We have a client that has acquired another company.  They are part of a controlled group so the new company will be part of the plan.  The client would like to give a more generous match to the new company's employees.  They have no problem excluding all HCE's from the more generous match formula.  Since there will be only NHCE's receiving this more generous match, is there any additional testing we must do; such as benefits, rights and features?  Any other issues we might not be taking into consideration?

We are the actuary for a cash balance plan that uses the actual rate of return for plan assets as the annual interest credit.  The interest credit percentage is limited to 6%.  The Plan had an asset return of 21% for the 2020 plan year.  As a result, the assets exceed the participant account balances by a considerable amount.

Any suggestions on how to use these extra assets for the participants?

Can we have an ad-hoc interest credit or pay credit to bring the account balances up to the assets?  I want to make sure we do not violate the accrual rules or discrimination testing.

Any suggestions would be appreciated.

We always provided the 402f notice with RMD paperwork just to be on the safe side, but I stumbled upon this article that suggests that Notice 2020-62 clarifies that this is not necessary.  I can see why it wouldn't be, but I'm just being overly-cautious.  Any thoughts?

link

Relevant section from article:
 

Quote

In late 2019, Congress passed the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), allowing individuals to receive a “qualified birth or adoption distribution” of up to $5,000 from an eligible retirement plan. While such distributions may be recontributed to the plan from which they are paid, Notice 2020-62 clarifies that they are not eligible rollover distributions and not subject to the 402(f) notice requirements. The SECURE Act also raised, from age 70 1/2 to age 72, the age by which a qualified plan participant must begin receiving required minimum distributions (RMDs). The recent guidance clarifies that 402(f) notices must continue to be issued for eligible rollover distributions until a participant’s RMDs begin.

Of course, the IRS Notice nowhere comes right out and says this - it says that QBAD doesn't need a 402f notice because it can't be rolled over.  Is the GF article writer just being a little aggressive?

I note that American Funds has removed the 402f notice from it's RMD form, so maybe there really is something here...
 

Can someone please explain to me when/if a client needs to provide participants with a copy of a loan program.  Is it solely upon request?

Relius's 401k documents seem to include all relevant provisions in the SPD BUT for some reason the 403b document does not.

Just curious what the rules are concerning this stuff.

NQDC Plan provides for payment of benefits in annual installments each March.  Termination of employment generally results in a forfeiture of further payments.  However, under certain conditions, such as, termination by company other than for cause, payments are to continue when otherwise due under the plan, but conditioned upon the participant signing a release of claims (no deadline specified).  Where the release is not a payment trigger (rather, failure to sign a release apparently results in a forfeiture) is it necessary to set a deadline for the release to be returned/and for the revocation period to expire?  

401(k) plan, husband and wife only participants - both over age 50, both deferred $25,500 (not $26,000) for 2020; ER contribution is $75,000 (as deducted on 1120S return)

plan document (McKay Hochman) says allocate PS pro rata;

husband's W-2 wages more than wife's W-2 wages, due to SH health added to his comp

When I allocate $75K pro rata between the two of them, then add his regular deferrals of $19,500, he is over $57,000 annual addition limit.  Can $500 of his deferrals be recharacterized as catch-up (making his total catch-up $6,500) to reduce the excess?  Then reduce his PS allocation by enough to get him down to $57,000 + $6,500 catchup?  The wife's original PS contribution plus deferrals, plus the excess from spouse, will still be under the 415 limit.

Or do you skip the part where $500 of his deferrals are recharacterized, which makes his excess $500 higher and the give all the excess to her?  There is room to do that, also.

Which is the preferred or prescribed method?

Thanks.

Nonelecting Church plan offers a match.  Does that make them subject to Title I now?  And do they have to file 5500s?

Fact pattern:

Nonelecting church plan, never sent written statement to be covered under ERISA.  But they have been filing 5500s (for whatever reason).  We took it over, and told them they might not have to file.  But they said they did because they offer a match.

Is that true for Church plans (as opposed to a "regular" non-ERISA 403(b) Plan)?

My husbands QDRO was submitted and accepted May 2019. Now his ex wife’s attorney is looking to revise based on clarifications sent in the pension offices approval letter. The pension office stated their interpretation and stated; “if this interpretation was not the parties intent then a subsequent order will need to be sent. The main issue being addressed is the survivor benefits, as written his ex spouse is not entitled to any death benefits. We would like to keep it that way. Now because my husband didn’t sign the new drafted agreement or respond the APs attorney is filing a motion to compel. Do we have to revise it? After being accepted by the plan do we have any legal rights to refusal? 

A client provided a "COVID stipend" to employees in 2020.  401(k) contributions were not deducted from the stipend in 2020.  Can the definition of compensation be amended retroactively as part of CARES Act amendment?

I don't get heavily involved in testing, so am hoping to clarify a point on ADP testing of otherwise excludable employees. I hope I'm asking the right question. 

Say a plan has immediately eligibility for deferrals, but age 21 and one year of service for all other contributions. Entry dates are January 1 and July 1. Plan year is a calendar year. 

An employee is hired in March 2019, works a year of service by March 2020, and enters the plan July 1, 2020. The person's March-December 2019 compensation makes them an HCE for 2020. For 2020 ADP testing, is that person tested as an HCE with the otherwise excludable group or the "regular" (i.e., fully eligible) group?

I have a question with regards to the application of an ESOP Valuation as is affects the share price paid to outgoing direct shareholders.

My employer is roughly 70% ESOP owned and 30% owned by direct shareholders.  When a valuation takes place a new enterprise value is reached by the weighted average of 3 different methods (DCF, CCF, & Guideline).  A discount for lack of marketability is then applied for a final enterprise value.  The final enterprise value is then divided by the number of outstanding shares to get the new share price.

Assuming the new valuation is higher than the previous valuation (as is usually the case), the new share price is higher for two reasons:

1) the company is worth more, and

2) there are fewer outstanding shares than the previous year because there are always many more shares sold by departing employees than bought by existing employees. 

For example, in a recent year the share price went up 14%; 8% was due to an increase in the value of the company while 6% was due to fewer outstanding shares.  Since all ESOP transactions take place on the last day of the year the new valuation is as of 12/31 as is the sale of the stock by outgoing employees.

My question – if outgoing direct shareholders are paid using the new 14% higher valuation then they are getting the 6% benefit of fewer outstanding shares.  This seems like faulty, circular logic to me – there aren’t fewer shares until AFTER they sell so in my opinion they should only be paid at an 8% premium not a 14% premium.  But since it all happened on 12/31 the company paid them out at the full 14% premium. 

Am I correct in thinking this is a problem or am I not understanding something?

DB plan is being terminated under a PBGC standard termination. Plan provides the lump sum option to all participants. One retired participant receiving monthly benefits (value of his benefits >$5,000) refuses to elect the lump sum option, and no insurance company is willing to offer an annuity contract for this participant’s benefit.

Is there any way this plan can be terminated? Can this participant hold up the plan’s termination?

Thank you.

A plan has 1 active participant who is 100% owner. However, the total participant count is 2 (one owner + another employee who still has a balance, is not an owner, but is terminated). Would a Form 5500-EZ or 5500-SF be filed?

Thanks.

This isn't a direct cafeteria plan question, but tis question was asked, and I don't know the answer. 

As part of an employer's overall benefit program, is it allowable to allocate (X) dollars per employee of employer contributions, which the employee can then use to choose among various option. For example, if an employer allocates $5,000 per employee. The employee can then choose to have the employer direct portions of this to the HRA, the Section 127 plan, the Health Insurance, the Cafeteria plan, etc.?

The employee would NOT be able to receive any of this in cash. So "use it or lose it" in the various benefit plans.

IF this is allowable, are there any tax ramifications?

Since an approach like this seems too easy, I'm guessing there are problems with it!

I'm going to refer the client to their benefits counsel, but thought I'd see if anyone knows a "general answer" to this. Thanks.

Can anyone provide some insight? We are looking into this set up for our 401k plans and find it interesting.  However we only know what our consultants tell us and we would like to have some feedback from those that may have a this type of set up or or may be contemplating the idea.

General question - when did it become standard practice to issue suspension of benefits notices for plans that don't provide actuarial increases and that have suspension of benefits notice language?

This might be more of a question for the old timers. I recall automatic actuarial increases for this becoming standard (worked at a large firm at the time) in the early 2000s - perhaps 2004.

I don't remember it from before that. Was the IRS pushing any plans, let's say, in the 1990s, to provide actuarial increases for failure to provide Suspension of Benefits Notices at normal retirement if the plan document stated the boilerplate (return to work) language only, and where the benefit was clearly defined as service and pay at late retirement date (presume over NRA, but under 70 1/2).  

If you receive an e-mail from the IRS saying your renewal is late and asking for documentation of your CE credits, the IRS probably lost one of your prior renewal applications. I filed my renewal timely on 5/6/21 and received the e-mail on 5/17/21. It said my renewal was late (but didn't say which one) and requested documentation for my 2018-2020 CE credits showing the IRS program numbers. The expanded listing from your PTIN account works, but not all of my credits are listed there.  A co-worker received a similar e-mail the same day from a different person at the IRS saying her 2018 renewal was late.  She sent a copy of the receipt of her 2018 renewal and that took care of the problem.  The IRS person told her half of the ERPA renewals didn't go through.  I sent a copy of my 2018 receipt and received a response that their records indicated I didn't renew in 2015 (I did), but they have my CE credits now and I'm good through 9/30/2024.

So, if you get one of these e-mails, find your receipt from the prior renewal and send that first.  You may not have to send documentation of your CE credits.  In my case that would have been interesting because ASPPA and NTSA didn't report my CE credits to my PTIN account and they don't send certificates with the IRS program number.  I contacted ASPPA and they are working on getting documentation for me.

Hi

Late Friday night, thought was going to relax and therefore, shut down the brain activity. However, got an email from a client with not so great news as distributions were not completed by the dates as I provided.

When it comes to determining DB plan distributions, I am a stickler to due dates for the distributions to be physically completed. I use monthly adjustments.

For example, if a participant was born on the 15th of the month, the distribution has to happen physically on 14th otherwise I recalculate the amount for the next month cycle. The software I use also agrees with me.

I am working on a PBGC termination and this is the first time I need to deal with request date vs actual transfer date issue for distribution.

I instructed the DB distribution had to be finalized by the 14th of the month. The client provided a letter to the investment house, requesting this transfer to be completed on the 14th , on the 14th. However the physical transfer of assets occurred on the 17th due to investment house procedures/settling of transfers. I have actual letters provided with the 14th date.

To make matters more complicated, the per share value of a stock held in the account was lower on the 14th than the amount on the 17th which creates excess of 415 limit (participant is over age 70 and at 415 limit) at the time of physical transfer.

As I need to provide detailed documents to PBGC showing the amounts distributed and possibly how they were calculated, which date of payment is acceptable/correct one? If it is any relevance, they transferred the assets to the existing 401k plan.

I hope i was able to explain the dilemma here.

Thank you,

I have a take-over 401k plan and discovered form 8955-SSA was not filed for 1 participant who terminated in 2013.   She turned 70.5 in 2019 and has not taken any RMDs.   All accounts are earmarked and this participant has had full disclosure and control regarding the investment of her benefits.  Should I file the 8955-SSA for 2020?  The record-keeper missed the RMD deadline.  I would appreciate some advice on how to fix these issues.

We recently took over a tribal government plan and the prior TPA has been filing a Form 5500 for the plan since its inception. This plan truly qualifies as a tribal governmental plan and so it is not subject to the Form 5500 requirements. Should we file for the 2020 plan year and mark that it is the Final Form 5500 or not file and, when the IRS sends a letter requesting the filing, respond that the plan is not subject to the Form 5500 filing requirement?