First time I have seen the following in my many many years in this business.

I am looking at a 5500 forms prepared by another TPA. It is first filing and for 2020 (calendar plan). 401k/safe harbor/profit sharing plan.

401k feature started late in 2020 - adoption date of the new plan. Not a short plan/sponsor year. Plan effective 1/1/2020.

Safe harbor and/or profit sharing deposited after plan year end.

All participants have been employed more than few years so eligible under 21/1 rule as of 1/1/2020 i.e. entered the plan on 1/1/2020.

On the 5500 forms, participant count on 1/1/2020 is 0 and 12/31/2020 10. All 10 were eligible as of 1/1/2020 - no one entered the plan after that date.

The way I know/done is the participant count on 1/1/2020 is 10 and not 0.

What am I missing here?

Thank you

Good afternoon, 

If a private non-profit entity sponsors an ERISA 403(b) plan with an employer match, and then discontinues the match, can the plan be reclassified as a Non-ERISA 403(b) plan and stop filing Form 5500-SF?  Would the plan need to be amended and restated into a Non-ERISA document?  Would the mere presence of old account balances derived from employer matching in previous years make the plan continue to be covered by ERISA?

Thanks as always for your help.

In reviewing an IRS-preapproved document, I saw this: “To the extent such laws are not preempted by federal law, the terms and conditions of this Plan will be governed by the laws of the state in which the Pre-approved Document Provider is located[.]”

This choice sometimes might matter because the document can be used to state a non-ERISA plan.

The document defines “Pre-approved Document Provider” not as the documents’ publisher but rather a retirement-services provider (a licensee of the documents).

Is this choice-of-law provision now common?

Client established a safe harbor matching plan in 2020.  however no body, owners nor employees made any contributions in 2020.  There are eligible employees but beginning and ending balances are $0.  Client doesn't believe a 5500 should be filed; i'm of the opinion of course it has to be filed; people were eligible.  Just looking for a 2nd opinion here.

Small non-PBGC cash balance plan used a 12/31 valuation date.

Froze 3/31/20, terminated 5/31/20, assets all out on 8/12/20.  So I'm prepping final report and SB for actuary to sign ahead of 6/15 extended deadline.

Is 8/12 an okay valuation date to use?  Assets and liabilities both zero at that point since everyone was paid (final assets were just a residual dividend liquidated to pay fees).  Don't want to switch to 1/1/20 because we'd have to assume folks would be hitting 1000 hours and getting a new contribution.  5/31 valuation date would obviously require more review of the numbers the software spits out.

Thanks.

-Bri

Hi,

Client's Sched. C reflected a loss. Unfortunately he maxed out his 401k so it will have to be refunded. The accountant came back asking if the non-taxable PPP income that the client received last year could be included.

I'm pretty sure I know the answer but wanted something in writing.

When someone over age 55 switches from Family to Single coverage May 1st, does the annual limit you use to calculate the prorata annual contribution limit include the Catchup $1000? So $8200 for 4 months, then $4600 for 8 months. Or do you use the annual limit of $7200 or $3600 for the prorata calculations, and then add the $1000 to that?

Thanks

Client has a discretionary match formula, first half of the year they've done 100% up to 2% but starting July 1 will increase to 3%.  They however want to leave the participating sponsor employees at the 2%.  My thought is that is acceptable as long as they pass ACP and as long as there isn't a disproportional amount of NHCEs in the participating sponsor. Would you agree?

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.