I have a plan that had a 3% SHNEC contribution for 2019. For 2020, they chose NOT to have a Safe Harbor provision. They are top heavy for 2020. Do they need to make a 2020 top heavy contribution for 2020 or are they all set because they were a Safe Harbor in 2019.

Thank you!

I may not be following the right trail of breadcrumbs, but is there an obligation to offer COBRA in the following situation. Foreign company employs several hundred employees. Say the wholly owned US subsidiary only has 5 US employees who are offered a group health plan. The COBRA regulations seem clear that the foreign parent and US subsidiary will be aggregated to determine whether the US subsidiary has 20 employees for COBRA purposes (it does). 

Say the US subsidiary terminates its group health plan altogether, but the foreign parent continues to offer whatever the comparable health insurance is in the foreign parent's country.

Are the 5 US employees entitled to COBRA coverage? Or has the "employer" (which includes the foreign parent) stopped offering any "group health plan" to "any employee" such that COBRA coverage ends?

In other words, does something exclude the foreign coverage from being a "group health plan" for COBRA purposes? I have to assume so - the foreign plan couldn't offer continuation coverage to the US employees - but am not seeing where that result comes from. 

Suppose a plan had 3% safe harbor nonelective provisions in place for the plan year ending 12-31-2020 and it was a brand new 401(k) plan. Deferrals were allowed right away upon hire, but to be eligible for the 3% safe harbor nonelective, a year of service was required. Assume they only have deferrals and safe harbor in the plan for 2020. Also, they excluded the non-key HCEs from the safe harbor (a lot of people).

Also suppose they are now "enjoying" the top-heavy surprise since not enough non-key employees deferred in 2020 to keep the plan out of top-heavy status (not even close, even with the eligible NHCEs all getting 3%).

Based on the language under IRC 401(k)(12) after its changes for the SECURE Act, do you believe they could amend the plan now to adopt a 4% safe harbor nonelective for 2020, making it's eligibility the same as the deferral eligibility, thus making the plan exempt from top-heavy for 2020?

Just looking for confirmation, but a participant loan program in a 401(k) plan can be eliminated as loans are not considered a protected benefit.  Does eliminating the availability of new loans apply to all participants, or just to terminated participants and/or newly eligible participants?

Thank you

Apologies if this is not the best forum to post this particular question but I'm curious about possible trends with respect to dispute resolution and similar terms in engagement letters for plan audits.  We recently were asked to review a proposed engagement letter for a 2020 plan audit for a large 401(k) plan sponsor and, in looking over it, noticed that since last year the audit firm had inserted broader indemnification provisions as well as mandatory mediation and binding arbitration clauses.  In addition, and particularly disconcerting to my mind, they also have inserted provisions to attempt to contractually limit the statute of limitations to one year and included express express terms prohibiting suit against any employee or partner of the audit firm for any reason.  I don't think anybody anticipates any issues with their audit firm and know you would not typically sue individual auditors personally if there was an issue but some of this seems way overbroad in the event some individual goes off track as part of the audit process, etc. 

Are these kinds of provisions market and/or a growing trend.  I'd really like to tell the client that they should reject the proposed terms and request something along the lines of the letters they've signed for many years in the past.  Or look for a new auditor.  And less of an increase in the audit fee . . . . Thanks.

If a plan is less than 60% funded so that no accruals can take place can this cause a 401(a)(26) failure? Does it matter if the plan provides for restoration of accruals?

Client mailed 1099R/1096 to IRS via FedEx at the street address given online.the PDS address, informs me the tracking # shows they are in Austin but they are not delivered to IRS.

Anyone else run into this?

We have a dental office client who has a qualified retirement plan (401(k)) and has signed up for and is now under a PEO arrangement. The PEO sponsors its own retirement plan and the employees will now be participating in that Plan. Have been asked options for the participants if any resulting from the termination of their Dental Plan. I am concerned about the replacement plan rules associated with going to a PEO and what options are available to the participants (if any). Under 401(k)(10) - would the PEO be considered a "replacement plan"?

I have a plan - discretionary match - Participants are allowed to defer on commissions, however commissions are excluded from match.

Is the compensation exclusion test required?

Thanks!

I'm saddened to report the passing of Bill Whitehurst, ERISA attorney extraordinaire.  And a really nice guy.

https://www.legacy.com/us/obituaries/winstonsalem/name/william-whitehurst-obituary?pid=197832813#utm_source=journalnow.com&utm_campaign=%2Fnewsletter-templates%2Fobituaries&utm_medium=PostUp&utm_content=355c2d446fed9f1e2e8dee78be6ebfb245df1f67

The IRS assesses a  multiemployer health and welfare fund a penalty for not timely distributing and/or filing Forms 1095-B due to an error by the fund administrator.  The penalty is not covered by the fund's E&O/fiduciary insurance policy.

Can the fund pay the penalty from plan assets?

Thanks.

I keep getting the CP214 form sent to me to remind me to determine if i need to file form 5500-EZ. I ignore it because it said we send this form just to remind you if you previously filed a form which I did in 2014. So today I was curious and I called the IRS. I said why do I keep getting this form even though I terminated the solo 401k plan.

She immediately ask me if I had the 5500-ez in front of me. I did and everything was filled correctly EXCEPT the part that said "total number of participants at the end of the plan year". I wrote 1. She said I should have written 0 and that is why I keep getting this form. The Assets was already 0 and I wrote Final written. I was told to mail a amendment for 2014. I asked if I have to pay a penalty. I already converted the plan to a traditional IRA in 2014 and already issue 1099 and my asset at end of year was 0. He said I should not. He claims I don't have to pay a penalty because I filed it on-time but I just filed it incorrectly. I was told to mail the letter with an explanation and a 5500-EZ. Is the IRS agent correct? Anyone ever encounter this? I read online somewhere I need to pay $1500 penalty or $150,000. I was the only person on this solo 401k plan and I only file this return (due to final year) once because my plan never exceeded $250k nor was it even close. 

Has anyone heard of forced rollovers for all participants from one employer to another if the employers were unrelated but there was an asset purchase involved? Again, not a transfer, but a mass rollover.

Terminating an overfunded db plan. Not relevant but 2 participants, owner/spouse.

Each took a loan out from the db plan and first payment is due late March. Loan is for 50k/each

Each will rollover their lump sum into their respective IRA's and loan will be rolled over into the qualified replacement plan (QRP) before first payment due.

Do they need to redo the loan agreement in the name of the new QRP without changing the original provisions?

Thank you

A participant was hired sometime in 2020, but met the entry date requirements on 12/31/2020. The compensation is $0 from entry date. The participant is due a Top Heavy minimum based on 415 compensation. How should this participant be treated for testing purposes (in terms of whether they are a participant or not - due to testing compensation of $0 - and what's their allocation rate for the General Test)?

I have a client that is a partnership sponsoring a 401(k) plan. There are 8 partners with equal ownership and 50 rank and file employees participating under the plan. All partners are surgeons, each has a separate P.A. and all are adopters and signers of the plan. Their plan document allows investment in "qualifying plan assets" only.

One of the partners wants to invest his account exclusively in gold and bitcoin. So, without requiring the plan to ease its investment restriction, is there a way to accomplish this? For example, could this be accomplished if this particular partner's P.A. sponsored its own plan? Or in another manner? 

Just needed to confirm something for testing purposes.  Owner has a son that makes $50k and contributes the max into the 401(k).  It's currently a Safe Harbor Plan, so there's no testing issues (they also make an additional Profit Sharing)

They are considering adding a Cash Balance Plan to further maximize the contributions for the owner.  If I were to exclude the owner's children from the Cash Balance, do I still have to include them into the testing for the offset? (obviously the son's EBAR is astronomical, since he's only in his 30s, so including him makes passing the test impossible).

If he's excluded from the Cash Balance, he can also still get the same Profit Sharing he would've gotten, correct?

Thanks in advance!

When the time comes and with some exceptions, a non-governmental § 401(k) plan must (to tax-qualify) permit an employee to make elective deferrals if the employee has at least 500 hours of service a year in at least three consecutive years and has met the plan’s age requirement (for example, 21) by the end of the three-consecutive-year period.

A plan need not provide nonelective or matching contributions for such a long-term part-time employee.

Relief from nondiscrimination and top-heavy rules applies only regarding “employees who are eligible to participate in the [§ 401(k)] arrangement solely by reason of [§ 401(k)](2)(D)(ii)[.]”  I.R.C. (26 U.S.C.) § 401(k)(15)(B)(i); accord § 401(k)(15)(B)(ii).

Some employers are considering simplifying a new provision by making all employees, with no age or service condition, eligible for elective deferrals (without providing a nonelective or matching contribution).

If an employer in its particular circumstances is not worried about coverage, nondiscrimination, and top-heavy rules:

Is there some other reason an employer should consider not extending elective deferrals to all employees?

I looked every where for this so sorry if this is a repeat.

The employer was part of a PEO, Multiple Employer Plan and has spun off into their own plan 401(k) plan.  Is the new plan considered a successor plan, and therefore cannot use the use the 3% Prior Year average available for the first plan year?  Or is the new plan considered a new plan?

I have a client with a document that allows prevailing wage contributions to offset employer matching (non-safe harbor) contributions. What test applies to the portion of the prevailing wage contribution used to offset a participant's employer match, ACP or 401(a)(4)?