Do I have these options correct - have not done this in awhile.   Not sure if we will ever get any relief legislation in time to make any difference. 

Stop Match

      30 day notice, amend plan, subject to ADP/ACP, Fund to date of amendment, SUBJECT TO MINIMUM TOP HEAVY CONTRIBUTONS.  these may be more than the match requirement.

Terminate the Plan

     Stop Match as of date of plan determination, not subject to additional testing.

So an employer furloughs half its work force for 30 days. They are scheduled to come back in 30 days. 

They are still active correct?  And cannot take a distribution?

Similarly, they would be considered to be on a leave with respect to their loans?

Many companies are laying-off their workers temporarily to get them off their payroll and onto unemployment benefits.  Expect this will trigger lump-sum termination distributions to a lot of participants - especially at companies that extended 409A plans to lower and middle management HCEs. 

Luke - Thoughts?  Anything those employers can do?  Thanks!

Calendar year DB plan with approx. 50 participants. Covers all employees, 21 & 1 eligibility. 1000 hours required for accrual. Plan sponsor is considering freezing for 2020 but it may be that 3 or 4 participants will have worked 1000 hours by the freeze date. How will that work for 401(a)(26)? Does the fact that a few participants accrue nullify the frozen plan exemption? Note that the plan is slightly underfunded on a plan termination basis.

So one of the requirements to disconitnue Safe Harbor contributions is that the safe harbor notice had to say "the employer reserves the right to discontinue the safe harbor contribution."

Then comes the SECURE Act and says "you don;t need to send the safe harbor notice for 3% SHNEC plans,"  If we take that advice do we still get the flexibility of discontinunng the safe harbor?  Apparently there is an exception to this notice requirement if they are operating at an "economic loss" but I'm just wondering if they tricked us into eliminating an available option.

Note:  I have already discovered that this rule is essentially meaningless because we almost always include a discretionary ACP Safe Harbor Match even if we never use it.  And in this scenario a SH Notice is still required.

401k Plan Sponsor is depositing amounts to participant brokerage accounts to cover annual maintenance fees.  All participants have individual brokerage accounts.  Deposit per participant does not agree to exact Annual Account Maintenance Fee.  

I understand there is probably many potential problems with this scenario, but my question relates to whether it is "not allowed" for an employer to reimburse participant plan fees this way?  They are truly making individual deposits per person for a flat dollar amount.  

It has always been my understanding that if an Employer pays ANY money into a plan that it must be allocated as plan contributions based on the plan document.  Has anything surrounding this topic changed in the last few years?

Thanks!

I am curious how others are assisting their clients during these difficult times.

Are you providing them with advice related to Partial Plan Terms or other topics?

Thanks!

I assume with all the lay offs and business downsizing, clients will want to know if they can stop making their Discretionary Matches.   In the back of my mind, I seem to remember there can be issues changing the discretionary match mid year.   Can anyone provide guidance?

Thanks in advance!

So lots of partial plan terminations imminent or in progress,.  We all agree that in this scenario, assuming it is a calendar year plan, anyone who terminates at any time in 2020 (and for any reason) must become 100% vested.  Is that correct? 

Seems like now would be a good time for someone to challenge the IRS to repeal that dumb interpretation.  Even if they solve the problem it will be too late.

Anyone have information on the consequences of a plan sponsor failing to get the 403(b) plan restated by March 31?

Thanks!

PNJ

Good afternoon -- I'm looking for confirmation on whether COVID-19 falls within the new disaster category of Safe Harbor hardships under the hardship final Regs. While this pandemic is listed on the FEMA website for each state, it was declared an "emergency" rather than a "disaster". In researching, it appears the Robert T. Stafford Disaster Relief and Emergency Assistance Act classifies both an emergency and a major disaster as types of disasters, so it appears to be eligible for hardship distribution (if allowed under the plan terms). However, I found conflicting information on a law firm's website that states it's an emergency but not classified as a disaster for safe harbor hardship purposes. Thoughts?

The company I work for purchased a different business and I started working for this new business but all benefits and 401k plans continued to be through the main parent company.  In January of 2019 during the transition they used incorrect information (address and social #) when sending my 401k contributions to the company that manages it so it looks like they created a new account and all of my money and employer matches have been going to this other account.  This week I checked my account (my main account that I've had for years and thought my money was going into) and noticed my allocations were all set at zero even though my payroll account showed a percentage being taken off every pay period.  After looking into it I discovered this other account and informed my employer and they said they contacted the company and the 2 accounts would be combined.

My question is, is this the correct way to handle this?  Technically my contributions have not been going into my account for over a year.  I don't believe my employer has my best interest in mind and I don't have any experience with this, so any help or guidance would be appreciated.

I'm having a brain cramp

Sole Prop.  Over 50

Gross Sched  C. : 19,114

Net after SECA, etc:   17,764

Deferrals:  17,764

415:  100%

Can he put in another 6,000 as c/u?

Could he put in PS and have some of the 17,764 classified as c/u?  I know the PS will lower the plan comp.

I'm having a hard time reconciling these numbers with 415 and the comp on Sched C

I know this is way early for this discussion, but here goes anyway...

Just had a dentist call to say that he is following the ADA recommendation and basically shutting down for the next three weeks.  Since his employees don't want to use their vacation days and prefer to collect unemployment, he is going to give them what they want and fire them (NY is waiving the usual one-week waiting period for unemployment benefits).  He intends to rehire them all in about a month, but was concerned about what effect it might have on the plan.

Obviously, they can't defer while they're not paid, and they don't have plan compensation during this period so their end-of-year safe harbor and profit sharing will end up being lower.  For those normally working just over 1,000 hours per year (and if that's a requirement for a profit sharing allocation), they might fall below the threshold and it could cause a problem with 410(b) testing.  And... what if he doesn't hire them all back?  I know partial plan termination is partially facts & circumstances, so maybe this could be argued, but I'm thinking this might come into play if he lets go 7 and rehires 4 because business is slow to restart.

According to this dentist, this is going to be a common situation for many small dental practices, so I figured I'd toss it out here so we can start discussing it.

Just curious ---- for old school plans that have all accounts in a pooled trust, no participants can make elections, they get one annual statement.  As we send these out, I'm curious if others are sending out statements as related to the current (and quite large) decrease in market value.  As it is we intend to communicate to clients that we recommend a 3-31-20 special allocation for new distributions, and we will need to communicate something to participants.

Looking for input regarding the calculation of the amount an employee is required to repay under Rev. Proc. 2019-19, Section 6.06(4)(a).  The Overpayment amount is $100,000.00.  Under Section 6.06(4), the repayment amount would be $100,000 adjusted for Earnings at the plan's earnings rate.  

In the current investment environment, the Plan has suffered significant losses.  Is the demanded repayment amount $100,000 minus the losses at the plan's earnings rate up to the date of repayment (e.g, $96,500)?  Or is the repayment amount merely $100,000 not adjusted for a loss (because there are simply no earnings)?

Thank you in advance for your input.

is there any chance this deadline is going to get pushed back in light of the coronavirus?

I have a client that has failed the ADP test and will need to take a refund.  However, last April he took a hardship distribution which wiped out most of his deferral account and he now does not have enough money to process his refund.  What course of action would we need to take?  Technically the deferrals are no longer in his account and he did not roll it over so basically we have the same result except for the distribution code and early withdrawal penalty.  He was not 59.5 when he took his hardship.  Any help is much appreciated.

Surviving spouse is receiving a small QJSA benefit from a defined benefit plan. She is elderly and needs to go into a nursing home, but the  pension pushes her past an income limitation-- making the cost of the nursing home very expensive. She would like to disclaim the retirement benefits, but we don't see an avenue to allow for this to occur.

Disclaimer- Her husband died longer than 9 months ago and she has been receiving monthly benefits since his death.

Assignment of Interest- She could assign her interest under 1.401(a)-13(e) but the monthly benefit would still be considered taxable income.

Cash-Out- Plan does not allow for any type of lump-sum unless present value is less than $1,000.  Current funding status would prohibit large lump-sum benefit payments anyway.

Any other ideas would be appreciated.

Hi All - Looking forward to your expert opinion on my situation.

Situation

- I started working in May 2019. First job. Huge multinational firm. I elected to contribute 20% of my pre-tax income into my 401k to hit the ~19k max employee contribution limit. My employer matches upto 6% for the first 100k of my salary. 

- In Nov 2019, I noticed that 401k deductions hadn't happened properly at all in any payroll - meaning 20% was not taken from my paycheck (bi-weekly) and hence no deposit to 401k and I was paid my full base salary excl medical premium and HSA deductions. I escalated to HR, and they took 3 months to investigate and got back to me in Feb 2020 after constant follow up. Meanwhile 2019 tax year was over and I got my W2 with no 401k deductions.

Solution from HR

HR told me in Feb 2020 that

- The underlying root cause was identified. The mistake was not on my side

- They will provide the full 6% match into my 401k as if deductions had happened properly

- However they cannot deduct any 2019 employee contributions for me retrospectively. Instead they would pay me a penalty of 2% of my base pay as compensation (into my normal paycheck and not 401k) in 2020 which they said is "the standard IRS guidance" to fix the issue

- My 2020 deductions would happen as normal

My problem

I dont want the 2% fee to be paid to me (which will also be taxed). Instead I want them to fix the issue by deducting from my paycheck and depositing into my 401k what should have been done properly in 2019. I am willing to cover that from my 2020 salary (for both 2019 and 2020 deductions) or willing to transfer the amount back to the employer (I had given HR these options as well). Meanwhile I have filed a tax filing extension till Oct 2020 to get some runway to deal with this problem 

Advice needed

- Is my HR statement on the 2% penalty the standard IRS guidance? Or is there a way to get them to put in the proper amount into my 401k for 2019 contributions.

- If there are rules to get HR to do the right thing, any idea of the impact on my tax filing will be welcome. The company provides for me a tax attorny for the first year of filing and I will be discussing this with them anyway but any insight will be appreciated.