Employer handed out a 2021 safe harbor match notice early and now wants to change to a 3% SHNEC for 2021. Are they obligated to the 2021 SH Match because of the notice, or can we get a new notice out by tomorrow and change that?

Is the relief for failure to adopt a written 403(b) plan document still available under EPCRS for a 403(b) plan that was not in existence in 2009. We have a 403(b) plan which became effective in 2014, but never adopted a plan document.  Can we submit a VCP using the Model VCP Schedule 2 ?

I wasn't sure where to ask this and after searching the forums I am guessing here.

Does anyone still use FDP?  I have a friend who is trying to run valuations using FDP for 12/31/20, and the old DOS based system thinks 12/31/20 is earlier than 12/31/19, so nothing will run.  My friend is not sure if it is an FDP issue or a DOS issue.  I know this is really reaching - for the youngsters, FDP was a recordkeeping / compliance software laid to rest around 2000 / 2001 (?).

Thanks - if no one can help, hopefully this post at least made someone chuckle.

Imagine an individual-account (defined-contribution) retirement plan that does not provide participant-directed investment.

Imagine the participants range from 18-year-olds to workers in their 90s.

If you were the plan’s trustee or investment manager with complete authority and responsibility to decide the plan’s investment policy, what would you do?

Would you decide an asset allocation grounded on some average of the participants’ ages?

Is there another method you might use to balance the potentially differing interests of younger and older participants?

Is there some other way—without changing the plan’s provisions—to manage this fiduciary challenge?

I am looking at a proposal for a cash balance plan that is offset by employer contributions to a 401(k) plan. It looks like there are 20 eligible employees but only the two shareholders have net contribution credits of more than $280K in the cash balance plan. They are both in their late 50s and the plan has a NRA of 65.

I seem to recall that for purposes of 401(a)26, only the benefits after offset can be considered if they are meaningful (.5% of pay or greater) when a cash balance plan is part of a floor offset arrangement. Whereas benefits before offset are allowed when a traditional defined benefit plan is part of a floor offset arrangement (provided the DC plan has uniform allocations, QJSA etc.) and benefits before offset are meaningful.

Anyone agree / disagree?

Hi all

Have not done of these in a long time.

Company started 3/1/2020 with FYE 12/31/2020 so in existence for 10 months in 2020.

Want to set up a 401k/PS plan (no SH can be done for 2020 but can be done for 2021)

My census

Key-HCE1 - salary 285k

HCE2 - salary 250k - can he be categorized as non-HCE for 2020

HCE3 - salary 200k - can he be categorized as non-HCE for 2020

Non-HCE - salary 50k

What prorations are required between the salary, 401k deferral and profit sharing (ADP issues aside)?

If need to prorate the salaries, what salaries do I need to use for ADP, 410(b) and 401(a)(4) purposes?

If my memory serves me right, I can start the plan from 1/1/2020 i/o short year as well as the limitation year, correct? If this the case, do I need to prorate anything?

Last, as the HCE's (assuming that the non key HCE cannot be categorized as non-HCE) will have enough of payroll to maximize the deferrals where the non-HCE will not, is this a BRF issue (again please ignore the ADP testing).

Thank you and happy Thanksgiving.

Plan is termed a/o 9/30.  In process of paying out accounts.  Hope to get this done by 12/31 for obvious reasons.

Tracking down former employees, get in touch with one of them.

She tells me she is getting a divorce.  Normally, flag goes up, put hold on account and wait for DRO.

Is that the same thing here?

Can a divorce hold up a plan termination?  Or, at least, hold it up for this one person?

Really, I implore all of you to stay safe, even though it may mean skipping traditional celebrations. We lost our best friend to Covid earlier this year - he and his wife didn't observe standard precautions, had a couple of big family gatherings, and both got Covid and he paid the ultimate price. Please don't let this happen in your circle. Be thankful for what you have, and don't take chances!

I'll get off my soapbox now. Best wishes to everyone.

I inherited an overfunded one-participant plan. The participant is the 70 year old owner with three year average pay of $100,000. Maximum 415 lump sum is about $1,000,000, but plan has $1,560,000. She could take the lump sum and move the rest to a qualified replacement plan, but the company won't have income going forward (no way to use up the excess) and she wants to close it down (can't have a plan with no sponsor). So I have three questions:

1. If she were to use a Retroactive Annuity Starting Date of her 65th birthday, the back payments with interest would be $560,000. This amount would not be rolled over. Then she could use the $1,000,000 to purchase a life annuity with payments of $100,000 per year. Is this correct? 

2. If she first took her RASD payments, could she then take her lump sum of $1,000,000? Or is this a 415 violation?

3. What if she were 71 (70-1/2 in 2019) and already took her RMD for 2019 and 2020. Does this affect the answers to 1 & 2?

I have heard more and more about the DOL audit and a plan sponsor could be deemed to have breached their fiduciary duty under the plan if DOL does not think you have tried hard enough to find your missing participants. My question is: 1. Should this be on the top of the mind for plan sponsors? 2. Is there any existing solutions to help you find missing participants?

we have a client who has passed away earlier this year.. The business is shutdown and we are looking to terminate the 401k plan.. there are 6 employees who are requesting distributions.. there is no other authorized signer or trustee on the plan and the wife who co-owned the business is non-responsive..

first and foremost we'd like to get the employees their dollars.. and then finish up the plan termination.. thoughts on best way to proceed here?

We have very few plans that register for TINs anymore.  One that just did is for a one-person plan, and now the person is moving.  I found Form 8822-B that looks like it might be what is needed to change the address at the IRS, but... does anyone actually do this?  Or is it good enough to wait until a return is filed with a new address and let the IRS update their records at that time?  Sure, watch this be the one time that the IRS sends a notice to the trust, and they won't be there to receive it...

We have a plan that the Plan Sponsor is currently a sole proprietor.  They are changing to an S Corp with some of the ownership going to the adult children, which will require a change to the EIN. Is it acceptable to restate the current document and just change the Plan Sponsor name and EIN or must we terminate the Plan and start a new one for the new entity and EIN?  Thanks 

Hi,

Let's say there is a 401(k) plan for a company that's taxed as a Partnership and has 2 owners (50% ownership each) at the beginning of 2020. In the middle of 2020, the owners leave the company and now there are 2 other owners (also 50% each). How would you calculate the compensation for the owners after the adjustments for FICA and contributions to other participants? We use DATAIR for our testing. The issue that I'm seeing is that if we code each of the 4 owners during the year as 50% owners, the adjusted compensation will not be calculated correctly because the total ownership adds up to more than 100% (4 owners at 50% each = 200%). What would be the correct way to run a plan like this?

Thanks!

With major recordkeepers announcing their PEP products this is going to be an instant question early on.

if a stand alone safe harbor plan wants to join a PEP, do you see any issue with that plan converting into the PEP and keeping safe harbor status (for as long as all provisions are identical)?

I know in the past i have heard of some payroll providers not really cooperating with these types of moves as well, requiring the plan to change providers prior to coverting.

thoughts?

Owner only 401(k) plan with a match formula of 100% on the first 3% contributed.  The owner hires an employee who becomes eligible for the plan 1/1/19 but doesn't offer him participation in the plan.  The owner corrects for the lost deferral opportunity through 10/31/20 and the employee chooses to defer 5% effective 11/1/20.  Normally, the ADP test is done by disregarding the improperly excluded employees so 2019 ADP Testing should be all set.  Why type of ADP Test should be done for 2020?

Hello DB Plans Community,

Here is the situation.   I just took over the defined benefit plan.   It has less than 100 participants (but more than 25).  All the participants are either receiving payments or terminated vested (however I am not sure it is relevant to my question).  AFN for 2019 has not been issued yet.  Some of the quarterly payments for 2019 Plan Year have been made late (more than 60 days late it is).  Plan sponsor made the required payments by October 15, 2020 to avoid the funding deficiency for 2019 plan year.  From 5500 has been filed timely without funding deficiency.

I would like to issue the AFN as soon as possible since it was due October 15.  Am I correct?  Do I need to issue a notification to participants regarding the “late quarterlies”?  I believe I do.  If so, I would like to include the language notifying the participants regarding “missed quarterly payments” and “the corrective action” as part of the AFN.   Where can I find a sample of the “notification and correction” language?

Thank you in advance.

401(k) plan year ends 10/31/2020.  

Deferrals for the plan year:

11/1/2019 to 12/31/2019:  $4755, all catchup for 2019 (total $25,000 deferred in calendar year 2019)

1/1/2020 to 10/31/2020:  $26,000

So the total deferrals for the plan year ending 10/31/2020, $30,755.

The plan makes a 3% safe harbor nonelective, so no ADP catchup to worry about.

If the 3% safe harbor contribution is $4860, then I'm thinking I can allocate an additional $32,640 in profit sharing.

That would be $19,500 in deferrals ($30,755 less $4755 in 2019 catchup and $6500 in 2020 catchup) plus $4860 safe harbor, plus $32,640 in profit sharing for a total 415 limit of $57,000.

So the overall total contributed for the plan year ending 10/31/2020 would be $68,255.  Basically the $57,000 415 limit, plus the combined $11,255 in catchup between the 2019 and 2020 catchup deferred during the plan year.

Does that sound correct?  

My admin system is treating the $4755 in last year's catchup as a 402g excess and not permitting the full profit sharing allocation.

Thanks very much.

Plan sponsor discovers participant loans were defaulted because of errors by plan sponsor (including failure to start payments) over a number of years.  The EPCRS Procedure sets out the steps the participant and employer can take in combination to fix that where there has not been a deemed distribution and 1099-R.  But what is the "fix" (1) where there has been a deemed distribution and 1099-R but no actual loan offset or (2) where there has been a deemed distribution and 1099-R followed by a termination or other event resulting in an actual offset?  If you were to go into VCP, what corrective measures would you propose?  (I understand in scenario (1), the participant can repay the defaulted loan creating basis but don't see that they gain much by doing that.)

Looking for feedback for the following scenario:

“Predictive equity analytics” addresses equity market risk and returns using graphical reports that warn beforehand of market downturn as well as enable capture of gains. “Essentially the quantitative predictive equity analytic capability found in investment banks and financial intermediaries is made available directly to 401(k) participants in a user-friendly manner."

Would 401(k) participants be better off directly managing their accumulated wealth within their accounts if given the proper predictive equity analytic tools and training or would they be better off  restricted to the menu of funding vehicles?