I had a plan sponsor calculate their own profit sharing and deposit it into participant accounts prior to the annual testing being completed.  If this contribution was for the 2020 plan year but the profit sharing was deposited in 2021, can't they just reduce the participant accounts by forfeiting the excess?  They are being told they need to use the correction method used for EPCRS, and I don't agree since the funding wasn't done until after the plan year end.  Or at least that is how we've always handled these previously, so now I am questioning the method.

When I am hand calculating earnings on an ADP refund, I usually take the gross amount of the refund, divide it by the amount of the contributions deposited in the year to get a factor.  Then multiply the factor times the earnings of the period to get the earnings on the refund.

For example, $5000 deferrals and $1000 refund.  Factor 20%.  earnings $500.  Refund earnings $100.

However, in this case, the participant is getting (nearly) all of her deferrals back (5800 out of 5850).

AND, not all of the deferrals were deposited during the year.  So, my factor is over 100%.  To cap it off, there was a zero balance to start the year.

So, I now have refund $5800, deposits $5000.  So my factor would be 116%.

My thinking is to use 5000 plus all the earnings plus the remainder of the deposit.  So, 5000 + 500 + 800 for a refund of 6130.

What do you think.  I've never dealt with this particular situation before.

This 401k plan does permit hardships for non safe harbor reasons.  But does that mean it can be any hardship that the Plan Administrator deems to be an acceptable hardhship reason?  Assuming it meets the immediate and heavy financial need, would an employee purchasing a new furnace for which she has no other means other than the plan be acceptable?  She is a non-HCE and we assume that any future requests for new furnaces from other employees would be reviewed and accepted?

Thank you

Medical Insurance company offers Vision as an option through its benefits, which itself is provided by a separate Vision insurance company.

Some groups will buy the Vision directly from the Vision company, others will bundle it with the medical insurance.  For those that bundle it, premiums, commissions etc are included in the medical company's provided Schedule A ltrs.

That's all fine.

The medical insurance company itself prepares its 5500. They do not include a Schedule A for their own medical benefits for its employees.

They include a Schedule A for the Vision that they purchase from the Vision insurance company.

Now, they are switching internally how they purchase their own Vision - they are now including it in the bundled option for themselves.

So, the question - would it still require a separate Schedule A letter?  Vision company does not want to provide one because of the extra accounting etc. but medical insurance company can run the accounting for themselves.

I have a client who has a C corporation- He did a split dollar life insurance collateral assignment- He assigned his whole life insurance to the C corp. The corp. pays the premiums and he personally pays the PS 58 costs. On the corporation books is the cost ( premiums paid) . If he decides to cash in the policy, he will have a taxable gain personally, because he stills owns the policy.He is now going out of business and I want to close out the corporation, what happens to the cost of the insurance on the books? Does he need to repay the cost of the premiums? He is the only employee and shareholder in the company.
Thank you. 

Am I required to give a new TPA who is replacing me a copy of the Plan Document?

Plan sponsor is judicially dissolved due to a shareholder dispute and a receiver is appointed to liquidate the company.

Receiver terminates the 401(k) Plan and distributes assets to plan participants.

Plan audit for final 5500 reveals numerous errors in plan operation that individually are insignificant.

The cost to correct the errors would be very significant and would result in participants receiving very small amounts

 IF receiver choses not to correct plan errors, can receiver be held liable if the plan is audited? What about the former shareholders of the company?

Is it acceptable to provide that the initial default rate in a QACA will increase on the anniversary of the participants initial automatic enrollment?

For example, participant is auto enrolled at 3% on July 1, 2021.  The deferral rate would increase to 4% on July 1, 2022, 5% on July 1, 2023, etc?

Thank you very much.

Hi, hoping someone less dense than me can help since I haven't been able to find any straightforward information on my own 

I'm trying to understand the nuance behind if a individually designed plan ESOP that previously received a determination letter (that has since expired, but it looks like the expiration date has been waived across all IDP's) needs to switch over to the Cycle 3 pre-approved plan design?

I read that employers should consider adopting a pre-approved plan since IDP Esops are no longer being reviewed by the IRS.  However, what would compel an employer to switch over?  e.g., it doesn't seem that there is much enforcement in this area and I'm trying to find laws or rulings that would motivate or otherwise incentivize an employer with an IDP ESOP plan to switch over to a cycle 3 pre-approved plan design.

Hopefully that's somewhat clear.. thanks in advance.

The former plan sponsor of a plan that terminated and was paid out in 2011 just received a check at her home from the fund platform that held the old plan.  The accompanying letter says that, as plan fiduciary, she needs to handle this $1,400 which comes from a settlement from 2012 by either allocating it among the plan participants or applying it as plan fees, so this leads me to think that this isn't specifically for her account.

Ignoring the fact that a settlement is arriving in 2021 from nine years ago... there were 8 or 9 participants with balances in the final year of the plan.  Distribution fees alone could easily eat up 1/3 of that.  Throw in some consulting time...

The problem I see is that there is no trust any more to pay the participants from.  We'd have to re-establish the accounts back at the platform, probably sign new paperwork, send distribution forms (find the participants!), etc.  And if the trust has assets again, doesn't that mean the plan is active again and we have to file a 5500?  Update the document?  By the time all those fees are tallied up, this money is definitely spent.

On the other hand, taking this money pre-emptively but not doing that work to 'earn it' seems wrong, unless consulting for it is a very long process.

Any suggestions?  Thanks...

What type of person/organization would you reach out to if you had a client who wanted to establish an Employer Educational Assistance Program?  Anyone you can recommend?

Thanks

I have a db plan frozen 12/31/2013

SPD is really old 12/1/2000

I am assuming at least an SMM should have been done?

plan doc was restated 1/1/2015

are there different requiremnts when a DB plan is frozen;ie. 5 years after a major change, 10 years otherwise?

Much thanks

Lexy

Sometimes I gotta ask a question that seems obvious but who knows...

Are there options for types of pay to consider as eligible pay for a one-person S-Corp other than W-2 pay?

Looking at the Plan Doc is not an option as plan is being set up right now.

Elective deferral plan states that upon attainment of age 65 deferred amounts will be distributed in 120 monthly installments beginning the first of the following month. A new Director joined in May 2019, elected to defer his fees and turned 65 six months later (Nov. 2019). He has been allowed to continue deferring his fees and no distributions have been made to him yet.

I’m trying to identify exactly what the failure(s) are here and am looking for input/opinions related to the amounts deferred after he turned 65.  

Should he have been allowed to defer at all after age 65? If not, the entire amount deferred after age 65 must be paid out this year and the entire amount deferred in prior years is likely subject to penalties.

Or was he allowed to defer after age 65, but the distribution installments should have begun immediately following the deferral? For example, could he defer fees in May 2020, but distribution should have begun immediately since he was over age 65? Still on a 120 installment schedule? If this is the case, only the installment amounts that should have been distributed so far must be paid out this year and subject to penalties.

Thanks in advance for your input!

So, in this situation, where due to the QACA the 2-year vesting is being utilized, if you amend the plan mid-year to take it out of safe harbor stratus, does the 2-year vesting still apply to the safe harbor piece? It would seem reasonable top me that it would immediately become 100% vested, but I've not seen this issue. Thoughts?

Our TPA firm has just been engaged by our first client that makes employer contributions to their non-governmental Section 457(b) plan. (We have 5 other clients with non-governmental Section 457(b) plans, but none have employer contributions.)  The plan also permits the participants to make deferrals from their salaries.

I have a very basic question for which I have not been able to find the answer--does the participant in this 457(b) plan need to make a deferral election with respect to the employer contribution?  If so, must the election be made the month before that employer contribution is made to the Section 457(b) plan, just like deferrals from their paychecks?

The deferral form that this new client has been using does not seem to address a deferral election for the employer contribution because it requires the participant to elect either a dollar amount or a percentage of his/her compensation for each payroll period.

Thank you for any guidance to which you can point me.

With all the new hardship distribution rules, is anyone still advising the Plan Administrator to get proof of hardship in case of plan audit?   Participant wants to take 100% of his funds ($360,000 plus).  He provided the wording below from the IRS to show he did not have to submit proof:    Also, he claims the IRS told him via phone call he did not have to submit proof. Thank you! 

3. How does a participant show that he or she is experiencing a hardship?

Generally, if a 401(k) plan provides for hardship distributions, the plan will specify what information must be provided to the employer to demonstrate a hardship. Most 401(k) plans use the "deemed necessary" rules described in Q&A-2 above, so that inquiry into the employee's financial status is not required. In other cases, an employer may generally rely on the employee's representation that he or she is experiencing an immediate and heavy financial need that cannot be relieved from other resources. However, an employer cannot rely on an employee's representation if the employer has actual knowledge that the employee's need can be relieved: (1) through reimbursement or compensation by insurance; (2) by liquidation of the employee's assets; (3) by stopping elective contributions or employee contributions under the plan; (4) by other currently available distributions (such as plan loans) under plans maintained by the employer or by any other employer; or (5) by borrowing from commercial sources. (Reg. Section 1.401(k)-1(d)(3)(iv)(C))

I have a very unique plan situation, one the plan that is terminating due to acquisition some of the participants are 72 1/2 and are eligible for RMD now they Advisor has stated since the participants are not terminated  from their employment in terminating plan and are just acquired by the acquiring company these participants will not be subjected to RMD  since they are not terminated employees is that true? 

Does Employment status play a key role in RMD? I thought once the participants attain 72 1/2 they are required to take the RMD also since the plan has terminated and they will be a distribution event so the participants will require to take the RMD correct?  

A participant in a 401k plan deferred more than the 402g limit in 2020. An appropriate refund check was issued timely. But the participant never cashed the check. Now it's past the deadline. If he cashes the check now, is everything ok? If the check goes stale dated and a new one has to be re-issued, can it be done under the original check date? If not, I assume the funds just have to stay in the plan, leading to double taxation on the excess.

An owner of a sole proprietorship made deferrals from compensation. However, the owner also had losses and the net compensation for the year was $0. How would you distribute the excess? Would it be using code "8" (assuming the deferrals were pre-tax)?

Thanks,