Hello all, thanks in advance for your help! I'm an IRS EP agent but I haven't worked very many DB cases, and I had a question about my dad's situation.

My dad worked for Albemarle Corp for several years.  They sponsored a DB plan through Merrill Lynch.

In 2017, he was filling out his benefit election form. Among several options he was given, he planned to elect 100% joint and contingent with 60 months certain. Payment was supposed to be $347.53 per month.

He never completed the paperwork (he was very disorganized and lost his birth certificate and was having trouble getting it from Vietnam. He passed away in August 2021 without ever filling out the paperwork.

After his death, I contacted Merrill Lynch and let them know my dad passed away, and I requested that they send a new benefit election package for my mom to fill out.

We got the package, and the only option now is a lifetime pension of $218.34 per month. Does that seem right that the monthly payment would be reduced so much? I still have a lot to learn about DB plans, but I thought the payment would be much higher. I know that options are supposed to be actuarially equivalent, but it just seems way off to me. 

Thanks in advance for your help!

Company A and Company B are part of a controlled group.  They each have their own 401(k) plans and TPA firms.  Company A's 401(k) plan can't pass coverage on its own (neither ratio or ABT).  The Plan's have been permissively aggregated for coverage and discrimination testing purposes in prior years.  I anticipate having to permissively aggregate the plans for the 2020 Plan Year as well although I don't have data for Company A as of the current date. 

Company A will have an ownership change in April (although it could be June or July).  Employees will terminate employment with Company A and become employees of Company C.  Company A would like to terminate their plan prior to the ownership change.

Does anyone have any suggestions in regards to the 2021 coverage test?  I anticipate the plan would not be able to pass coverage on its own (for the short plan year). 

Would I be able to use the 410(b) transition rules? Due to the ownership change, do I get a free pass on coverage testing?

Do I tell the client to wait and terminate the plan on 12/31/2021 so I can use permissive aggregation for the 2021 Plan Year?

Any suggestions would be helpful.  Thank you.

We have a Long Term Disability policy where the carrier will make contributions to an employees' 403(b) account in an amount equal to what the company was contributing before they started receiving disability benefits. Does this need to be noted somewhere in the 403(b) plan document? If so, what needs to be reflected?

I  have been contributing to OTRS since 1989. I plan to retire in 2025. I was married from 2006 to 2014. He was awarded half of the marital portion of my retirement.

When you work out the percentage it comes out to 10%. Is this calculated on my final pension amount? Shouldn't it be calculated on a lesser amount since I've gotten several considerable raises since my divorce? 

ADP/ACP tested plan.

Plan allows for in-plan Roth rollovers.

HCEt does the Rollover early January of entire account.

In February, plan fails ADP & ACP tests.

How does the refund get processed?  How are earnings taxed?  Are they?  All the funds are now in the Roth Rollover account.

Because someone who uses the care, skill, and caution that would be used by one who is experienced in managing an individual-account retirement plan would be mindful of privacy and security risks (including cybersecurity risks), there is a growing consensus that a plan’s administrator must oversee prudent procedures for managing those risks.

For many plans, that means getting a recordkeeper’s contract promise that it uses commercially reasonable privacy and security procedures.

But even good procedures might be ineffective if a participant, beneficiary, or alternate payee does not guard carefully her identifying information.

If that’s right, does a plan’s fiduciary have a responsibility to educate participants (and other individuals) about those risks?

If so, what do you think an employer/fiduciary should do?

Plan Sponsor just amended a prior year 5500. The efast2 search now does not show any 5500 for that year - original or amended. Just curious if this is standard, or if something might have gone wrong with filing?

If a plan uses match formula of 100% match on the first 1%, plus 50% match on the next 5%, is that considered a safe harbor match?

Group:

I may be going crazy given this day and age we are living in. 

I thought I read on one of the older benefits link.com messages/posts that the DOL - in some investigations - will not issue a closing letter but still close out their audit. 

Could this occur in a small case DOL Audit for an esop with less than $5k value?

Or did I misunderstand the posting that the DOL Audit will always include some form of closing agreement or determination? 

Thank you in advance. 

For the employers who suspended their discretionary matching contributions (calculated on a payroll period basis) in 2020, is the 401(a)(17) compensation limit required to be prorated under Reg. 1.401(a)(17)-1(b)(3)(iii)?  The plan year was still a 12-month period, but the matching contributions ceased (for example, let's say as of 4/15/2020).  Would that require a compensation limit of 4/12 x $285,000 to be applied to the matching contributions that were made prior to the suspension?  If so, it could require forfeiture of a portion of a participant's matching contributions that were made early in the year (likely due to deferrals made from first quarter bonuses).

I'm aware that the preamble to the final Regs. regarding the suspension of safe harbor contributions provides the following:  "The preamble to the proposed regulations stated that a plan that is amended during the plan year to reduce or suspend safe harbor contributions (whether nonelective contributions or matching contributions) must prorate the otherwise applicable compensation limit under section 401(a)(17) in accordance with the requirements of § 1.401(a)(17)–1(b)(3)(iii)(A). Some commentators asked for clarification as to how these rules apply. Such an explanation of the application of the rules of section 401(a)(17) is beyond the scope of these section 401(k) and (m) regulations."

However, because preambles are not law, and because the Regs. are specific to safe harbor plans, I'm looking for thoughts on whether the proration applies in the case of a discretionary matching contribution formula applied to deferrals made for a payroll period, not in excess of a specified percentage of compensation earned during such payroll period.  It seems wrong to forfeit a match that was permitted when made, but became in violation of a limit when the employer ceased contributions.  Thanks in advance for sharing any thoughts!

With the final regulations published Jan 6th, I want to make sure I am understanding these new requirements.

A plan loan offset that occurs in a DC plan solely due to either termination of the plan; or, termination of employment AND an offset that occurs within 12 months after the employee's termination date (NOT 12 months after employee takes the distribution) is a QPLO.

Example:  Participant terminates employment on 2/22/2021. Participant elects to take a distribution of the account balance in August.  Total account balance is $50,000.  Of this balance, there is an outstanding loan in the amount of $10,000.  Participant receives a check in the amount of $40,000 as the $10K loan balance was offset.

To report this distribution in January 2022, a 1099-R is issued reporting the $40,000 as a lump sum distribution (code 7, 1, or 2 depending upon the situation) in Box 7.  A second 1099-R is issued to report the $10,000 QPLO using code M in box 7.

For 1099-R purposes from the plan it doesn't matter if the former participant does a rollover of the $40,000 within the 60-day period, and also does not matter if the participant funds and rolls over the $10,000 amount before their tax filing deadline for 2021.  

Correct?

Thanks in advance for your help!

An employer wants to pay end of year bonuses to employees based on a percentage of revenue they brought in to the company.   This company also has a 401(k) plan with a dollar for dollar safe harbor match up to 4% of compensation.   The owner wants to count the employer safe harbor match as part of the bonus. 

For example, employee Z is due an $8,000 bonus.  Employee Z is also due a $2,400 safe harbor match based on his deferrals into the plan during the year.   The employer says the bonus is $8,000 minus the $2,400 safe harbor match that will be made on behalf of employee Z = $5,600 remaining bonus to be paid in cash to employee Z.    So, employees that get a bonus and do not defer into the plan get their full bonus in cash.

Is this allowed, legally?   If it is not allowed, can anyone provide a reference to a statute or something so we can explain to the owner why this is not allowed?

Thank you!

I was debating this with someone, so I just wanted to get some clarity.  Company of 10 EE with 4 who were "highly": 1) Owner, 2) Owner's spouse (despite only making $50k) 3 & 4) Regular employees.

If we were going to determine HCE with the Top 20% (meaning 2 HCE) who would be considered?  Would it just be the owner and his spouse due to attribution?  Or would it be the owner, the highest paid non-owner and the spouse?

Thanks in advance!

Kind of a convoluted question, and I don't have full information available. 1.403(b)-5(b)(4)(ii)(B) provides that you can exclude employees who are eligible under a 401(k) plan of the employer. (my emphasis) The Employer sponsors a 403(b) plan which excludes union employees. Now, the union employees can defer into a 401(k) plan. I don't yet have information here, but I don't have much contact with union plans. I'm not sure if the employer is technically the plan sponsor, or if the union is the plan sponsor.

Does it really even matter? If the employees are eligible to defer into the 401(k) plan, doesn't the employer have to be a "participating employer" in the union plan in order to even submit deferrals on behalf of the employees? 

Also, what happens if a collective bargaining agreement excludes union employees, but there ISN'T a 401(k) Plan? This would seem to require e change in the CBA, or the 403(b) plan is in violation of the universal availability requirements. Anyone ever seen such a situation? This question is theoretical, as thankfully I haven't (yet) encountered this.

My organization adopted a SARSEP while they were still permissible. Later, the organization incorporated as a non-profit. The IRS has told us that nonprofits cannot have a SARSEP. I see in the code where a nonprofit can't create a SARSEP, but if an existing SARSEP is in place and then nonprofit status is attained, is that a bar to keeping a SARSEP?

so SECURE act eliminated the notice requirement for SHNE plans. our plan document requires a plan amendment. does the amendment need to be done if they are making the contribution and can it be adopted by March 15?

edit: well the plan document says needs to be adopted 30 days before the end of the plan year.  

Hello, a colleague asked me a question and I just don't know the answer. 

Client wants to purchase real estate in the plan but they don't have enough of a cash balance in their account.  They are asking if they can take out a bank loan to purchase the RE (apparently, he wants to use current property in the plan as collateral to borrow the money.). 

We both don't believe it's possible (PT?) - the plan would be basically taking out a loan?    

Thank you!

A 401(k) plan excludes some compensation for allocation purposes.  414(s) passes the ratio test, but ADP results, although failing using gross and net comp, are better using gross comp.

Here is the question.  

Suppose a participant's gross comp is $40,000, and for extremes let's say allocation comp is $10,000.  Let's say we give the participant a QNEC of 20% of allocation compensation, which is 5% of gross compensation.  This the only ee getting a QNEC so the representative rate would be 0.

If we are using gross compensation in the ADP test, are we allowed to use the full $2000 QNEC (as 5% of testing compensation) in the ADP test, or are we limited to 5% of allocation compensation, even though we are not using allocation compensation in the ADP test?

Thanks very much.

Seems ok, but smells funny. Medical practice hires a new Doctor, NOT as an owner or partner. Plan has 1-year eligibility for everything but they want to let this Doctor in immediately. Amends plan to credit service with prior employer so that Doctor enters immediately.

This Doctor will not be a HCE for 2021, as there is no lookback year comp, so it doesn't technically seem discriminatory. Thoughts?

Any tips on how to enter the definitions of statutory and plan compensation where the statutory definition is 415 compensation and the plan comp definition is gross comp on the W-2?