We have a client that is currently utilizing a 2 month eligibility requirement. They are changing the eligibility requirement to 12 months effective 1/1/2022. My question is an employee hired September 1, 2021 would be eligible as of November 1, 2021. The employee begins deferrals on Nov 1, 2021. on 1/1/2022 when the eligibility requirements change would the employee then be required to wait until September 1, 2022 to begin contributions? Or would they be somewhat grandfathered in under the 2 month requirement?

Pardon my igmorance, I have not had this issue come up in quite awhile.

One of our clients maintains a profit sharing plan, one individual has a life insurance policy owned by the plan and he has terminated employment.

As far as I can remember, the choices are either to surrender the policy for its cash value and the deposit the cash value into the participants' individual account - just a change in investments  OR

participant buys the policy for the cash value from personal funds

Questions - when he purchases the policy, where does that money go?  Part of the general assets of the plan, or into the individual participant's account?

If the money stays in the plan, is it allocable to the remaining participants?

I plan sponsor started a new 401k plan in 2020 and gave instructions to the payroll company that a 1 year/1000 hours eligibility requirement to enter the plan was desired.  No auto-enroll.  Someone at the payroll company dropped the ball and did a 3 month elapsed time eligibility condition and included auto-enroll with it.  The payroll company has kind of fessed up to it being their mistake.  We now have several participants with employee and employer dollars in the plan due to the early eligibility and auto-enroll who were never intended to be in the plan.

is this something that can be fixed via an IRS correction program?  The employer would like to treat these individuals as ineligible and refund their 401k amounts if possible all due to mistake of fact.  Other options would included amending the plan to do away with auto-enroll and the 3 month eligibility, but that would help for new employees and would not fix the existing employee problem.  He could also bite the bullet and keep everyone in the plan, but terminate the plan and pay them out.  But that would mean he could not start up a new plan until at least 2023 and he would like to have a plan in place without disruption.

Thank you for any replies.

A new solo medical practice established this year.  A 401k plan was created this initial year as well.  The doctor has no employees at this time.  The doctor's spouse is working during this initial year to help establish the practice.  The doctor would like to pay the spouse for services and the spouse would then like to deposit a portion of that compensation into the plan.

With no other employees, the doctor does not currently have a payroll service and would like to not have to use one until employees are hired, likely next year.

Without using a payroll service, Is there a way for the doctor to pay her spouse for (legit) services to the new practice so that he can be considered an employee?  If he is paid as a 1099 employee, can a plan document be written to include him as an eligible employee for the 401k plan, which would allow him to contribute 401k/Roth/after-tax?

Thank you for any comments

I, the client's TPA, did not file the 5500 that was due Jan 15, 2021 for the 2019 plan year.  The deadline was extended b/c of Hurricane Sally, therefore it was due on Jan 15, 2021.

I am willing to pay the $750 DFVC fee myself, but am coming here in hopes that someone knows of a way I can plead my case.  The client has NOT received notification from IRS or DOL; I discovered my error when I was filing his 2020 5500.  I don't know why I didn't file his 2019, it looks like I began the process.  Who knows what happened back in Jan 2021.

Any ideas?  Thanks so much!

I was asked this question a week or so ago and have been putting it off hoping this person would go away.  He hasn't.  I have read that there are companies who promote real estate in plans.  I see it as a big pain in the .... butt.   Here is what he wants to do and also what I want to tell him -

He wants to purchase an apartment building.  He informs me that he is in escrow to purchase and intends to get a loan AND wants to use some of his pension money to complete the deal.  Doesn't sound ok to me. Maybe a great investment, but IDK if he can legally do it.  Am I correct in thinking this is a prohibited transaction at it's simplest?  He will benefit personally outside the plan with the help from his pension.  IDK, maybe there is a way to pull this off but I clearly don't know the way.  He is concerned about prohibited transaction rules which impresses me, he is concerned and wants to do it the right way.  He is asking me if I know anyone who could advise him how to complete the transaction.  I was going to tell him to find an ERISA attorney in his area ( I am east coast he is west).  

Am I right... steer him towards an ERISA attorney and let him/her educate him on the legalities of this type of investment?  and if it can be done how it needs to be structured.

Thanks

I know this has been discussed in the past, but I'd like to see what, if any, experience you've had. And if so, has it been different for 401(k) and 403(b).

We just had a 403(b) client receive a letter from the DOL, inviting them to use the VFC program. First one we've seen. This was generated from the 2019 5500 form, which showed late deposit of deferrals. Total interest correction was something like 30 dollars, it was corrected promptly, and excise tax was paid. The DOL calculator was used to determine the lost interest, but VFC program was NOT utilized. I know that the Philadelphia region was saying that the DOL could consider it not "fully corrected" if the DOL calculator was used but not VFC filing was done.

This letter was out of the Boston region, not Philadelphia.

So, first, is everyone getting these letters, and in other regions? Or maybe this was just random.

Second, has anyone yet contacted the DOL person listed on the letter in such a situation with extremely minor amounts involved, and if so, with what result?

Third, has anyone heard of/experienced an audit that was initiated because, after receiving this letter, they did not utilize the VFC program?

It just goes against the grain to have to do a whole VFC filing on some of these plans where the lost interest is $1.18. But if an audit is triggered absent a VFC filing...

Thank you for any thoughts or actual experience on this.

If a 401(k) plan owns a term life insurance on the life of a participant, and the participant dies, the death benefit goes to his children as beneficiaries. The children are requesting that the death benefit, which is income tax free, be directly rolled over into a Roth IRA. I see no problem with this but their accountant is saying that an income tax free death benefit can't be rolled over to a Roth IRA.  Does anyone agree with the accountant?.  

When filing the form 5500, what should the IRS plan # be listed as for the PE? What if the PE had a prior plan that merged into the MEP - what should the IRS Plan # be then? What happens when the PE decides to start their own "stand alone plan" - what should the IRS plan # be listed as then? What happens if the PE decides to start their own "stand alone" plan and previously sponsored a "stand alone" plan that merged into the MEP that the PE adopted? Additionally, what should the effective date of the "new" plan be listed as? Should it be a restatement?

Have any fellow TPA firms found software that will scan brokerage statements for certain items such as contributions, withdrawals, dividends, etc and convert into an excel file for ease of starting the trust accounting process? We have found a significant number of clients recently that are moving back to individual brokerage accounts making the trust accounting much more labor intensive and with room for data entry errors.  Looking for any best practice tips from other firms that have found efficiency solutions with brokerage trust accounting.

What is the cash value of life insurance and annuity policies to show on Form 5500 for a 412 plan?

A participant is terminating/retiring.  Because he is not an owner he did not have to take an RMD from the plan. Does he need to take one before he rolls his account balance into an IRA?  The goal is to pay him out before the year end and we don't want to miss an RMD if he is required to take one. 

Hello All:

We are talking with a prospective client(s) that we've identified as having a control group problem between two entities (one with a 401k, one without) that they are not aware of yet.  Before we recommend they fork out for an ERISA attorney to spell out their options, I'm curious what others have seen in similar situations?

Obviously the cleanest option is to bend the knee the file under VCP/VFCP. However, for businesses that don't or didn't otherwise qualify as a QSLOB and had not identified this issue over a period of many years and many employees as in this case, even remediation prior to an audit can be harsh and a business decision might need to be addressed between compliance and continuity. Open to any thoughts or experiences anyone has to share!

FYI I am not a TPA, but based on personal experience I am not surprised this issue wasn't addressed over the years by the existing bundled recordkeeper/administrator solution. 

Thanks in advance for sharing.

Have you been amending your vendor agreements for MHP and transparency bill reporting/disclosure obligations despite having broad legal compliance provisions in these agreements?  

My client is being audited by the IRS because their CB and PS plans are terminating. The TPA excluded 2 NHCEs from the CB plan "because that's what the prior TPA did", and it passed the numeric testing, but the plan document never stated that these two people should be excluded. These 2 employees were included in the PS plan, and received benefits every year there. Both plans are terminated, and assets are distributed.

The IRS is asking where the benefits are for these 2 employees, because the document doesn't exclude them. The TPA isn't sure why they were excluded, but they were, and everything passed testing. But the document doesn't exclude them. 

What can the client do, short of going back and calculating what the benefit would have been if they were in there and dumping that into an IRA? 

Just took over a case where they didn't have any beneficiary forms on file.  There is a participant who just recently passed away.  He has an ex-wife, who he divorced before the Plan ever started so I don't believe she's a factor here.

He has one biological child and step-children.

Would his entire balance then go to his lone biological child?  That's what I'm thinking, I just wanted to confirm.

Thanks in advance!

A 401(k) plan has been deemed Top Heavy and will begin making minimum contributions to non-key employees who are plan participants. However, there is a group of employees who are eligible to participate in the plan, but absolutely refused to do so because the funds offered by the plan invested in companies that have poor records regarding the environment. If a non-key employee is eligible to participate in the plan but absolutely refuses to do so, should they be receiving minimum contributions or can the plan sponsor argue that only employees that enrolled in the plan should receive minimum contributions.

Regulations Section 1.416-1 Q&A M-10 states that non-key employees that are "participants" in a top heavy plan must receive minimum contributions and ERISA 3(7) defines "eligible employees" as participants. However, Q&A M-12 refers to "employees covered under the plan" as receiving minimum contributions and I could argue that these non-key employees are not "covered" under the plan. Any thoughts? 

The Direct Rollover option is not mandated for QPLO distributions.   The QPLO amount, however, is still an eligible rollover distribution.

Q.:  What must the disclosure statement contain?