In September, I did a lost earnings calc on the VFCP site with these figures (among several other entries):

Principal: 12,132.67

Loss Date:  4/29/2019

Recovery Date:  5/2/2019

Final Payment:  9/28/20

Amount Due:  $6.40

But, they never made the correction, so I'm re-calcing the interest with a Final Payment of 10/28/20 this time.  I entered:

Principal: 12,132.67

Loss Date:  4/29/2019

Recovery Date:  5/5/2019

Final Payment:  9/28/20

Amount Due:  $12.83

Notice I made a small mistake.  The Recovery Date is 3 days later.  And the amount due is MORE THAN TWICE AS MUCH!

When I run the original figures again with 10/28/2020 Final, it gives me the $6.40 again.

Does it make sense that a Recover Date merely 3 days later would result in a 100% higher result?

Non-profit has a 457(b) plan and 401(k) plan. They want to terminate the 457(b) plan and have the assets distributed to the participants (2 executives). One of the executives would like to contribute pre-tax salary deferrals to the 401(k) plan from the 457(b) distribution. The definition of compensation in the 401(k) plan is W-2 plus pre-tax deferrals. The executive is arguing that the 457(b) distribution is reported as W-2 wages and I can't find anything that says it can't be done - it just feels wrong. Does anyone out there have something that either supports or opposes the executive's position? 

Employer wants to reduce the deferred compensation benefit paid at termination of employment from $2.5M to $2M?  Is this permissible if we keep the same time and form of payment and the parties agree?  The 409A regulations (26 CFR 1.409A-1(c)(3)(vi)) envision that it is permissible to increase the benefit but I do not see any express approval of reducing the benefit.   

I have a staffing firm that has internal employees (work in the office) and around 200 external employees that work on jobs about 9 months out of the year, work over 1000 hours.  They all get W-2 wages and health insurance.  They want to start a 401k plan but want to exclude the external employees (known as contractors) and only have the  internal employees be part of the plan.  I am thinking they cannot do that since the "contractors" are getting W-2 wages and work over 1000 hours and some may work 12 months within a 12 month period.  The staffing firm says other staffing firms are able to have a 401k plan and not include their external employees (insist they are W-2 waged as well).  Am I missing something?  Wouldnt they have to be included if they worked 12 months, 1000 hours (some leave and come back within 12 months)?

They would not pass coverage testing if they exclude the so called "contractors".  There are about 20 eligible and there are only 6 internal employees.

I keep reading that contractors can be excluded - but arent most 1099 waged not W2?  How are staffing companies excluded contractors that are W2 waged?

Thanks

We have a new client who has come to us to establish a 401(k) plan.  The entity is a Community Land Trust.  I have not encountered this type of entity before.  Can they establish a plan?  Thanks in advance for your input.

So, a profit sharing plan needs to define a "Contribution Formula" and an "Allocation Formula" in order for the plan's contribution to be definitely determinable. In many plan documents when you select a new comparability - each employee is own group formula, no additional "method" on how to allocate the contribution formula is required. For example, no additional input is required to establish if each group will receive a flat dollar, % or the greater of the two.

However, its different when we select new comparability - groups, documents tend to make you establish in the plan document whether the contribution formula will be allocated via flat dollar, % or the greater of the two.

I can reason why this may not be required for new comp - each employee is own group. But my question is this, is it actually required that the plan document define in new comp - groups that each group will be allocated the contribution based on flat dollar, % of comp or the greater of the two? Couldn't that simply be provided in writing to the plan administrator to satisfy the definitely determinable requirement?

Have a takeover plan that failed 401(a)4 for 2018 and 2019 and no corrective amendment was done. Our understanding is the only way it can be corrected is with a VCP submission at the shocking new fee of $3,000. Must we pay $3,000 to correct 2018 and $3,000 to correct 2019? Or can they both be corrected at one time for one $3,000 fee?

Our CEO started in Feb of this year and was doing 401k % of 5%

He is at 500K annual base comp

He has now hit the 285K comp limit for 2020 in Sept 2020 and both his match and deferral stopped

Match is 14,500 which is ok 5% of 285K

But 401 k is capped at 14500 as well

He is over age 50

If he had done say 10% when he started he would have been able to do 26K in 401k contribution

Can we catch him up in 401k to 26K by suggesting he increase his 401k % from 5% t0 14% for final 2 months of plan year?

Or is it too late to do this since he has hit the 28

Thanks

Alexa

In another BenefitsLink discussion, the originating inquirer described a plan sponsor’s desire to change to a regime under which each participant is a distinct allocation group.

Instead of asking about how to make such a change, I ask different questions:

(Assume that no nonelective contribution will be a subterfuge for what really is an individual’s § 401(k) cash-or-deferred election.)

Does ERISA’s title I or the Internal Revenue Code impose any constraints on a plan sponsor’s opportunity to specify that each participant is a distinct allocation group?

For those plan sponsors that use IRS-preapproved documents to state the user’s documents, do the documents available from mainstream providers impose any constraints on a plan sponsor’s opportunity to specify that each participant is a distinct allocation group?

Assume an employer has enough practical capacity to decide, allocate, and communicate a distinct contribution for each individual.  Are there other reasons a plan sponsor would not want the flexibility to specify that each participant is a distinct allocation group?

Hi

DOT is 12/31/2020

NOIT - termination notice - given by 10/31/2020 - to satisfy 60 days

NOPB - notice of benefits - given by 11/9/2020

Can I file 500 with PBGC on 11/10/2020 or have to wait till after 2021?

I believe it can be done earlier i.e. do not have to wait till 1/1/2021 but cannot remember.

Thank you

If an entity purchases another division and wants to merge the existing 401(k)/retirement plan into their existing plan, what steps can they take to limit the purchasing entities fiduciary and liability exposure if the merging plan was not run correctly?

I had a couple of question regarding nonstatutory stock options.  

A nonstatutory stock option is includable income in the year granted if it is includable in the employees taxable income.  But what exactly are the circumstances that would cause the option grant to be includable or not includable in income, and how is that income generally reported.  I know that it would be on the employee's W-2 at the end of the year, but is it reported as part of their paycheck, for example, when the option is granted?  So if they had a deferral election for a 401(k), the compensation related to the grant would be included in that deferral election, unless the compensation was excluded?

If a plan were to switch from using the W-2 compensation definition to a definition that excludes stock options, would the safe harbor 415 compensation be the better option, since that excludes not only compensation from exercising an option, but also when an option is granted?  

Thank you very much.

Starting restatements almost immediately. There exists an option to to do a "minor modification" and submit to the IRS on a from 5307, if necessary. Question for any of you who might have a contact at the IRS - is this form and/or instructions going to be revised any time soon? Current version is, I believe, 2014. If no revision contemplated, then I guess we use the current one! (Not that I'm planning to anyway, if it can be avoided...)

https://www.irs.gov/forms-pubs/about-form-5307

We had a participant request to come and review the financial reports of the qualified plans (i.e., essentially the 5500s).  The participant does not want to pay copy costs and just wants to come to the office.  We are limiting access to our office due to COVID and do not want participants coming in to the office.  So, the two options I can think of are (1) let the participant come but limit his time and place him in an unused office and require a mask the whole time or (2) waive the copy costs and send him the documents.  Does anyone see any issues with these options?  

Thank you. 

Just a general question...what did your firm charge for the PPA restatement and what do you plan on charging for the Cycle 3 restatement? Thank you!

as we approach restating plan docs, curious if there are thoughts about merging existing 401(k) and separate Money Purchase plans by the same sponsor? My initial reaction for long standing plans is to keep them separate. Though certain fees would be larger as applied to two plans, merging them might be complicated and risk prone.

A Takeover 401k Plan. The plan has  1) deferrals, 2) safe harbor, and 3) PS contributions. The deferrals and safe harbor are of course 100% immediate vesting. The PS contributions are 100%  immediate vesting as well, (they are used to offset the DB Plan and only the vested PS balance can be used to offset the DB). Each participant has one total balance at year end and each participant's balance is not allocated between the three money types (deferrals, safe harbor, and PS contributions). Hardship distributions are not allowed in this plan and in service distributions after retirement age are allowed for all three money types. Distributions are made after a terminated participant requests payment for all three money types. Question:  Since all three money types have 100% immediate vesting and all share the same specs listed above, is it ok, that each participant's balance is shown as one total balance and is not broken down per money type?  Thank you in advance for any insights on this matter.

I have a Cash Balance Plan that provides a substantial benefit for most of the NHCE's.  The Average DB Allocation Rate for the NHCE's is 3.5%.  At least one of my HCE's has an Allocation Rate in the Profit Sharing Plan of 15%.  The Average Benefit Test and Rate Group Tests pass with no problem when I provide a Profit Sharing Allocation of 4.5% to the NHCE's.  Is the minimum gateway for the Profit Sharing Plan still 5% based on my one HCE at 15% in the PSP.  I understand that the DB/DC gateway minimum increases from 5% to 7.50% but can my DB offset drop what would have been a 5% Profit Sharing Gateway to a 4.5%. 

Sorry if this question has already been answered.

Thanks for your help. 

I was Fromerly employed at a government contracting agency and was wondering how do i gain accsess to my 401k account and if i can withdrawl money

For our plans that have the "maybe" safe harbor, we have always provided the client wanting safe harbor treatment the notice saying they will fund the 3%, the maybe notice for next year and the amendment 30-90 days prior to the end of the year.  I assume that process does not change with all the new Safe harbor rules. I know there are new rules about declaring safe harbor treatment into the next year.  I'm concerned about what needs to be done this year for these "maybe" safe harbor plans.  Can it be simplified such as - ignore this year end and provide a notice next year up to Nov 30 for 2020?