Good morning to all,

A participant in one of our plans received a hardship distribution in March of 2019 from her 401(k) account.  At that time, she was required to "sit out" from making subsequent deferrals for 6 months.  The question is, whose responsibility was it to resume her deferrals?  Is the burden on the participant to notify HR that she would like to start back up, or is the burden on the HR department to contact the participant and ask her if she would like to resume deferrals?  Or even possibly, was HR supposed to automatically resume her deferrals after 6 months based on prior instructions from the participant given prior to the hardship distribution?

In any event, she has not made deferrals since that hardship distribution, a little over 2 years ago, and is now complaining to the new financial director that her deferrals should never have been stopped because "she never signed a waiver asking not to participate".  We are trying to help figure out whether any back deferrals, match, and interest are due to her from the date 6 months after the hardship withdrawal was made through today.

I have researched this various places and cannot find this particular question addressed.

Thank you,

ldr

Can a cash balance plan have a full calendar year plan (i.e., effective date of 1/1) if the entity only came into existence in the middle of the year?

Are prototype documents allowed to use language that effectively allows for each participant to constitute their allocation group for purposes of a profit sharing allocation?  Effectively the employer is allowed to choose the amount each participant gets in terms of a profit sharing allocation... assuming you are passing top heavy and whatever testing is necessary (general test/cross test).  I have only administered volume submitter and individually designed plans. I have read through 2 or 3 adoption agreements and have not seen anything like this in a prototype document.  

The IRS letter suggested DFVC is an option if the DFVC requirements are met.  The only requirement I could find is that the plan has not been contacted by the DOL about the late filing.  Which they have not, but the IRS has contacted them.

Can they use the DFVC then in this instance?

Thank you

I have a client who is hoping their audit requirement is eliminated for 2021.  The active/eligible participants plus inactive with a plan balance as of 1/1/2021 are 98.  A fixed match true-up was calculated and funded in 2021 for those eligible in 2020.  Included in the true-up were 3 participants who terminated in 2020 and had no plan balance as of 1/1/2021.  So their plan balance was zero on 1/1/2021, then the small match true-up was deposited in mid-2021 and then they had that paid out as well.  So they had no plan balance as of 1/1/2021 unless you count their true-up A/R.  If we count them as participants with a balance as of 1/1/2021, then the count is 101.  The plan reports on the 5500 and audit on a cash basis.  

I suspect everyone will say get the audit to be sure and that is what I wil tell them.  I did look at 1/1/2022 as well which is clearly 98 and so 2021 will be the last year (for now) which I guess is the silver lining.

Just curious about comments at this point.  I will tell the client to get the audit.

Tom

We received a Medical Support Order in the form found on the HHS website:  https://www.acf.hhs.gov/css/form/national-medical-support-notice-forms-instructions

1. The form seems a bit lacking to me.  The rules for QMSOs require the Order to include, among other things, (1) a reasonable description of the type of coverage to be provided, and (2) the period to which such order applies.  This Order doesn't seem to do either -- they checked the box for "medical" coverage, but we have several options, and I don't see a place to put down the period of coverage anywhere.  That said, it is a model document from the Federal government, so has it already been deemed sufficient?
2. Since we have several medical options, do we just contact the participant and tell him he has to pick an option that provides for dependent coverage?
3. If the participant signs up, and he is married, can he also sign up his spouse?  I would think this counts as an open enrollment window for him and the dependent, but not for the spouse.
4. If the participant is on his spouse's insurance, can he just add the dependent there rather than having to enter our plan (I assume this would require a different QMSO relating to the spouse's plan)?

One of my clients is adding Union employees to the company.  It will take them over the 120 count.  Was wondering is there a way to set a separate plan to avoid this.  Although the same owner will own the company although he doesn't participate, still a controlled group because of it, so I'm thinking no but am I missing a way to avoid this?  BTW it's a plain vanilla 401(k) plan.

I'm just not feeling comfortable about this one and would appreciate other's thoughts.

Company M is an LLC taxed as partnership.  Two owners, 50/50. Only one of the owners (Owner A) is actively working for Company M, the other owner works for a different company.  Owner A also owns 91% of Company K.  I'm told Company K has no employees.  Company M only has one employee (Owner A), all others are independent contractors receiving 1099's.  It is a software development firm and the website shows 12 people as "employees"  (supposedly all but the owner are 1099 contractors).  Owner A also has a owner-only 401(k) plan with an investment firm and wants to open a cash balance plan with us. 

Also found out that Owner A established residence in NY and very recently became a US citizen.  He has since returned to France and wants to use his address in France for the plan document and 5500.

It's been difficult to get details on this, so my comfort level is low.  Other questions I should be asking or information I should request?

Any help is appreciated!

Company A has a standard 401(k) no allocation restrictions for match - passes coverage

Company A purchases Company B ( stock purchase) will be a controlled group. Company B has a Safe Harbor 401(k) and passed coverage before the purchase.

Intent is to maintain two separate plans. Company B may move to non Safe Harbor.

Since all employees of the controlled group are deemed employees of Company A, am I correct is saying coverage testing must be satisfied for each. However since one is  safe harbor and one is not, cannot aggregate.  

Company A HCE 56 Company B HCE 6

Company A NHCE 343 Company B NHCE 1043

Based on these number Company A will fail Coverage.

If after the transition period Company B is amended to a standard 401(k) with the same eligibility and match as Company A, is the coverage testing issue a moot point as long as each passes coverage separately/

This hurts my head!!

As I understand it, sole proprietors and partners are considered to have their income determined on the last day of the year.

How does that work in a short plan year?  I have two examples:

1)  Plan year 10/1/21 to 12/31/21.  Effective date 10/1/21.  Does everyone use pretty much 1/4 of their comp, but the owner gets to use all of it (subject to the comp limit and 415 limits) because it was all "earned" on 12/31?

2)  Plan year 1/1/21 to 6/30.  Everyone gets comp for first half of year, 415 and comp limit are pro-rated.  But Partners get zero comp, therefore zero benefit because they earn their comp 6 months later?

Hi

Calendar DB plan with EOY valuation. 1 Lifer

Date of termination 4/1/2022.

Need to run the final val. 

Under automatic, is my new val date 1/1/2022 or 4/1/2022? I think either is fine but want to double check.

Thank you

In MA, the pension plan allows participants to retire after 10 years and attaining age 55.

If a participant takes a leave of absence due to medical reasons from April through August, can this participant be denied a pension if he decides not to go back to work.

The participant completed 10 years of service and age 55 during this time period. 

Employer deposits match and a "profit sharing" each pay period for everyone (who is supposed to get each).

They missed one guy for a couple payrolls in 2021.  (Deferrals went in fine)  They deposited the missed contributions the other day.

Given that the contributions need to be deposited by the time they file their taxes, do I need to bother withy earnings?

(Let's assume the taxes weren't filed yet)

I understand penalty a and b calculations. I also see that b calculation will never be larger than a according to IRS guidance. If business has 59 Fte (so they are an ALE) but *only* 28 truly full time employees then they are shielded from both penalties, no?  Because when you subtract the “free” 30 off penalty a they would be at $0.  So, even if 4 people go and get PTC their penalty A would be $0 and their penalty B wouldn’t kick in because B can’t be bigger than A it says. So, anyone with 30 FT all year (or less) is protected from penalties, yes? 

Terminated DB plan transferred overfunded assets to QRP.  Currently they are still in the 7 year period to allocate.  If the sponsor is looking to sell the company, can the new sponsor keep and allocate the suspense assets or does the excess have to revert back to the original sponsor?

Hi,

Thank you as always for all the knowledge and help. A PS Plan is under audit. The agent is questioning why three participants  (terminated in 2012 )are shown with 100% vesting if based on their years of service they should only be 60% vested. The answer is correct, their vested percent should only be 60% , however, the unvested amounts were forfeited and used to reduce the contribution back in 2016. Therefore, their remaining account balance  is all vested and that is why the report shows them with 100% vested balances. Question- Can this response  open up any potential issues?   Thank you.

Pension plans typically offer JSA options (50% through 100%) that name the spouse as beneficiary and which satisfy the QJSA rules. However can the pension plan offer a JSA option for a non-spouse beneficiary such as a child? Of course spousal consent would be required but I never saw a plan offer a JSA option for a non-spouse beneficiary, such as a child? Any issues or concerns here?

Hi, we have a participant who made deferrals with 2 different plans (one of which we administer) in 2021. He contributed to Plan A (we do not administer this plan) in the first half of 2021 (until he left that company) and to Plan B (the plan we administer) in the second half of 2021. The participant is under the age of 50, so not catch up eligible.

About a month ago, he contacted us and told us that he exceeded the 402(g) limit between the 2 plans and sent us a statement from Plan A showing that he contributed $9,500 with Plan A. He contributed $12,000 with Plan B, so his total deferrals for 2021 were $21,500 (so $2,000 over the limit). We processed the corrective distribution for $2,000 (plus gains/losses).

He contacted us a few days ago saying that the statement he sent us from Plan A was incorrect. The correct contribution with Plan A (he also sent us W-2 to confirm) was actually $8,500 (not $9,500). So, the participant was actually $1,000 over the limit (not $2,000). He already cashed the corrective distribution check.

What would be the best course of action to correct this issue?

Thank you.

Is a calendar year plan that terminated on 12/31/2021 exempt from filing a PBGC Form 4010 for the 2021 plan year (due date is 4/15/2022)? The PBGC Form 500 is scheduled to be filed on 4/29/2022.

I have a client who is an S-Corp.  They get a W2, but also took what the call $70k in "distributions" as bonuses that are not included in their W2 for the year.

The question is, do those "distributions" count towards compensation during the year or is it excluded since it is not part of the W2?