Good afternoon to all:

An existing client with a 401(k) plan for his Company A at John Hancock has made us aware that he owns 50% of another very small Company, B. An unrelated partner owns the other half of Company B and has nothing to do with Company A.  Company B has 5 employees, 2 of whom want to participate in the 401(k) plan of company A. 

Since our client does not own 80% of company B, we do not have a controlled group.  We just also found out that we definitely do not have an affiliated service group.  We are going to do a separate plan for Company B.

However, only for purposes of funding the plan for Company B, could the two people who want to participate be added to the existing plan at John Hancock for Company A?  It's probably going to be expensive to set up a separate trust arrangement at John Hancock for just two people in a tiny plan, and we were wondering if they could be added on to the Company A plan just for funding purposes.  They could be listed as a separate "division" just to make it easy to spot them on reports, but is there anything "wrong' or "illegal" about putting on two employees who are in a different plan?

Thoughts?  Your advice is appreciated.

If  a participant rolls over their qualified retirement plan into an IRA, are the assets protected from creditors like they are in the qualified plan? 

Have a plan that failed the adp acp test.  Participant is 60% vested. Relius is showing Allocable Income on the ACP correction.  Is it 60% of the Refund Amount that is forfeited? How does the Allocable Income  come into play then? 

This involves a fairly standard smaller 401(k) Plan that started in 2016.  At that time, all participants completed a beneficiary form.  The one participant completed his, naming his spouse as primary beneficiary and his son as contingent beneficiary.

2018 the participant divorces and then marries spouse #2.  But never changes the beneficiary form.

2020, the participant passes away.  

Even though a new beneficiary form was not completed, the new spouse would be the beneficiary, is that correct?  Is that automatic?

Thanks

Can two plans be aggregated for ACP testing, but not ADP testing?  (Note:  I'm using "plan" in the colloquial sense here.)

I understand the the 401(m) and 401(k) components of the plan are separate "plans" under 410(b), but Treas. Reg. 1.401(m)-1(b)(4)(iii) and (v) indicate that this treatment does not apply for purposes of permissive aggregation under the ACP testing rules.  I take that to mean that, if you aggregate plans for ACP purposes, you also have to aggregate them for ADP purposes.  However, I have found surprisingly little discussion on this topic thus far.

Has anyone ever seen a document for people getting ADP/ACP refunds that addresses the following critical point: What you do with the refunds dictates the ultimate impact.  So others can probably write more eloquently (and with more expertise) than me on:

-Availability of deductible pre-tax IRA's

-Availability of current year 401k contributions for you or your spouse to offset

-Availaiblity of Roth IRA contrbiutions (if not over limits)

-Availability of back door Roth IRA contributions

-Simply ivnesting in an after-tax account (capital gains, municpal bonds,etc).

It seems to me that if there were such a document it would go a very very long way...  I could probably write such a thing with all appropriate disclaimers.  I could even do a bit of a choose your own adventure (whats your AGI? Are you married? etc).

A 401(k) plan mistakenly allowed one of their ineligible employees to enter the plan and fund salary deferrals. We know the correction for this under SCP is a retroactive amendment allowing just that NHCE to be eligible to make salary deferrals when they did, just for that year.

If this is done, does it automatically then make this otherwise ineligible employee entitled to employer contributions or safe harbor contributions? It would seem that the intent of a corrective amendment is to only correct the plan with respect to what was violated.

Anyone agree or disagree? 

Thanks.

It seems that several folks responded differently about completion of the Form 5500 (EZ). Is an individual required to complete &file 2 separate 5500's one each for solo401K and DB plan when assets exceed 250K together?

Do plan administrations search public records for marriage and divorce certificates?

example would be filling out the pension application to start drawing a regular pension and not checking the divorced box. If you did not check the box saying that you had been divorced do they search public records to verify?

thanks

Client with about 50 employees in its 401(k) plan wants to change TPAs.  The new TPA (major insurance company) has suggested a third party ERISA 3(38) investment manager (major investment firm) to select and monitor investment options to be made available to participants. Big emphasis on how 3(38) allows fiduciaries to avoid or minimize their fiduciary liability.

Seems like a good idea until I read the service agreement with the 3(38) investment manager (“IM”) which states that:

1. Employer is responsible for determining that the investment lineup chosen by the IM is “appropriate for the plan”. Wait, isn’t that the IM’s job?

2. IM will indemnify the plan (but not the fiduciaries) against losses arising  from its breach of fiduciary duty, willful misconduct or breach of the agreement (but not from its negligence). First, you can’t sue the plan for a fiduciary’s breach of his fiduciary duty. Second, the whole point of 3(38) is to protect the plan fiduciaries, not the plan. Third, the IM should indemnify if the loss is attributable to its negligence.

3. The Employer and the plan indemnify the IM for any losses arising in connection with the services provided by the IM unless attributable its breach of fiduciary duty, willful misconduct or breach of the agreement. So, the Employer and the plan have to indemnify the IM for it losses even if those losses are due to the IM’s negligence.

Bottom line is that the Employer is not receiving the protection from statutory fiduciary liability that the marketing materials promised and, in fact, is assuming contractual liability to the very party that is supposed to assume that fiduciary liability.

Am I missing something?

I am getting old fast and  new to DB plans as I've been looking to find good TPA for solo401K and defined ben plan for single owner/employee. I have been working for just over 30 yrs and finally decided to set up a CB plan and solo 401K already established in Dec. All of my accounting etc. is straightforward with no complicated matters and it's just myself in my owner-only small business (LLC.).

Does anyone know if I really need a TPA to do anything for the solo401K I setup and administration or can I use the general plan/ adoption agreement template that the large brokerage house already has?? Any recommendations on TPA for the CB plan as it seems hundreds of TPAs that are selling services with large fees and mostly geared towards larger businesses. I know DB plans are complex and although mine is straight forward, I'd like to find someone/group that may actually want to help me:)

Thanks for any help in advance.

Plan contains the following provision:

"Solely for purposes of determining the amount of an employee's Pick-Up Contribution, Earnings shall be determined without regard to the limit on Earnings imposed by Code Section 401(a)(l7)."

Is that acceptable? If so, any cite.

A company has a plan that runs from 1/1 to 12/31. It pays employees once a month on the first of the month. An employee is hired in December of 2020 (enters the plan right away as there is no eligibility condition) and has no pay through the end of year (he receives his first paycheck on 1/1/2021). So, the employee cannot possibly defer / receive a match for 2020.

Should this participant be included in the ADP/ACP test for 2020?

Also, should the participant be included in the active participant count for the Form 5500 purposes for 2020?

Thanks!

Small business owner (no employees) would like to set up a Solo K plan - however he wants to add his child (minor) to the payroll and have the child participate in the plan.  I've read that in order to qualify as a Solo K ("Owner-Only")  an employer must have no full-time employees other than themselves, a business partner and a spouse. - What about children?

Question -Would the plan continue to qualify as a Solo K if the child is eligible to participate? 

Thank you

Hi, 

I would greatly appreciate any insights etc., on the below. A DC (Money Purchase) Plan (volume submitter) has a provision in the compensation definition section (shown below) that allows the owners to sign a form that states that their compensation for the year of the effective date of the plan and all future years is $0. Their contribution based on this is $0, and only the employees receive an annual contribution. Are there any issues with this? Thank you.

       Compensation Limitation Election Available to Certain Participants.  Except for determining Top Heavy  

              allocation requirements under Section 3.5 or Code §415 limitations of Article 6, any participant who is a

        Key Employee, an Owner-Employee, a Self-Employed Individual, or a Highly Compensated Employee may  

        elect for any Plan Year, on a form prescribed by the Administrator to limit Compensation for all purposes

        under this Plan. 

Hi, 

I believe participants with outstanding loan can rollover their loans to an IRA account, can anyone provide more detail on this? 

Should the CARES Act Non-Cash Bonus be included or excluded for Total Comp and Testing purpose?

Hi

I have not had an overfunded DB plan PBGC termination in many many years.

The excess is to be reverted to the employer under the provisions plan document, always have been from adoption date which is 2007. There is also a resolution that the excess will be transferred to qualified replacement plan - QRP.

100% of the excess will be transferred to QRP and all participants in the db plan are actively participating in the QRP. Excess is estimated at 300k.

PBGC form 500, line 16a to 17c is where I am having a bit brain freeze to complete.

I would appreciate if someone with this experience can share their knowledge.

Thank you

Just had an interesting question presented to me - real life case.

401(k) plan with several hundred participants had an ADP failure. Small failure - between $1,000 and $1,500 had to be distributed to 1 HCE. This was done timely in March of 2020 - BUT, 3 days after the deadline, the custodian reversed the distribution - due to some BS paperwork question. They never notified anyone of this, and the distribution was never reprocessed.

Fast forward to now, when it was just discovered.  Of course it can be corrected by a QNEC (prohibitively expensive) or the "one to one" correction method. Problem with one-to-one is that the amounts are so small that it amounts to a QNEC of just a few cents for many eligible NHCE's.

Anyone have brilliant creative thoughts? VCP is prohibitively expensive, and any solution under SCP, while possible, carries no guarantees. Many fixes, while "reasonable" by ordinary standards, might not stand up under audit. However, short of an "approved" fix, then some risk must be assumed.

Thanks for any thoughts.

I'm assisting with the 403 B plan termination for the first time, this has a GCA ( Group Custodial Agreement) how different is the termination process? What are the keys factors that I will need to look into it. 

There are participants who have outstanding loans, when a 401K plan terminated the participants will be allowed to roll over the loans into the acquiring company plan how does it work with 403 B GCA( Group Custodial Agreement)? 

• Can funds be liquidated and cashed out? 
• Can the funds be rolled over only to a retirement plan or can it be rolled over to an IRA? 
• For non-responsive participants - Generally when a 401k plan terminates participants are given at least 30 days to make/take distribution of their choice, what is the time period provided for participants with 403 B? can the funds be rolled over to an IRA if they don't respond? 

Any material that I can refer?