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.

I have an employer that has 2 companies that are part of a control group.

In reviewing their plan compliance (while doing something else), I saw that they had one SPD mega wrap that comprised the plans for both companies.  

Thing is, the "parent" company sponsors and administers the medical and dental for both companies.  The "child" company sponsored and administers some different benefits than the parent (pre-paid legal, etc.).  

Correct me if I'm wrong, but shouldn't the plans for the "child" company be in a different SPD wrap (or standalone SPDs) than the "parent"'s mega wrap?  I believe the code says that each administrator/plan sponsor has the requirement to furnish the SPD.  

If this is just going to the "child" company's employees, I guess it is only a technical violation.  Am I picking nits here?  

We are amending a plan to increase the eligibility from 3 months to a year of service.

For employees who never completed a year of service but were previously eligible, they will only be allowed to continue as a participant if they have a balance in the plan on the amendment effective date.

Our document does not restrict us from kicking participants out of the plan due to a plan amendment.

Does anyone see an issue with amending the plan to only grandfather those with a balance?

Mutual funds’ proxy-voting solicitations are much fewer than they were in the 1980s and 1990s.  Yet it’s still not none.

A trust company’s typical directed-trustee agreement provides that the trustee votes the trust’s securities only as the plan’s administrator directs.  That leaves the administrator (usually, the employer) with an unwelcome duty.

An individual-account plan could require participants (and others with accounts) to direct the fiduciaries’ voting.  But often this is practical only if the plan’s administrator has engaged a recordkeeper or other service provider to deliver the fund’s proxy-voting solicitation and collect the participants’ (and beneficiaries’ and alternate payees’) directions.

BenefitsLink mavens, will you share your experiences about which recordkeepers offer or disclaim such a service?

A small CB plan (~25 participants) currently requires 1 hour to benefit for accrual. They want to freeze for 2020. Obviously it is too late to issue a 204(h) notice by 12-31-19. Could they get around this by amending the plan to require 1000 hours for 2020, and then just make sure to freeze before 1000 hours are worked in 2020?

I do understand they could just freeze ASAP and limit the 2020 accrual to be based on comp through, say, the first week of January (assuming it only takes a few days to confirm with them and get the 204(h) issued). But it'd be easier to just have no accruals for the year.

Thoughts? Thanks in advance.

a client who owns a loan-out company sponsors a one person defined benefit plan and has also accrued benefits under the SAG-AFTRA pension plan.  suppose the client is age 70 and her 415 dollar limit is $30,000/month and 415 salary limit is $22,500/month.  she has accrued a benefit of $5,000/month under the SAG-AFTRA pension plan.  do you simply reduce her 415 limit by $5,000/month so that her maximum benefit under her company sponsored defined benefit plan is $17,500/month ($22,500 less $5,000)?

i've read some old threads and don't seem to understand exactly how the offset should be applied.  

I have been at my ESOP company for almost 2 years. and this is my first experience at an ESOP. We are 100% ESOP and 2019 will be the first year eligible for an ESOP contribution. As an Executive, my pay is on the higher end. However, since I have only been there 2 years I have not had the chance to accumulate any shares. We are in the early stagers of selling the customer and I can not seem to find a good source on how funds are distributed among the employees. I have read that the proceeds of the sales would be distributed based on % compensation of on overall compensation (like the normal contributions are). However this does not seem logical as a line and staff employee who has been with the company for say 25 years and accumulated a decent amount of shares would not get as much as an executive who has higher compensation but much less tenure. Has anyone had experience with this. As an executive I obviously want to have financial participation in a sale, but if payment to employees is based on shares I would not be receiving much. What other compensation options are there in an ESOP since the company is 100% employee owned and all money goes to the shareholders? Thank you in advance for the help.