Does a self-insured health plan that charges premiums that produce a surplus, i.e. the total amount collected exceeds the claims paid/incurred, have to rebate any portion back to the employee? I cant seem to find an answer that clearly states that self-insured plans would be required to do so. Any help or advice would be greatly appreciated. Thank you!

[Note: I have found PLR 200007025 [ https://www.irs.gov/pub/irs-wd/0007025.pdf ]  which deals with another issue but notes that the self funded plan discussed has the following structure

"All premium payments (including the portion of the non-partner employee premium paid by Taxpayer) will be deposited into a dedicated account from which administrative expenses and eligible medical expenses under the Plan will be paid on behalf of all Plan participants. If the total premium payments are in excess of the claims and expenses incurred for a plan year, the excess will be used to pay claims and expenses of the Plan incurred in the following plan year and thus reduce premium payments for all participants in that following (or subsequent) plan year."

The PLR ultimately concluded that the plan qualifies as a health insurance arrangement, but this is a PLR and nearly 20 years old.]  

A client has a money purchase plan in which distributions are permitted for the following reasons: normal retirement after 25 years of service, or at age 62 with at least 10 years of service or the later of age 65 and the fifth anniversary of commencing participation in the plan; early retirement at or after age 55 (but before age 62) and completion of at least 10 years of service; deferred retirement after 5 years of service; disability retirement contingent on at least 10 years of service and a Social Security determination of disability. If Social Security denies a benefit award, the trustees shall make a determination of disability in their discretion based on proof of disability through a physician of the employee's choice. The employee has stage 5 kidney cancer. While he could qualify for a trustee discretionary determination of disability, he only recently applied to Social Security and he might not live until after it has made its determination. The only other possiibility is a deferred disability. Could the plan be amended to allow any participant in imminent risk of death to apply for a distribution of his full account balance?

Has anyone had any luck with an owner-only plan VCP submission to retroactively initially adopt a plan?

My apologies if this has previously been covered.

It is my understanding that 10% withholding is the default on ADP refund distributions, as a non-periodic payment.  Most of the recordkeepers we work allow the participant to elect the default, no withholding, or withhold an amount other than 10%.

My question is, is the Plan required to allow the participant to make an election? 

We are working with a new recordkeeper whose process for refund distributions is a spreadsheet that has no option for withholding.  Upon questioning they have responded that 10% applies with no other options for withholding.

Thanks very much.

Is there any creative way to establish an executive deferred compensation plan for a partnership.  I totally understand the flow-through issue but this firm is adamant that there has got to be a way to create such a program for partners that are retiring and getting a return of their capital contributions (all seven figure distributions).  If they are recategorized as income partners instead of equity partners, would that make a difference or would the capital distributions still be treated as K-1 income?  Any thoughts are welcome!!

Hi

A DB plan covers  the retired owner (a corporation) and also his spouse who is part of the plan as an additional employer (sole-proprietor). Their children are over 21, for 1563 purposes.

Retired owner has both DB and rollover assets in the DB plan and wants to transfer the rollover portion into the new PS plan. Eventually they will terminate the DB and will want to rollover all assets into the PS plan, may be this or next year.

According to the vendor for the PS plan document, the document does not allow any new participants who are already terminated/retired thus the retired owner cannot transfer his rollover portion from the DB into the new PS plan because he can never be a participant (nor the eligibility provisions allow/have anything on it). According to the vendor, the only way out is to change some language in the document which may take out the document from pre-approved status.

Has anyone seen this before and was able to find a solution?

Thank you

401(k) plan, sponsor has bi-weekly payroll, every other Friday.  Deferrals are withheld from payroll Friday, the 10th of the month.  The due date, seven business days, would be Tuesday, the 21st.  Plan sponsor writes a check for the deferrals and mails it on Monday, the 20th.  It is received and posted to the brokerage on Thursday, the 23rd. Just looking at the activity in the plan brokerage account it appears the deferrals were late, but the payment was mailed timely.  Does the check date count?  The postmark on the envelope?  

Help appreciated to resolve a discussion here.

Thanks!

We are in the process of terminating a clients' cash balance plan.  The sum of the account balances will be equal to the value of the investments once the 2019 contribution is made. I realize that as a DB plan, we must give each participant a relative value disclosure of their options, ie lump sum, annuity, 10YC, etc. ,etc.

I have never administered a DB and a participant elect any sort of monthly benefit. They have either elected a lump sum to rollover, or a lump sum to be cashed out.  My software vendor's program provides the options and those dollar amounts that must be offered to each participant

The client is asking what does he do if one of the participants does in fact elect a monthly benefit. If the plan is terminating, where do those options come from?  I could understand an on-going plan paying an annuity for the life of one of the participants out of the plan investment account; if the plan is terminating, the monthly payments can not come from the plan.  If the participant takes the lump sum and buys an annuity, depending on interest rates, the lump sum very well will throw off a different monthly annuity amount than what is shown on the relative value disclosure.

Question from one who has not dealt with this issue in the past, how is this to be addressed?

I am often asked, outside of a divorce context, whether or not a Participant in a defined contribution plan needs to notify and/or obtain consent from his spouse before: (i) making a loan; (ii) taking a hardship distribution; (iii) rolling over Plan benefits to an IRA or other qualified Plan account; or, (iv) taking a taxable distribution.    

I know how it works with a Federal TSP Plan, but I cannot find a definitive answer or a reference to any applicable statute as it relates to 401(k), profit sharing, 403(b), ESOP, or other form of defined contribution plan, or with respect to an IRA. .  

Much of what I see says that it depends on the Plan documents.   

Any ideas?  

David

I have a situation where the prior year profit sharing calculation missed giving a contribution to an eligible employee that should have entered the Plan.  The normal correction method is to do a make-up contribution for the prior year plus earnings.  Total contribution due is approx $1k.  However, I have an extra issue with this Plan.  It is a partnership subject to the self-employment calculation.  To be technically correct, 2018 should be redone adjusting the contributions/plan compensation of the partners in 2018.  That would cause many more problems, i.e. amendment of the partnership return, the individual returns of the partners.  Would it be more practical to factor it into the 2019 partnership calc along with the staff ER contributions for 2019?

I have a C corporation which is a hospital and employs hospital staff (PAs, non-owner doctors, etc.). I then have a separate partnership which was setup as a billing entity and bills the hospital for services (1099 income); they try and zero out the c corporations income each year by having the partnership (billing entity) bill the C corporation.  The owners of the billing partnership are 22 S corporations (4.55% each) which are owned by 22 individual doctors who provide services to the c corporation hospital. The owners of the C corporation hospital should Theoretically be the 22 owners of the s corporations but they have told me they haven’t been the best at keeping its ownership up to date (I probably need to ask them who the actual owners are) when new partners are admitted to/removed from the partnership. The 22 S corporations and the C corporation are the only entities with employees and are the only entities covered by the plan; the billing partnership isn’t covered by the plan. Here are my questions:

1. Are the S corporations and the billing partnership b-organizations to the C corporation? This would make them an affiliated service group with no A organization, right? 

2. What ownership percentage do I use for determining if the 22 owner doctors are HCEs? 4.55% or 100%? I assume 100% because each of the 22 owner doctors own 100% of their own S corporation and each S corporation participated in the plan. 
 

I am starting a new thread because I think it it warranted and better suited in the 401(k) message board. 

Please see my prior question and the replies from @Larry Starr and @Bill Presson

I'd like to clarify upfront that I am NOT asking about the start-up cost credit. I think I have a pretty good handle on that one. I am asking about the NEW! automatic enrollment credit provided by SECURE. Please don't conflate the two. 

Question: Section 45T that adds the new EACA credit. Can a one-person plan (HCE only) claim this credit? Assuming of course they are amending their plan to add an EACA? 

I don't think the plan start-up costs definition in 45E is relevant because this isn't a plan start up cost. 

Does anyone think the sponsor of a 1 person HCE plan CAN'T claim the credit? If so, why? 

Participants husband and wife in same plan.  Reciprocal beneficiary designations-His to her and hers to him.  Wife has died.  Husband is, as stated, the  beneficiary and has requested an immediate lump sum. Husband want to Roll over the distribution to his rollover account in the distributing plan. Can this be accomplished by an intra plan transfer?  1099 to be issued with G code.   What am I missing?  See the attached "Rollover Chart" from IRS, as annotated with highlight.  Thanks for your thoughts.

rollover_chart.pdf

Hello!  Long-time reader, first-time poster....

I have a prospective client that I won through an RFP, therefore, I didn't know a ton about the plan until we "won" the business.  I don't work with any 403b plans, but I wanted to share the scenario with you for any insights:

This is a 403B plan for a college.  The college states that they are ERISA exempt and the plan document reflects that as well, however, they are allowing an employer match and their plan document also designates the employer to have responsibilities that should be prohibited in a non-ERISA plan (QDRO processing, etc). They have NEVER performed testing, had a plan audit (150 pcps), or filed a 5500.

1. There isn't some legitimate reason how they could possibly be operating the plan this way, is there???  I'm not finding anything.

2. To correct this, would they have to retroactively test and file 5500's dating back to 2009?

Obviously my suggestion would be for them to hire an ERISA attorney, but I wanted to kick the tires with the experts here first in case I was missing something glaringly obvious.

Good evening. 

I have a simple IRA setup, but Looking back I am stuck on some of the fine print and want to make sure I am doing it right.  Probably over thinking this. My eligibility requirements for example are as follows. For our plan year 2020, you have to be expected to make at least 5 K in 2020, and also have made in 2 preceding years (2018 & 2019). 

What I am stuck on is the second part of the following statement. 

"For a calendar year, an eligible employee may make or modify a salary reduction election during the 60-day period immediately preceding January 1 of that year" - Ok with this

"However, for the year in which the employee becomes eligible to make salary reduction contributions, the period during which the employee may make or modify the election is a 60-day period that includes either the date the employee becomes eligible or the day before"  What is this saying?  My understand that eligibility is based on calendar year, so lets say, an employee  earned 5K in 2018, and 2019, and are expected to in 2020, I would have given them the notification paperwork prior to the 60 day notification period ending Dec 31st. 

Let me begin by giving a bit of background:

My understanding is that 401(k) withholding  - also called the employee deferral - max of $19,500 in 2020, must be withheld from a paycheck. That is the gross wages must be high enough so that when the withholding is taken out, there is enough left for a net check that is $0.00 or higher than zero.  For example, I have a doctor group of S Corps who have a partnership. The S Corp /Doctors have salary schedules. They front load their 401(k) withholding in January/February of each year because they can - their cash flow is high enough to allow this.  In order to do it, we have to increase the gross wages to accommodate the withholding of the 401(k) deferral. My understanding is that the law requires the gross wages to be included in this situation so they can collect social security & medicare on those wages. I have had 2 pension “experts” tell me this over the last 10 years.

Recently, the law firm’s pension administrator (internal admin person, not a lawyer) said that the law firm’s policy is to treat all partners the same with respect to 401(k) withholding, and that is to withhold it from their “compensation” - in this case, since the entity is a partnership, the compensation is in the form of guaranteed payments as required by IRS rules.  Partners cannot receive W-2s from the partnership if they are more than 2% owners. They must receive guaranteed payments (GP). GP are subject to “self-employment taxes” if the partner is an individual. But when the partner is an S Corp, there is no self-employment tax at the S Corp level. The S Corp must pay a reasonable salary to the shareholder, but if the shareholder does not take any money out of the S Corp that year, the IRS would not receive any social security or medicare taxes on that “compensation.” It is my understanding that this is therefore NOT an allowable approach when the partner is an S Corp - withholding from GP to take the 401(k) employee deferral of $19,500.00.

 My question is the following:

Were both of the “experts” incorrect, and in fact, the law firm is allowed to handle this the way I stated above, when the partner is an S Corp - withholding 401(k) employee deferrals from GP? Or are they correct and what should happen if the S Corp should have a salary schedule that includes gross ups sufficient to allow for the 401(k) withholding to be paid that way?

Background:  DB plan is terminating, I've just begun the PBGC application.  Traditional DB plan was frozen 30+ years ago.  Two participants, vested terminees, remain as they'd been awaiting age 65.  Plan never had a lump sum option, only annuities.  As part of the decision to terminate, the company that now administers the plan (bought the prior company, which is no longer in business) decides they should just offer a lump sum option, so it's been written into their final PPA restatement as of 1/1/2020.  The lump sum option also helps so the plan doesn't end up with maybe 5,000 in residual assets, too.

Now, one of the two participants immediately returned his form for a lump sum.  (Although he hadn't asked for early retirement benefits, he's past the plan's ERA of 55 and so he's eligible to be paid now, independent of the PBGC review.)  Anyway.  he scanned over a QDRO for an unrelated plan.  But that had me thinking, and I reviewed the prior TPA's distribution files which we have.  I found a QDRO from 2006 signed by a judge.

Or, at least it was meant to be a QDRO.

I'm concerned when I read it, because the order assigns 50% of the participant's account balance as of some date in late 2005, with all the earnings thereon, to his ex-wife.  Seems normal enough except that the plan did not offer a lump sum option at all, and so technically there's no account balance to speak of.

Now that there is a lump sum option, there's at least some substance to the request to assign 50% of the lump sum value to the Alternate Payee.

What's the actual legal rule for something like this - The order indicated a form not authorized by the plan.  At the time.  But now the plan does authorize such a payment.

I am suspecting that a revised Order will be needed, if for no other reason that there never really has been an "account balance" to divide and assign.  But I also want to learn the legal standing of something like that, where it's as if a would-be QDRO suddenly flips to being legitimate after the fact, so to speak. 

(In other words, the "account balance" terminology notwithstanding, would an order like this be acceptable, now that the plan was amended in such a way that the original order now is properly compliant with the terms of the plan as they now are.  Something like, well, it wasn't Qualified when it was written, but it is now.)

thanks.

--Bri

Husband and wife work for the same company.  Husband holds private stock in the 401(k)retirement plan.  Husband passes away.  Since the stock is held in the plan fbo husband will a 1099-R code "G" be needed?  None of the assets actually leave the plan they will be transferred to the spouses participant account.

I was watching the ERISApedia webinar on the SECURE Act questions - and Ilene mentioned that in order to sponsor a SIMPLE IRA, an employer must cover / have a NHCE. 

Does anyone have a cite for this? 

I have never heard that particular rule, but I don't work with SIMPLE IRAs, so I'm sure there is lots I don't know. 

I thought a sole proprietor with no employees could sponsor a SIMPLE IRA, but maybe I'm mistaken.