For single employer plans, we currently have a "standard" approach to determine the expected return on assets for asset smoothing and actual ROA used for rolling FSCB/PFB forward. This approach involves an assumption that annuity cashflows generally happen at the middle of year, and expenses are paid at the end of the year. We have a couple of plans that we received as part of an acquisition several years ago that reflect actual cashflow timing to the day. We would like to move them to our "standard" approach to be able to take advantage of processes and tools we have built. Any change would be very minor. Looking for opinions or guidance on whether adjusting the assumed cashflow timing in these calculations amount to a change in funding method. I haven't been able to find anything in Gray Books, regs, revenue notices, etc. that gets to this level of minutia which makes me think we should be fine to make the change without having to file with the IRS for approval.

401k PS plan with a pooled profit sharing account.  The plan terminated and all distributions were made during 2019.  Form 1099-R was issued for all distributions including the 2 participants who did not cash their distribution checks from the pooled account.  We are unable to contact these 2 participants after many attempts over the last year.  Their balances were $139 and $87 and Form 1099-R was issued indicating a cash distribution.  Since the plan is terminated, would you forfeit the accounts, escheat to the state, auto rollover?  Does anyone have a procedure that they follow regarding situations like this?

Hello, This just came across my screen. My employer would like to give an employee a travel allowance in lieu of them needing to submit mileage reimbursement forms monthly. I know this is taxable, but would it be considered supplemental wages? If so, it will be separated from their normal wages, so would this be best to do at the Supplemental rate? Would this need to be coded for the W-2's? 

Thank you, John

Client is in the process of terminating his CB.

As far as election forms, I assume the options must be enumerated in similar detail to a straight DB, ie can't just give the lump sum option and spousal waiver (as in a DC).

We know that the 3% Safe Harbor Annual Notice has been eliminated with the SECURE Act. However we received information from VOYA (attached - page 3) that says it is still required to give participants a notice if they are a new hire. I haven't read this anywhere else in regards to the SECURE Act. I would assume that only the SPD would need to be distributed?

0310_001.pdf

This really is a question for Relius, but perhaps some of you have dealt with it already. 

Suppose you have a midpoint EBAR (for HCE's) of 8.740. So any EBAR's within 5% above or below this midpoint are considered to have an EBAR of 8.740. This gives you a range of 9.177 to 8.303.

In the Relius testing, it uses the LOW of 8.303 for the EBAR in the testing. So a HCE with an unbanded EBAR of 9.1, for example, is in the testing at 8.303. Is this correct? I thought that the testing would have to use use the midpoint of 8.740.

We have a SHNE 401(k) plan, 2 shareholders, 10 employees.  The clients is on extension every year and they contribute in September for the previous year.

The accounts are investment only with a major carrier.  The carrier has returned the elective deferrals of the shareholders telling them they have over-contributed for the year.

It has been my understanding that, as long as there is an election by the participant prior to the end of year, he has the ability to make the deferral contribution for the previous year.  Of course, this could be incorrect.

Does anyone have a cite??

I agree that if the health insurance benefit for a >2% S-corp shareholder is included in W-2 Box 1, it is included in plan compensation (we use W-2 definition) and 415 comp.  But I've got an accountant (several, actually) who doesn't get that information to be added in - he claims that his way, it ends up deductible to the employee, not the S-corp, so he doesn't bother adding it to the W-2.  Plus, it means he doesn't have to chase it down while preparing W-2s.  I'm not an accountant, so I don't know how OK that is, but what I do know is that there are some participants whose "compensation" is significantly affected by this, and are now receiving a few thousand less in profit sharing.

Is there a leg for us to stand on as TPA to add that amount in, even though it's not on the W-2?  Or do we just tell the plan sponsors to get more diligent CPAs?  Thanks.

A governmental hospital claims dual status in sponsoring a 403(b) plan.  They now wish to offer a tax exempt 457(b) top hat plan.  I am not sure they can.  Treasury Regulation Section 1.457-1(m) states "Tax-exempt entity.  Tax-exempt entity includes any organization exempt from tax under subtitle A of the Internal Revenue Code, except that a governmental unit (including an international governmental organization) is not a tax-exempt entity."  Although the hospital's administration of a 403(b) plan is due to their dual status , I believe the aforementioned regulation prevents them from offering a tax-exempt 457(b) top hat plan.

What do you think?

I am not sure how 401(k) plans works, so hoping for any guidance. Apologies if question is basic.

Several companies are in the same brother sister controlled group. None has ever had a 401(k) plan. One of the companies wants to set up a 401(k) plan that would cover just its employees. Can that company do that or must the plan allow participation by employees of other brother-sister companies?  

Also, assuming that the company can set up a 401(k) plan to cover just its employees, would discrimination testing be done on just that company's employees or must it include employees from all the other brother-sister companies? 

Thanks. 

Monday brain cramp. Suppose you have a DC plan utilizing cross testing. The rate groups either pass the ratio test, or the plan passes the ABT test. Fast forward a year, and it is discovered that census data was incorrect, and a participant or participants were improperly excluded. So the employer has to do make-up contributions, matches, whatever.

Do you have to go back and re-run the nondiscrimination testing taking into account the corrections? I don't think you do, but I'm not putting my finger on the guidance to back that up.

Thanks.

I've read through many overviews of the SECURE Act.  One item that isn't clear to me is whether an active non-owner employee can delay their RMDS beyond age 72, as they could under the old 70 1/2 rules. 

Thanks!

Two questions,   I have a final form 5500-SF to file for 2019.   The issue is there was an additional $5.29 in residual earnings that posted to the account after all the participants were paid out and the money was returned to the company in January 2020.    Can I accrue for this on the 2019 5500-SF and mark it final, or will I need to prepare a 2020 5500-SF and that will be the final one.   

Next question,  

Large plan terminated as of 9/30/2018.    Large plan audit was done for 2018, participants were paid out in 2019.     Does the plan require another audit for 2019, no contributions, just distributions,  if not, do I file a Schedule H again for 2019 but with out the audit attached?    I've never come across this issue before. 

Thanks for your help

Plan was signed 6/1, with effective date 1/1, but 401(k) effective 7/1. Since plan started mid-year, actual 401(k) and safe harbor match are based on compensation from 7/1.

Plan defines compensation for all purposes to be full year compensation.

This leads to two initial questions:

1. If 401(k) wasn't even available for the earlier period, is it possible to use full year compensation?
2. this would apply equally along the way to new participants who enter mid-year

Nice thing for those receiving contributions is they would be receiving greater contributions with full year compensation.

Thank you

Very new here and need clarification: for a plan to fully qualify under 125 must an employer offer an alternative to taking the employer sponsored health plan(s)? Example: Employer requires all F/T employees (no exceptions for F/T employees) to participate in sponsored health care plan(s) (employer/employee share plan cost). I'm confused on whether there has to be an alternate choice for the employee (there are different plan choices - Kaiser/Blue Shield/Etc.) such as pay into health plan OR cash-in-lieu/some other taxable benefit? Thank you for any help! 

My privately held company was acquired by an ESOP company almost two years ago.  I have been told I must go through the 6 years of vesting however I have now noticed that two other acquisitions that were also private companies their employees are fully vested at the time of acquisition.  ESOPS being federally regulated it appears my company's employees (only two) should be fully vested as well?  I cannot find any topics like this.  Thanks

A 403(b) plan with universal availability for elective deferrals. The plan uses the excludable classification of employees who work less than 20 hrs/wk.

Does the excludable class of employees get counted in a 410(b) coverage test for elective deferrals?

A group health plan provides for all of the categories of benefits under essential health benefits. An employee covered under such plan was hospitalized for two days in connection with surgery. He had made a $1,000 copay payment at the time he was admitted to the hospital. The participant also obtained pre-authorization for the hospitalization, as required by the plan. After he was discharged, he found that he was subject to a bill of just under $50,000 for his hospitalization. The plan provides for a $1,800 per day limit on reimbursement of hospital expenses. His plan paid $3,600 ($1, 800 per day) for the two days of his admission and after applying his copayment. Since hospitalization is one of the essential health benefit categories, I am concerned that this is in violation of the ACA prohibition on annual limits. Hospitalization, per the SPD, includes the following: semi-private room and board, use of operating and recovery rooms and equipment; use of intensive care and equipment, laboratory or pathological exams, x-ray exams, drugs and medicines provided by the hospital; blood transfusions and use of transfusion equipment; use of cardiographic equipment and supplies, basal metabolic exams, anesthesia supplies and equipment, oxygen and its administrationi, use of physiotherapeutic equipment and supplies and any additional  medically necessary services and supplies customarily provided by the hospital. I am concerned that the $1,800 per day limit violates the prohibition on annual limits.  Does anyone agree?

Imagine an employment-based § 401(k) plan allows—without waiting for age 59½, severance from employment, hardship, or some other distribution-permitting event—a qualified birth or adoption distribution (up to $5,000) within what Internal Revenue Code § 72(t)(2), as added by SECURE § 113, permits.

The statute defines such a distribution as one “made during the 1-year period beginning on the date on which a child of the individual is born or on which the legal adoption by the individual of an eligible adoptee is finalized.”  The statute does not require (and assume the plan does not require) showing an expense attributable to the birth or adoption.  The only fact needed to support a participant’s claim is the fact of the birth of the participant’s child, or the participant’s adoption of an eligible adoptee.

Assume the plan’s administrator adopts a new claim form, which has check-off boxes for a birth or an adoption, and for an adoption includes the participant’s statement that the adoptee is younger than 18 (or is physically or mentally incapable of self-support) and is not the participant’s spouse’s child.  Assume the form includes a strong statement about how a false statement can result in fines, imprisonment, liability for the plan’s expenses, and other legal consequences.

If you’re advising the plan’s administrator:

Is it enough that a participant states the necessary facts on the plan’s claim form, and signs it?

Or do you require a claimant to submit a copy of the birth certificate?

(Even if that aberration would frustrate normal processing for a plan that has electronic claims for all kinds of distributions?)

Do you require a claimant to attach a copy of the court order or other document that grants the adoption?

If a participant’s claim attaches instead a notarized affidavit stating a common-law adoption, would you advise the plan’s administrator to approve or deny the claim?

Hi all.  We had a client with a db plan recently ask if they can stop offering new retirees the option to receive pension payments via paper check.  Client was also curious as to whether they can convert participants currently in pay status who receive checks to direct deposit.  I haven't looked into this yet, but I feel like there's no way either option is permissible.  

If anyone has considered this issue before, I'd love to hear from you!  Thanks.