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!

We have a plan that has a participant who died in 2019 after attaining age 70.5.  Had he survived, his first RMD would have been due by 4/1/2020.  His spouse is his sole beneficiary.  Section 1.401(a)(9)-3 allows her to delay commencing benefits until 2020, however she is electing a distribution now.  Does a distribution now trigger an RMD requirement for 2019?

A client with a VEBA had its exemption automatically revoked for failure to file 990s for three consecutive years. Seeking retroactive reinstatement of the exemption. According to Rev. Proc. 2014-11, the IRS will not assess failure to file penalties against the organization if IRS grants the organization's request for retroactive reinstatement. What if the IRS does not accept the argument raised in the reasonable cause statement, in which case reinstatement would not become effective until the date the reinstatement submission was mailed? Would the IRS assess failure to file penalties for the period between the revocation date and the mailing date of the reinstatement filing? Did anyone have this happen in a real-live situation with respect to a client where the IRS rejected the reasonable cause statement and assessed failure to file penalties for the period that the VEBA remained non-exempt?

Plan sponsor wants to provide a greater match formula for lower paid participants. For example:

1. 1. Tier 1 – if you make < $45,000 your match is 100% on 5%
   2. Tier 2 – if you make > $45,000 < $75,000 your match is 75% on 5%
   3. Tier 3 – if you make > $75,000 < $125,000 your match is 50% on 5%
   4. Tier 4 – if you are a HCE your match is 25% on 5%

Let's assume the match is based on plan year comp (not funded per pay period) so at the end of the year you know which category each participant is in. If the plan passes BRF for both current availability and effective availability, then is this acceptable (pending ACP testing)?

Is this type of match formula possible within the regulations? If so, we obviously need to make sure our document allows for it. Our document allows for us to write in tiers, but I am not sure that tier section means compensation bandwidths.

Thank you

We took over a plan that had brokerage accounts, each participant had an individual brokerage account for deferral and SHM contributions and there was a pooled account for PS contributions.  The participant loans were taken out of the participant's balance in the pooled ps account and the repayments were also made to the pooled account.  We have since transitioned the plan to the John Hancock recordkeeper platform.  Off calendar year plan end is 02/28.  It has been brought to our attention that 2 participants with loans terminated, one in 2017 and the other in 2018.  The deemed loans had not been removed from plan assets on the 5500 filings, should we amend prior year returns or report on the filing for 02/28/19 year end?  Since the 1099-R was never prepared for these terminated participants (one has not been paid out yet and the other has received a partial distribution and will receive the remainder of her balance in the next week.), how should we proceed regarding the non-issue of the 1099-R for the appropriate years?

Hello.  I need some guidance.  A few years ago (2016), I was hired to manage a company with a SIMPLE IRA. They'd been using the same financial advisor/group to manage the SIMPLE since it was established many years prior.  Since I knew nothing about this type of IRA, I did a bunch of research.  What I found was concerning, though I wasn't confident I fully understood the IRS guidelines.  I spoke with the advisor and he didn't seem able/willing to give me a straight answer, but never told me different when I told him I thought we were doing things incorrectly.  All seemed ok until this year.

We're setup with a 1 year, $5k, 3% match.  The company/advisor was not offering enrollment to all eligible employees - only those hitting the $5k threshold AND classified as fulltime.  The company was requiring a full calendar year of employment before being eligible and then allowing enrollment starting the following Jan 1 (I started March 2016 was told I wasn't eligible until Jan 2018 because I had to be employed for a full year first. Based on what I'd read it was my understanding that I was eligible to start Jan 1, 2017 - which I did).  The advisor was not distributing the annual notice/election information prior to the Nov 1 deadline.

Hopefully I was correct, as I made all of those changes noted above (length of service doesn't matter, just $5k earned in any one previous calendar year to be eligible for start date Jan 1, notices are given out prior to Nov 1 with a 60 day election period for Jan 1 plan start, parttime employees meeting the $5k are eligible, etc.).  I usually have the advisor come out in mid November to meet with each employee to go over their options, answer questions, etc. That gives them time to decide what they want to do, make the election/change and I can be ready for changes come Jan 1.  This year the advisor notified me he is switching all SIMPLE meetings to January.  Is that ok?  Obviously, he can meet with people in January, but don't I want them making their elections/changes during Nov/Dec?  Plus the fact that I then won't have elections/changes until after the start of Jan 1 could mean the initial 2020 contributions could be wrong and make more work for me.

I admit, I don't know SIMPLE IRAs.  However, I don't really feel confident that our financial guy does either.  If my gut is right, I'm ready to find someone else to help us with this.  I realize SIMPLEs are somewhat flexible just because the rules/penalties are pretty loose, but if there are rules, I wan to follow them!  I really appreciate anyone's feedback (even if you tell me that I am the one that's wrong here). Thanks!

Erika

Hello , Thanks to all for your time & knowledge in advance ...

25 year Employee of company that started an ESOP in 2007 ,  I was terminated in 2011  60 pct Vested 

Company took out 10 year 32m loan for the ESOP...Loan paid back in 2018  [11 years ]& I am expecting paperwork for first

distribution any day, distribution according to administrator will be over 5 years . 

My understanding from pamphlet from NCEO is that since I was made to wait more than 6 years for my distribution ,

I am now entitled by general rules to get a one time full sum Distribution.  Is this correct ? Where would I find the code ? 

More than 200k involved & prefer to have lump sum ...over 60 years old and on SSDI now .

Pamphlet I purchased was the Participants Guide to ESOP Distributions ...Administrator & I do not speak .

Again thanks for any direction and info I can get . 

Cross Tested Plan, 3% SH non, Top Heavy, Semi Entry at 4/1 and 10/1

I have an employee with a legitimate participating compensation of 163.01.  Participant was eligible 4/1 and terminated 4/5.

Employee is entitled to 3% safe harbor and then a 2% profit sharing for the year. 

So the Gateway 414(s) compensation would show 163.01 with a 401a allocation of 8.15.  So I need to check to make sure the employee is receiving at least 3% compensation on full year comp for top heavy status.  Employee need 516.80 additional funds to receive top heavy minimum.  Full year comp was 17,498.33.

So here is the rub and the question.  The benefit percentage of the employee in question would be like 300% plus based on the 524.95 401(a) total and compensation of 163.01.  Would you leave it this way?  Or do something different?  

On this plan, there are generally 2 to 3 employees that come in mid year and need a top heavy minimum.  Where everyone else would show a benefit percentage of 5%, the 2 or 3 might show as 5.8%.  Gateway then passes, and then I go to the next steps of making sure the other test pass. 

I just haven't seen a legit participating comp scenario skew the percentage this wildly.

Thanks

We have a PS plan with pooled accounts and several terminated participants with small balances (under $200).  We will be sending to PenChecks for check processing and the fee they charge is $35 per participant.  The sponsor would like to pay the charges from the plan's forfeitures.  Is this a legitimate plan expense?

Anyone know?

Hi to All,

This question is about what to report on the 5500 or 5500-SF as a client's bond coverage, depending upon the date one chooses.

I can find plenty of references that say that a bond coverage amount for purchasing purposes should be determined near the beginning of the year and should be based on the greatest amount of funds handled in the previous year.  What I can't find is a reference stating that the bond amount reported on the 5500 should be the amount in force.......as of when?  The first day of the plan year?  The last day of the plan year?

The reason it came up is that a plan had no bond in its first year of operations, calendar 2017.  The employer purchased an adequate bond on 02/01/2018, and renewed that bond on 02/01/2019.  The plan is subject to having an independent audit due to having over 100 participants.  The employer bought a Colonial Surety retroactive bond for the minimum amount possible ($10,000) to cover 2017.  Colonial will not sell a retroactive bond without having the subsequent years as well, so the employer paid for a total of 4 individual one year periods of coverage that run 11/01/2016-10/31/2017, 11/01/2017-10/31/2018, 11/30/2018-10/31/2019, and 11/01/2019-10/31/2020.  

The auditor is advising the client that he needs to decide whether or not to purchase more coverage for 2018 because of the one month, January 2018, for which he (now) has a $10,000 bond.  He actually needed a $150,000 bond on exactly 01/01/2018 and he bought one, from a different company, on 02/01/2018, but the auditor's position is that this is still not sufficient.  The auditor says that one might just let it go and not worry about it, were it nor for the fact that the plan is filing late which already draws attention to itself and reporting an inadequate bond amount would be just one more red flag.

That led to another question, one of general procedure.  We typically report on the 5500 the amount of coverage in force as of the end of the plan year, even though the amount is determined based on assets as of the first of the plan year.  During the year, our clients will increase their bond coverages if we have advised them to do so based on the prior year's annual report.  For example:  A client has a $20,000 bond for all of 2018.  We produce the annual report for 2018 sometime between 01/07/2019 and 09/14/2019.  At that time, we advise the client that based on their assets at the end of 2018, they need to increase the coverage in 2019 from $20,000 to $30,000.  The client dutifully complies and by 12/31/2019, the client has a $30,000 bond.  When it's time to prepare the 2019 5500-SF, do we report $20,000 as the bond amount because that's what they had on 01/01/2019, or do we report $30,000, because that's what they had by 12/31/2019?  Every place I have worked so far, we would report the $30,000 figure.

So the questions are:

1. Does this client really need to go to the extra expense to increase the Colonial 2018 bond for that one month (January) that they were out of compliance and 

2. When doing the 2018 5500, do we report the amount of coverage they actually had as of 01/01/2018 ($10,000) or the amount of coverage they had in force as of 12/31/2018 ($160,000)?

Thank you as always for your ideas.