401k plan excludes post-severance compensation from definition of compensation for purposes of deferrals and matching contributions.  Employer improperly withheld deferrals and made matching contributions on last paycheck received after participants terminated.  What is the correction?  Does it depend on whether the participant has received a distribution of their plan account?  I initially assumed the correction would be to return the improper deferrals to the participant (and issue a 1099?) and forfeit the matching contribution.  That works if the participant has not yet received their distribution.  If they have already received their distribution, then they have received those improper deferrals - is the correction then to issue a 1099 for the matching contribution only (assuming they have already received a 1099 for the distribution of their plan account)?

SH 401(k) plan (SH NEC), two entry dates (Jan-July), eligibility is age 21, 1,000 hours; plan is top heavy.
Employee hired 6/8/2020, worked 986 hours in 2020. Employee worked 300 hours in 2021 before stopping full-time work 5/21/2021 (so over 1,000 hours in first 11 months).
Employee was then available on as-needed basis.  Employee worked 156 hours between 8/5/21 and end of year. (total hours worked in 2021 was 456 hours)
Did this employee enter the plan? She had 1,000 hours in first 12 months but was not there on the entry date although she was available "as needed".

Is she entitled to any contribution for 2021 (such as SH)? What about top heavy?

Thanks!

I've got a calendar-year pooled 401k/PS plan where the trustee has asked for an interim valuation because the assets have (of course) dropped by a significant percentage since 12/31/21 and participants with a significant total of the plan's assets are looking to take a distribution.  I've already gone over the pros and cons, the "if you do it when it's down, you should make sure you consider doing it when it's up" speech, etc.

My Q is... obviously, the terminated participants who are looking for a distribution should get updated statements to reflect the updated amounts that are going to be distributed to them.  But what about the active participants (who are not eligible for a termination distribution)?  Is there any reason to give them statements as of 5/31/22 that show this ~20% drop in value?  Since it's not EOY, do they need to get this interim valuation statement?  The plan allows no ISWs or hardships (except RMDs, which wouldn't be affected by this interim valuation).  Thanks.

Is it legal for an employer to mandate a minimum annual HSA contribution from its HDHP-participating employees? Employee HSA contributions are deducted from employee paychecks on a pre-tax basis via a cafeteria plan.

Hoping someone can share their knowledge as to the deadline for adopting an amendment to a preapproved governmental 401(a) plan to update the plan document for the final hardship regs/BBA '18.  Thanks!

I have a plan sponsor that wants to amend the eligibility requirements and entry dates to allow a specific employee to enter the plan.  After that employee enters the plan, the plan sponsor wants to amend the eligibility requirements and entry dates back to what they were.

Is this allowed? If not, why?

We have a client (A) that purchased a division of another company (B) and wants the employees of that division to "merge" into A's existing 401(k) plan. B's TPA told our client (A) that they could do a spin-off. 

Our general understanding of a spin-off is that it results in a new company and a new 401(k) plan. Neither of those things are happening.

Additionally, company (B) currently sponsors a 401(k) plan and since only one division was sold to our client they will not be terminating their plan. 

We don't see how this could be treated as a spin-off or a merger. Can anyone give insight as to when a spin-off is an appropriate measure and if there is anyway that this would not be a distributable event for the participants of Company (B)?

Thank you!

One of the accounts has inquired about a QACA SHNE 401(K) for a huge home health care agency, composed of office staff, home health care workers, and nurses.

From what I'm reading from ERISA Outline Book, but possibly incorrectly, each group can either be in  one plan or 3 separate plans - as long as each class has a uniform percentage, with a minimum of 3%.  All requirements for safe harbor status will be met. Each plan would need to pass 410(b)?

I do not believe the plan could be effective mid-year as the 30 day notice was not met, but to be effective for 2022, as long as the plan is set-up, doc prepared and signed by 9/30.

No profit sharing.

Have a client who is a physician who is paid as an independent contractor by a hospital and two medical clinics. He has his own corporation that sponsors a defined benefit pension plan and he is the only participant.

He just got hired as an employee at a VA Hospital. They have their own 401(k) plan. However, he will continue to do work for the two non-related medical clinics that pay his corporation. Since he has no ownership in the VA Hospital, no ownership in the medical clinics I would think no controlled group or affiliated service group exists and there should be no required aggregation for testing purposes.

Does anyone disagree?

Thank you.

Sole proprietors with an existing plan can make 2021 401(k) as well as profit sharing contributions up to their extended tax filing date in 2022.

Sole proprietors can adopt a new 401(k) plan in 2022 for 2021 (up to extended tax filing date in 2022).

Can they make both 401(k) and profit sharing contributions to the new plan in 2022?

This statement was recently made by a TPA. related to PCORI fees in 2022: 

Generally, health care Flexible Spending Accounts (FSAs) are not required to file a Form 720 unless the employer (and not just the employee) makes contributions to it that exceed the lesser of $500 annually or a dollar-for-dollar match of the employee's contribution. 

I did look as the IRS Chart chart summary. and FAQs Related Item: Patient-Centered Outcomes Research Trust Fund Fee: Questions and Answer and  the final regulations , but do not see the above exception.  Does anyone have insight to the above bold exception??

I did see the follow exceptions for FSAs:

Special rule for coverage under multiple applicable self-insured health plans:

• Generally, separate fees apply for lives covered by each specified health insurance policy or applicable self-insured health plan.
• However, two or more applicable self-insured health plans may be combined and treated as a single applicable self-insured health plan for purposes of calculating the PCORI fee but only if the plans have:
  • The same plan sponsor; and
  • The same plan year.

Special counting rule for HRAs and FSAs: 

• Plan sponsors are permitted to assume one covered life for each employee with an HRA.
• Plan sponsors are permitted to assume one covered life for each employee with an FSA.

Q5. Which individuals are taken into account for determining the lives covered under a specified health insurance policy or applicable self-insured health plan?

A5. Generally, all individuals who are covered during the policy year or plan year must be counted in computing the average number of lives covered for that year. Thus, for example, an applicable self-insured health plan must count an employee and his dependent child as two separate covered lives unless the plan is a health reimbursement arrangement (HRA) or flexible spending arrangement (FSA).

Thanks for you review and reply in advance!

Plan terminates effective 5/2022.  After testing is completed it is determined that there are 415 excess amounts.  The plan removed them  from the pretax source.  How does this impact the 402g limit for 2022?

Participant deferred $8000. 

415 excess is $3000.  ($2500 is distributed due to losses).

What can the participant contributed on a pretax basis for the remainder of 2022 (assume not catchup eligible)?

I administer a plan that provides employer contributions for employees working less than 1000 hours but more than 500.  When do the vesting provisions of the Secure act take effect?  I have two participants that would be 100% vested under the new law.

My understanding is that in years past HR departments would not ask for Marriage Certificates.

When Marriage Equality became legal, some departments started to ask only same-sex couples for their Marriage Certificates, which ultimately was determined to be discriminatory and not a recommended practice.

Any thoughts if HR departments are now asking for Marriage Certificates from all new hires these days?  This would be mostly related to setting up their medical benefits with spouse coverage included.

A plan that we administer has 2 trustees and has a major mutual fund company as its recordkeeper. Both trustees have left the company (acrimoniously) for reasons that are not relevant here, but both of them have put in online requests for distributions from the plan. At this point, the company has not yet named new trustees, and the old trustees remain on the recordkeeper contract, and would be the ones responsible for "approving" the withdrawals on the recordkeeper website.

Trying to figure out whether, as the TPA, to approve the withdrawals, and let the now terminated trustees approve them. Would there be some legal recourse from the plan sponsor as to why we allowed these funds to be distributed, even though they cannot be assigned?

Thanks for any replies.

We have a group of employers that are somewhat related, but definitely not considered the same "Service Recipient" under the 409A Regs.  But, they all have identical Nonqualified Plans.  We would like to combine the plans into a single plan.  We would take pains under the Plan to make sure the definition of "Employer" was a reference to the individual Employer the Service Provider works for, including that the Employer is responsible for benefit payments out of their own general funds, and the Employer's creditors have access to those funds in the event of bankruptcy/insolvency, etc.  Does this work?

Some concerns I have are:

• Say one Employer goes bankrupt and their creditors wipe them out so they can't pay benefits under the Plan -- is there any risk the other Employers are on the hook for benefit payments for the bankrupt employer?
• Say one Employer goes bankrupt, would their creditors have any claim over accrued benefits owed to the Service Providers of other Employers under the Plan?
• Are there any other rules that would prevent a combined Plan just as a matter of statute or regulation?

Thanks in advance!

We're a small 401k platform (a startup) and we're looking to bring on a TPA to either act as a consultant, or to work with us on a per plan or monthly basis. I'm not exactly sure where to start looking, so any guidance would be appreciated! Thanks!

A plan being restated for Post-PPA will update fees for individual participant expenses. This restated plan is effective on 1/1/2022. Since the SPD reflects the updated fees, is that sufficient to satisfy notice requirements for fee changes, or is it necessary to issue a notice notifying participants of this change to be effective 30 days after the notice is given?

Considering gross compensation for plan purposes is Box1 on the W2 + deferrals + section 125 + bonus + commission.  What about spousal travel and group term life? Are those also included in gross compensation? 

I got a DRO today for a participant in Louisiana.  The DRO says there is no divorce and that in LA, a community property state, the DRO can be a mechanism by which a participant can "donate" to the spouse "of his undivided interest in a thing forming part of the community."

Anybody ever come across anything like that?  Everything else in the Order lines up nicely to form a QDRO.