I know in-service withdrawals of deferrals may not be made prior to age 59 1/2, but is there any requirement that they must be allowed after age 59 1/2? 

We have a PS 401(k) plan that allows in-service withdrawals from all accounts only after NRA - NRA being age 65 and 5 years of eligibility service.  So I was wondering if participants would have to wait until NRA or if there was a rule regarding deferrals that would supersede that.

If anyone has an opinion and/or something they have found from the powers-that-be, please share. This has stumped several colleagues but I'm sure it can't be a totally unique situation.

ABC Company has a deferral-only 401(k) plan (no match or non-elective provisions) with one key employee Fred, who is the CFO and earns $250k per year.  The ABC Company 401(k) Plan is top heavy.  Fred is also employed by XYZ Company - completely unrelated to ABC Company - and participates in the XYZ Company 401(k) plan.  In 2019 Fred had a $10,000 excess deferral - he contributed the IRS maximum in the XYZ Company 401(k) plan and $10,000 into the ABC Company 401(k) Plan.

If the entire $10,000 that Fred contributed to the ABC Company 401(k) Plan is refunded as an excess deferral, is the ABC Company still required to make a top-heavy minimum contribution to non-key employees?

My initial reaction is no, because an excess deferral is not an annual addition, but I can't find anything that would support this.  I have colleagues that feel ABC Company is required to make a 3% top-heavy minimum contribution since Fred contributed 4% of his compensation to the plan even though the entire 4% is being refunded as an excess deferral.  Again - they haven't provided anything to support their position either.

If a plan has the following language related to suspension of benefits - A participant who remains employed by the Employer after his normal Retirement date and who is to be credited with at least 40 Hours of service each month will have a Late Retirement Date on the first day of the month coincident with or next following actual termination of employment with the employer or change in employment status to a position in which the Participant would be expected to be credited with less than 40 Hours of Service each month.  The Plan Administrator shall notify such participant that Monthly Retirement Income will not commence until his late retirement date and the Monthly retirement Income will be equal to that amount determined pursuant to 4.03.

and 4.03 (late retirement) says - When a participant retires on his late retirement date, his Monthly Retirement Income shall be an amount equal or greater of: (a) his accrued benefit based on the Participant’s Years of Credited Service and Average Monthly Compensation as of his Late Retirement Date, and (b) the Actuarial Equivalent, as of his Late Retirement Date, of the Normal Retirement Benefit which would have been payable at his Normal Retirement Date.  This benefit is payable in the Basic Form and commences on said Participant’s Late Retirement Date.   

Isn't it irrelavant if notice is given or not since the SOB language states that the monthly retirement income will be equal to the amount determined persuant to 4.03 which says the benefit will be the greater of the accrued benefit at the late retirement date or the actuarial equivalence of the NRB as of the NRD?  Even if notice was given the particiapant should have had actuarial equivalance if it was greater than the accrued benefit and it wouldn't have been limited to NRB at NRD.

Thanks for your input

Plan auditor determines that the plan did not follow the definition of plan compensation while performing the 2017 audit of the plan. Tells the plan sponsor to calculate the necessary QNEC at 25% of missed deferrals, plus appropriate match. Going out to do the 2019 audit, they find that the plan sponsor did not remit the QNEC to the plan until January, 2020. The auditor believes that the Sponsor should now go back and recalculate the QNEC at 50%, since the remittance was after the close of the 2nd plan year following the discovery and calculation of the QNEC.

Any thoughts on this?

We know this applies to SHNE for HCEs, I do not see any mention of suspension for NHCEs, such that ADP/ACP need be met the customary way and HCEs need go through the reductions anyway, through levelling, returning , etc and the 3% top heavy need be for the full plan year.

This may seem a dumb question, but how does this help the sponsor that can't afford the SHNE for NHCEs?

Especially for 2019- many sponsors wait until end of year or accrue the contribution.

The plan sponsor's new legal counsel  wants to review all contracts with their vendors.  Due  to the complexity of the agreements they want to use outside counsel or a  consultant.

The question is - can the cost associated with this service be paid from the forfeiture account. Forfeitures are used to offset admin fees.  This is not a plan design issue, just looking at agreements to be sure they are current and encompass all features provided.  Ok to pay for forfeitures??

Any site I can reference??

Thanks

I have opted out of the healthcare plan at my current employer since I have healthcare through my husband.  Since I opted out of our healthcare, my employer is contributing $4.54/hour to my 401K.   My employer adds this money into my weekly pay as "misc income" and then deducts it as H&W 401K.  Is this legal or should my employer be contributing separately to my 401K and not through payroll?

Hello, this might be a dumb question but I am curious as to know if the funds that are allocated in an employee’s esop account compound as the esop matures the same way that money sitting in a 401k for many years start to compound interest? I hope that I am making sense. I have worked at this company that is employee owned for 15 years and I plan to retire there in another 25 years or so. Thank you in advance.

if I may, I only have only one more question. Do most people diversify when they are 55 and over and have been working at the esop company for over 10 years? I mean if the company has done so well for all of the years that They have been there would it be foolish not to diversify? I would hate to miss out on a much larger return by diversifying but I also realize that any company can go bankrupt and lose everything. Just wondering if there are people that ride the esop 100% until retirement.

A client has received both schedule c income and W2 income, both of which came from his own businesses (sole proprietorship and s-corp). How can we run DB calculation in this case? Should I use earned income + W2 as the compensation basis? 

What about deductions? How can we break down the contribution among sole proprietorship and s-corp? 

Seems to me that many non-ERISA plans require employer sign-offs for things like distributions and loans.

I read some articles that seem to suggest that the only way to have a non-ERISA plan is for an independent party to sign off on everything.  Is that how it works in the real world (I only work with ERISA plans so forgive my ingorance on this aspect).

Re the definition of compensation for PLAN purposes (for a plan that uses W-2)  - as I understand it, absent a specific exclusion in the plan, FMLA wages, even if under a "special" category for employer SS payroll taxes or whatever, would still be considered as wages for purposes of calculating employer match, whatever. Did anything override this that I missed? Thanks.

If an employer allows participants to take a Cares Act distribution during early 2020, but say later in October of 2020 decides to no longer allow them would this be a violation of protected benefits? My reasoning stems from participants who were previously allowed to take a distribution due to a particular event are no longer able to do so through the current statutory period that allows such a distribution to take place.

A Participant in a 401k Plan received a Hardship Distribution in 2020. He is now a "Qualified Individual" under the expanded definition under CARES Act (the spouse of...).

He intends to make the election to pay the taxes over the next 3 years as permitted as a Qualified Individual under CARES, exemption from 10% penalty.

QUESTION: is he permitted to return the distribution the Plan or an IRA if he is able to do so within 3 Years of the distribution date? Thank you

Informal poll and query for BenefitsLink readers:

Considering only individual-account (defined-contribution) retirement plans that provide participant-directed investment:

Does a plan with its recordkeeper’s or TPA’s help permit a participant to charge against the participant’s account the fees of an investment adviser unaffiliated with the recordkeeper or TPA?

• Always

• Often

• Sometimes

• Seldom

• Never

When a recordkeeper or TPA allows such an opportunity, what conditions are imposed?

What, if anything, does the recordkeeper or TPA require the adviser to sign to be recognized for a plan’s payment regime?

Does the regime for paying an unaffiliated adviser’s fee allow any rate the participant instructs, or is there an upper limit?

Can a 2019 Contribution be made to a SEP that has not yet been esablished?

We intend to set up a plan for an employee before July 15, 2020 and make a contribution.

Can we postpone to OCT 2020 if we elect an extension?

Comments?  Thnak you!

Ken Phillips

Hi, I am new to this posting board and skimmed  this topic that may have been already been discussed.

We are considering a change in valuation date from 12/31/2019 to 1/1/2019. I haven't checked IRS Revenue Procedure on funding method changes and whether it is eligible for automatic approval, however, one major drawback to this proposed change is that AFTAP certification deadline would have been 9/30/2019 and since this didn't happen then the plan is automatically frozen 10/1/2019 among other adverse operational changes. If they already received credited service for benefit accrual for the period 1/1/2019 to 9/30/2019 then for 2019 the automatic benefit freeze doesn't affect 1/1/2019 funding valuation results right ?

• Can someone point me to the statutory authority (or an IRS publication, etc.) which precludes passive enrollment for FSAs?  
• Can the spousal surcharge roll over?
• What about any tobacco surcharge?

Considering a change to org structure to include Senior Plan Administrator and Plan Administrator (and possibly Jr. Plan Administrator). Did anyone have criteria to make someone a Senior Administrator vs a regular Plan Administrator? Is it just experience in years worked in the industry (after 10 or 15 years?)  or would it be taking on additional roles?

Thanks!

A client who own and runs a small hotel (and is obviously COVID-affected) wants to: 1) take out a $60,000 COVID Distribution, 2) elect to spread the tax out over 3 years, and then 3) repay $20,000 before 12/31/20, another $20,000 before 12/31/21, and the final $20,000 before 12/31/22 so that the entire amount is repaid equally over the 3 year period.

If the IRS follows the Form 8915 disaster rules, this would seem to work, but I can't find any real guidance to say that is how the tax process will work.  Does anyone else have any guidance or educated opinion?

Also, the hardship would normally be subject to 10% withholding.  Are there any ways around this for COVID Distributions intended to be repaid?

Thank you!