In 2020, ER deposited $100,000 to a holding account in the plan (I know!).

Maxing out the owner and giving 5% to the EEs results in a $70,000 allocation for 2020 and passing of tests.

Does he have to allocate the remainder to the participants?  Or can he take back the funds as a Mistake of Fact?

I have a participant in a plan that, as a result of her employer moving her from one location to another (and then having to also move her parents, as she is their caretaker), is requesting a hardship withdrawal to "lease" (i.e, rent) a house in her new location. She has no other source of funds and the employer would like to grant this request.

As the lease is for, technically, her principal residence, would you be inclined to grant the withdrawal?

Thanks for any replies.

I'm not perfectly clear on how you would test this design, and would appreciate any insight. 

A 401(k) plan allows immediate eligibility for deferrals on date of hire; the only condition is age 21.

The plan also provides a safe harbor nonelective (also age 21). Eligibility for this portion is the January 1 or July 1 after working 1000 hours (not January 1 or July 1 following a full 12-month period in which the employee completed 1000 hours). So, if a full-time employee was hired on July 1, 2021, they may work 1000 hours before the end of 2021 and enter the safe harbor portion on January 1, 2022. 

This does not seem (to me at least) to impose the maximum permissible minimum age and service conditions in 410(a), so it's not clear that dividing line for ADP/safe harbor would necessarily correspond to the participants actually getting those contributions when using the otherwise excludable employee rule (i.e., some participants who have not satisfied the maximum permissible age and service requirements would be getting safe harbor nonelectives). 

If that's the case, how would you test? Would it be everyone with less than the maximum permissible conditions subject to ADP (even if some are getting safe harbor nonelectives) and everyone with more than the maximum permissible conditions exempt from ADP testing due to the safe harbor? FWIW, this is what ERISApedia and Who's the Employer seem to suggest.

This might actually be a more general question, but since the plan I'm working on is looking to allocate just a safe harbor, I figured it went here...

A doctor owns 100% of three businesses: Sole Prop A, Sole Prop B, and S-corp C.  They are all part of the plan.  For the first time, I've got an issue with the compensation.  Sole Prop A has a net Schedule C (before pension expense) of $34K.  Sole Prop B has a net loss (before pension expense) of -$127K.  And the S-corp paid him a W-2 of $278K, including $18K of 2% shareholder health insurance premium.

Normally, all the numbers are positive and combine to be way over the compensation limit (even after the safe harbor expense for the participants), so this is nothing to worry about.  But 2020 was, well, 2020.  I'm sure it isn't as simple as combining the three numbers.  I thought I remembered hearing that you combine the self-employed amounts, and if that is less than zero, you can treat that as zero... but I can't find that in writing at the moment, so I'm reluctant to go with that until I've got something to hang my hat on.

Any thoughts or directions to point me in?  Thanks.

I have been talking with a consultant that is working with an advisor who set up a "solo(k)" early last year and funded their deferrals (at that time) for the year; later that year, the business owner hired new employees and was operating on the idea that the next year (now) they would adopt a 401(k).  However, the advisor now thinks no document, associated with the "solo(k)", was prepared, thus no eligibility criteria was established.

So is the solution:
1. Treat it as though no document has been created and remedy that matter
2. Then remedy missed deferral opportunity based on step 1 (design/eligibility criteria)?   

Let's say an executive is currently employed and on his employer's group health plan. The executive is being terminated in connection with an M&A transaction but will become an consultant to the company for six months as an independent contractor. As part of the termination, the employer has offered to pay for COBRA coverage for him and his dependents for six months. The executive is already eligible for Medicare.

Assuming he is not enrolled in Medicare, he's still eligible for the COBRA coverage, correct? He would lose COBRA coverage if, after the COBRA coverage becomes effective, he then enrolls in Medicare. Do I have that right?

TYIA

Just curious- how do you handle HSA accounts and escheatments? Do you treat the HSA like an IRA because it can make investments in Mutual Funds or do you treat it like a checking account? I've looked and couldn't find any guidance about how if or when to escheat a HSA account. Any guidance would be appreciated here, thanks

Let's say I have a mep plan with 4 companies. Companies 1&2 are a controlled group. Companies 3&4 are a separate controlled group. 

Can 1&2 have one matching rate while  3&4 have a different rate? I know that I have to pass ACP test for companies 1&2 and then separately 3&4. 

Can a plan adopt an 11(g) amendment to fix a discriminatory definition of compensation? The plan excluded bonuses, and it does not contain a fail safe provision to automatically include bonuses when necessary to pass testing. TIA

A 401k plan document is written with a $1,000 force out provision for non-responsive terminated participants. The plan recordkeeper (bundled provider) processed force out distributions as if the document allowed for the $5,000 limit rule. 200 participants were forced to IRA's when they should not have been. This error happened within the last two months and was an isolated incident to these 200 participants. 

Rev Proc 2021-30 now provides more options for retroactive amendments pending certain conditions, one of which is (i) The plan amendment would result in an increase of a benefit, right, or feature.

Benefit, right or feature is not defined (as far as I know). My thought is that this error does not provide an additional benefit, right or feature. However, do others believe this can be corrected under SCP using a retroactive amendment to change the limit to $5,000? 

Thank you

Looking for a referral for companies that perform cybersecurity audits.  We are a small TPA (5 employees). 

Thanks very much.

Participant takes CRD during 2020 and repays the CRD during 2020.  Do we reflect the CRD on the 5500 and then show it going back in?  Or because they offset do you not show it?

Many news outlets are reporting the decision by Delta Airlines to impose a $200/month surcharge on employees who refuse the COVID vaccine.  Here is a link to the Wall Street Journal's article: Delta Air Lines to Impose $200 Monthly Charge on Unvaccinated Employees, Add Testing Requirements - WSJ

My initial reaction is that COVID vaccination status is a "health factor" under Treas. Reg. 54.9802-1(a)(1)(iv) (Receipt of health care) or (v) (Medical history).  One could also argue that refusing the COVID vaccination a health factor because it is analogous to the dangerous activities listed under "evidence of insurability" in Treas. Reg. 54.9802-1(a)(2)(ii).

It seems like the $200/month is a higher premium under 54.9802-1(c) for a similarly situated individual - it is a stretch to argue that COVID vaccinated employees/non-COVID vaccinated employees are not "similarly situated" because vaccination status is a bona fide employment-based classification under 54.9802-1(d)(1).

That leaves the exception for nondiscriminatory wellness programs in 54.9802-1(f), and specifically the exception for "activity only" wellness programs in 54.9802-1(f)(1)(iv), since the $200 is related to a health factor.  The activity-only wellness program would need to complete with the frequency, size of reward, reasonable design, and uniform availability/reasonable alternative standards requirements of 54.9802-1(f)(3)(iv).  It seems like the employee's personal physician can offer an alternative if he/she is willing to say that obtaining the COVID vaccine is not medically appropriate for that individual - although it is unclear what the alternative would be in this circumstance. 54.9802-1(f)(3)(iv)(C)(4)

I just received 2 e-mails from EFAST that the filing status of 2 plans were updated  as "filing received" but the files were sent in April & June respectively which both had good ACK files and the new e-mail has the same ACK file as the old.

I did not re-file either plan myself.

There were 2 warnings - one is basically "filed after due date with no cause or amendment" and the other is "matches another filing in database"

I'm trying to figure out if it's a general problem with the new electronic filing system for EZ plans or specific to 2 of my plans.

Anyone else get one of these?

Hi all- I was wondering if anyone knew the actual formula that is used to calculate the Lifetime Income Illustrations that are required in 2022. I know that DOL has the calculator but was wondering if some had the actual formula for both the Single and Joint, thanks

Background: Client purchased a plan with automatic enrollment and safe harbor match, with an effective date of 7/1/2021. The plan went live on our system, census was uploaded and participants were notified of their eligibility to participate, received all the required notices, and should have been automatically enrolled if they did not opt out. 

Client has now reached out (along with their financial advisor) saying that they never wanted automatic enrollment, didn't understand it, and now wants to "cancel" the plan. They have not done any withholding of ANY elective deferrals at this time, so the plan has not been funded. 

I am of the opinion that since notices have gone out, accounts have been set up, etc. they have a 401(k) plan, and they cannot just "cancel" it, i.e. pretend it never happened. I know how to correct the failure to automatically enroll participants so that is not the issue. 

Our main point of contention and one I am having difficulty finding any guidance on is; at what point can we say, "sorry, you officially have a 401(k) plan so you have to fund any required contributions and go through the normal termination process to close it"?

I believe the plan is active, and that they need to go through the correction process for the automatic deferral failure and then they can terminate the plan. The client contends that since they have not funded, the plan is not active and we should be able to just "cancel" it.

We've already told them that they can remove the automatic enrollment provision, so that is not the issue. 

If I anyone can point me to some guidance on this topic, it would be much appreciated. 

I was asked today if a new 401k plan can cover employees with W7#s instead of SSN.  I have no idea and am not sure what information I need to get to make a determination.  Anybody have any experience or guidance on this?  Thanks!

Business closed in 2020. Plan to be terminated in 2021. No employees in 2021. Since there are no nonexcludables I would think the plan should pass 401(a)(26). However, since the 2 employees minimum  goes to one if only one employee, does that imply that one  goes to zero if there are no employees. An ancillary question is  can an overfunded   plan be maintained in a retiree only mode if the sponsor remains in existence with no employees.

• Question 12 on Form 5310 reads as follows:

__ Yes   __ No   Has this plan been involved in a merger, consolidation, spinoff, termination re-establishment, or a transfer of plan, assets or liabilities that was not considered under a previous DL?

If “Yes,” submit the required attachment.

 What does "considered" mean in context of plan that uses pre-approved provider? Does the pre-approved provider's DL submission "count" as "considering" these mergers? Or would only an individual filing "count" as "considering" these mergers?

Here's why I'm asking:

Terminating plan is adopter of pre-approved plan. Prior to provider's pre-approved plan filing for Cycle 2 Determination Letter, the now terminating plan had 3 plans merge into it, with the now terminating plan as the surviving plan.  All are DC plans (and used plans from pre-approved providers), so no 5310-A filed, and no 5310 was filed at the time of the mergers by the surviving plan -- only DL filings so far have been usual filings on cycle by pre-approved plan provider. The terminating plan timely adopted its Adoption Agreement Restatement after the plan mergers, when its pre-approved plan provider sent the Adoption Agreement Restatement, for the Cycle 2 Determination Letter.  Pre-approved provider timely filed for Cycle 3, and presumably has received DL, although no Adoption Agreement Restatements sent out to employers yet. For the surviving plan, that is now terminating, when I file its 5310, can I check "no" on Line 12 of the 5310 as the previous mergers took place before the pre-approved provider's latest DL and before the plan adopted its latest Adoption Agreement Restatement?

Client adopted new DB plan under SECURE retroactive to 2020, but already contributed 30k to his owner only SEP for 2020. He really is only allowed to contribute to a DC  6% x $285k, which is $17,100.

The SEP is with Schwab, and so is the new DB. I doubt they will transfer the contribution directly from SEP to DB unless classified as a rollover (which it isn't!).

Is the only solution to ask Schwab to return the contribution as a contribution in error? Do we ask for a return of the erroneous non-deductible excess (30,000-17,100 = 12,900) or the full $30k?

Your help is appreciated!