We don't work with these but a referring advisor is asking - they have a client who started a simple IRA July 1.  The payroll company says compensation for the full year is counted.  So that if the person contributes 6% from July through Dec they will end up at 3% deferral for the full year and get 3% match on their full year pay rather than 3% on their pay from July through Dec.    I figured the reason the IRS imposed the Oct 1 set-up deadline was to make sure employees got the 3% match for at least 3 months since the owner could make the max deferral within those three months.   The payroll company disagrees with that apparently.

Comments?  Thank you.

I posted here about this matter earlier, but there have been more developments.

Here is the original post:  

In short, the Participant kept disputing the Order, but was unable to provide anything that would prevent the Order from being a QDRO and processed.  We had a valid, court-certified order and we began the procedures for processing it.

Now, the Participant has started a claim for benefits under the Claims Procedures of the 401(k) Plan.  Accordingly, we are putting on hold making any payments to the Alternate Payee.  Is this the appropriate move?  We are legally obligated to follow the Claims Procedures, but those take time.  The Order does not provide for any earnings/losses on the amount awarded to the Alternate Payee, so the delay is actually costing the AP money (although, maybe not, given the market).

Should we exhaust the Claims Procedures before we process the QDRO?

Hi

DB/DC combo plan.

Termination of DB is a possibility (PBGC covered). Assume freeze date 7/31/2022 (small enough for 15 day rule) and assume termination date 9/30/2022. Distribution for the DB may or may not happen by 12/31/2022, possibly spills into 2023 as the rates seem to be getting better for 417e.

DC has 401k/SH/PS options.

What salaries should be used to determine the DC SH and PS portions as well as combo testing?

Thank you

Good morning, 

Is anyone else having any trouble getting in touch with Datair?  We do not seem to be able to raise them via any normal means - email, phone, etc. and we were wondering if anyone else is having trouble.

Thank you!

I hope BenefitsLink neighbors will help me with an unscientific survey. Any results will be used only for a research project. And I’ll use responses only anonymously and in the aggregate.

What percentage of your work time is used in a proceeding that requires you to file a Form 2848 or other notice of an appearance before the IRS?

(For example, my estimate for 2006-2021 is about 3/100 of one percent. That is, about 99.97 of my work time did not involve defending an IRS examination or presenting a request for a ruling or determination.)

What is your estimate of the percentage of people who regularly provide advice about retirement plans who have never filed a Form 2848 or other notice of an appearance before the IRS?

Hi. Our prior retirement plan provider (VALIC) sent us two small checks (one for $1 and another for $17) stating that they charged the wrong interest rate on escrow amounts held under the contracts which were securing outstanding loan amounts under the plan. Thus, they are refunding for the participants that were affected. Does anyone have guidance on what to do with these checks? There is no indication about who these relate to.

I've done this before but it was not during a restatement year.  A small plan (husband, wife, 1 employee), husband and wife are divorcing.  Can I simply prepare the Cycle 3 restatement docs and take her off as a trustee?  Or does she need to formally acknowledge and agree to no longer be a trustee in amendment form in addition to the restatement?

Thanks

One of the requirements to be able pass coverage using the Average Benefits Percentage Test is to have a reasonable classification.

We have a cross-tested profit sharing plan that does not pass 410(b) 67%.

In terms of the allocation, the plan indicates that each participant is in his/her own group. Does that by itself mean that the plan does not have a reasonable classification and therefore cannot use the average benefits percentage test?

Thanks!

Client sponsors a safe harbor non elective and wants to add voluntary contribution to their accounts but no NHCEs will be making voluntary contribs.  Plan ill need ADP testing, that is a given.

With voluntary contribution made only for HCEs, will need ACP test which obviously will fail w/o  QMAC. If 3% QMAC for all employees will pass ACP, is a flat % of comp allowed?

Client understands the elective contributions will be subject to ADP testing.

Can plan have ADP as well as ACP testing each year??

Suppose the following:

A 401(k) safe harbor retirement plan covers two related companies - Company A and Company B.  Employee has ownership in both Company A and Company B.

Employee has wages of $30,000 in Company A and defers the maximum pre-tax deferral to the retirement plan.  Company A matches those wages up to 4% for a match of $1,200 ($30,000 x 4%).

Employee also has wages of $100,000 in Company B.  No employee deferrals here since those were already maxed in Company A.

Do the wages get aggregated since the Companies operate one plan such that the wages in Company B should also be matched?  Does Company B owe a match to Employee of $100,000 x 4% = $4,000?

A reference to authoritative literature on this would be helpful.  I have searched with different terminology but have not found what I need.  Thanks.

I know the IRS has said you can define your otherwise excludable employees either by direct reference to 410(a)'s statutory dates, OR you can use the plan's entry dates, OR you can ignore entry dates (like one might do under a strict reading of the carve-out rule).

I normally like my exclusions as defined under 410(a).  But, I've got a testing situation where a 2021 HCE was hired early January 2020, made his 200K in earnings, became match-eligible as of APRIL 1, 2021 (one YoS, age 21, quarterly entry), and then terminated a few weeks later after becoming eligible for a big hunk of match.  So, before his July 5, 2021, latest possible entry date under 410(a).  And therefore, I'd normally deem the guy excludable. 

This is not for ADP purposes - his plan is safe harbor.  

But, it needs to be aggregated for 410(b) purposes with a second plan within the entire controlled group.  The other plan is slightly different because its match eligibility is one YoS, age 18, and monthly entry dates.  (And its SH match formula is slightly different, too.)

The hundred dollar question (oh, we'll bill them more than that) is:

Should I be defining my excludables based on whichever plan the employer sponsors?  For instance, since my HCE guy is in the quarterly entry plan, he's not excludable because he properly came in on April 1 after his year.  

But let's say I have two employees, one each at separate companies in the separate plans.  Let's say they both started 5-15-2020 and terminated 6-12-2021.  The guy in the quarterly-entry plan would be excludable (terminated before 7-1) and the guy in the monthly-entry plan would not (entered 6-1), presuming I'm using a "plan's entry date" approach.

Does that sound like an appropriate approach, as opposed to using one set of criteria for both groups of employees?  I have to pass the average benefit percentage test for the quarterly-entry plan because its ratio percentage is in the 40s (SH % = 23.75) so I need to be sure who's in the "main" test out of both groups of employees. 

And I don't want that lone HCE on his own, as the otherwise excludable test for his plan would also fail 410b and require extra employer contributions for ABPT purposes....maybe a lot.

--bri

Old instructions for changing a plan name or address said to send a letter or fax to the office that issued the EIN, and indeed there were several offices for various geographic areas. Nowadays, we get EINs online. There is a single fax number and address (Cincinnati) on the newest instructions if you want to get an EIN that way; not sure if that would work for a change.

Further muddling things is the fact that this particular EIN has likely been de-activated, with no activity since 2017. The address for re-activation is in Ogden UT (different fax from the Cincy address for changes). 

Any experience with changes and reactivations at the same time? After googling all of this for an hour, I'm inclined to just get a new number.

For 30+ years, I drafted plan documents for clients and consulted them when issues arised.  Most of my clients (small professional practices) used a local investment adviser/broker to invest plan assets, and a local accounting firm to perform allocation/testing computations and Forms 5500 and SARs.

Some time ago I notified my plan document/consulting clients that I would no longer be a provider of plan documents, though am yet available for design, operations and fix-it consultations.  Since July 1, I've been contacted by a few 'procrastinators' looking for a source of just plan documents for Cycle 3 restatements and later updates.

If you so provide documents separate and apart from other services, and would be interested in either referrals from me or providing a document with me involved in the design, please e-mail me at johnsimmonslaw@gmail.com.

Thank you

Hi

Sorry if this was discussed before.

My first age 72 calculations for 2 different scenarios and want to confirm my understanding:

Scenario 1: Participant turning 72 on 9/1/2022, first RMD is due by 4/1/2023 and based on 1/1/2022 AB (fully vested)

If they want to take by 12/31/2022, can they take 1/1/2022 AB*12?

Scenario 2: Participant already receiving RMDs for the past few years. The past # were based on old tables and they do not need to be adjusted, correct?

The new AB portion will be calculated based on the new tables, correct?

Any corrections/comments are appreciated.

Thank you

Large welfare plan client submitted DFVCP payment in 2020 but has never submitted a filing (we do not have a service preparation contract with this client). The group likely crossed 100 participant threshold in 2013 or 2014, but not 100% sure without doing more research. What is their best course of action in this situation? Should they reach out to an ERISA attorney to assist?

Thank you in advance! 

A participant who also happens to be a Plan Trustee took out a plan loan a couple of years ago.  The participant terminated in 2020, but was not removed as a Trustee until 2022.  The documents specifically provide that a party in interest under Erisa 3(14) who terminates employment with an outstanding loan will be treated as an employee whos employment has not terminated and for any other applicants, the loans become due and payable at termination.  Our question is this.   At the point this former employee was removed as a Trustee is that loan due and payable?

Thank you

Our plan currently has a discretionary true-up match with no allocation service requirements.  Is it ok to amend the plan for the current plan year to add a last day of employment rule or do we have to wait until next year? We want to exclude terminated employees from receiving the true-up match for 2022, if the company decides to make one.  Thanks.

Any thoughts on whether individual annuity contracts distributed when a 403(b) plan terminates must limit distributions to one of the events that would permit a distribution from a 403(b) plan (e.g., termination of employment)?

On the one hand, Rev. Rul. 2020-23 indicates that "The distributed ICA is maintained by the custodian as a § 403(b)(7) custodial account that adheres to the requirements of § 403(b) in effect at the time of the distribution of the ICA until amounts are actually paid to the participant or beneficiary."  (While this ruling relates only to a plan funded with custodial accounts, not one funded exclusively by annuities, presumably similar rules would apply under Rev. Rul. 2011-7 relating to plans funded by annuities.) This might be interpreted to suggest that the individual contract must adhere to the distribution requirements of a 403(b) plan, e.g., distributions are available only upon certain events including termination of employment.

However, I see two arguments against this interpretation.  First, the participant is entitled to take a cash distribution upon termination of a 403(b) plan.  Thus, allowing a participant to take a cash distribution from the annuity contract after termination of the plan would appear to adhere to the requirements of § 403(b).

Second, the revenue ruling provides that "the employer has no material retained rights under the distributed ICA after it has been distributed."  If the participant's right to a distribution is contingent on the employer certifying that the participant has terminated employment, that would seem to be a material retained right.

We are currently dealing with an annuity provider that claims the employer must continue to provide it with notices of when employees terminate employment, and that distributions will not be made under the individual annuity contracts until termination of employment occurs unless there is another basis (e.g., age) for allowing a distribution.  Are other providers taking this position?  And has anyone ever encountered the IRS taking this position?

Just curious if anybody has seen any regulatory guidance or discussion around steps to comply with the transparency in coverage (TiC) rules' requirement to post a link to required rate information on an employer's publicly accessible website in a situation where the employer has no website at all.  I understand that employers can contract with third parties to have them host the information on other websites but under the rules the employer still has to post a link to the other third-party website on the employer's own website so that doesn't solve the issue.  I have seen a few articles that touch on this question and simply advise that employers with no website should consult ERISA counsel.  Unfortunately, the company's ERISA counsel was apparently absent the day they covered this topic in law school.  I don't know what it might cost to create a basic public website for the company that might at least link to a third party site if need be but it strikes me that may be a better way to come at this rather than looking for some exception.  Appreciate any thoughts or suggestions.