We were brought in to look at a SEP for a company in a controlled group because they didn't cover (2) employees in another company. (Not only that but they didn't include a partner in the sponsoring company.)  One employee was excluded for two years and one for one year, and the partner for three.

My reading of EPCRS is that this is a significant failure and not eligible for SCP; must go through VCP. Is that correct? Any experience with fixes for this other than giving the employees the same percentage as the partner who got the contributions?

Hello! 

I was hoping someone could help clear up some deadline confusion for new plans. 

I'm not clear on what the final deadlines are for establishing a new plan (both Traditional and Safe Harbor) for this year. Is it October 1st?

If its auto enrollment does that mean September 1st? But if there's not auto enrollment provision then its extended to October 1st?

I saw some mention that you can start a plan as late as December 31st, but is that only for plans starting next year?

Any clarity would be massively helpful! Thank you!!

Hi

DC plan terminating and will do distributions in 2022. Pooled account. Do not recall when i did one last time so asking out.

Owner has been taking RMD's for sometime.

There are a few other participants.

I am thinking of allocating the RMD based on the distribution amount for 2022 e.g. if the total distribution is 100k, take 10k RMD (assume correct amount) and rollover 90k

Is this ok or I have to provide RMD first  to the owner based on prior year balance and then allocate the distribution based on the balance?

Thank you

We have a client converting from one recordkeeper to another. Their payroll vendor is charging them to set up the new payroll files.  Would this be considered a qualified plan expense that can be paid from plan assets or is considered a settlor expense? We have received varying opinions. 

What is the life annuity rate for male age 81

My chart only goes to age 80, Age 80 rate life annuity rate is 68.605

Thanks

Client has operated as a sole proprietor and contributes to his SEP based on the net earnings from the business every year. Client and his spouse open a new business in which they materially participate (husband /wife partnership filed 1065). This business will also have employees separate from the husband/wife. In year 1, the new business reports a loss for self-employment purposes. Would the client be able to exclude the net earnings from the partnership and determine his SEP contribution based on his sole proprietor business or would the net earnings from both businesses have to be aggregated for purposes of determining net earnings from SE for contribution purposes? Would this SEP now be subject to controlled group rules as well and potentially make the employees eligible in future years?

One of the terminating plan there is a participant with a deemed defaulted loan.  The acquiring company will not accept the deemed defaulted loan, the part was not aware the loan is in the deemed defaulted status and the interest just kept accumulating. The loan was only for $15000 however the now with the interest it is $52000.  Since the loan is deemed defaulted should the participant pay the $52000 or is there any other way this can be handled.

Thanks 

We administer a 401(k) where the ESOP is administered elsewhere. Please don't waste any time on this if you don't know off the top of your head. This is an academic question only, as it is the ESOP's problem (if there is any problem) but I'm curious, as I had to look through the ESOP document for some items.

I'll spare you the details, (involved and confusing) but for 409(p) testing (this is an S-corp) the ESOP document refers to Code sections that don't exist, etc. so I'm unable to verify this via the Code sections referenced in the document, but here's the gist:

The plan document refers to "disqualified persons" as including family members. "Family members" include, for these purposes, "a brother or sister of the individual or the individual's spouse and any lineal descendant of the brother or sister." So, this creates attribution between siblings. Is this correct? Different from "normal" 318 attribution rules.

After a plan termination, we have always provided benefit elections to participants and have required that all be executed and returned to us before the distribution of benefits. Then upon receiving all elections, we prepare a letter to the broker (signed by the trustee) to make the distributions all at one time and attach instructions and amounts for each participant. Must it be this way?

I have heard others that just process the distributions as the benefit elections arrive. I think this could be a problem in a DC plan with pooled investments, but may be ok if the DC plan has all self-directed investments.

What about a non-PBGC DB plan with insufficient assets to pay benefits? In this case, the business owner will waive a portion of his benefit to pay all other benefits. In this case the business owner will receive his distribution first and all others will receive theirs as the benefit elections come in? I don't think this should cause any discrimination issues as ultimately all remaining participants (all NHCEs) will receive their full benefits and the owner will already receive less than his full benefit.

Anyone disagree or have any comments with this way of thinking?

Thanks.

I just wanted to make sure I was correct.

Cash Balance Plan is terminating as of July 31, 2022.  In order to calculate the 2022 requirement, they can maintain the 1,000 hour requirement correct? 

I have a client who is terminating their Cash Balance Plan and wants to make their 2022 contributions based on the short plan year, so they can get the money paid out before the end of the year.

Have the '22 segment rates been released as of yet?  If not, is it OK to use the '21 rates?

Thanks!

Hi,

I recall seeing that an the contribution to the DC Plan that will serve to offset the DB Plan benefits (DB is floor offset plan) should be a minimum of 5% of comp. Therefore, to use 3% of comp as the DC Plan is not advisable. 1. Is this correct? 2. Or is this only so that the DB Offset plan is a safe harbor, so technically 3% can be used, however, the db plan will now be a NON safe harbor offset plan? Thank you very much for any insights from all the Pros out there.

The plan sponsor calculates and deposits the employer contribution per pay period.  For this particular participant, they calculated it incorrectly and deposited $30 too much for the 2021 calendar plan year.  Unfortunately, the plan has immediate distributions; by the time we got to do the reconciliation, the participant had terminated and taken a distribution.

Sure, the plan could try and get the money back because it was an excess distribution... but that would be returning money to the plan that didn't belong there in the first place.  Similarly, if the participant balks at returning it, we'd normally instruct the plan sponsor to deposit $30+earnings to the forf account... but, again, that's $30 that shouldn't have been there at all.

Is there any justification for letting this go?  I need a justification because it's an audited plan, so I have to be able to back this up to the audit team.

Thanks.

Any thoughts on what to do if a plan participant who should be receiving RMDs does not apply for benefits in a defined benefit plan, even after numerous reminders?  The application would include an election of a specific form of benefits and providing bank account information for the deposits.

I'm assuming that one should then start providing benefits in the form of a joint and survivor annuity, or a life annuity if the person is not married, using paper checks.  (It's actually a governmental plan, so a joint and survivor annuity does not have to be the default form, but that would at least satisfy the RMD requirements.)  But if the person later wants to select a lump sum form, can they be permitted to do so if the plan otherwise does not permit a change of elections after beginning to receive benefits?  Alternatively, can they be forbidden from making the election (because obviously there is the potential for adverse selection if participants can elect a lump sum after starting a J&S)?

Also, what happens if checks are sent but never cashed?  There are procedures for dealing with missing participants, but I have not located any for dealing with participants whose whereabouts are known but who simply ignore checks.

In recent months, some BenefitsLink discussions have remarked on ERISA § 105’s command for lifetime-income illustrations. These discussions assume recordkeepers provide a service to generate the illustrations. Some discussions observe that an illustration is not routinely furnished for a self-directed brokerage account. I guess those mentions refer to a situation in which there is a securities broker-dealer’s account AND there is not an arrangement that results in a computer feed of the SDBA’s balance (not the details) to the recordkeeper’s system.

BenefitsLink neighbors, how much does this happen?

How many ERISA-governed plans have this situation?

I work for a small TPA/consultancy (under 20 employees) who have outsourced their entire IT function to a third party. We are in the process of trying to upgrade some of our IT systems and are interested in what other options are out there especially with regard to remote work situations. For those of you that have also outsourced your IT support would you be willing to share what group you work with, whether or not you would recommend them, and do they facilitate remote work environments? Bonus points if they are in the San Francisco area. 
 

I have a plan.  It's top heavy.  All eligible employees receive at least an 18% contribution.  When I run the tests I am failing TH.  How can I be failing a TH test?

Eligibility is 500 hours.  2 employees work less (much less).  To pass 410b I had to override and let 1 of them in.  

What more needs to be known?

I have no confirmation yet, but here's what has been communicated to me. I've asked for additional details.

Employee is out on disability. Has not terminated employment. Employer pays disability premiums, disability payments are made to the employer, who in turn pays them to the disabled employee. This would normally be considered compensation for plan purposes, as the plan uses W-2 and does not exclude disability payments. So far, so good.

What I'm being told is that the insurance company is issuing the W-2. Do (some) insurance companies perhaps do this as a "service" and issue a W-2 in the name of the employer, using the employer's id #? Anyone have experience with such a situation?

I am terminating a profit sharing due to the sale of the company.    This is not a 401k plan and they do not wish to apply to IRS for DL.  I was taught to give a 15 day notice to plan participants but can't find the citation.  Can someone please provide me with some guidance in this matter?

Participant elected to have Roth deferrals taken.

Company deducted funds pre-tax.  (However, the proceeds were "correctly" placed in the Roth source at the record keeper.)

Crossed tax years.

What might the fix be here?