Good afternoon to all,

I have been asked to get your input on the following question:

"Can a " 3508 direct seller" person participate in a 401(k) Plan? They are paid by way of a 1099 rather than W-2 and are recognized as "Employees" for some benefit purposes. We do not have experience with this type of "employee". If the plan defines compensation as W-2 income then they have no compensation to defer from. Maybe they make Roth deferrals or Voluntary Employee Contributions? Any thoughts or comments are appreciated."

The questions is being raised on behalf of a plan sponsor who DOES wish to cover such persons if a way can be found to do so.  

Thank you as always.

The FFCRA provides a payroll tax credit for the cost of health care coverage provided during paid family or sick leave. A client asked about a "rumor" that he heard regarding the availability of a credit for health care coverage provided to employees on a temporary layoff (unpaid). 

I don't see anything like this in the CARES Act. Am I missing something? Thanks!!

If a 401(k) plan has a limit of 1 hardship withdrawal per plan year, does the CARES Act override this provision so that a participant can take an additional withdrawal?

I have a separate account on my ex husband pension plan and I want to get payee in a lump sum. So I can by law get a lump sum

I may be missing something, but hopefully someone can confirm. I've seen the newly permissible CARES Act "coronavirus-related distribution" referred to as a new form of "in-service" distribution (or some variant thereof). It pretty clearly seems to apply to in-service distributions, but I don't see anything that would limit a coronavirus-related distribution to in-service. Perhaps people are just referring to it in that shorthand as that seems to be the most useful practical application?

In other words, if a 50-year-old participant terminated two years ago with a $200,000 401(k) balance, does anything prevent them from taking a $100,000 distribution (assuming they are affected by the virus, etc.) and taking advantage of the favorable tax treatment of this new distribution type?

What is the correct procedure to follow when a client realizes he has filed a 5500 under the EIN of the trust?

Profit sharing plan is in the process of termination, the owners have been taking their RMDs each year.

Under SECURE ACT, does the provision of taking RMD prior to rollover apply?

Hello, I have seen a few suspension of the SH election questions already, but didn't see this question addressed. If we have a client that wants to suspend their SH election now (either the 3% safe harbor or the match, doesn't really matter), can they elect to become a safe harbor plan later in the year or after year-end based on the provisions in the SECURE Act? 

We are wondering if this is a way out of the cash flow requirements now and a possible fix later on if things turn around to avoid refunds. 

Before discussing this as an option with clients I am looking for some guidance one way or the other.

Thoughts? 

I am sure we have all read the bill and many articles.  I wanted outline three scenarios to make sure I am reading the Act correctly in regards to COVID Loans and the delay of payments.

1) We have a new COVID Loan and the participant delays the payments for 1 year.  The max loan period is still 5 years and payments that were supposed to start on 1/1/2021 will start on that date.  Payments that were supposed to start on 4/1/2020  - 12/31/2020 will start on 04/01/2021.  The loan will need to be re-amortized since interest has been accruing and even if payments were doubled the loan would not be paid off within the 5 year period.

2) There is an existing loan in effect.  Participant chooses to delay current payments for 1 year.  Let's say it is a 5 year loan and he is in year 2 of the loan.  Payments from now until the end of the year are delayed for 1 year.  The original loan payments go back into effect on 01/01/2021 and the delayed payments start back up on 04/01/2021.  We are now in year three of the loan and that loan needs to be re-amortized to make sure it does not exceed 5 years.

3) Loan is in 5th year and participant wants to delay payments for 1 year.  This is allowed and the 5 year rule is disregarded. Payment continue in next year and need the loans needs to be paid off within 6 years.

Do I have this correct???

I looked at the DOL FAQs regarding the Coronavirus and Employers obligated to contribute to a multiemployer welfare fund. I note that the FAQs, especially Q&As 35 - 37 permit the payment of Emergency Family and Medical Leave benefits and Emergency Paid Sick Leave benefits to be provided "by other means, provided they are consistent with your bargaining obligations and collective bargaining agreement." I can foresee that most funds would want to negotiate the bargaining agreement so that they provide the expanded paid leave benefits from the fund and that the existing paid leave provisions may not be sufficiently broad to apply to these expanded paid leave rights. Assuming that is satisfied, would the employer be precluded from providing such paid leave benefits from its own funds and applying for and retaining the IRS payroll tax credits? Would that be consistent with the employer's bargaining obligations and the collective bargaining agreement? Or would there be an obligation? If it would, would the employer be obligated to either have the fund apply for and retain the tax credits  or would the employer be obligated to pay the credits obtained over to the funds?

I am wondering if anyone has thought about or encountered this issue:

Fully-insured plan covers employees who are "actively at work"

An employer who receives a CARES Act loan has employees on the payroll who are not actively working because of the shut down of non-essential businesses.

Would the employer be in technical violation of the medical insurance policy if coverage continues for the employees?

Is there anything in the CARES Act about this? 

Is a Coronavirus distribution allowable from a MP plan if a participant has not otherwise satisfied the normal distribution requirements?

Although 2202(a)(4)(c), if you follow through all the reference trails, might appear to allow it, it seems like it isn't covered under 2202(a)(6)(B), and therefore not allowed?

Thoughts?

P.S. - just saw the following from Ilene Ferenczy in yesterday's Benefits Link Newsletter, which confirms my thoughts. My thanks to Ilene for her write-up!

"The bill permits any “eligible retirement plan,” including qualified plans, IRAs, 403(b) plans and governmental 457(b) plans, to make a coronavirus-related distribution.  The bill makes it clear that the provisions in Code sections 401(k), 403(b), and 457(b) that limit distributions will not be violated by coronavirus-related payments, but provides no such relief for defined benefit or money purchase plans (which cannot make in-service distributions prior to age 59-1/2)."

I'm thinking time we move from using passwords to secure files to a web based secure file exchange system.  Any recommendations for entry level data exchange (for instance so HR can upload their trust accounting rather than email or fax)?  free?

Wondering if all plans administrators and employers will cooperate and increase loan limits and permit withdrawals up to $100k. this isn’t discretionary is it? 
 

seems to me a bad decision not to allow these withdrawals but just wondering what the consensus is here and when plans will start to integrate the new rules with all the moving parts. 
 

We have more than one small plan with SH match where only the owners defer and so only the owners get SH Match.  They assure us that HCEs have been given the opportunity to defer.  While technically okay, what position are other TPAs taking?

Also, for one of these clients, they have a DB, PS and 401(k); of about 8 participants only the 2 owners (H&W) defer.  The 401(k) excludes HCEs from SH Match, so effectively this allows only the owners to defer with no ADP testing whatsoever.  Again, technically acceptable but.....  Thoughts?

Any adverse experience with IRS running plans this way?

I read somewhere along the way that perhaps you could amend a safe harbor plan to eliminate prospectively the SH for the HCE's and preserve the safe harbor status.

Is that possible?  Anyone looked into that?

I have a plan that is amending to remove the auto-enroll and auto-escalate feature and the service provider wants to take anyone in the plan at the auto-enroll % and make them 0%.  That seems odd and more work for all.  Seems the provider should leave everyone "as is" as this change is only for newly eligible participants.  Does anyone have any information to share on this. 

Physician group - they set up contracts with certain employees to base their overall compensation upon the benefits they will receive in their profit sharing plan (which I'm not fond of).  If the highest HCE rate is 20% is there anyway to give certain NHCE's only a 3% profit sharing contribution based on the employment agreement?  OEE does not work as many our not OEE's.  They also don't want to exclude them from the plan altogether.  Plan is also top-heavy. 

Am I thinking this clearly - Client waived eligibility requirements as of the effective date of a new plan and this brings in an HCE hired on the effective date.  There are 5 other employees hired after the effective date (all NHCEs) who are subject to the plan's eligibility conditions of 1 YOS and semi-annual entry dates.

For coverage purposes we do have 100% of HCEs benefiting and no HNCEs benefiting - coverage failure?  

Or do we consider the total population and consider 100% of HCEs (HCEs hired on or before effective date + HCEs hired after effective date (here no HCEs hired after effective date)) benefiting v. NHCEs benefiting which is calculated as follows:

NHCEs hired on or before effective date / NHCEs hired on or before effective date + NHCEs hired after effective date = NHCE benefiting population 

...and that % must be greater than 70% for this waived service condition to pass coverage?  

I am getting push back that you can have such dual eligibility conditions and there is no need to test for coverage.

Many cities have issued "shelter-in-place" orders for citizens, closing businesses that are not considered essential.  We are having a hard time determining if our TPA firm meets the Homeland Security definition of essential.  We are purely administration, we are not a CPA firm, do not sell product.  Thoughts? 

Thank you