The plan document specifies that the $1,000 limit for mandatory cash outs and $5,000 limit for mandatory rollovers. What if the participant has about $1,020 in the account and the distribution processing fee is $50 (so the amount after the fee is $970). Would a direct distribution or a rollover be processed?

A university maintains an ERISA-governed § 403(b) plan, and is the plan’s administrator.

The plan allows a choice of three investment vendors—TIAA-CREF, Fidelity, and Vanguard.  The plan has no common recordkeeper; each vendor keeps records to the extent a participant uses the vendor’s annuity contract or custodial account.

The plan provides hardship distributions, using only the Treasury rule’s deemed needs.

The university asked me to write a form on which a participant would specify which of the deemed needs is the claimant’s reason for the requested hardship distribution.  The university knows a vendor has its forms, yet asks for this form besides the vendors’ forms.  Completing this form would not relieve a participant from completing her vendor’s form.

Is a plan-level hardship form a good idea or a bad idea?

Employer has two plans.  HCEs are supposed to participate in the 403(b) plan.  NHCEs are supposed to participate in the 401(k) plan.  Each year, HCE or NHCE status is determined for the following year, and the person is supposed to be put into the correct plan accordingly.

However, errors have been made in some instances, in both directions.  Thus, for example, HCEs have contributed to the 401(k) plan, and NHCEs have contributed to the 403(b) plan.  Obviously, this violates the terms of both plans.

Does anyone have any experience as to the corrections IRS might be willing to accept in these circumstances?  What we'd like to do is to treat this as a mistake of fact, withdraw the incorrectly contributed amounts from each plan and contribute it to the other plan.

However, by the literal terms of the IRS Fix It Guides, the HCEs have been impermissibly denied the right to make contributions to the 403(b), and the NHCEs have been impermissibly denied the right to make contributions to the 401(k), which would require QNECs in both cases.  And then the HCEs have made impermissible contributions to the 401(k) and the NHCEs have made impermissible contributions to the 403(b), all of which would have to be disgorged.  

All of that just seems to be excessive, given that no one has been denied the right to make contributions.  And the investments of the two plans are the same, so no one has lost out in that area, either.

What has been your experience?  Will the IRS allow for a reasonable correction, or does it insist on following the technical terms of the Fix It Guides in this situation?

I want to make sure I'm understanding the Prohibited transaction/disqualified person plan rules correctly. If I have a client where the ownership is as follows:

A - 40%

B - 40%

C - 20%

A & B are siblings and not related to C.  A & B own interest in property (the same property) in their individual 401(k) SDB accounts.  They want to sell the property. Since they aren't related and neither own more than 50% of the company, are they disqualified persons? Assuming not, can they personally buy the property from the plan to remove the investment?

Now it time to receive my retirement  starting in April 2020 I have not received any payment yet due to  divorce settlement decree with no QDRO on file with the courts. How long can the pension broad hold my retirement since the ex did not do the QDRO?

Hello.  I am working on a PSP that uses W2 compensation with no exclusions.

I have the payroll report and W2s for all employees.  There is an employee who had child support payments deducted from payroll.  The payroll report shows his gross compensation of $5,000 and child support payments of $1,000.

His W2 reports $4,000 taxable income in Box 1. I thought it should be $5,000, since the garnishment is post tax, not pre-tax.

Does anyone out there agree with my thinking?

Thank you!

I've looked everywhere with no luck, and while I've placed an incident request, I was hoping maybe someone here can tell me what I'm missing.  I want to email pp statements for a small plan.  I've checked boxes allowing electronic statements in plan specs and census data.  I've entered the correct (I think) smtp info in the email under system admin.  I've got a valid email for the pp.  When I print the statement to email the pp, I get a timeout notice.  (When I used another SMTP, I'd get a server can't be found error, which is what makes me think I've got that portion set up correctly.)  It's like I'm missing an execute step, or need to authorize my mail client to send the email on Relius' behalf?  Any ideas what might I be missing?  thank you!

Wow, suffering from terminal brain cramp. Suppose an employer has a Money Purchase plan with standard last day/1,000 hour requirement. Employer is terminating a group of employees, many of who are  HCE's. Employer wants to amend the plan to waive the 1,000 hour/last day requirement for THIS GROUP OF EMPLOYEES ONLY. Contribution level will be the same as for everyone else.

This shouldn't inherently cause a coverage testing problem, right? They will just all be included in the coverage test, and the plan will pass or fail as usual. But it'll have to be tested for nondiscrimination? Something is bothering me here, but I can't put my finger on the correct citation.

Maybe what's bothering me is 1.401(a)(4)-2(b)(4)(iii). This amendment would take you out of design-based safe harbor status, and then you'd have to general test?

Hi 

I am never comfortable with providing prior service for the following situation but there are different schools of thoughts out there.

Working on a new DB plan. Have employees and the owner as eligible. I am now told that the owner's spouse have been working for the company and never drew a salary. He has been employed since 2000.

Assuming that he always worked 1000 hours, any issues in providing 1 to 5 past YOS (have not totally determined yet on how many years I will need for the plan design) for benefit accruals (under safe harbor rules)? I believe, the lack of salary history will be of an issue especially for 415 and testing but let's put that aside for the time being. I just need to determine if I can provide prior service.

Thank you

Husband and wife DB plan, both passed NRA of 62, are looking to terminate the plan, but plan asset value has exceeded 415 lump sum by 1 million. What are the ways to solve the overfunding issue so they can terminate the plan? 

One way an actuary suggested to me is having both participants start taking in-service distribution, which can be treated as eligible rollover distribution and rolled over to IRA without tax implications. But it seems to violate one of the exclusions of an eligible rollover distribution: "a series of substantially equal periodic payments over a period specified in section 402(c)(4)(A)". Is this really workable? 

Group:

Plan has had an investment in gold coins for several years. These are not qualifying investments, I don't think.

So, all along they should have been filing a "regular" 5500 with a Schedule I attached.

All along, the bond was for mare than the value of the gold.

Any harm or foul here?  Maybe next year file the I?

Did we really commit perjury by saying all the assets were qualifying in the past 5500's?

I have a DC plan with a 12/31 PYE and a terminating DB combo plan associated with the same employer. I know plans of the same employer with different plan years may be aggregated for ABT testing purposes under 1.410(b)-7(e), but do you just follow the rules of 1.410(b)-5(d)(5)(ii) and add the DC contributions divided by calendar year compensation to DB benefits divided by partial year compensation? Is it that easy or am I missing something? Any different rules when the plan is a short plan year versus just a different plan year? 

More IRS guidance.  And not on a Friday!

Notice 2020-51

My client owns “Altaba, Inc. Escrow” stock as an asset in a pooled fund in its profit sharing plan. It allocates total plan investment earnings annually among plan participants. The stock is no longer actively traded on the stock exchanges and Fidelity lists its asset value at 12/31/19 as “not available”. How can I determine the value of this stock at 12/31/19 to use in calculating its investment earnings for 2019 to use in my total plan investment earnings to be allocated among plan participants for 2019?

I was referred a plan sponsor whose 401(k) plan  is under audit.  The IRS agent is requiring proof that the Safe Harbor Notices were issued.  Other than email, what type of proof are other TPAs recommending to clients?  The agent actually called all the employees for the last 4 years to ask if they received the notice!

Please don't waste any research time on this, as it is an academic question that came up tangentially during a general conversation.

SH match plan calculates SH match per plan year. Can it be amended mid-year to change to per payroll calculation/deposit?

EPCRS provides the missed deferral opportunity (MDO) is equal to 50% of the employee's missed deferral.  The missed deferral is determined by multiplying the ADP of the employee's group (HCE/NHCE) by the employee's compensation.  We have a situation in which 2 HCEs participated in the plan 2014-2018 and during each of those years a NHCE was not given the opportunity to defer.  Since there is no NHCE group in the Plan, how is the missed deferral determined?

401(k) plan provides that unvested amounts are forfeited upon the earlier of 5 consecutive breaks in service or the date of distribution or deemed distribution.  Company is about to terminate the plan and just discovered that, while forfeitures have been occurring when employees terminated employment and either took a distribution or were deemed to take a distribution (e.g., terminated with no vested interest), no forfeitures have been occurring for individuals who didn't have a distribution or deemed distribution but have incurred 5 consecutive breaks in service.  So, these former employees still have unvested amounts credited to their accounts more than 5 years after their termination.  The plan provides that forfeitures are to be used to offset employer contributions, or reallocated if forfeitures are greater than the contribution obligation.

Any ideas as to what to do?  Can the company simply cause the forfeitures to occur now and transfer those amounts to the forfeiture account?  Or is a correction required for past years, and if so, what would that look like?

Plan has 1 YOS/age 21 for pretax, match and nonelective.  Based document (not AA) has language that indicates no age/service requirements to receive DB contribution.  So in theory, all employees are eligible for DB contribution. However, to actually receive a contribution you must work a DB job. 

Here are my questions: 

1) For ADP/ACP, do we only include those with 1 YOS/age 21?  What if someone received a DB but did not have 1 YOS?

2)  Plan is top heavy, of those employed on the last day of the plan year, who receives the Top Heavy allocation?  Only those with 1 YOS/age 21?

3) Can the Davis Bacon contribution be used to off set the Top Heavy obligation?  The plan has the option to use the DB as a QNEC for ADP or to Off set ER contribution.  Does this matter?