Can I amend a 3% Safe Harbor Plan to exclude different items of compensation prospectively mid-year?  I cant find anything on point but it feels like a back door reduction in the SHNEC, the consequence of which of course is to blow my safe harbor for the year.

Has this been addressed anywhere? I'm just surprised that no one ever wrote in one of these articles "Be careful!  If you amend to reduce eligible comp that is a de facto reduction the contribution formula!"

We have a plan that was established 1/1/2020.  It allows prevailing wage and profit sharing contributions as of 1/1 but the effective date of the deferral provision is 4/1/2020.  Should the compensation used for the ADP test be for the time period the deferral was effective, so 4/1 - 12/31/2020?  We normally use prevailing wage as a QNEC in the ADP test so it seemed like we would need to use full year compensation if we used the QNEC.

I have been a TPA for very small clients for many years.  I took a *wonderful* class taught by Norm Levinrad at NIPA a couple years ago, and I STILL refer to my copious notes.  I have relied on my software (Datair) to calculate everything for me, and I have more than a general idea of how New Comp works.  HOWEVER, I want to fully understand New Comp.  I have a couple plans that I spend hours on each year, moving peas (ee's) under nutshells (alloc groups) to pass the tests.  But if I fully understood this stuff, I'd feel so much better.  

Is there a webinar, a class, a tutorial, a book - that would explain the basics of New Comp??  A "New Comp for Dummies", if you will.  I feel like a dummy.  I'm willing to pay for this "class" (within reason).

I want to know things like: (1) WHY does a participant who worked 150 hours have to get an allocation?  (2) WHY does the allocation have to go on full year comp, when a participant entered on July 1? (3) How do I calculate (by hand) EBARs?  etc etc etc  Norm's classes were great, believe me, but it was like drinking from a fire hose and I'm still soaked!

Thanks for anyone taking their time to point me in a good direction.  (Maybe there are others who feel the same way?  Maybe we could do a zoom class???)

Should plan numbers 001,002 etc. be by ein or ultimate parent within a controlled group? It would seem the same ein should not have two plans with the same number. Does it matter though  if two separate eins within the controlled group both have a plan 001 or is more proper to name them 001 and 002?

Hello, in 1994 my ex husband agreed to a QDRO (Total number of months during marriage which participant participated in (*** retirement account) to wit: 123 months / over/ Total number of months of participants active participation in (***) as of the date of retirement or termination from service X.50 X Gross amount of monthly income

Recently his attorney sent me a modification to sign.  The company filed for bankruptcy in 2015 and the QDRO was replaced with a different benefit plan.  The new amendment states "shall not apply to any special termination program benefits which the participant is or may become eligible to receive under *** Appendix S"

Should I be entitled to those benefits as well? My attorney is not replying and I need to decide how to proceed = any help advice is appreciated.

Three companies were members of a control group with employees from all three entities participating in the 401(k) plan. The company that originally set up the plan was sold in a 100% stock sale effective 12/31. The buyer requested the plan be terminated effective 12/30 and the BOD passed a resolution to that effect. The remaining two companies of the control group want to set up a new 401(k) plan with the same structure as the prior plan but only the employees of the two remaining entities. Does this trigger any successor plan issues? Thanks!

hello -

I have a client where the payroll dept allowed an employee defer into the plan prior to meeting eligibility.  The Trustee does not want the participant in early.  Therefore, i need to distribute the mistaken deferrals.  

It does appear that a correction method is to have the investment company return the deferrals adjusted for gains or loss.  There is no mandatory withholding.

I've read that some have done it as EPCRS or as a 402g.  Which is correct way to complete? 

Thank you!

When client severs their relationship with MEP provider and wants to set-up their own plan, should that plan be a "restate" of an existing plan for that employer or the establishment of a new plan? My understanding is that a spinoff from a MEP is a continuation of an existing plan. Is that correct?

Employer has a health plan, and a VEBA.  The VEBA permits use of VEBA assets to fund health benefits.  However, the health plan is not insured.  Rather, a vendor requires that a reserve fund be set up.  That fund is used for health benefits, and must be replenished as it is used for that purpose.

The vendor will only accept amounts sent by wire transfer.  However, the bank that holds the VEBA account will only send money by checks. (This strikes me as odd, but that's the facts we have.)

Employer would like to have the VEBA write a check to the employer, and the employer would immediately contribute the funds to the reserve fund by wire transfer.  However, for some brief period of time, the money would be in the employer's hands.  Has anyone seen the IRS argue that this is an impermissible inurement?

Since Relius is no longer offering software to produce 1099-Rs and 945's, what are others using? What do others recommend?

Thanks.

An advisor approached me on 12/31/20 with a potential case. Company with no existing plan. Owner, mother, father and two FT employees that would be eligible under even the most stringent eligibility. He asks me to do a 401k/PS plan document so that the owner could participate and defer $19,500 on 12/31. I immediately think this is not allowed. Where is the chance for the other employees to participate? Even if there was an actual payroll on 12/31 for everyone, this certainly doesn't sit right with me on a BRF basis. Definitely violates the spirit of many of these discrimination rules. If the owner participates and no one else does, the Plan is TH and ADP fails so there would need to be an employer contribution anyway (QNEC and TH) which would be very high if it worked at all. I offered a cross-tested PS option but the FA said he found another TPA that provided him with what he wanted. The case is lost to me so it doesn't matter now but I am curious. Is there a specific reg that would be violated by starting the 401k on 12/31? 

ABC LLC is a multi-member LLC taxed as a partnership.  One member, John, was incorrectly classified as a W2 employee for many years, and is a participant in the company's 401(k) plan.  Beginning 1/1/2021, John is receiving guaranteed payments on K-1 instead of W-2.  Is John able to continue to participate in ABC's 401(k)?  There has been no match or profit-sharing in the past though there may be in the future.  If so, how does this happen?  Does John need to set up his own corporation or LLC to receive the guaranteed payments, and to be the participant in ABC's 401(k)?  If he is eligible, will he then contribute once a year to the 401(k)?

Hello to all

This might be a rhetorical/stupid question but have been thinking about it.

Let's assume, the plan year=corporate year aka calendar year 2020.

SECURE Act now allows pension plans to be set up after corporate fiscal year end and prior to the due date of the 2020 tax return. Let's assume 9/15/2021 is the extended due date.

A candidate approaches for a new plan in July 2021 for a new plan effective 2020. Profit sharing combined with cash balance - no can do on the 401k for 2020.

I get a census for 2020 and also thru July 2021.

I notice that some eligible employees on the 2020 census are no longer there as of July 2021 i.e. terminated sometime during 2021.

With this knowledge, I do not see a problem designing the 2020 plan in July 2021 with the events taken place in 2021. This way, I can anticipate any issues for 2021 and take that into consideration for the 2020 design/testing, done in advance.

What do you think?

Thank you.

Noted that DOL/IRS have eliminated filing a form 5500EZ as Form 5500-SF (One Man) electronically. Going forward you can now file Form 5500EZ electronically. Just checked ASC/DGEM this morning and see that one of the first questions on EZ screen is whether efiling or paper.

That is all well and good, but have filed several final 5500-SF (One Man) filings that had short final plan years in 2020 due to termination already (filed using 2019 series of forms as usual for short final plan years).  Question is what to do about those filings given this late sea change in eliminating 5500-SF (One Man)?

I'm a little (a lot?) confused on this. So, say an ESOP plan that was individually designed (weren't they all until relatively recently?) applied for and received a determination letter in 2014 - back when individually designed plans were on a 5-year cycle. That letter said it expired 12/31/2019.

But, didn't Rev. Proc. 2016-37 eliminate the 5-year cycle, and isn't it true that you generally cannot file for a determination letter currently (except for initial qualification, plan termination, etc.)?

So even if the plan sponsor wanted to apply for a determination letter, they can't? Or, is there a special situation for an ESOP that I'm missing?

There are three threshold for key determination- 

Key Employees

1. An officer of the company earning $180,000 or more annually;

2. 1% owner with a salary of $150,000 or more; and,

3. 5% (or more) owner regardless of salary.

Situation 1: Mr. David got compensation in 2019 $ 140,000 and in 2020 $480,500.

Question 1: Do I need to  consider him as KEY Employee in 2020 plan year (plan year end 12/31/2020)?

Situation 2: Mr. David Mr. David got compensation  in 2020 $485,500 with 1% ownership. 

Question 2: What will be his key status for 12/31/2020?

Thanks in advance.

When starting a new plan, must eligibility be waived for ALL employees?  Or can we say "eligibility is waived for ALL full time employees"?  However full time is defined.

if a plan is reallocating forfeitures only to all active employees (hce & nhce) and 70% coverage does not pass but abt does pass, can you use the active employee status as an allowable determination class to use this option to pass coverage.

Happy New Year!

Wondering if anyone is aware of functionality that allows the plan's advisor to view participant-level transactions and, if permitted, execute transactions or act on behalf of the participant?

Do providers allow advisors to view participant-level transactions? If so, is this something that's common? I received an inquiry today and was unfamiliar. 

Thank you!

LawnBoy

Never seen this one... client wants to NOT allow prepayment on participant loans. Not seeing anything in 1.72(p) or 2550.408(b)-1 specifically prohibiting this, but it seems wrong on so many levels that I've got to assume this has been addressed somehow before.

First, it doesn't seem like ERISA would pre-empt state law on this question, so if state law doesn't allow for such a provision on loans, then that nixes it, perhaps. Then I start thinking about fiduciary issues - if a participant wants to pay it off early, and the plan/fiduciary won't allow it, then the participant is, in essence, being forced into an investment that is perhaps "underperforming." Etc., etc., - anyone ever heard of this question coming up?