An interesting question came up yesterday in a discussion with some other folks who are in the TPA arena.

Suppose you have a TPA whose engagement letter specifies that Revenue Sharing paid to the TPA by the investment firm will offset TPA billings to the Plan Sponsor. At some point, due to asset growth, the Revenue Sharing paid to the TPA starts to exceed the amounts charged, so is basically placed in a holding account with the TPA. The Plan Sponsor is fully informed of this, and as a fiduciary is still happy with this investment arrangement. The amounts accumulating in the holding account start to become substantial, and the TPA is uncomfortable with this, and wants to change things to (a) get rid of the accumulated amount, and (b) prevent it from accumulating in the future.

The gist of the discussion was that the TPA should issue a new engagement letter, so that the TPA would keep all future Revenue sharing fees, even if in excess of what would normally be charged. And the holding account will be used to offset fees charged in the future until it is depleted entirely, which will take, apparently, about 4 years. Plan Sponsor is apparently fine with this.

A couple of questions were kicked around, however, which were interesting, and I'm soliciting opinions.

1. Is there really any reason why a new engagement letter couldn't simply say that the TPA will keep the accumulated revenue sharing immediately, as long as the Plan Fiduciary doesn't have a problem with it? In other words, does it have to be allocated over the next (x) number of years until depleted?

2. What happens if the client leaves? Wouldn't this money go to the TPA anyway, as it certainly isn't a Plan asset, or anything "belonging" to the Plan Sponsor?

Seems to me that the solution proposed, while certainly reasonable, is more cumbersome than necessary? Anyone ever encountered a similar situation?

I cut and pasted the new Required Minimum Distribution Life Expectancies from the Proposed Regulations into two Excel tables:  Single Life and Joint Life. 

Seems my Excel skills are better than my html today, so the file is embedded in my website: http://www.peregrinepensions.com

At the very bottom of the page, find and click the period (.) right after my email address.  It should ask if you want to download the file.  Go ahead.  It's safe.

I have a plan that has auto enroll.  They are going to add auto escalate at 1% per year up to 6%.  My understanding is that a participant can elect/agree with the auto escalate but elect a cap/maximum of less than the 6% maximum.  Example, Nancy New is auto enrolled at the 2% but completes the enrollment form indicating she wishes the auto increase to stop at 4%.  Is this possible?  We have a bit of an internal debate within the office on this.

Thanks!

I have a 401k Profit Sharing plan with more generous eligibility than the statutory requirement.  The plan is top-heavy.

I would like to start a new 401k plan with immediate eligibility and exclude Keys.  I would transfer the Deferral Component of the existing plan to that plan.  The new plan will not be top heavy.

With the existing plan, I want to amend out salary deferrals and have it be a stand alone profit sharing plan with two year eligibility.  Keys will be eligible to participate in this plan.  I'll have a cash balance plan paired with this that has keys in it as well.

Any issues?  Successor plan rules?

A financial company that shall remained unnamed has recently notified it's plan sponsors that it is changing how it handles uncashed distribution checks. Any checks uncashed after 365 days will have the money moved to an IRA. 

When we asked for clarification the response was that nothing from the tax reporting on the original distribution would be changed. Depending on the type of original distribution, the deposit into the IRA would either be considered a contribution, or a rollover. It would be up to the participant to make sure it was reflected correctly on their tax return, including amending prior returns if necessary. 

I can think of a whole host of ideas why this is a bad idea, and was wondering what other people think. 

The financial company is not making any distinction between under $5,000 force out distributions, affirmatively elected distributions, rollovers, cash outs to participants, Roth money, non Roth money etc. What if the amount exceeds the person's IRA contribution limit? 

I have not seen other companies handle uncashed checks this particular way before. But maybe there are others who do it the same way? 

Am I in the minority in thinking there are several other similar - but much better - ways to handle this? 

401(k) Plan  I don't do this enough and am second guessing myself

A. excludes Safe Harbor Exclusions,  fringe benefits, expenses, deferred compensation and welfare benefits.

B.  Also excludes bonuses.

C.  Employees covered under 125 plan and get paid cash if they don't select benefits. 

1.  For the compensation test to I take Item A. from gross compensation for the denominator or just use total gross? 

2.  For the numerator do I use the denominator -B?

3.  Also if It doesn't pass and the match is just 15% of the deferral, I assume that the only consequence is using a 415 compensation for testing purposes. 

is there a rule for matching contribution adjustments at the end of the year?  Meaning if a client is off by 2 cents so they still have to deposit this amount? Thank you.

1.  Does a client have to set up a retirement plan (with 5500 filing) when starting Prevailing Wage Job?

2.  Is there anyway around this?

3.  Can a Simple 401k Plan have Prevailing Wage?  I dont think so but trying to think out of the box instead of setting up a plan with Prevailing Wage requiring 5500.

They are trying to avoid admin cost of a Prevailing Wage Plan.

Thank you.

A summary plan description's ERISA-rights notice states: “ In such a case, the court may require the Plan administrator to provide the [documents requested] and pay you up to $110 a day until . . . .’’

Has the amount referred to been adjusted?

If so, is it $112 or some other amount?

Client has a deferred compensation plan with employee elective deferrals and employer nonelective contributions that they are looking to terminate for various reasons, but they also want to adopt a new long-term incentive plan that would be aggregated with the employer nonelective contributions under the plan aggregation rules in 1.409A-1(c)(2).  Can they terminate and liquidate the employee elective deferral portion without terminating and liquidating the employer nonelective contribution portion? 

If these were two separate plans they could clearly terminate just the one, I'm just not sure that would work since they are in one plan document.  Thoughts??

New client has outstanding loans with missed payments. Some loans have not been paid on at all going back a year.

I was going to give the following options to the client for correcting. Please let me know if there are any issues with these:

1. Catch up loans for all missed payments including interest and start loan payments on next payroll.

2. Re-amortize loans, with new start date but same end date as original loan so it is still paid off within 5 years of the loan origin. If this is allowed, the interest rate of the original plan was higher than the current so I would re-amortize using the current (lower) interest rate.

3. Have participants take out a second loan for the missed payments, and contribute the money back to the plan and start both loans on next payroll. (assuming the plan allows for 2 loans and the second loan does not exceed the limit based on their balance or $50k)

4. Have 59.5 employees take in-service distribution (trued up for taxes) for missed loan payments, and contribute the money back to the plan.

Note: none of these loans are for HCEs.

Just a quick question about a plan that is slightly overfunded, by about $200,000.  Owner only sole prop.

Could the sponsor leave the plan active, roll their current 415 limit benefit from the plan and the leave the excess assets in the plan.  Then invest the remaining $200,000 in a money market account so not to gain interest.  In 3 years when their new 415 limit is $200,000 more, take the excess?

I know there's a lot more to it, but trying to keep it as simple as possible.

A plan fails the ADP test for 2018 and refunds are made by March 15, 2019.  It is later discovered that there was an error in the test and additional refunds need to be processed.  Is the excise tax due on the full refunds or only those made after March 15?

Hypothetical: Non-5% owner is age 75 and rolls 100% of balance to IRA in May 2019.  Terminates employment in August 2019.  It seems there may be an RMD requirement.   But if he had not terminated employment there would be none.

Another example: Non-5% owner 70 years old retires in April 2019.  He will turn 70 1/2 in November 2019.  He requests 100% rollover in July.  I don't believe there is any question - he must take RMD and rollover the balance in July even thoguh not yet 70 1/2.  

Tax-qualified defined benefit plan offers early retirement distributions (age 55-64).  NRA is age 65.  Plan provides that if participant terminates and commences early retirement distribution, if upon reemployment before age 65, participant desires to continue receiving distributions, participant must waive (in writing) opportunity to earn future accruals on service earned between reemployment and eventual final retirement, in which case his initial distributions continue unchanged with no additional accruals or further adjustment to his payments.  Is this participant waiver of additional benefit accrual in exchange for continuance of pension distributions (during reemployment) permissible?  If the person does not waive the additional accruals, his pension benefit is "suspended" during the reemployment period and then resumes at eventual retirement, adjusted to reflect additional accruals earned during reemployment along with any required actuarial adjustments.

Many thanks.

I have been divorced for 6 years.  As part of our divorce settlement which was filed with the courts as part of our divorce paperwork, my ex is entitled to more than $100,000 from my teaching pension.  In Pennsylvania, it is a state funded pension and can be taken out as lump sum (which I would have to do) or as a monthly benefit. 

Our mediator had a QDRO drafted by an independent company that specializes in drafting QDRO's  for PA teachers.  My ex refused to sign saying that it was not the correct amount and has refused to since.  The mediator does not know how this will impact the QDRO.  The pension system thinks he will be entitled to it, but hasn't faced this before.

Help please.  Retirement is two years away...

An individual-account retirement plan allows § 401(k) contributions, provides matching contributions, and allows (but does not mandate) a non-elective contribution.

The plan provides that an election to make an elective deferral (whether non-Roth or Roth) that does not include a proper investment direction is invalid.

But if a participant never made elective deferrals, she might not have made an investment direction.

Rather than set a default investment, the plan’s sponsor would prefer to provide that a proper investment direction is a condition for a participant to share in a non-elective contribution.

This would not be an exercise of a fiduciary’s discretion; rather, the plan’s sponsor would express the provision in the plan’s governing document.

In this employer’s circumstances, excluding a few people from a non-elective contribution would not result in a failure under Internal Revenue Code § 410(b) or § 401(a)(4).

Is there some other tax-qualification condition a plan might not meet because of this provision?

Is there an ERISA mandate a plan might not meet because of this provision?

SH 401(k) has assets held in pooled account from inception (1997) - no participant direction.

Plan sponsor has decided to move assets to American Funds platform and allow participant direction beginning 2020.

Some assets in the plan will not transfer to the AF platform and must be liquidated or distributed.  They include a Certificate of Deposit and some corporate bonds.

Two of the three owners are over age 70 1/2 and must take RMDs.  Can they choose which assets are distributed for the RMDs?  And if the plan allows inservice distributions for participants who are NRA (65) or older, can those participants (the HCEs) select which assets can be distributed/rolled over to IRA (after satisfying RMD requirement)?  

There is concern that allowing HCEs to "cherry-pick" assets for distribution might be discriminatory, even though they would be distributed at current market value and there would seem to be no harm to the NHCEs.  (There are no NHCEs who are NRA or older.)

Thanks for any advice with this!

This might have been asked before but I wasn't able to find this exact question-

I am contemplating whether to first get the TGPC designation or work towards my CPC designation (I have completed the pre-requisites).  I see there is a governmental and tax-exempt module in CPC, but not sure how comprehensive it is.  I work on private, governmental and tax-exempt plans.  I have more experience on the private sector side and would like to gain more expertise on the public sector side. I would rather begin the CPC and take the governmental module unless that module is not very comprehensive.  Thoughts?

Thank you!