An employer is Top Heavy in it's initial plan year. If the plan makes a discretionary match to NHCEs, is this employer contribution included in the Top heavy ratio for the first year? 

Or does it have to specifically be a non-elective contribution as specified in the plan document?

Any feedback would be greatly appreciated. Thank you. 

Participant  divorced in 2011. DRO wasn’t qualified, but a hold was placed on retirement account.   
Participant remarries is 2014 (updating his beneficiary to current spouse ) , and becomes disabled as of Jan 2017, and opted to receive reduced  disability retirement. Commencing December 2018.   Participant elected optional spouse pension, and began receiving 50% of benefits.  
Erisa law allowed for plan to withhold for 18 months while waiting for a QDRO.   (Beginning Jan 1, 2017).   The plan continues to withhold 50%.   (December 2019 ).   
Having already commenced, and finding AP and her Attorney negligent in completely a qdro (as written in DRO) husband hires QDRO attorney to complete QDRO   It’s now being written as “Shared” QDRO.  
In our state disability retirement is not a marital assets so her shared payment will begin after participant turns 65.    
If participant dies before 65, survivor benefits are to go to current spouse.  ( as there was no QDRO at commencement )    If participant dies after 65 ...is it legal for AP to share the spouse pension with the current spouse?    And continue to receive her percentage of the “spouse benefit”  for her lifetime or until the current spouse passes ?  

A Plan Sponsor's Payroll Company processed a participant's deferral change in July 2018. For some unknown reason they stopped the deferral as of July 2019. There reason is it was an "anniversary election" - wait....what!!!

So now it is December 2019; and the participant has not had deferrals withheld from pay since July 2019. I have instructed the Plan Sponsor about the correction method to use. However, if the participant can still defer the maximum for 2019 from the final 2019 bonus paycheck, is the QNEC still necessary?

I don't know about anyone else, but I never knew about this form until I read Ilene's SECURE Act review:

Last but not least, a little-known provision of the Code requires plan administrators to file Form 8822-B to register a change in plan name or plan administrator name/address.  The penalty for nonfiling of that form will increase from $1 per day to $10, up to a maximum that is going up from $1,000 to $10,000.

Hi, A DB plan offers benefit option of Joint and Survivor combined with a years certain annuity. The J&S can use non spouse as the survivor (and of course there is a maximum % allowed based on the age difference between participant and the non spouse survivor). The plan offers cost of living (COLA) increases as well (up to 4.99%)----the  benefit at RMD age/ret. is reduced  due to the future increases of 4.99% per year. Is this COLA allowed to be used in a case where you are using a non spouse for the J&S? Thank you

SECURE permits retroactive adoption of qualified plans during tax return filing period beginning with 2020 tax years.

Obviously can't include retroactive 401k deferrals for corporate employees receiving W-2s.

But given the long running debate over the "deadline" for self-employed proprietors and partners to make 401k deferrals has anyone considered whether the new provision will allow self-employed to make retroactive 401k deferrals?

For example, some practitioners take the position that 401k deferrals can't be elected or deposited until the amount of self employment income has been determined which can be as late as the extended due date for the tax filing.

So could a "solo K" be adopted by a proprietor on 10/15/2021 to create a 2020 tax deduction? 

I saw this today in a SECURE Act review by Ballard Spahr LLP:

b. Nonelective 401(k) Safe Harbor Changes for Traditional and QACA Safe Harbors – The SECURE Act eliminates the notice requirement for safe harbor plans that make non-elective contributions to employees.

I can't put my finger on this in the text of the Secure Act text.  Can someone confirm this?

In the event an employer wants to merge a prior plan that contained life insurance policies in the accounts of its participants into a successor plan that does not permit life insurance, what options does the client have in regards to those life policies?

Husband and wife one participant plan has made nondeductible contributions in several years.  They still have over $100,000 of nondeductible contributions being carried forward to 2019.  They want to retire in 2019.  What happens to the nondeductible contributions that can no longer be carried forward, and what is the plan sponsor's excise tax obligation?  Thanks!

Would appreciate any opinions on a new employer using a plan effective date prior to the start date of the company.  I know the EOB says it may be possible but recommends requesting a determination letter which is not likely possible for a pre-approved plan.

Say the employer (in this case a one-man company) start date is November 1, 2019, and the employer wants to start a calendar plan for 2019.  If we make the plan effective for November 1, 2019, but define the limitation year as the calendar year, are we still good with not having to prorate limits?

Thanks.

All: 

I have a plan with 401(k) deferrals and profit sharing.  The plan is top heavy.  The elig for the 401(k) is age 21, 1 month of service entering monthly.  The profit sharing is age 21, 1 YOS, entering quarterly.  It is a new comp plan with each person in their own group. 

I have an employee with a DOB in 1993 and a DOH of 9/29/2017 who was hired as an intern.  On 10/24/2019, she was reclassified as a "regular employee".  She did not complete the YOS (1000 hours) in 9/27/2017 -- 9/26/2018 or 1/1/2018 -- 12/31/2018.  She will complete the YOS for 1/1/2019 -- 12/31/2019. 

Based on her data, she will become a participant in the 401(k) portion on the date that she becomes a regular employee (10/24/2019) and she can begin to defer immediately.  Since she did not meet the YOS previously, she will not become a participant in the profit sharing portion of the plan until 1/1/2020. 

So for 2019, she is eligible for the 401(k) portion of the plan.  She is actively employed on the last day of the plan year so she is entitled to the TH minimum allocation. 

The issue is that based on her indicative data and the fact that the 401(k) portion uses an elapsed time methodology for eligibility, I believe that she would be a statutory employee.  (She has met age 21 and she has met a YOS, on an elapsed time basis, on 9/26/2018.  Based on the statutory entry dates, she would be a statutory employee as of 1/1/2019.)  Do you agree?  If not, why? 

Under the assumption that she is a statutory employee, she is now required to receive the minimum gateway contribution.  If this is correct and she does receive it, she will have a high EBAR and cause the testing to go from failing to passing.  Does anyone see any issue with this? 

One more thought on this is, if the allocation changes and the testing then fails, I cannot provide her with an additional contribution that would cause her to get something above the gateway as she is not entitled to it.  Agree? 

Finally, the plan calls for compensation while a participant in the plan, so I ask what should her comp be for minimum gateway purposes?  Since she is received the TH min, should it be her 415 compensation?  If not, what should it be since she has no compensation defined for the profit sharing portion of the plan since she is not eligible. 

My apologies if this is rambling.  Please let me know if anyone has any questions.  Thanks in advance. 

The provisions of the Secure Act that were incorporated in the legislation signed last week changed the new plan credit for employers from $500 to a maximum of $5,000 ($250 x number of eligible employees). 

Would the credit also apply for an employer who currently has no plan but becomes an adopting employer of a 413(c) Multiple Employer Plan?

Thanks!

Client (74) is a sole proprietor in a business that does music publishing and talent management. He is the only current employee and participant of his DB plan. Through good stock investments, he over funded his DB plan. Prior actuary sold business and didn't alert him to the over funding issue. New actuary informed that due to the over funding he cannot make a tax-deductible contribution this year. Plan is now valued at $4.4mm. Client is still earning approximately $400k a year in royalties and management fees. I am trying to formulate a plan for the client and would appreciate your help/guidance as this is a case of first impression for me. Here is what I have come up with thus far.

• Immediately make Required Minimum Distribution for 2019
• Increase plan benefits to the maximum allowable amounts under Section 415 of the Internal Revenue Code ("IRC”). What are some ways this can be done?
• Freeze DB plan growth by selling stocks within the plan and investing in short and medium duration Commercial Paper. 
• Immediately transfer via a direct rollover the maximum lump sum amount allowable (how much is this?) to an IRA
• consider employing wife and/or daughters since, as participants, they will accrue plan benefits under the plan, reducing the overfunding. Follow all compliance rules and be aware of traps for the unwary, such as ?  Wife already does some work for the business. She just doesn't get compensated, yet.
• Other ideas?

Thank you all

Can I amend a SH plan now to change PS method from pro-rata to new comp for 1/1/20?

Suppose you have a 100% shareholder of a corporation with 20 employees. The business sold as an asset sale. In other words the buyer did not purchase the corporation but instead paid $ xxxxxxxx for the business.

The seller, who will maintain the corporation wishes to establish a defined benefit plan that would only cover him.

I seem to remember reading something about how this type of thing may require covering former employees.

I could see how this may be considered an affiliated service group if the buyer were purchasing stock of the corporation over time, but would that be the case with an asset sale?

I know this is a legal question. Just wondering if anyone ran into the article I read about this a number of years ago that I cannot seem to find?

In 2017 and in 2018 16 employees were allowed to join the plan  and defer before meeting the eligibility requirement ( 7 in 2017 and 9 in 2018).  The  client  was told the document provider would  draft an amendment to bring these 16 into the plan. An amendment will be done for each plan year  listing  the employees by name for the respective year.  Vendor said this  will correct the problem.

Here is my question - isn't this one time amendment a "corrective amendment" and therefore had to be adopted by 10/15/2018 (for the 2017 plan year) and 10/15/2019 (for the 2018) Plan Year?

Can the plan just adopt the amendment now to correct the eligibility errors for the past two plan years. What am I missing???

Thanks 

I have a DB plan ( not Cash Balance) that was terminated this year and has a funding deficiency. Since this would be the final SB filed for the plan, I am unclear how to show the correction of the deficiency on the SB since instructions say to report only contributions made with 8 1/2 post yr end.  The minimum contribution was due 9-15-19 but wasn't funded until 11-15-19. The contribution made was adjusted for interest using the effective interest rate for 2019 and the deficiency corrected. We are wondering whether to un-terminate for 2019 so a clean and final SB could be filed for 2020. Client is concerned about the audit risk.

Someone in my office got a call about maximum deductions for a 401(k) Plan.   It's 2 participants, husband and wife, both doctors.   They only receive 1099 income.    I'm not sure they can have a 401(k) plan with only 1099 income to begin with.      What type of plan could they have, if any.    What limits would it be subject to?     Could they have a DB plan with 1099 income?    

thanks for any help or point me in the right direction.      

My employer has a 401K that does not have a "true up" clause.  This was a huge surprise to me and I discovered this when they were withholding too much money for my 401K and I hit the federal limit 3 months before the end of the year.  I thus was informed that I was no longer eligible for the employer match because I wasn't contributing to the 401K anymore since I'd maxed out the federal limit.  

Because the larger-than-expected withholding was due to a mistake made by the accounting department, I asked if they could just use the option in the 401K to make a discretionary deposit to provide the missed matching in the form of a bonus, but I was told it was somehow "illegal" to do that without any explanation.  My plan provider says they are within their legal options to provide me, and only me, a bonus to cover the difference and they have many avenues in which to justify it. 

The plan is a safe harbor plan and I am a HCE.  I'm getting conflicting information from everything I've read and my plan provider.  What are my options here?  It appears my company is dragging their feet to run out the clock so they can claim there is nothing they can do about the problem.  My understanding is even as an HCE under a safe harbor plan, they could give me a bonus so long as the total did not exceed 4% of my income.  Am I correct here?

Any thoughts on this?  I'm not an accountant nor am I a benefits specialist and I would love some help understanding all of this.