Company sponsors a safe harbor 401(k) plan.  Plan uses the basic safe harbor formula.  Plan also allows for profit sharing, each participant being there their own allocation class (with last day requirement).

The Plan Sponsor would like to encourage more participation from lower paid participants.  They are thinking of making an additional profit sharing contribution to non-HCEs only that hit certain deferral limits during the year.  For example, if they defer half of the 402g limit they would receive $500.  If they defer the full 402g limit they would receive $1000.  

Has anyone had a plan that had such a program?  If yes, how did you communicate the program to the participants?  I'm thinking at the very least you would have to be crystal clear about who is eligible each plan year and exactly how much they would have to defer to reach a profit sharing contribution level?  

Any thoughts would be appreciated.  Thanks!  

Ees with under 20 hours per week were excluded from participation, butt he document did not indicate that they were excluded.  Have people tried to do VCPs for this to amend retroactively to exclude?  

This relates to health FSAs.  Notice 2020-29 allows employers to treat the dollar amount of year-to-date reimbursed claims as a floor, below which participants may not reduce deferrals.  However does the uniform coverage rule still apply to claims incurred before the change in coverage?  This would seem to result in rewarding participants who delay submitting requests for reimbursements?

Example 1 - Late Reimbursement Request

• For the 2020 plan year, Lucy elected to contribute $1,200 to a health FSA, or $100 per month. She has

contributed $600 for Jan-June 2020.

• On May 1, Lucy incurs a claim for $1,200.

• On July 1st, Lucy reduces her 2020 election to $10 per month for the remainder of the plan year. She expects

to contribute $60 for July-Dec 2020 ($660 in total).

• The employer can limit Lucy’s ability to reduce her annual election if she had received more than $660 in

total reimbursements before July 1, under Notice 2020-29.

• But the uniform coverage rule in the section 125 regulations arguably still allows Lucy to submit her May-incurred claim for

$1,200 for reimbursement.

Example 2 - Prompt Reimbursement Request.

Same facts as above, but Lucy submits her claim for reimbursement in June 2020.  On July 1, Notice 2020-29 allows the employer to prevent Lucy from reducing her deferrals because her May claim was $1,200, her full deferral budget.

This discussion suggests scenario 1 can be avoided "by carefully defining the period of coverage for 2020."  I am not sure how that would work but would welcome comments.

We're seeing more stale dated checks being re-deposited by recordkeepers into plans--typically to an unallocated cash account or the forfeiture account. How are others reporting these on the 5500 filings? Obviously the checks have been shown as distributions in prior years.

Participant in April, 2020 takes a $50,000 loan

Participant, because of COVID, wants to pay off the first loan to take the $100,000 COVID loan. Participant pays off the loan, requests $100,000. Asset Custodian rejects the loan, saying the maximum loan amount is $50,000; $100,000 reduced by highest outstanding loan balance in the last 12 months ($50,000). I agree with this calculation.

Question is: Is the loan limit calculation a safe-harbor calculation? Could the plan sponsor decide to ignore the limitations and give the person the whole $100,000 loan? I think not, but wouldn't mind seeing if anybody has run into this before.

Thanks for any replies!

Would everyone agree that, in the case of a VEBA maintained by a tax-exempt entity, 419A(d) does not require the entity to establish separate accounts for key employees?  Since 419A(d)(1) states that it applies to the first taxable year for which a reserve is taken into account under 419A(c)(2), I assume that no separate accounts would be required.  Obviously, these employers aren't concerned with the general deduction limitations of 419 and 419A.  However, I want to make sure these amounts don't need to be taken into account for 415(c) purposes under 419A(d)(2) and that no excise tax is triggered under 4976(b)(1)(A).

Thanks in advance!

I have a client that has historically been a 5500 SF filer, consisting of a husband and wife, and one employee.  The employee left the firm in 2017 (was not replaced) and moved their money of the plan in early 2018.  In 2018, they filed a 5500 SF as a Single Employer plan because the terminated employee still had money in the plan for a portion of the year, and the plan was still covered by a fidelity bond.  For 2019, should I have them file the 5500 SF as a One Participant plan (dropping the bond requirement) or should I continue to file them as a Single Employer plan?  I still think it's easiest to have them continue to file an SF as opposed to switching to an EZ.  It's a fairly simple situation. anyone see any issues either way?

Hi all, I'm new to this world, so please bear with me.  I'm hoping I can get insight from this Board regarding the following scenario:

Large government employer (~550 employees) currently offers a cafeteria plan which employees can use to pay premiums for medical, dental, life, and to make contributions to FSA and HSA.  Employees must elect one of the medical policies offered, but otherwise they can take the rest as cash if they make no other elections/contributions.

Employer is considering allowing employees to opt out of medical coverage if they can show that they are covered under their spouse's medical.  This would mean that employees may get all the cash from the cafeteria plan if they make no elections/contributions.

Depending on which union the employee belongs to, the employee will have a different total cap on his/her cafeteria plan.

What issues do you see?  

Good morning all

Looking into designing pension plan for a financial planner. Owns 100% of X, Inc. and has employees.

Checked the website and see that other names were listed other than the employees.

After questioning the additional names, the following response was provided:

I own 100% of X, Inc. but affiliated with Y, Inc. (also a financial form) and have access to Y, Inc.'s people. No common ownership or shared employees.

What am not asking here to determine any issues?

Thank you

PS PBGC coverage is another issue - any thoughts?

Plan had a hard cap on a discretionary match.  It is $250 in the document, but for the past couple years, they have been contributing up to $350 to those who qualify.

Can we do a retroactive amendment to change it starting in 2018 when they made the change?  ACP test passes no problemo.

Mostly union people.  I guess I should ask if the union docs got updated....

John Hancock Sch C Report showing RIA information.  Compensation paid to the RIA has been reported on Sch H as a plan expense.  Do you list the RIA on the Sch C?  Do you contact the advisor to be sure you are correctly referencing this is Direct, Indirect, EID etc?  I doubt the advisor will have any ideas but I want to be sure I am properly including this and feel like I'm not 100% positive I'm doing this part correctly.

Thanks for any input.

What are your thoughts on this; a firm has audited a 401(k) plan for many years. A new auditor was recently assigned this year and has brought up a potential issue that has existed since the plan was established. Is it fair to ask why they never caught the issue earlier? Does the firm have any culpability in this case?

Does anyone use this site?  It had a pretty robust community.  Seems to have vanished...

Cafeteria plan permits all changes in election addressed in Notice 2020-29 including dropping deferrals towards premiums under employer sponsored group health plan (pursuant to affidavit of other coverage), and dialing health FSA deferrals down to zero.  Question - an individual who is no longer deferring under the plan in any way still a participant in the plan or does participation terminate?  Regulations re: FMLA leave are as close as existing guidance gets, but does not provide a clear answer.  Comments appreciated.

Prop. Reg. 1.125-5(k)(2) provides that a plan can be designed to cover less than 213(d). But it dates back to 2009 (pre-ACA). Now that the CARES Act eliminated the prescription requirement for OTC, can a Health FSA not be amended and remain covering only OTC with prescription under 1.125-5(k)(2)?

Plan lost 1M in investment value in 2019.   Company deposited 1.25M in September of 2020  which would meets requirements for deduction for 2019.

Now the Company wants to count the 1.25M deposit in 2020 partially for 2019, 2020 and 2021.   I know it can be used for 2019 and 2020 but what about 2021 for both deductions and minimum funding requirements.

A 501(c)(3) organization forms a 100% wholly owned for-profit subsidiary. The CEO of the 501(c)(3) is retiring 12/31/20, but they want to sign him to a part-time contract with the for-profit to help get it launched effective 1/1/21. His services would be provided exclusively to the for-profit gong forward, and he would be paid from its payroll and not the 501(c)(3)'s. The services would be meaningful/substantial - probably more than 20% of full-time, but less than 40%. They want to pay a meaningful signing bonus up front, but they could be convinced to spread it out over a longer period built into the part-time salary. The contract would be for 12 to 24 months.

A couple of questions/issues come to mind:

• Would the arrangement in any way implicate section 457 by virtue of the fact that the for-profit is 100% controlled by the 501(c)(3)?
• Would the arrangement in any way implicate section 457 by virtue of the fact that the individual previously was employed by/CEO of the non-profit parent?
• Any other issues spring to mind?

Thanks for any thoughts you might have.

Hi

New client. A partnership, 2 partners, each making over 500k. deducted full 56k profit sharing for 2019. Now I am told that they have been making IRA contributions as well for many years in addition to maximizing profit sharing.

Can IRA be in addition to the maximum 415(c) limit?

Thank you

An employer is part of a Multiple ER plan.  They decide to leave MEP plan and establish there own SEP plan.  Would the SEP plan be considered a "new" plan? 

Additional Questions:

1) If new plan is established with an effective date of 5/1/2020, can the contributions/compensation be combined in the new plan for the entire year?  (assume 12/31 PYE for both)

2)  Does it matter if it is a Safe Harbor plan?

Plan has a fixed match 50% up to 4%

Effective 10/15 the match was changed to discretionary - the employer will match 50% up to 6% - funded each payroll for the remainder of 2020. In addition, the employer added the true up feature as of 10/15/2020 for the 2020 plan year. 

Questions. On 12/31/2020 when the true up is calculated , is the match contribution based on the formula in place as of 12/31? Therefore, even though  the match was 50% up to 4% for the first 10 months, you use the total wages and deferrals as of  12/31 and determine the true up base on the 50% up to 6% formula. 

Thanks