Under a defined benefit plan (pension), are there circumstances under which a non-profit employer may credit an Highly Compensated Employee (HCE) years of service toward the pension benefit?   For example, having reached 33 years of service, can they credit 7 YOS so when the employee reaches normal retirement age they receive the same amount they would have if they had worked the 7 years (excluding potential raises).  The reasoning would be it saving the company money by taking the higher salary off the books.

We live in a time of transition, an uneasy era which may endure for years.  During the period, we may be tempted to abandon some of the time-honored principles and commitments which have been proven during the difficult times of past generations.  We must never yield to this temptation.  Our American values are not luxuries, but necessities - not the salt in our bread, but the bread itself.

Grey divorce (both over 59 1/2 ), Roth IRA has aged 5 years, Roth IRA balance is divided incident to divorce and spouse's "new" Roth IRA is the transferee of the Roth distribution.  Does the spouse's Roth IRA start the 5-year clock anew or does it benefit from the 5-year maturity of the source Roth IRA?

I am not surprised the the regulations under IRC 408 and IRS publications do not address this, but I do not find much secondary material venturing an answer.  One that does appears to go with the spouse Roth having the benefit of the age of the original Roth, drawing from the rules relating to dividing basis in an IRA transfer. 

Why would a church elect to have it's plan subject to ERISA and subject the plan to all sorts of qualifications?

We have a church plan that was established way back in the 90's.  The initial plan document says the plan is "Not Subject to ERISA."

However, they've been filing 5500's throughout.

What's not clear is if they ever formally elected (as an attachment tot he 5500) to be subject to ERISA (or filed for a determination letter with that attachment).

So, what if they are not subject to ERISA?  Can they just stop filing 5500's and when the "where's your filing" letter comes just write back and say "we don't have to file b/c we aren't subject to ERISA"?

I understand that if they ever elected to be covered by ERISA that it's irrevocable.

Like most of you, I'm in the mainland U.S. and seldom work on plans (either dual-qualified or stand-alone) that cover employees from Puerto Rico.  However, I occasionally need to answer questions about those plans, especially regarding coverage and non-discrimination testing.

Are there any good resources available?  From 2018, I'm aware of this document:  https://documents.popular.com/pdfs/PFS/02_Puerto_Rico_Qualified_Plan_Discrimination_Testing_and_Reporting.pdf

Hi,

Thank you all , as always, for all the insights. I have seen those that have stated on this forum that an EZ Filer that answers yes to having participant loans is a flag. On the 5500 -schedule I there is a question if the plan held a part of the assets in real estate. If you answer yes to this question, is this a flag as well. And if this is indeed a flag, is it advisable to stay away from investing (DB Plan assets) in real estate to avoid this (even though clearly legal to invest a portion of the assets in Real Estate-with diversification, less than 20% of the assets etc.). Thank you,

Hi,

Thank you, as always, for all of your help and insights. May we all be safe. A DB Plan has a 1,000 hour requirement to enter plan and to be eligible to accrue a benefit for the respective year.  However, once an employee enters the plan, even if his annual hours of service dips below 1,000 he will still be eligible (although won't earn additional vesting, since only vests an additional 20% per year that had 1,000 hours of service).Question : What If a participant in a DB Plan terminates in middle of the year with 800 hours, will he accrue a benefit for this final year? Thank you.

Client wants $100,000 loan, per CARES Act.  This is the first for us and not sure how the mechanics work:

1 - My main question is if participant chooses to defer payments and the first payment would normally be due in October, 2020, are payments deferred only until January, 2021, or do we defer all repayments til a year from October (ie October, 2021)?

2 - I understand the Act allows for deferment of payments for 12 months, but I am not sure what that means because I believe you can also extend the term.  Do they make double payments after the 12 months until all the deferred payments are paid, or do we just tack them on to the end of the loan?

3 - Do I prepare an amortization schedule as I would normally,  starting in October, 2020, and re-amortize when they begin payments, or do I start the amortization schedule with the date they are to start payments?

4 - I understand interest accrues while the repayments are deferred.  Is this then added to prinicpal before amortizing/re-amortizing the loan and spread over the entire 5 years? 

As you may be able to see, I am extremely unclear on the actual mechanics of the loan repayment - how do we write the note and how do we amortize the loan?

If we just recently completed restatement of a 403b plan, when would the next cycle be due? 

Hi

Doing some research for an insurance agent about using seasoned contributions in a 401k plan that has 4 sources: Deferrals, match, safe harbor match and profit sharing.

Q1: As all is considered employer monies, I can use 25% of cumulative contributions+forfeitures for universal life policies, correct?

Q2: As all is considered employer monies, I can use 49.99% of cumulative contributions+forfeitures for whole life policies, correct?

Q3: This is where I cannot tell if I can use all sources as seasoned monies. I am ok with the deferral and profit sharing sources but could not find any example including the match and safe harbor match (checked on EOB and no reference to match or safe harbor match - not that I have seen any). Can the match sources be used for either for cumulative and/or seasoned contribution calculations?

Thank you for your comments.

I was contacted by a CPA with this question concerning one of his clients:  Client is a retired judge getting a pension from the Florida State Retirement System. Since 2017, he has been taking his retirement payments and transferring them into a Roth IRA for himself and his wife. The transfer to his wife's IRA is totally inappropriate, but, with regard to the husband, what penalties will be assessed on him for doing what he is doing?

I'm having trouble determining whether the Affiliated Service Group proposed regulations can still be relied on. 

Is it correct that Prop. Regs. §1.414(m)-1 through 4 have not been withdrawn and can still be relied on (until final regulations issued)? And that IRS Rev. Rul. 81-105 still applies? 

Thank you!

A PBGC-covered cash balance plan terminated.  Two participants who had terminated employment years ago, have not responded to the distribution election forms.  The mail was delivered, and a commercial locator service confirms the last known addresses.  One participant did respond to the plan administrator's attempts to connect by phone and email, indicating he would complete and return the forms but still has failed to do so several weeks later despite repeated reminders.  The other participant could not be contacted through email, LinkedIn, Facebook, etc.

Both participants have cash balance accounts of approximately $10,000 each.  Neither participant is at normal retirement age.  Working with an annuity broker, we were told that they could not find a carrier that is willing to accept a liability of this nature.  

Can these funds be transferred to PBGC under the Missing Person Program?  I don't think the participants technically qualify as "missing", but they are both unresponsive.  If the plan can't purchase the annuities, what other option is there?

Thanks for your help.

404(a)(5) notices went out to participants within the 30/90 day window prior to first investments. Unfortunately, the notices inadvertently included two investments that were not actually available to participants. My question is, if we send out corrected notices, does the the 30-day clock restart? or can we simply send out a corrected notice and still utilize the original 30-day window? Also, could this possibly qualify for the unforeseen circumstances exception that is provided for in 404(a)(5) (I've heard this is interpreted very narrowly by the DOL)? The Regs appear to address this type of good faith error from a 408(b)(2) perspective but not a 404(a)(5) perspective.

A match formula was not applied correctly and all participants were short on receiving their match for the 2017 plan year.  It is now 2020 so we are passed the 2 year window and we are considering the errors significant.

Is it correct that the employer should deposit the missing contributions plus an earnings amount as soon as possible or should the VCP be filed and wait to hear from the IRS before taking any corrective action?

Thank you

Does anyone have the name of a Company that could help facilitate the merger of an overfunded sole proprietor plan with an unrelated company that has an underfunded plan?  Thanks for any suggestions.  We cannot increase benefits for this sole prop and he has no employees that can be added to the Plan.  He really wants to avoid the huge tax liability with a reversion.

An employee of a participating employer in a plan gets a W-2 and defers on it.  They are also a partner in the other participating employer and have a large  net loss.  Do I have to net the two incomes and show them with a loss for the plan purposes?  They did defer on their wages.   

For 2019, both partners of a company deferred $13,000 each during the plan year based on their draw.  Once we received the K-1 from the CPA, it is evident that both partners had a loss for the year of -41,500 each (no guaranteed payments either). 

Do they receive a distribution of the ineligible deferrals plus earnings or does it forfeit and stay in the plan?  What code section does this violate - 415?  or something else?  

Participant X is in two 401(k) plans for 2019.  He is less than 50 years old.  In plan A he defers $10,000 in 2019.  In plan B he defers $10,000 in 2019.  In plan A, he is an HCE.  The plan fails ADP testing and he is refunded $1,000.  Has he violated 402(g) for 2019?