Group:

I'm a new user to ftwilliam software.  Even though I've drafted and worked

with a number of S ESOP plan documents over the years.

Ftwilliam seems to be one of a few firms in 2021 with an IRS Pre approval letter they received

for their ESOP Plan document which was

dated June 2020 from IRS. (ftwilliam didn't release the letter to users until Mar 2021)

Even with the pre approval letter are you (as ESOP practitioners) still filing an application for determination of initial qualification (form 5300? 5307?)?

Thoughts and comments appreciated.

In my daily perusing of employee benefits and executive compensation news, I came across an article discussing Trevor Bauer's contract with the Dodgers.  The article stated:

Quote

 

Bauer received a $10MM signing bonus, $5MM of which was paid in March.  The other $5MM will be paid next month.  Beyond that, his 2021 salary is $28MM, but with the quirk that it’s all payable on November 1st of this year.  Here’s what happens if he opts out after the 2021 season, according to Cot’s:

Bauer may opt out of the contract after the 2021 season, receiving a $2M buyout, with Dodgers deferring $20M of 2021 salary without interest, paid in $2M installments each Dec. 1, 2031-40

 

Doesn't Section 409A prohibit such an arrangement?

One owner has two entities, currently no employees.

Can he have different plans for each one and contribute the maximum to each?

One currently has a SEP the other is starting up a new 401k PS plan.

Organization A is a tax-exempt organization under Section 501(c)(3) and maintains a 401(k) Plan.  CEO of Organization A is a highly compensated employee for Plan Year 2020, which causes the Plan to fail minimum coverage testing.  CEO wishes to lower his compensation so that he is no longer a HCE for future years, and instead receive the same amount of compensation from Organization B, which is also a tax-exempt organization.  The two tax-exempt organizations are not under common control under the rules of 1.414(c)-5(b), and thus do not appear to be related employers. (80% of directors of one organizations are not representatives of, or controlled by, the other organization).

If CEO of Organization A wishes to lower his compensation from Organization A, and receive that same amount from Organization B to make up for that (in an attempt to keep his compensation the same, but avoid violation of minimum coverage rules for Plan maintained by Organization A), does this violate the anti-abuse rule of Section 1.414(c)-5(f)?  That rule states as follows:

"Anti-abuse rule.—

In any case in which the Commissioner determines that the structure of one or more exempt organizations (which may include an exempt organization and an entity that is not exempt from income tax) or the positions taken by those organizations has the effect of avoiding or evading any requirements imposed under section 401(a), 403(b), or 457(b), or any applicable section (as defined in section 414(t)), or any other provision for which section 414(c) applies, the Commissioner may treat an entity as under common control with the exempt organization."

Not finding any guidance on the subject.  Does not appear I can get around the Anti-Abuse rule, but thought I would see if anyone had seen anything like this before.

A 401(k) plan with a Relius document allows "partial withdrawals in excess of the required minimum distribution."  A retired participant took her RMD in February, plus an additional partial withdrawal of $2k.  Now she wants another partial withdrawal.  Can the document language be interpreted as allowing multiple partial withdrawals in the same year that are not distributed at the same time as the RMD payment?

The client has an existing 401(k) Safe Harbor Match plan where Key Employees participant. This plan has immediate entry.  A Cash Balance plan and a Profit Sharing plan are added, where Key Employees also participate.  The Cash Balance and Profit Sharing plans have a one-year wait for eligibility.  

Question #1......Since Key EEs participate in all three plans, I believe all three plans are part of the 416 required aggregation group.  The 416 required aggregation group is Top Heavy.  Does the 401(K) Safe Harbor plan lose the Safe Harbor Top Heavy exemption, and now have to provide 3% of Compensation to those that are in the 401(k) Safe Harbor plan but not yet in the CB or PS plans?  I believe the answer is no.

Question #2..... The CB and PS plans only benefit employees of specific job classifications (i.e. dentists, hygienists and technicians), and would satisfy the subjective reasonable classification test.  If each plan individually passes the 70% coverage ratio, then I think I'm good and no need to do ABT.  However, it's not looking like that's possible and I'm going to need to do ABT.   If I need to do ABT, I believe I'm required to pull in the 401(k) deferrals and Safe Harbor Matching contributions.  Is this correct?

Question #3..... If the 401(k) Safe Harbor plan is pulled in for ABT, have I blown the Safe Harbor TH exemption and now have to provide a 3% of Compensation TH Minimum to everyone who is in the 401(k) Safe Harbor plan but not yet in the CB or PS plans?  I think the answer is yes because now I'm using the deferrals and match for coverage.  Side note.... If I include the deferrals and SH match I easily pass ABT, then also easily pass 401(a)(4).

Multiemployer Partial Termination occurred in 2020.  Facts & circumstances - Plan is  > 100% funded (no With Liab or "to the extent funded" issues).  Single large employer who was the only one in the region of the country, shutdown.  Plan's permanent break is 5-years.  Must plan vest back to 2015?  Hyperbole - participant earned 501 hours (1/2 credit) in 2015 and quit.  Must plan protect and vest his accrued benefit for the 1/2 year of service ?

Just having a brain cramp - but if the accounts of terminated participants are charged an annual fee (50.00, 100.00, whatever) and this fee is paid to the employer, how is that not a prohibited transaction? 

If we have a client with SH 401(k) Plan selling his practice in an asset sale. He will terminate all employees effective with sale and those employees will be hired by the acquiring company. His corporation will retain the Plan and he wishes to terminate the Plan and the corporation as a result of the asset sale. The corporation will only exist for wrapping up any accounts receivables, the 401(k) Plan, and other administrative items.  At this time he does not wish to make any additional employer contributions - other than the required ones for deferral and SH match through date of sale.

Does this generally meet the exception to the 12 month rule where the plan can be less than 12 months as a result of the business transaction and retain it's status as a SH 401(k) plan?

Does the answer change if the termination is done before, concurrent with, or after the transaction? Assuming it is done contingent on the sale going through if done before or concurrent with.

I know he can clearly retain SH status if the plan runs through 12/31 for a full 12 months but he would like the option to terminate sooner without ADP/ACP testing and this would seem to me at least to be on account of a business transaction.

I have a participant in the plan for whom we added after-tax contributions.  Not to worry, she is not an HCE.  She is married to a guy who is an "HCE" but he works for an unlreated company. But the bottom line is she wants to contribute as much as possilbe.

What sorts of limit are people imposing on these contributions to make sure we don't blow the 415 limit? Can it be a one-off limit decided at the beginning of the year?  For example, I want the client to be able to add a goal to the payroll system.

I think it just occured to me that the payroll system's "goal" should be $58,000 minus 19,500 ASSUMING the Employer contributions will not exceed the Employer contributions (in my case they will not).

Is that what people are doing? Other idea?

A new plan is established effective 1/1/2021 (but adopted mid-year). One of the employees (who met the eligibility conditions) is terminated in the middle of 2021 (before the plan is adopted - so the employee was not able to defer to the plan) The plan is Safe Harbor Non-Elective, so this employee will receive 3% Safe Harbor contribution for the year. Would an SPD and a Safe Harbor Notice be required for this employee? 

Thanks!

I'm fairly new to the world of VEBA, but my understanding has always been that in order to have an HRA, there can be no employee contributions. Since a VEBA is just the funding vehicle, how can an association have a post-retirement HRA that is funded by voluntary post-tax employee contributions with a small employer match? I have an IRS approval letter for the VEBA where the plan accurately described itself as voluntary post-tax with a death benefit, but I'm perplexed as to how/why the IRS granted approval to begin with. What am I missing?

I was listening to a discussion the other day regarding dual eligibility in safe harbor plans.  One individual mentioned that they had clients who allowed immediate entry for deferrals but had a 3 month wait for the safe harbor match. 

I know you can use disaggregation to require a participant to earn the statutory entry requirements before they are eligible for safe harbor, the caveat being that ADP testing is required for that group, which could include HCEs, and the plan would not be deemed to be non-top heavy, but I'd never heard that you could have dual eligibility as was described.

Has anyone had any experience with that type of design?  I had always thought that once you were eligible for deferrals you were eligible for safe harbor (at least the NHCEs), notwithstanding the disaggregation option.

Thanks.

Hi

I need to confirm the following as per my understanding.

Looking into a 2020 db plan design with providing prior year service. 

Plan has a minimum required contribution (MRC) based on amortization of funding target. Not worried about MRC as they want to maximize contribution.

Per law, 15 year amortization is effective for plan years beginning after 12/31/21 with an option of election for 3 prior years.

I am thinking to elect to have 15 year amortization starting with 2020 plan year and also have the sponsor to adopt the election (election is required to adopt 15 years, as per my understanding).

Am I missing anything here?

Thank you,

I'm looking for helpful secondary analysis / discussion of the usual 4204 exceptions for asset sales and how to think about various possibilities in a deal setting but not finding much.  Anybody have recommendations?  Am I just missing it or does the ERISA Outline Book not address this topic at all?

Thanks

In case my previous post was too confusing, please allow me to replace it with the following:

I represent a multiemployer defined benefit plan. Employer X previously maintained a single employer defined benefit plan for its collectively bargained employees. X negotiated the merger of its plan into the multiemployer plan in 2005. Under the merger agreement between the union covering X's employees and X, X agreed to make contributions for the underfunded portion of its single employer plan to the multiemployer plan over a 10-year period with interest. Instead, X paid the entire underfunded portion plus interest to the multiemployer plan in a lump sum in 2006.  X withdrew from the plan in 2019. In assessing X for withdrawal liability, the actuary treated the lump sum contribution to the plan as an employer contribution in determining the amount of X's withdrawal liability. X has filed a request for review of the fund's assessment challenging the treatment of the lump sum contribution as an employer contribution. Did the actuary correctly characterize the payment as an employer contribution?

Our volume submitter plan document allows for the exclusion of HCEs using the following language...

Notwithstanding the foregoing, the term "Covered Employee" shall not include the following:

any Employee who is a Highly Compensated Employee for the Plan Year

Can the language be tweaked as follows to allow Jane Doe who is an owner HCE to participate?  I would like to exclude all the other HCEs.

Notwithstanding the foregoing, the term "Covered Employee" shall not include the following:

any Employee who is a Highly Compensated Employee for the Plan Year with the exception of Jane Doe

I know the deduction limit for the employer part of a 401k plan is limited to 25% but does that 25% limit flow to the partners 1040?  I have a partner that maxed out at $57,000 plan does not go over the deductibility limit.  However, his accountant is doing his 1040 and he says he is limited to 20% of his SE income.  He made less than usual in 2020 so this is the first time I have seen this.  I always check for 25% at the plan level, but am I supposed to be checking this limit for each partner in a partnership as well?  Does anyone have any insight on this?

TIA

So this is the 2nd time this has happened in 2 days.  I have a large financial institution demanding that I send them the Determination Letter for a plan that has less than 10 participants in order to roll over money to an IRA on behalf of an old employee.  These plans are small and do not have their own Determination Letters with their name on it (I do not want to start sending around my company's Opinion Letter).  The financial institutions refuse to accept any other documentation.  Is anyone else having this problem?  Possible solutions?  Thanks!

I am looking for guidance on navigating transferring a 401k plan from TIAA. The plan was set to be transferred to another record keeper, however the new record keeper backed out of the process when they learned that the 15 outstanding loans in the plan are collateralized loans with TIAA. They are now saying they will not take the plan until all 15 loans have been retired, which will take 5 years and require shutting of new loans for existing participants. Unfortunately other record keepers have now taken the same stance. 
 

Is there a creative solution to this? Has anybody successfully navigated this hurdle in the past? 
 

Thanks!