I have not dealt with 403(b) plans for at least 30 years.

We set up a corporate profit sharing plan for an employer who is a 501(c)(3) back in 2000; were told by the insurance agent, now known as a "financial advisor", at the time the client had an old 403(b) plan (an old Equitable contract that is no longer marketed, that they terminated and were going to roll over into this new profit sharing plan.

The client has been making a 3% contribution each year to the profit sharing plan.

The 401(b) was employee only, so no 5500s.  This was plan #001, which we were told was terminated.

I pulled the trust report from Equitable for 2019 for the profit sharing plan, and noticed  employee contributions for the first time, called the client who told me the old 403(b) is still active and those contributions should have been made to the old 403(b) annuity accounts.

I was about to suggest to the client that the plans be merged.  Since no 5500s were done or needed as there were no employer contributions, (IRS would have no record) a "silent" termination - ie rollover to plan #002 and show as a transfer in on From 5500-SF.

In so doing, however, I would need amend the profit sharing to a 401(k) going forward,  but the plan would need to be ADP tested or the employer 3% profit sharing contribution would need be the 3% SHNE with 100% vesting.

Currently the profit sharing is 100% after 2 years.

Any thoughts going forward???

Participant left employment July 2019 and is/was 60% vested.

Employer terminating the plan on November 1, 2020.

If this person takes a distribution next week, will they have to be 100% vested?

From the IRS website:

All affected participants become fully vested in their account balances on the date of the full or partial plan termination, regardless of the plan’s vesting schedule. (emphasis added)

So, the date of the Plan Termination is after the date he is taking the distribution.

Do you book ADP refunds as a liability on the 5500?

I have an auditor who insists on having the ADP refunds for 2019 booked as a payable on the 5500.

I've never done this. 

What do you guys do?

I'm hoping to get input on an atypical nonqualified plan design. Say you have a standard NQDC plan that allows for employee deferrals, employer contributions, etc. All distributions would be in a lump sum on the earliest of termination, death, disability, or change in control. The participant would have no control over investments in their account.

However, the amount of the payment would differ based on which event triggers the payment. Termination (for any reason), death, or disability would result in a payment of the participant's account plus a specified and reasonable rate of interest. But a change in control would result in a payment of the participant's account plus a rate of return based on the increase/decrease of the employer's stock over the period of the employee's participation in the plan.

So, for example, a participant is in the plan for five years and has an account balance of $100,000, then retires. The payment amount would be $100,000 with a prespecified interest rate of, say, 5% applied over the five years of participation.

But if the same participant is employed at a change in control, the payment amount would be $100,000 increased (or decreased) by the increase (or decrease) in the value of the employer's stock over the five years preceding the change in control. 

The 409A Handbook has an example in the anti-toggling section stating a "toggle" between amounts is compliant because it doesn't change the time or form of payment. I don't see anything else that immediately jumps out at me as impermissible, but would appreciate any thoughts.

Background: We have a brand new cross tested plan. For the 401(k) portion, the eligibility requirements are 21/ 1 YOS (1000 hours). However, the owners would like a special participation date for immediate participation for themselves (no employees in either adopter). This is a plan for two new adopting employers, and the business entities were established in 2019 and 2020 respectively. For one owner, he has been performing services and on payroll since 2019. For the other owner, he started performing services on 1/3 and will be on payroll 10/1 of this year. The document has a specified place for special participation dates, but I wasn't sure what the date should be.

My question is when can this special participation date be? Does it follow with when they started performing services for the business entity or when they started on payroll? In other words, with an owner who has performed services 1/3, but not on payroll until 10/1, what special participation date would I need to use?

Thanks!

Hi All,

New here.   About 4 months ago I took out a COVID related 401K hardship withdraw through my employer.    It was for $28,000.    I took a large pay cut and my wife lost her job.   It helped greatly but I worry about the future and would like to take a 2nd withdraw for the amount of $13,000.   It pains me to do it, but I want to be better safe than sorry.    My question is, is a second withdraw even possible?    I understand the max amount is $100,000 and my wife is still out of work and I am still at a lower wage.      I also totally understand all the tax repercussions involved in withdrawing the money early.    

I plan on talking to my employer about this, but was looking for a little outside input first.   

Hi

Looking into designing a new CB plan for an existing 401k plan and trying to determine if Joe is an HCE or not for 2020.

Joe was 50% owner in 2019 and received 75k in salary.

Joe terminated in 2020 (not informed about the hours yet but let's say over 500) and sold his share to the other owner on 5/15/2020.

The new plan will be effective 1/1/2020 but adopted in November 2020. The val date will EOY.

As Joe was an HCE as of 1/1/2020, is he an HCE for all year by ownership?

Anything I am not thinking of? May be top 20% rule (not sure how it would apply here and effectively when).

Thank you

Large plan with late deposits in 2017.  Corrected in 2018 with applicable earnings deposited in 2018 and 5330 submitted in 2018. All done.  According to the 5500 directions, these late deposits go on the 2019 5500 for the last time, correct?  See below---

The total amount of the delinquent contributions must be included on line 10a for the year in which the contributions were delinquent and must be carried over and reported again on line 10a for each subsequent year (or on line 4a of Schedule H or I of the Form 5500 if not eligible to file the Form 5500-SF in the subsequent year) until the year after the violation has been fully corrected by payment of the late contributions and reimbursement of the plan for lost earnings or profits.

Brain freeze here:

Plan has dual elig. & entry, 3 months svc. & quarterly entry for deferrals, and 1 year, semi-annual entry for safe harbor match, safe harbor added in 2019.  Two scenarios need help on:

1. Former participant termed 2018, rehired 8/1/2020, was a participant for several years prior to 2018 termination.  Is this person eligible to defer and receive safe harbor immediately starting on rehire of 8/1/2020?
2. Similar scenario, but this EE has been working for several years, was eligible in past, but never wanted to defer, he now wants to.  Can he start deferring now in paydate 9/25/2020, and also receive the safe harbor for 9/25, or, would he have to wait till 1st paydate after 10/1 deferral entry and would he have to wait till 1/1/2021 to start receiving safe harbor?

Thanks in advance.  

Broker came to me with a question.  I have not been involved with the SIMPLE;  years ago, we heard the expression "SIMPLE plans for simple minds."

His client has a SIMPLE IRA with the 3% match.  Apparently the owner has already contributed more than the max deferral.

Can a SHM be set up to fund the difference for 2020 so the owner does not have to take any money back; or would the excess need be returned?

We have a plan where the owners did not contribute the full allowable safe harbor match for themselves for  2019 (4% basically).  They did max out deferrals for 2019.  We have always though that the owners SH  was just like everybody else - had to be trued up at year end.  they get K-1s..... Has that changed?  I was thinking I heard a discussion recently on a Relius webinar.  

With those recordkeepers and third-party administrators that offer a § 3(16) service for the service provider to decide claims for a distribution, including a hardship distribution:

(1)   Does an employer/administrator want a power to override the service provider’s decision?

(2)   Does a § 3(16) service provider want the employer/administrator to have such a power (even if the employer/administrator doesn’t want the power)?

BenefitsLink mavens, what’s your experience about what’s happening?

does anyone recall whether there was any general relief concerning the timing of notices such as the safe harbor notice. i recall something general coming out in the beginning of the pandemic. 

EDIT: Ok i found it. it wan an EBSA extension for title I notices. i do not think that applies to safe harbor notices. 

Has anyone found a good comparative chart that is a resource/tool for comparing the various aspects of MEPs, PEPs, and various group plans that providers might define as an exchange or a MEAP? 

Per CPA of a married couple's plan, for self-employed, 415 contribution limit is apparently based on 'Total Income'. Total Income includes Wages and items on Schedule E such as rental and passthrough, as well as Schedule D for cap gains. The amount that was contributed for the plan exceeded what was determined to be Wages. Self-Employment tax was based on the full Total Income, can contributions as well? I hadn't seen that before. In this case it exceeds what was assigned as Wages.

Doctors' group has one main 401(k) plan for staff and each doctor has separate plan (due to historically having separate plans even though plan provisions and investment opportunities presently mimic the main plan).

Eligibility requires 1 yr of svc.

I'm wondering -  can a doctor start their own plan in the year of hire and make contributions to that plan even though they would not have been eligible to make contributions in the main plan?

Establishing new safe harbor 401(k) plan. Have established 401(k) effective for October 1st, using 3% QNEC.  Effective date of Plan January 1, 2020.

Employer mistook when the first payroll would be in October.  Instead of being October 8th it is October 1st (actual payroll date).  The enrollment meeting scheduled for September 30th, after when the October 1st payroll will be called in.  Next payroll to be paid October 15th (bi-weekly).

I see nothing except the "3 month rule".  And find no exceptions.

As we are using the QNEC for the safe harbor does anyone have an opinion on delaying until October 15th the first 401(k) deferral from employee's pay?

Any assistance or thoughts greatly appreciated.

I am curious to hear the group’s thoughts on what to do about UBIT shares (that is, shares in an S-corp that were long ago transferred from an ESOP to a non-ESOP portion of the plan in order to avoid a failing 409(p)).

Here are the ideas we've come up with so far:

1.       Have the trustee sell the UBIT shares to the employer.

2.       Provide NHCEs with a one-time, voluntary election to use cash allocated to their accounts in the ESOP portion of the plan to purchase UBIT shares, with purchased shares returning to the ESOP portion of the plan, and tracked so that they are not re-allocated to disqualified persons. 

3.       Add an in-service distribution option to the non-ESOP portion of the plan.

I am curious to hear thoughts on the following:

•        Do you read CCA 201747007 as precluding option 2?  We had a client do something similar years ago and get a determination letter on it, but that occurred before the CCA came out.

•        If all of the participants in the non-ESOP portion of the plan are HCEs, we think there’s a 401(a)(4) problem with option 3, since the ESOP portion of the plan will not offer the same in-service distributions.  We do not think Treas. Reg. § 1.409(p)-1(b)(2)(v)(B) addresses the problem. Other than adding the same in-service distribution to the ESOP portion of the plan, do you see a way out of the 401(a)(4) problem?

•        Any other ideas? If so, have you gotten a determination letter on them? 

Lifestyle spending accounts are a trending after-tax benefit consisting of employer after-tax reimbursement of lifestyle products and services such as personal coaching, fitness wear and gear,  pet boarding, personal training, etc. Employers choose a yearly maximum and only pay out documented reimbursement requests, up to the maximum limit.  Employer deducts reimbursed amounts as taxable compensation to employees.  Just wondering if anyone out there has formally classified this "benefit" as either a payroll practice, benefit plan, or addressed potential constructive receipt issues.  

I am a S Corp owner planning to set  up Defined Benefit plan. I do my own taxes. Any recommendations for a plan setup and  administrator ? I found  Charles Schwab to be expensive. Does TD Ameritrade offer full service like Schwab ? Any recommendations on Emparion?