I submitted a VCP filing on behalf of a client. After submitting the filing, it was determined that some of the corrective contributions indicated on the charts will have to be revised due to incorrect data. We have completed the revised charts and want to submit them to the IRS to become part of the filing.  Two issues:

(1) We have not even received an acknowledgement from the IRS. Should we send it anyway and ask them to replace portions of the existing material that was filed with the new material? Or should we wait until the IRS actually acknowledges our filing or has an agent send us a letter? What if the IRS approves the filing without any further action or change required on our part?

(2) We submitted the filing in February 2019, before the new procedure for faxing the filing became effective. If we supplement the filing, can we send the supplemental filing and its attachments via regular mail or should we utilize the new procedure of faxing it to the Service? Thanks.

A client issued a hardship but payroll failed to suspend their contributions for 6 months. They have not (yet) adopted the amendment to dispense with this requirement and have issued other hardships where the contributions were suspended appropriately.  What is the recommended remedy/correction for the Plan Sponsor in this situation?

Starting in 2018 the plan instituted a required match on a payroll basis with a true up contribution to be funded each year.  This matching true up computation period is on a calendar year basis.  The plan is an off calendar year plan with a PYE of 9/30. The match true up was calculated based on the 2018 calendar year and the computation period crossed over two different plan years and was funded during PYE 9/30/2019. 

We are pulling year end census data including matching contribution data for plan year end testing and were questioning how  to best include the match true up for testing.

Is it appropriate to Include it as a contribution made in the PYE 9/30/2019 even though the computation period was over parts of two separate plan years?

looking to see if someone else might have run into this before and how they handled it.

A 403(b) plan incorrectly excluded some employees from participating in the plan over several years.  To correct the error under VCP, a contribution must be made for the missed deferrals and the missed matching contributions.  How are those corrective contributions made when the employees no longer participate in the plan (and don't have accounts anymore)?

This is in NJ, so not a community property state. If a person names a non-spouse beneficiary on a rollover IRA, does the spouse have any legal basis to claim half or all of this account? No spousal consent form was signed. 

My dad left his traditional IRA (with Vanguard, a rollover from an employer sponsored 401k) to me when he passed away. My mother, who he was married to but estranged from, has hired a lawyer and is challenging this beneficiary designation. The bank has frozen the account and we now have to “work it out” or go to court. There is not very much money in the account (~50k)  so it’s definitely not something worth going to court over if at all possible.

I’m bewildered by this as everything I’ve read AND a lawyer I spoke to says she has no legal basis for the claim. I don’t know why the bank is freezing the account if this is so clear cut. Does anyone have any insight into possible nuances to the law around this that we could be missing? 

I have received the following question from a fairly sophisticated client who is a fiduciary as to his company's 401(k) plan:

"I question whether this role [as a fiduciary] has implications for us as is customary for fiduciaries, such as limiting our ability to invest personally (outside of the 401(k)) in the funds offered in the 401(k)."

Personally, I see no problem -- for the following reasons:

(A) The relevant prohibited transaction provision of ERISA Section 406(b)(1) prohibits a fiduciary from: "deal[ing] with the assets of the plan in his own interest or for his own account."  To me, the stated concern the client expressed is not snared by this prohibited transaction provision (and no other prohibited transaction provision appears to apply); and

(B) the exclusive benefit rule of ERISA Section 404(a)(1) does not appear to prohibit the contemplated action.

In short, i see no problem with a fiduciary using for his individual investment purposes knowledge gleaned from his experience as a plan fiduciary.

Any thoughts?

Did folks see this? I just found it so interesting and timely. What do people think? 

Anyone else intrigued?

Hopefully more details will become available as the suit moves forward. 

Who approved the distributions? what was the process? was an online requests? How come they haven't provided a copy of the plan documents? How did the money go into accounts that weren't in her name? Wouldn't someone catch that? Why haven't they settled? So many interesting things. Distribution fraud is booming and a very real problem. 

https://www.napa-net.org/news-info/daily-news/recordkeeper-plan-sponsor-charged-401k-account-theft

https://www.napa-net.org/sites/napa-net.org/files/BermanvEsteeLauderComplaint[1].pdf

I've one client with target benefit plan and I couldn't find  forfeiture use specifics in the reg. 

Can forfeitures in target benefit plan be used If the plan doc. states, "

“Administrator may elect to use any portion of the Forfeiture Account to pay administrative expenses incurred by the Plan. The portion of the Forfeiture Account not used to pay expenses will be used first to restore previous Forfeitures resulting from rehired Participants, then to restore Forfeitures resulting from missing Participants or unclaimed benefits. Any remaining amount will be used to reduce Employer contributions.”

We've come across some conflicting information regarding hardships and the default/options for federal tax withholding. 

Is it true that the default withholding is 10% of the Hardship amount? The result is that the default withholding will result in a check for 90% of the participant's requested hardship amount. 

If 10% is the default, is it required that the participant file a W4-P to either opt-out of tax withholding or elect an amount greater than 10%?

Here is the fact pattern.

Parent’s voting stock is owned 50/50 by John and James (unrelated).

Parent owns 100% of Sub.

Sub is thinking of creating Sub 1 which will be owned

• 50% by Sub
• 50% by Sub’s general manager 

The ultimate question is whether Parent is in a controlled group with Sub 1. I think the answer is no.

I am struggling with whether Sub’s general manager’s stock in Sub 1 will be excluded under 1563(c)(2)(iii) (assuming the stock will be subject to a condition that runs in favor of Parent or Sub).

This rule hinges on Parent owning 50% of Sub 1 and I don’t think it does because the parent sub rules for determining stock ownership in 1563(d)(1) only apply the constructive ownership rules from of 1563(e)(1)(options), (2)(partnerships) and (3) (estates and trusts).

I am leaving my company before the end of the month.  My coverage will end the day I leave the company, but I am being charge my full premiums for the month.  Is this legal?

I am posting this for a family member

Sister was an employee with Farm Fresh supermarket and has a 401k with Supervalu  which owned  Farm Fresh but  closed and sold them all.   She is 61 years old and looking to  close this account and moving the money to a money market savings account.   She has not contributed any funds to this 401k since the closing of Farm fresh.   Would there be an issues doing this and if you can help with info on  the process of getting the money that would be appreciated.     Supervalu is also doing a merger with another company to form UNFI

I know in an EACA, the plan could have a provision that allows the withdrawal of deferrals within 90 of the deferrals starting.

Can that provision be used in a QACA plan?

I see a few related threads on the topic, but is there a clear answer on the following:

In its 401(k), the employer matches 100% up to 4% of compensation. For people earning above the 401(a)(17), their match is limited by the 401(a)(17) cap at under 4% of their total compensation. So if they earn $400,000 and defer $19,000, their match is capped at $11,200 ($280,000 * 0.4) whereas a match based on 4% of their total compensation would have been $16,000 ($400,000 * 0.4). 

If the "missed" amount due solely to reaching the 401(a)(17) limit ($4,800 above) is either paid in cash or is contributed (as an employer nonelective contribution) to a nonqualified plan, does that violate the contingent benefit rule?

Here we are on 10-15, 1-person MP plan has not provided contribution info, so assuming no contrib was made by 9-15. We don't even know the required contribution amount.

I think this is what to do:

If no contribution amount provided - Cannot file 5500EZ. It will be late, will need to pay a penalty through the late EZ program, and file 5330.

If contribution amount provided, but not made by 9-15 - Prepare 5500EZ for signing. Will need to show outstanding unpaid amt of contribution. Will need to file 5330.

Assuming those are correct steps, an extension for 5330 was not requested.

Curious what other practitioners have done in this situation?

How can I search for a particular user profile.  How could someone look up BG5150 without clicking on the relevant link in a thread?

I think I have read that the financial audit  (large plans) fees charged by a CPA firm can be paid from the plan each year.  However, my question is -what is a fair way to allocate those fees among the plan participants.  If the same amount is charge each participant, then some small account balances could almost be wiped out.   Most of my clients just pay it from the company and deduct it as a business expense I guess.  

For the client who insists on the plan participants paying for it - should they divide the fee based on account balance?  What are your thoughts and experiences?  Thanks

I am hoping someone can provide me with some guidance.  I have a 2006 terminated employee who died in 2007.  The employee had no spouse and left his 401k assets to his 3 year old son (under $2,000).  I have a copy of the letter that the employer wrote to the family of the deceased in 2007.  They received a phone call from the deceased employee's mother who told them to contact the sister, which they did.  There was no response.

We when took over the plan in 2017 we found out that the employee was deceased and the assets had not  been paid out.  we have sent letters with no response and  we are now well past 5 years.  So we now have a plan failure - even though the beneficiary has no idea that he is entitled to the assets?

The beneficiary is still a minor (16) and  I  have located the beneficiary on face book (I did not contact him).  I have contacted the mortuary who provided phone numbers that no longer work.   I have located the sister and sent several e-mails, she does not respond.  I cannot find a financial institution willing to accept the assets as a rollover into an in inherited IRA.  At this time, I have no idea on how to proceed.  Any suggestions/guidance would be greatly appreciated.

The expanded EPCRS correction for loans under 6.07 seems to contemplate a loan correction scenario in which the Employer would be required to make the loan payments in the case where the Employer caused a default (due to failure to withhold payment).

Has anyone had this scenario where the employer did make the loan payment? Was it self corrected or did they file a VCP?

We have a grandfathered split dollar arrangement based on a modified endowment contract (MEC).  The employer is entitled to the premiums paid (without interest) upon surrender of the contract or upon death.

At this point, the employer (which is a tax-exempt organization) would like to get out of the contract, by either taking its share as a loan or by taking a cash withdrawal of its share.  At that point, the employee would own the contract.

The issue is what the tax consequences of this would be.  Normally, distributions from an MEC are treated as coming first out of income (taxable) and only after that out of basis (nontaxable).  However, in this case, the party taking the distribution would be a tax-exempt organization.

Does anyone believe that either a) the employee would be taxed on the amount withdrawn, even though it is the employer getting the money, or b) the employer would be subject to UBIT on amount withdrawn?