A plan with a pooled arrangement allows inservice withdrawals for amounts that have accumulated for at least two years in the plan. What would be the best way to determine the amount for such a withdrawal at this time since account balances are lower now than they were two years ago due to the market's volatility over the last few months?  Since there won't be a 2022 contribution, basing the withdrawal on the balance from two years ago could result with a distribution from a participant's account exceeding their 1/1/22 balance.  Doing an interim val on this sizable plan just because one participant requests an inservice withdrawal seems unreasonable - I'm hoping there's a better solution. 

So we asked Relius why we could not get our Lifetime income numbers to work and they said:

Quote

Prior to generating any reports or results, the user must download needed tables and updates into Relius. These are global and are done by choosing Utilities / Update Global Tables from the main menu. The two tables are (a) the Ten-Year Uniform Life and (b) the Ten-Year constant maturity Treasury (CMT) securities yield rate for the first business day of the last month of the period to which the benefit statement relates.

These rates must be updated monthly and are available from FIS. They are typically available for download by the fifth business day of the following month

What they don't mention is WHERE we get the rates.  Anyone know?

Also would anyone know what the math is to caluclate the benefits if say I needed to do it in Excel?

          I have a 401(k) Plan that had a required contribution of about $55,000 for Plan Year 2020. This required contribution didn't get deposited until 4/22/22. Given the pandemic and a downturn in business, even though the client wanted to make this contribution in a timely manner, the soonest they were able to make the deposit was late this past April. I would like to hear from someone who has had a client in the same situation (as I am sure that this has got to be a somewhat common situation) and what they did about it. Also, if the IRS got involved, what relief were they willing to give.

Thanks for the help

Can plan allow distribution event to be "later of" separation from service or a specified date? 

Hello everyone,

My understanding is that the 2% Shareholder Insurance Premium is included in Code 415 Compensation (aka Current Includable Compensation), W-2 Wages (aka 6041 and 6051 Compensation) and Wages under Code 3401(a) (aka Wages for Income Tax Withholding), but it's excluded from Code 415 Safe Harbor Compensation. I want confirmation that the 2% Shareholder Insurance Premium is a taxable fringe benefit (per IRS Publication 15-B) that is excludable from Plan Compensation under the exclusion "All fringe benefits (cash and noncash), reimbursements or other expense allowances, moving expenses, deferred compensation, and welfare benefits." Thank you.

I have a plan where all the NHCEs who are eligible for profit sharing have terminated and are 0% vested. I am trying to max out the owner and his wife to their respective 415 limits via a profit sharing contribution using a new comparability formula which I can easily do; however, I have to give the employees a roughly 20% profit sharing contribution. Luckily, they didn’t get paid very much in the current year and the owner and his wife are getting over 95% of the employer contribution. I know I can’t rely on NHCEs for general testing if they don’t have some vesting. What are my options to make the employees somewhat vested so I can rely on them? I have heard of an amendment that you can make to give them testing? If you can do this, do you just list the employees names in the amendment and state what level of vesting you are giving them? Can you just give the employees you are relying on more vesting but exclude others? 

An ESOP's normal form of distribution is a 5-year installment; the plan document allows that the remaining payments may be accelerated to a single lump sum distribution at the Plan Administrator's discretion.  The sponsor then adopts by resolution a distribution policy that restricts the acceleration to terminated participants, depending upon available cash flow; retirees will be paid installments.  Their ERISA counsel insists that this class-based distinction is non-discriminatory, and besides, the retirees benefit by continuing to enjoy gains from the future stock value growth.

As of 12/31/21 there are three retirees(2 non-hce & 1 hce) paid by installment; and two terminees they want to accelerate, 1 non-hce of <$5k and 1 HCE(former 5% key) with a $750k account balance. The retirees installments are less than $300k, and their total balances are less than $700k.

1.  Is the determination to accelerate distributions subject to BRF?

2. How would you structure that test, amounts distributed this year vs total balances, ratios of eligible distribution amounts, other?

We have a 401k/PS plan that provided 100% vesting for Employer discretionary PS contributions.  When we prepared the cycle 3 restatement, we included a change in that vesting schedule making it 2-6 graded. The restatement was effective 1/1/2021 and the employer signed it 4/15/2021.  Eligibility requirements are 1 yos/21 yoa and 1/1 7/1 entry dates.   One employee hired 1/21/2020, so met eligibility at 1/21/2021 and entered the plan 7/1/2021.  Does this participant have to be 100% vested following the pre amendment provision or is he subject to the amended graded schedule since he did not become a Participant until after the later of the restatement's effective date or adoption date?

The plan document makes reference to an Employee who is a Participant as of the later of the date such amendment is adopted or the date it becomes effective being required to have his Vested interest as of such date not less than it would have been without regard to such amendment.

Thank you

A plan's normal retirement age/date is the later of age 65 or the fifth anniversary of the commencement of participation. 

The Plan also provides for the one-year hold-out rule for both eligibility and vesting. 

Facts: Employee is over 70 y/o but has not yet reached the fifth anniversary of participation. Assume the employee is eligible to participate and has not yet vested in the account. The participant incurs a break in service and is not expected to ever work 1,000 HOS again. The participant, therefore, is suspended (likely indefinitely) from participating and will not again earn a YOS for vesting purposes. 

Question: Even though the participant is suspended from participating and earning vesting credit due to the hold-out rule, is the clock still sticking on the fifth anniversary to each the normal retirement date such that the participant will become vested five years from the first day of the first plan year in which the participant entered the plan (which has not yet occurred)?

Where in EPCRS does it indicate that contributions made just for HCE's due failures applicable to HCEs are not going to cause nondiscrimination problems.

So HCE's deferral election was not implemented.  QNEC / Match make up not required.  There must be something in EPCRS that says if I correct for an HCE the correction does not create a nondiscrimination issue.  Where is that?

A pension plan is terminating.  One of the participants who has a distribution over $5,000, has to get a waiver of the J&S annuity from her spouse in order to get a lump sum distribution.

Problem is:  spouse is incarcerated and has been so from the time they were married.  How could she get his waiver especially if she has not been in direct communication with him for years? Can she get some sort of court order that the marriage has been abandoned?  Is there a precedent case for this?  

Company A acquires Company B in a stock acquisition.  Employees of Company are immediately moved to Company A, Company B dissolves.  Company A sponsors a retirement plan; the plan does contain provisions that employees acquired in a 410(b)(6) transaction are excluded through the transition period.  A couple of questions --

• Does the fact that employee were transferred to Company A negate the transition period in regards to those employees?  I don't think it does.  The employees were still acquired as part of a 410(b)(6) transaction; it is essentially what happens in an asset sale.
• Company A's plan was restated for Cycle 3 after the acquisition; no change in coverage as a result of the amendment.  Does the restatement end the transition period?  I am thinking that the restatement does not end the transition period, but I am a little more uneasy about this part.

Thanks for any guidance.

In order to pass 401(a)(26), can you give one non-highly fully employed participant a greater benefit eventhough it is not the stated formula in the plan?

From EPCRS Appendix A .05(2)(b)

"Under this correction method, a plan may not be treated as two separate plans, one covering otherwise excludable employees and the other covering all other employees (as permitted in §1.410(b)-6(b)(3)) in order to reduce the applicable ADP, the corresponding missed deferral, and the required QNEC".

This has always made my mind bend in uncomfortable directions because testing everyone together (i.e., not testing OE's separately) always reduces the ADP for the NHCE's and thus reduces the correction.  I am never excluding the otherwise excludables "in order to reduce the corection."  Excluding the otherwise excludables would INCREASE the correction?

Is it possible the authors just don't know anything about running ADP tests?

Plan definition of compensation excludes reimbursements, etc. The only participants that have a reduced compensation for 2021 are both owners, so I don't think there is any problem in terms of 414(s). For the purpose of 401(a)(4) testing (on a benefits basis), do I have the option of using total compensation as testing comp? In this circumstance that would create an advantage since it's only 2 HCE's that have plan comp less than total comp.

Those of us who advise retirement plans’ administrators often turn to two articles of faith:

1.    Federal law generally, and ERISA particularly, supersedes and preempts most State laws.

2.    A retirement plan’s benefit cannot be assigned or alienated (except for a QDRO or the plan’s offset against a breaching fiduciary’s benefit).

Those points often frustrate people who deal with accounts not so privileged.

Imagine a participant dies with an almost-zero bank account and no other asset beyond her individual account under a retirement plan.

Imagine a creditor recognizes the only way to get paid what the decedent owes is by pursuing the retirement plan.

Has anyone experienced a situation in which a creditor tried to get a retirement plan to hold off on paying a beneficiary, asserting some right against the retirement plan?

If so, did the plan’s administrator get rid of the creditor’s effort quickly and easily?

Or was it a pain-in-the-neck to make the creditor go away?

Did the plan’s administrator act by itself, or did they use a lawyer to shut down the creditor?

Affiliated Service Group question:

Attorney with his own LLP and his own retirement plan, moves into a new law firm's offices, and his name is put onto the firm's website. He has access to the Admin staff.

Law firm however treats him as an independent contractor instead of W-2 employee.

Law firm does not intend to give him retirement benefits.

I just get so dizzy from these controlled group concepts.

Not sure if he needs to be included in nondiscrimination/coverage testing with the existing law firm's retirement plan (after the first year as Otherwise Excludable).

I again apologize for all the questions, as I'm trying to learn and help out in my office.

When we have a DC/DB combo plan, the 7.5% Gateway (I know it can be less than this, but generally is viewed as the "Safe Harbor" comes exclusively into the DC Plan correct?  I just wanted to make sure.

Thanks!

A client is instituting a match for the first time. They requested the plan implement a quarterly vesting schedule.  I have never heard of quarterly vesting. I asked a few colleagues and no one has heard of it.  Has anyone here heard of this before?  If you have, can you explain how it works or where I could learn more about it.

The plan is currently being restated on a pre-approved document, which offers the standard vesting options. I expect a quarterly vesting structure would be permissible on a custom document.  So, we could modify the pre-approved document and treat it like a custom document going forward. Any thoughts about that?

Questioning myself a bit on this. Suppose you have a plan that allows immediate deferrals, but for eligibility requirements for the safe harbor nonelective, wants to have 3 consecutive months with 250 hours to be eligible. Now, automatic top heavy exemption is blown, but that's immaterial for this plan. Shouldn't be any problem with this, if you pass testing using the OEE, right? Or is there something else I'm missing? 

Most likely this isn't going to be an issue anyway, as prospective client most likely doesn't have any HCE's...