A 401(k) plan sponsor formerly had only key employees eligible to participate, so top heavy testing wasn't an issue. The plan included profit sharing contributions.

Next year, a non-key employee will become eligible. To get out of top-heavy testing, they just want to cease profit sharing contributions, allowing only the elective deferrals and safe harbor NECs (safe harbor NEC provision for non-HCEs had already been adopted when the plan was first adopted, but was basically moot until now because there were no non-HCEs).

Under IRC 416(g)(4)(H), is the plan considered exempt from top heavy testing? Going forward it "consists of" only the elective deferrals and the NEC, although it contains "old" profit sharing contributions made during the prior era.

Under the SECURE Act's changes to post-death required minimum distributions, the legislation considers a child to be the participant's eligible designated beneficiary (and thus not subject to the 10-year payout rule) until the child attains majority (whatever that means). However, another category of eligible designated beneficiary considers an individual (regardless of relationship to the participant) to be an eligible designated participant if s/he is at least 10 years younger than the participant. Going back to the child, would the child remain the participant's eligible designated beneficiary because s/he is at least 10 years younger than the participant once the child attains majority? I know of no individual having a child (unless s/he adopted an adult) who is fewer than 10 years younger than the participant. Or is the child, at the point at which s/he attains majority forced onto a 10-year payout from that point?

Let's say participant dies at the age of 60 and designates a child who is then age 15 as his/her beneficiary. Once the child attains majority, does the child remain an eligible designated beneficiary because s/he is at least 10 years  younger? Or does the child lose his/her status as an eligible designated beneficiary and become merely a designated beneficiary, in which case, remaining amounts payable to such beneficiary must be paid out withint 10 years of the date the child attains majority?

I have been searching for the latest bipartisan agreement on the Coronavirus Relief bill in legislative language format. Has anyone been able to access a copy? If so, could you please attach a link to it?

Thank you.

We have discovered that a plan has been accruing funds in an ERISA Plan Expense Account since 2016 and none has been used to pay expenses or reallocated back to participants.  The amount is over $25,000.  I'm not exactly sure when this type of account would NOT be considered a plan asset, but, in this case, it seems to be plan assets (although not included in prior year 5500 reporting) and the amounts should have been allocated to participants each year.  Does this need to be corrected similarly to improperly carried over forfeitures, where the extra revenue each year has to be allocated to those who would share in each of those years, meaning we must go back to 2016, 2017, 2018, etc. to do a separate allocation for each year?

Obviously, I would love to allocate only based upon current participant balances.  Any option here without submitting through VCP?  There are no fees that can be paid with this because advisor and TPA are already paid in full through asset-based payments from the Plan.

Thank you!

Non-profit is in blackout and ADP refunds are due.  This is a non-profit that has definutey be impacted by COVID and the refunds are significant as is the amount of the excise tax.

Now, we can write an amazing "sob story" because this entity is definitely COVID front-line. So for example, the budget is really taking a heavy COVID hit for PPE and testing, etc.  If one was going to ask the IRS to abate the penalty how would one go about doing it?  We were thinking complete the 5330 as normal and then in lieu of sending a check, attach a cover-letter.  Has anyone ever been in this situation before?

Hi all

Having another senior moment.

Looking at a combo plan (both 401k and cash balance plans are top heavy) where the existing 401k plan has safe harbor match (changed to non elective for 2021) and ps allocation is last day+1000 hours and everyone in their own group. Top heavy also requires last day rule. The cash balance will be a new plan effective 1/1/2020.

One employee (DOP 1/1/2019 and non-HCE) terminated 1/10/2020 and rehired 10/4/2020. He deferred a bit in the year and gets the safe harbor match.

He is excluded under the CB plan.

Gateway requirement is 5%

Performed the combo testing and the system did not require a gateway allocation to him and passed the testing (I have others who satisfy the combo test and helping to pass the test).

He should get at least 3% as the 401k plan is top heavy and did not get a warning on that either, correct? As it is safe harbor match, should have 3% of allocation, at least.

Something does not smell right.

I do not believe it matters if he worked under or over 500 hours.

Thank you for your comments.

For those owners who are having some DCA contributions reclassified as after-tax in order to pass the Average Benefits Test, can the employer pull that money out of the funding account and just give it back to the employee? Or, does the employee still need to use those funds for qualified DCA expenses?

It sort of makes sense to give those dollars back to the employee since they aren't really getting any pretax benefits from it anymore. 

Thanks

Cross tested profit sharing plan with everyone in their own group.  Plan excludes a group of employees by job classification - some who would otherwise be eligible other than the job class exclusion.  

When doing coverage testing - plan passes Ratio Percentage test with these excluded employees included in the counts as not benefitting.

When doing non-discrimination testing on the profit sharing allocation (HCE's getting a 20% contribution and NHCE's getting 5% - has no last day or 1000 hour) do I have to include the excluded employees in the calculations at a 0% benefit rate?  

How do you react/respond to a client's request for their current plan docs (AA, BPD, SPD, etc)?

I find in way too many cases, soon after I supply the requested material, I get a letter saying the client thanks us for our service, but they are making a change.

Why should I facilitate that?

I know that's not the case will everyone who requests them, but I also want to shout into the phone:  YOU SHOULD HAVE ALL THIS.  IN FACT YOU MUST.

How do you admonish the client for not having these doc without sounding like a jerk?

A client provided bad compensation data on the plan for 2019 and we are realizing adjustments need to be made.  They also switched carriers and are in blackout until 2021.  Can they still make the adjustment matching contributions.  Document is set up for annual matching contributions and now need adjustments (additional matching contributions) that most likely will not happen utnil 2021.

A business has 3 unrelated owners who each own 33 1/3% of the business.  The business has no other employees.  Can this business sponsor a single plan that is considered an owner only/solo plan which is exempt from nondiscrimination tests and 5500 filing?  The business is structured as an LLC and taxed as an S-Corp.  

During 2019 there were 2 employees and one earned > HCE limit.

If we elect the TPG in 2020 , then there should be no HCEs in 2020 since we round down (2 x 20%)

Just want to confirm that there is no issue here since we are consistent with our rounding policy and that there is no rule we are not considering.

The Document Provider we will be utilizing for the Cycle 3 restatements has a notation at the top of the first page, on the Adoption Agreement - "[Collapsible Version – Elections that are not selected by the Employer and provisions that are not integral to the Plan are not included in the Adoption Agreement. A complete version of the Adoption Agreement has been made available for review to the Employer. The Employer certifies all provisions and elections appearing in this Adoption Agreement were taken from the complete version of the Adoption Agreement.]" 

We are utilizing the Collapsed Version and do not wish to supply the Plan Sponsor with the Adoption Agreement with all unselected provisions. We can see where the Client might just use this to "amend" their Plan, without informing us of the change. Obviously, we could add a watermark - but as you know, this will not stop some Clients from using it anyway.

How are other people handing this? Thank you.

I have a prospect with the following scenario -

Two companies, one a partnership 67/33 owned, and one an S corp, 75/25 owned respectively until May 1, then 100% owned by the majority owner.  As of May 1, 2020, the partnership effectively dissolves in an asset sale.  The S corp has lots of profits for this year and probably a couple of years going forward.

Any thoughts on how to set up a DB for the (one man) S corp?  Can we "just" make it effective May 1?

I think a primary concern is the "effective" dissolution of the partnership; it's probably in existence thru Dec 31.  But no discrimination problems since the only other person potentially in is an owner.

Taking on a new client (solo - EZ). They never filed 5500EZ for 2016-2019 so we are working to clean up. While working on these 5500's I discovered they deposited $500 to much in 2016 ($500 past 415 limit), and $35K excess for 2017. There were no contributions made in 2018 or 2019.  What would you recommend as the best way to fix the excess contribution? I am thinking that he needs to remove this money from the plan along with earnings. Thoughts?

I work within a payroll company where the main objective is sell as many plans as possible to meet sales goals. Right now we have over 300 plans and more coming in every day.. Including myself there is only 1 other person that knows how to administer the plans. I have only other employee that unfortunately doesn't understand the concepts so his role is minimal. Also, being a payroll company our area uploads the contributions for our payroll clients which is more than a full-time job by itself.

How big is a typical caseload for 1 administrator? I am seriously considering resigning after 7 years because I do not feel I can give the quality service that needs to be given to clients. I'm tired of working many long hours and cringe that our busiest season is right around the corner. The stress is beginning to affect my physical and mental well-being but I find myself wondering if I should just suck it up and continue in this situation. I've never resigned from a company before.

The only perk is that I can work from home.

Client is wanting to change their vesting schedule from 100% immediate to 4 year graded (25/80/75/100).  My understanding is that Vesting is a protected benefit which cannot be reduced or eliminated. The more restrictive schedule must be applied to all future contributions received on or after the effective date of the change.....unless you make all current participants 100% immediately vested in all future contributions as well and apply the more restrictive schedule to new participants. Are there recent or newer regulations addressing this that may have a different application than the one I've described? Is this how more restrictive vesting should be applied?

This is for a medical group partnership with no employees and all HCE's, common in emergency medicine. Each member is a separate entity but the group is an affiliated service group.  Are individual cash balance plans allowed?  I believe some members may have them already.

Although contributing to both a 401(k) and a SIMPLE IRA in the same year is not allowed, can an employer keep the SIMPLE account open if the only contributions made going forward are to the 401(k), or must they close the SIMPLE account before the 401(k) plan is started?

We have a situation where a participant in a plan has died.  His brother has provided a POA naming him.  He doesn't have any letters of testamentary because he's saying he doesn't need one - he's the POA.  Our process is to require a letter of testamentary to show who was appointed the executor.  Are we ok distributing to the estate without a letter of testamentary - just distribute to the estate - paid to the estate, etc.  I think we still need one - we need something to show that this person has the authority to sign on behalf of the estate.  Any help would be appreciated.

Thank you,