Participant is allowed to defer more than the 10% limit that the plan allows.  Not catchup eligible.

Per EPCRS, and Excess Allocation arising from a deferral must be distributed to the participant.

What 1099R code is used on that distribution?

Sorry about the length in advance !

Plan A for Company A:  At the end of 2019 this plan matched 100% of 3.5% contributed –and was merged into Plan B.  This plan had a 2-Year Cliff Vesting program for company match dollars (0/100%).  In addition, this plan has the same automatic enrollment features (e.g., start at 3% and increase 1% each year until 6% is achieved) as Plan B.

Plan B for Company B:  At the end of 2019 this plan matched 100% of the first 1% and then 50% of the next 5%.  This plan had a 2-Year Cliff Vesting program for company match dollars (0/100%). In addition, this plan has the same automatic enrollment features (e.g., start at 3% and increase 1% each year until 6% is achieved) as Plan A.

Effective 1/1/2020, the two companies merged to become Company AB.  Effective 1/1/2020, all employee contributions were INTENDED to be matched at 100% of the first 3.5% contributed, the more generous formula.  Their intent was to transfer the money from A to B in the first quarter of 2020, but COVID happened and they delayed until the market settled down; that transfer was initiated in the Fall of 2020 and has been completed.  Now, Plan B has 100% of the money for Company AB.

However, the new Plan amendments never provided for the more generous standard----100% of the first 3.5% match. Nevertheless, all company B employees received the more generous match even though the new plan did not provide for it while it was being contributed. 

Question is can we amend the plan now under SCP to provide retroactively for the more generous match that company A and B employees both got, or must we go under VCP ?

Section 4.05 (in the SCP section) in Rev. Proc. 2019-19 says the following:

No employees were disadvantaged. In fact, former B employees benefited by the higher match—the plan just did not properly provide for it at the time. It’s also well within the 2-year period for SCP.  What do you think ?

A plan is using the safe harbor rules for hardship distributions.

A participant incurred a medical expense in 2019 and has been paying the bill off over time.  There is currently an amount still owed on the original expense. 

Two questions:

1.  Assuming the document is silent on this specifically, can the participant request a hardship for the amount of the medical expense that is still outstanding even though the original expense occurred two years ago?

2.  If #1 is a "Yes", assuming the plan document allows for additional hardship restrictions, is it acceptable to say for example, that hardships will only be allowed for an expense that occurred no more than 6 months from the date of the request?

Thanks very much.

This is a 2-part question.  Was the deadline to distribute excess deferrals postponed to May 17 this year?   Secondly, suppose an employee participated in two 401(k) plans during 2020 (unrelated employers) and funded $19,500 in Roth deferrals to both plans.  (Yes, this is a true case!)  Is there a remedy for this error or should we ALL be trying to do this???  The penalty of "double taxation" doesn't apply, so what does??

Does anyone have recommendations for getting plan materials (SPD in particular) translated into Spanish?

A quick search doesn't seem to turn up any firms focused on translating or providing ERISA documents in particular, but I thought familiarity with plan concepts would probably help provide a more accurate substantive translation.

I have a client that got a notice from the DOL regarding potential prohibitive transactions due to there being delinquent contributions during the Plan Year.  I haven't experienced this before, so can someone tell me what the fix/response is and what is involved?

Thanks in advance, I really appreciate it!

I was wondering if someone could help me with a question.  I have two doctors whose businesses do not constitute either a controlled group or affiliated service group.  They have a shared employee relationship where one doctor pays the shared employees through his payroll and the other doctor reimburses for his attributable portion of the pay.  I know the proposed regs years ago were never finalized but are a good guideline.  My question here is prior service crediting.  One doctor's business started in 2018 and the other back in the 90s.  I have one employee hired back in the 90s.  Both doctor's have a 401k plan and the 2018 company started his plan effective 01/01/2020.  Would I credit the service from the older company back to the 90s for this employee?  Or is it permissible to credit all hours of service going forward from inception of the shared employee relationship?

Thanks so much in advance for any help anyone can provide.

Employer missed the SH match for several employees in 2020.  Most of the other employees were ok.

It is a payroll-based SH Match, and therefore, the contribution must be made no later than the end of the quarter following the quarter in which the deferrals were taken.

Did they just blow the SH protection for both ADP/ACP tests and Top Heavy?

Hi

I am trying to locate a rev-proc (may be a notice) that came out sometime 2016 (if I recall correctly) where it mentioned automatic approval of valuation date for an end-of-year valuation date to either the plan termination date or switch to beginning of year valuation. Just cannot seem to find it but remember it as it was specifically addressing terminating plans.

This was something before Rec-Proc 2017-56.

Any help would be appreciated.

Thank you

We have a client with a safe harbor 401(k) plan that imposes different elective deferral eligibility requirements for NHCEs and HCEs. NHCEs may begin making elective deferrals on the first day of the month following the first day of employment or re-employment. HCEs must complete 12 months of service before entering the elective deferral portion of the plan. However, in practice, HCEs have entered the plan at the same time as NHCEs (that is, the first day of the month following the first day of employment or re-employment).

On a separate, but possibly related note, all eligible employees must complete 1 year of eligibility service to receive the safe harbor match.

We have not seen a plan eligibility provision like this before, and wonder if this provision was intended to address early participation rules and nondiscrimination testing requirements. Has anyone else seen this provision? If so, in practice have you only applied the HCE eligibility provision to 5% owners (because a new employee cannot be a HCE based on compensation that first year)?

Money Purchase Plan terminated 3 years ago.  Only accounts left are for lost participants and each has over $5,000.  Record keeper will not cash the accounts out and move to an IRA because of the spousal consent issue.

What can the sponsor do to get this plan closed up?

My ex husband requested a distribution from my pension.   He was allowed as we had signed a QDRO.  However when my employer calculated his lump sum, they calculated it for 29 years of my employment.  The QDRO that we signed said the calculation should have only been for 19 years( while we were married). So they gave my ex too much money.  What is my recourse?  

I've seen TPAs and CPAs alike get tripped up on this topic, so any clarity would be much appreciated.  W-2 wages are a deductible expense on a business tax return, regardless of whether the recipient is an owner or nonowner.  I've been told that deferrals (for both owner and nonowner) are also deductible on the business return, as according to the IRC they are technically considered a type of employer contribution even though they originate from paychecks.  The IRC considers them ER conts in this respect, it was explained, because the employer voluntarily established the 401k plan.  This would explain why one would think that any W-2 amounts that are deferred could be deducted twice - once as wages and again as deferrals.  Thinking it's too good to be true, it would make more sense that the non-deferred W-2 amounts are deductible as wages and the deferred amounts are deductible as deferrals so that the same $ are not deducted twice.  I've heard both sides of this debate - what is the correct explanation?    

Scenario:  An employee was furloughed in early 2020.  He is offered COBRA at that time but does not elect it.  His employer calls him back to work in, say, June 2020.  He declines to come back because he has obtained other employment but is not eligible for coverage at that job.

Is this employee eligible for the second COBRA election period and the COBRA subsidy?  I think he is because his qualifying event was an involuntary termination of employment and the resulting voluntary decision not to return is irrelevant.  

That result doesn't sit well with me.  I have not seen any DOL or IRS guidance on this.

Does anyone have any thoughts on this scenario?

Thanks!

Is there any reason that a former owner and/or his family members cannot continue to act as ESOP trustee as long as the new owner approves? 

401(k) Plan with over 100 participants was audited by a CPA firm for the period 4-1-19 to 3-31-20. Plan sponsor has changed the year end to September, with a short plan year 4-1-20 to 9-30-20. Question is whether the short year audit can be put off under 29 CFR 2520.104-50, and be included with the audit for the plan year 10-1-20 to 9-30-21? Looks like it can, but  I've never seen this or been asked the question before. 

Thanks for any replies.

I work with some tax-exempt employers who offer a 403(b) plan and a separate 401(a) plan that matches the elective deferrals made to the 403(b) plan by some (not all) of the 403(b) plan participants.  

A question has come up as to whether the matching contributions to the 401(a) plan could be structured as 401(m) safe harbor matching contributions to satisfy ACP testing (assuming it passes 410(b) coverage testing).  In other words, the employer would sponsor an elective deferral-only 403(b) plan for all employees and a separate safe harbor match-only 401(a) plan for some of the 403(b) participants.

What do you think?

I want to see if this is just us, or are others encountering similar things, and also to get other perspectives on the issue - maybe mine is skewed.

This week , we have received notifications from a couple of vendors/recordkeeping platforms. To paraphrase succinctly, they are saying that due to the fact that Trust Provisions are no longer in the IRS pre-approved documents, that we need to notify them (the vendor) and send them a copy of the PROPOSED plan restatement provisions, at LEAST 30 days prior to sending them a copy of the restated plan. This so they can "review the provisions" to make sure they can handle the plan. For all I know, this may be something that many vendors are doing. And these are plans where the employer is the Trustee, or it is a corporate Trustee.

My feeling is BS on that. It is hard enough to do these restatements and coordinate with the employer, without getting the VENDOR to approve the choices. As far as I'm concerned, we do the restatements as usual, (after getting employer approval of any changes) and send the completed document to the vendor afterward. If they have a problem with it, we can amend the plan, or the employer can find anther vendor if the vendor won't handle the employer's desired provisions and it is important enough to the employer.

I should also state that the changes that employers are making are nearly always basic things - maybe eligibility, or adding or removing hardship withdrawals, etc. - normal things that are handled all the time by vendors when plan amendments are completed anyway.

Maybe I'm just grumpy and unreasonable this morning. Have you been seeing anything similar, and if so, any thoughts? Thanks.

Hi,

The 415 is 19,166. This is increased if the particpant is age 71 (provided that had enough salary average to cover).correct? If this is indeed increased, it is increased from 65 to 71 and not from 62 to 71. Correct?..Thank you very much.

Employer has had 6-month wait to enter the plan, no hour requirement, just elapsed time.  This pulled in several part-time employees who work <1000 hours.  They have no balance in the plan.  The participant count went over 120 as of 1/1/2020 and so will be audited for 2020.  The plan was been amended to exclude part-time, seasonal, temporary defined as those scheduled to work <1000 hours effective 1/1/2021.   The intent then is to exclude these employees prospectively from participation as of 1/1/2021 - no longer covered under the plan and thus not included in the participant count.

Example: an employee who always worked <1000 hours was eligible in 2020 and has no plan balance.  The 2021 amendment is intended to exclude this employee from participation in the plan effective 1/1/2021.  I think this is ok.  Comments?

Thanks in advance.