(A)(i). The financial institution for the employee's IRA is saying that there is an RMD due because the participant reached age 70 1/2 this year. As such, they want the RMD amount calculated and distributed, and then they would accept a rollover of the remaining balance.

Does anyone have an opinion on this?

Anyone have any experience or able to offer any insight with respect to the treatment of IRAs in bankruptcy and the potential loss of a bankruptcy exemption due to the IRA owner's prior distribution / rollover of an amount within the IRA during the 60-day rollover period?

Facts are as follows: IRA owner has an IRA with a fairly large balance. IRA owner had expenses to pay and was nearing possible bankruptcy filing. IRA Owner went to bank with intention of taking an early distribution from the IRA (and paying applicable taxes and penalties) in order to get sufficient funds to cover immediate expenses until his tax refund arrived Bank told him instead that he could take money out as a "rollover," use the funds to cover expenses, then use his tax refund to redeposit the amounts without adverse consequences provided the amount was replaced prior to the 60-day rollover period expiring. IRA Owner did that just that, took a distribution, used the funds, received tax refund and made the redeposit within 60 days. The bank and IRA owner have considered IRA to remain qualified / tax exempt IRA for all purposes.

IRA owner then filed for bankruptcy. Bankruptcy Trustee is now challenging exemption for the IRA account saying the entire IRA account was disqualified due to prohibited transaction created by virtue of IRA Owner's use of the rollover amounts before redepositing. Basically the Bankruptcy Trustee claims such use constitutes an impermissible loan of the IRA funds to himself and/or use of the IRA funds for his own benefit and/or general self-dealing. The Bankruptcy Trustee points to a couple of Florida Bankruptcy Cases--In Re Hughes, In Re Willis--where the bankruptcy court appears to have held in favor of the Trustee on somewhat similar facts finding that the withdrawal and repayment of the withdrawn amount within 60 days resulted in a prohibited transaction under the tax rules thereby disqualifying the entire IRA for tax purposes and thus causing the IRA to lose bankruptcy exemption.

Has anyone dealt with anything similar? Interestingly, the Bankruptcy Courts in these cases appear to arrive at this conclusion by applying the tax laws but it is unclear whether the IRS has ever considered much less arrived at a similar holding with respect to these particular IRAs. Indeed, the IRS has numerous PLRs which would seem to suggest this same thing is generally possible in a non-bankruptcy context without disqualifying the IRA. Specifically, there are rulings where the IRA amounts are withdrawn but repaid within the 60-day period and even cases where the funds were apparently used for the IRA Owner's benefit during the 60-day period. Am I missing something? How can the Bankruptcy Trustee claim the bankruptcy exemption is lost because there has been a prohibited transaction under the tax rules resulting in the IRA's loss of tax exempt status when the IRS has not made that determination and appears to have permitted similar transactions without disqualifying the IRA on similar facts. Given that having access to / holding the distributed amounts during the 60-day rollover period could arguably be viewed as providing a general benefit to the IRA Owner even if he or she does not actually use the IRA amounts to cover expenses during the rollover period, it seems that the prohibited transaction issues would likely always be such a concern in any IRA rollover scenario that the IRS would not / could not permit the 60-day rollover policy in the first place.

How do you calculate a Top Heavy Minimum on a Plan that is terminating (shutting down) midway through the year? Technically the Top Heavy minimum is based on "end of year balances". But if you cannot shut down a Plan until the balance is at zero, how do you "go back" and calculate the TH Minimum - Is freezing the Plan an option?

Key-employee borrowed approximately $15,000 more than permitted. We intend to correct under VCP.

QUESTION: Must we also file VFCP with DOL's Employee Benefits Security Administration and report this as a prohibited transaction?

Can't seem to find a precise answer.

Thanks.