Could a sponsor add a match that varies with compensation?  Something like:

Comp $1 to $30,000 match 100% deferrals

Comp $30,001 to $50,000 match 80% of deferrals

$50k to $100k 70% match

$100k+  50% match

And maybe cap some of the higher tiers, like 70% of deferrals up to max match of $10,000.

As service providers get more experience with choices users of IRS-preapproved documents make in using those documents, here’s two questions I’d like to crowd-source:

What percentage of users add an “administrative” provision beyond what’s in the standard documents?

What percentage of users add an arbitration provision?

Background:

IRC 401(a)(9)(B)(II) provides that the 5 year rule applies where the employee dies before the distribution of the employee's interest has begun (no later than December 31st of the fifth year after the calendar year in which the employee died). 

IRC 401(a)(9)(H) provides a special rule for "certain defined contribution plans" - "... if an employee dies before the distribution of the employee’s entire interest—
(i)In general.—Except in the case of a beneficiary who is not a designated beneficiary, subparagraph (B)(ii)—
(I)shall be applied by substituting “10 years” for “5 years”, and
(II)shall apply whether or not distributions of the employee’s interests have begun in accordance with subparagraph (A).

Treasury Regulation § 1.401(a)(9)-5 - Required minimum distributions from defined contribution plans. 

Q-5. For required minimum distributions after an employee's death, what is the applicable distribution period?

A-5.

(a) Death on or after the employee's required beginning date. " ... the applicable distribution period ... (is) the longer of - the remaining life expectancy of the employee's designated beneficiary and the remaining life expectancy of the employee or ... If the employee does not have a designated beneficiary ... the remaining life expectancy of the employee ..."

(b) Death before an employee's required beginning date. "... the applicable distribution period ... Nonspouse designated beneficiary. ...  the applicable distribution period measured by the beneficiary's remaining life expectancy is determined using the beneficiary's age ... "

So, a couple of simple questions which may have simple answers that I am missing:

Is the 5 year rule optional for tax-qualified, employer-sponsored, individual account plans, like the 401(k) plan?

Does the plan have a choice of applying a 5 year or 10 year period? 

Do the Plan Aggregation Rules of 409A apply to employee benefit plans not subject to 409A?  I think the answer is no, however after reading the regulations it does not appear immediately clear.

does the election between 1) excess asset revert & 2) excess assets are to be reallocated impact the ability to transfer an excess to a QRP?

Hello, can you provide me with some guidance on the "relaxed deadlines" in the "out-break period" when an employee fails to verify their dependents. The dependent was removed from the plan in May.  But they are now providing documentation and asking for reinstatement. Under normal circumstances we do not allow the dependent to be re-enrolled until Open Enrollment. 

In California, are there penalties for a sponsor with existing qualified plan but failed to opt out by the applicable deadline?

I've got a NFP that is terminating their 403b plan and starting up a 401k plan (for many reasons).  Most of the active participants are expected to roll their 403b plan balances into the new 401k plan.  Of course, we never had to worry about top heavy in the 403b plan... but what about these rollovers in the 401k plan?  It's the same entity sponsoring the plan, so they seem to be related rollovers, and they are participant-initiated.  But since they are from a 403b plan, do they retain the characteristic of not being subject to top heavy (so therefore I can treat them as non-related rollovers for the purpose of testing)?  Thanks.

The sole proprietor's 2020 personal tax returns are on extension.  The sole proprietor will currently adopt a new defined benefit plan for 2020 effective 1/1/2020.  The plan's benefit formula will be 10% of average monthly compensation x years of participation.  The participant's accrued benefit as of December 31, 2020 is equal to $1,916.67 (or 1/10 of the 2020 IRS dollar limit).

Can the plan be designed with a $2,000.00 maximum monthly benefit and not run afoul of any IRS rules?  The objective is to limit the 2021 accruals such that the required minimum contribution for 2021 is $0 or a very small amount.

A year of benefit accrual service is based on 1,000 hours of service.  The sole proprietor has already worked 1,000 hours during 2021.  Does limiting the 2021 benefit accrual through the use of a $2,000 maximum monthly benefit violate the anti-cutback accrual rules or anything else?

Plan had 103 participants at 12/31/2019.    Eligibility is 1 year of service, for deferrals enter on 1/1 or 7/1 following meeting eligibility requirements.   Profit Sharing is one year and enter on 1/1 preceding meeting eligibility.    

My question is this.  at 12/31/2019 there were 103 participants.    as of 1/1/2020 there were 14 additional participants eligible for the deferral portion of the plan bringing the total to 117, still under 120 to require an audit.    BUT, there were 12 additional participants that became eligible for the profit sharing portion on 1/1/2020 as well but not eligible for the deferral part of the plan.   (So hired 2nd half of 2019.)     So counting them the total at beginning of year is 129 and would require an audit for 2020.   

I'm fairly certain those employees all have to be counted in the beginning of year count, but is there anyway not to count them since at 1/1/2020 they were technically not eligible yet and didn't become eligible till they had their 12 months of service for eligibility?   as an example, date of hire is 12/01/2019, had 1 year 12/01/2020, date of participation for p/s is 1/1/2020.   

Thanks for your response. 

Question - a plan is class-allocated for 2020 and has allocation conditions (1000 hours and last day of the year employment) for profit sharing.  That obviously means someone who did not meet the allocation conditions will not receive profit sharing contribution.  But is the reverse true?  Does someone who did meet the allocation conditions have to receive a profit sharing contribution? Seems the employer could choose not to contribute to that "class" (one employee in the class.)  In other words, the class allocation funding decision comes first.  The plan is not top-heavy and includes a safe harbor match.

The reason I am asking - the profit sharing decision is being made now for 2020 and several employees who met allocation conditions for PS for 2020 terminated employment in 2021.

Comments?  And thank you!

(We are removing allocation conditions and pretty much making all plans class-allocated with Cycle 3.)

Tom

I submitted a VCP last October and have left several messages on the status inquiry line over the last few months with no response/call-back from the IRS.  Has anyone else had this issue?  Just wondering what the average turn-around for VCPs is given COVID, etc.

A medical practice plan has apparently just hired a doctor who is a Canadian citizen. Everyone understands that since paid U.S. source income, is eligible for the 401k plan - all normal.

Now, this plan allows each participant to have individual brokerage accounts. Doctor is from Canada, and his broker is in Canada. Is there any problem with a U.S. Trust allowing him to invest in funds in Canada? Further complication - Plan specifies each Doctor is Trustee for her/his account. So technically a foreign Trustee.

Anyone run into this before? P.S. FWIW, the Trust is in fact organized in the United States, so even if this person invests in funds in Canada, it would appear that the Trust itself is under the jurisdiction of U.S. courts, and therefore it is ok? Is this "settled" law or does this require an opinion from an ERISA attorney?

Starting up a new 401(k) and owner wants to roll money in from Self-Directed IRA. They sent me a copy of a checking account balance at some bank that, according to the owner, contained the money of several employees. Is there any substantiation I can request to make sure this mystery money is legit?

EE covered in a frozen pension plan and another pension plan of same employer. The sum of the monthly accrued benefits in both plans do not exceed 415 benefit limits. The lump sum is the greater of benefit based on plan rates ( '94gar 5%) or 417e rates but not to exceed applicable 415 limits. In this case 417e applies and the question is how to compute the 415 maximum lump sum. The plan doc in plan A and plan B states only  that if the sum of the accrued benefits from all plans exceed the applicable 415 limit, the limitation is first applied to plan A.  It doesn't cover this situation since the aggregate limit is not exceeded.

John has a monthly accrued benefit of $10000 in plan A ( frozen plan) and 1350 in plan B. The applicable 415 limit is $14166 per month at age 65. Not clear on how to compute the 415 lump sum for each benefit. 

Hi

Need to refresh memory.

Looking at a combo plans (DC+CB). Plans are top heavy and top heavy benefits are provided in the DC plan only. Not my typical way of designing.

CB has 1000+ hour requirement for pay credit

DC has 401k + 3% non-elective safe harbor + profit sharing.

Profit sharing portion has no hour requirement but has last day rule.

Gateway is 7.5% i.e. 3% safe harbor + 4.5% profit sharing

Have a participant (in both plans) terminated during the plan year with more than 1000 hours of service, however not employed at end of year.

The participant gets CB pay credit, the minimum to satisfy 401a26.

The participant gets 3% mandatory safe harbor.

What else does he get? Additional 2% profit sharing for top-heavy (it is 5%) or full 4.5% profit sharing for gateway?

Whichever he gets, I think i need 11-g, correct?

Thank you

Safe K plans can contain provisions where HCEs are not allocated a Safe Harbor match.  Are one or both of the following design allowed?

1) HCE Safe Harbor match is limited to $3,000 ($3,000 is an example)

2) Non-Shareholder HCEs match is limited to $3,000

Thank you  

Plan A wants to contribute $50,000 for the 2020 year but needs more deductions in 2021.  Can they deduct the 2020 contributions (which are deposited in 2021) on the  2021 tax return (i.e., you can always deduct on the cash basis) and then use the special 404a6 timing rule to deduct 2021's contributions (which are funded in 2022)  on the 2021 tax return as well?  The combined deduction is less than 25% of 2021's comp (it's a virtual certainty so that is not a concern).

My position has always been "of course because both deductions are perfectly legal, so why in the world 2 completely allowable deductions be disallowed?"  There is simply no rule on the books that says you cant take them both.

Now someone did mention that maybe there is some tax law that says you have to have consistency in approaches, and to that I can't speak.  Anyone have some first hand knowledge on that?

Our client is wanting to change their eligibility requirements to Age 21, 12 months of service and 500 hours, with plan entry being immediate. Basically if the employee is at least 21 and has completed 500 hours within their first year of employment, they would enter the plan as of their 1 year anniversary date.

Where we are getting stuck is what if the employee does NOT meet the 500 hours within the anniversary year? We would be switching to evaulating the 12 month period then on a plan year basis. If the employee then completed 500 hours between the plan year of 1/1 and 12/31, does the entry date become 12/31 of the plan year the 500 hours was completed, or is it 1/1 of the following plan year? 

Company A is acquiring Company B via stock acquisition.  Both companies currently sponsor retirement plans.  Company A has a stand alone plan and Company B is part of a PEO.  Once the acquisition happens  Company B will retain their own EIN and act as a subsidiary of Company A.   The intent is for Company B to terminate participation in the PEO plan prior to acquisition.   Post acquisition Company B will become a participating employer on the Company A plan.

The question is does Company B employees have a distributable event or would participation in Company A plan be viewed as a successor plan?