(1) A 401(k) Plan offers participants the option of (a) not self-directling their contributions, in which case the deposits are made to a pooled account and directed by the trusteees, or (b) self-directed into a mutual fund account menu.

Do the 404(a) participant disclosure regs apply to those in (a) above? No fees are being deducted from the pooled account but I assume that there are still asset fees. That would trigger the notice, correct?

(2) Who provides the notice on brokerage accounts? For example, if a plan has 20 participants and everyone has a Schwab account, Does Schwab provide the 404(a) notice? Would it detail every dollar spent on trades or other purchases or would the notice simply be one stating what the fees are if trades are made?

Thanks

An owner of a small 401k plan passed away. He was age 55.

Divorced from his spouse so he named his 2 children as beneficiary.

If both are under age 18, what distribution options are there? Can they legally make a decision in regard to this matter? Do they have the opportunity to have the account rolled over to an IRA?

If one is under 18 and the other over 18 (assumed that they are 50/50 beneficiaries) we can treat 1 beneficiary different from the other, correct?

To make things more interesting, the deceased participant had an outstanding loan in the plan, total still outstanding of $18,000. How does that factor into the mix?

Thanks for any comments.

I have a client with a few "Davis Bacon" employees (most of their employees are not). Generally, the plan has a one-year eligibility wait. However, Davis Bacon contributions start from day one. All plan assets are self-directed. However, the client wants the Davis Bacon money to default into a QDIA. The affected employees could switch their money into different funds of their choosing the next day if desired. The client does not want this QDIA route for any other money types in the plan. The document is a Datair Volume Submitter; and I don't see any option under self-direction to cover this treatment for just one money type. The client could implement it as policy, but it doesn't sit right with me. Any suggestions?

If compensation is earned in the last pay period for the year but not paid until the next year, which year would this compensation fall under?

Hi all,

I'm not clear as to what the following Code Sections mean....

436(f)(3)©

436(i)(2)

Would anyone care to shed some light on them?

Also, am I correct that Section 436(j)(3)(A) means no mandatory burn of COB/PFB if assets/FT is >= 100%? For example, assume assets of $1 million, FT of $990k, COB of $100k, and PFB of $200k. No need to burn any of the COB/PFB?

TIA

.. Scott

Where would one get the information necessary for preparing a 404a5 notice? We have Mornginstar for Rates of Return, and expense ratios, but where would we get things like returns for benchmarks, what the appropriate benchmark is, as well as a trading restrictions/fees?

The recordkeepers must be getting the data from somewehre, but where? Is it obtainable on a smaller scale?

A small group of our F5558 extensions were filed before 7/31 without the EIN. Does anyone know if we can fix this or do we simply have an invalid extension and now a late 5500?

Two questions I've been asked on a topic I rarely get involved in:

In either a SIMPLE IRA or SIMPLE 401k, are employer contributions (either match or ER nonelective) required when no HCE's (including owners) are deferring?

If the plan sponsor is a sole proprietor or partner in an LLC (i.e. income is not w-2) is there any restriction on their comp different from a qualified plan?

Thanks

Is the lump sum reported on the Form 501 schedule MP simply the account balance?

Under Section 4062(e), an event occurs if: (1) ER ceases operations at a facility; (2) as a result of the cessation, one or more employees of the ER who are participants in the plan are separated from employment ("affected participants"), and (3) the number of "affected participants" is more than 20% of the active base (active base looks at participant count prior to ER cessation decision.

For purposes of determining whether you have a 4062(e) event, I am trying to determine whether you have to include individuals who have been guranteed their benefits in annuities (in other words, they received irrevocable commitments from an insruance company). For example, in a frozen plan, an employer may attempt to avoid the "event" by obtaining "commitments" for some of its younger employees (i.e., that is, they make the decision to get commitments after the decision to cease operations). By obtaining commitments, there appears to be an argument that these individuals are not "affected particpants" because they were not "participants" at time of separation and would not be considered in the numerator for purposes of determining whether there was a 20% reduction.

Thoughts?

we have had quite a few situations where a participant was cashed out and after 12 months, the check is voided because the participant never cashed it. Have any of you ever seen a circumstance where the money was redeposited into the plan, and then deposited and tracked in the plan's forfeiture account? It seems to me that simple answer here is the auto-IRA, but I've been asked to address this question.

Thanks,

Tim

When running a top heavy test for a non-calendar year plan, how do I determine the amounts that can be considered "Catch-Up" for the year, and thus disregarded for the test? Take a plan with a 10/31/2011 year end and no plan-imposed cap on deferrals: Is the catch-up amount determined using 2010 and/or 2011 calendar year deferral amounts, plan year deferrals (11/1/2010-10/31/2011) minus $16,500, something else??

Off-calendar plans make my head hurt, so ANY help would be greatly appreciated.

Thanks!

Plan year end was 6/30/2012. HCE 2011 W-2 was 12,000 and 2012 W-2 projected to be 22,500. All tests pass for pye 6/30/2011. I did not include the catch up of 5,500 in 2011 when allocating the profit sharing contribution for pye 6/30/2012. HCE's total annual addition for 6/30/2012 is 56,500. I can recharactorized 5,500 of HCE deferral as 2012 catchup and the remaining 1,000 to be returned. My question is, since I already used the full 2012 calendar year catch of of 5500 at 6/30/2012, should the HCEs 2012 W-2 be limited to 17,000.

Hi,

If an alternate payee is a spouse or former spouse, the QDRO distribution is included in the alternate payee’s income. If the alternate payee is a nonspouse, it is included in the participant's income.

How are you tax reporting these distributions for nongovernmental 457(b) plans? I have looked all over for any guidance and have found none.

If the alternate payee is a nonspouse, I assume that the distribution is reported on IRS Form W-2 since it is taxable to the participant.

If the alternate payee is a spouse or former spouse, I assume the distribution is reported on IRS Form 1099-MISC.

Can anyone confirm. Thanks!!

anyone else try logging into the IRS FIRE website today? I've been trying since this a.m. with no luck. It keeps telling me that the site is having "connection" problems and to try again in a few minutes. I know I can call but thought I'd first see if anyone else was having an issue....

Thx in advance!

The EOB has a section in here that says the following paragraph means something surprising:

© Definition of matching rate. For purposes of this paragraph (a)(5)(ii), the matching rate for an employee generally is the matching contributions made for such employee divided by the employee's elective deferrals for the year. If the matching rate is not the same for all levels of elective deferrals for an employee, the employee's matching rate is determined assuming that an employee's elective deferrals are equal to 6 percent of compensation.

The EOB is saying this means that if a plan disregards 401k over __% of pay for purposes of calculating the match, that the employee would be receviing a different rate of match for different levels of deferrals (one match rate for contributions below ___% of pay and then a 0% match for contributions above ___% of pay).

The implication from the above is that you would basically always be assuming that an employee contributed 6% of pay (i.e., because most plans will disregard at least some 401(k).

That outcome seems to be a little too ridiculous to be applied in practice. Anyone agree?

When a controlled group wants to give different (discretionary) matching contributions to different companies, what testing is required? One resource is telling me that so long as each company passes coverage and ACP, and the combined group passes, that's all you have to do. Another resource is telling me that you also have to do 401(a)(4) testing.

Does the answer change if they are separate plans for each company rather than all participating in a single plan?

2 questions:

1) Asset-Based Fees -

My impression was that we needed to include the asset based percentages for recordkeeping, custodial and advisory services on the ANNUAL notice. I know the actual dollars are reported on quarterly notices. So, if a Plan has a recordkeeping fee of 50 bps and a custodial fee of 10 bps and an advisory fee of 25 bps, this needed to be listed on the annual notice. And, if the fees were based on total plan assets (i.e. recordkeeping fee went down to 40 bps at $1 million of Plan asstets) we needed to add the whole chart. But the sample notices I am seeing from the big providers don't list anything other than an EXPLANATION that there are fees and a DESCRIPTION of what the fees represent. They are not saying the actual percentages or amounts. Does this seem OK?

2) Plan Provisions -

American Funds give Plan Provisions including vesting info, etc. Most others are giving the generic info about voting rights, etc. I didn't think we needed to add Plan Provisions to the 404a5 notices. Am I correct?

What does everyone think? Thanks!

Hello,

Looking for some help here- this is somewhat long, but want to cover all the details. This is a question in regards to 401k compliance (True Up Calculations). I am my company’s 401k Plan Administrator and this is my first year in this role. In addition to this role I have about 20 other jobs I do, so this isn’t my primary purpose at my firm, (which is probably why I really need some help!!) Also, if anyone thinks they can help, but needs more general information on this situation, please ask. (Obviously with respect to confidentiality of company and employees).

Got my plan’s trueup for 2011 back and they say we underfunded one employee. This employee came from an affiliated company in Aug 2011 and as per our plan, wasn’t eligible to contribute to plan until 3 months after hire. Employee contributed from Oct to Dec 2011. Trueup says we owe him match for the 3 months he was ineligible because our adoption Agreement has a box checked for “No Exclusions” for Plan Compensation. However, our Plan Summary (distributed to all employees) clearly states you can’t get a match unless contributing and can’t contribute until 3 months after hire. The company that provides our 401k is not budging on saying we owe, because of their interpretation of the Adoption Agreement, but if the employee did not contribute, he can’t receive a match. Obviously going forward, our Adoption Agreement needs to change to prevent this from occurring again, but I can’t seem to figure out how to avoid getting hit for this. The 401k provider says we can just not pay it and risk IRS audit, but I don’t see how this can hold up. The adoption agreement contradicts itself on several occasions and the wording is very vague. Our provider is not much help, as they are not open to hearing anything other than what they want to hear. If anyone has a link to something that can help me out, it would be greatly appreciated. I already looked on IRS website for 401k and it isn’t much help, in the sense that it doesn’t cover something as specific as this. Even if I have to give in to the provider, I want proof saying there is no other way.

Believe me, its not about the employee getting the extra money, its just the fact that my employer is not going to be thrilled with this situation; also, the simple fact that they are saying, “Ok your plan says this, but we say this, so give us money. By the way, we could have explained this to you when you completed the Adoption Agreement, but we figured it would be lots of fun to jam you up with compliance issues that we can’t really even back up!!”

My role as 401k Admin is a small part of the multitude of roles I have at my company and I was sort of “thrown into it”. My vast experience in Compliance consists of me passing the Series 63 in 2008 and never using any of it again! The person before me was employed for the sole purpose of payroll/401k admin, so I can’t spend hours upon hours researching this to prove the provider wrong, nor should I have to. Not really sure why this is so complicated. We cut the provider a check for holding our plan assets, but yet I don't see the benefit bc we are doing all the legwork. Forgive me for being cynical, I just think that the situation is ludicrous; this is also not the first time I have had to butt heads with them. We’ve had employees come during the plan year and not contribute for 3 months and we weren’t hit for this before. I think someone on the other side is wrong, but I need help proving them. Someone please point me in the right direction, as this has been an ongoing fight for 2 months!! Thank you in advance!!

I knew I should have stayed in bed this morning! Very strange question here...

Employer has DB plan with 7/1-6/30 plan and limitation year.

Employer also apparently has an ERISA 403(b) plan with a calendar year limitation year. I have no idea, at this point, what the 403(b) plan language says about limitation years if more than one plan is maintained by the employer.

The DB plan has some fairly standard (or at least it used to be) language that all plans of the employer must have the same limitation year.

This isn't really a document error - nothing wrong with the document language. It's more of an operational error than anything else, but what is the operational error to correct? There's no actual 415 violation involved!

Would you just amend that language out of the plan and be done with it? Amend and submit for a determination letter? Ignore it until next go-round with updating documents?