Employer terminated employee.  Reached a settlement agreement to pay former EE a certain amount of money upon termination.  ER is thinking they now don't have to pay the former EE any 2019 safe harbor non-elective or subsequent gateway minimum in the profit sharing because this agreement stipulated that if she took this settlement money the employer was not obligated to give her any additional funds of any type - including plan contributions for the 2019 plan year in which she terminated.  I don't think this is permissible but wanted to see if someone had any idea if this was even possible to do.

An existing governmental 401(a) plan holds matches as well as allows employer nonelective contributions. Is there any problem with describing multiple different allocation formulas with different eligibility and vesting schedules for match, nonelective, or both?

Since it's governmental, we don't need to worry about 410(b), 401(a)(4), or other nondiscrimination testing. Any variations in vesting schedules will be more favorable than the longest permissible vesting schedules and will slightly favor non-HCEs. 

So, for example, people in category A get a match, but no one else does. People in category B will get a nonelective contribution of X% of compensation, with a six-year graded vesting schedule. People in category C will get a nonelective contribution based on years of service with a two-year cliff vesting schedule. And so on. 

Appreciate any thoughts. 

We’re being forced out of our rental we had tried to buy because the appraisal fell short. We’re trying to buy a different house and my husbands 401k provider keeps denying it and wanting more info. We have sent the the purchase agreement signed at the real estate agency as well as a loan estimate. We have the purchase price, close date and everything they previously asked for. I just don’t know what to do or why they’re doing this to us. We’re weeks from being homeless if they don’t release our funds. Does anyone know who I can contact for help or what we can do? 

I have a client that let a new employee enter the plan before meeting the eligibility date. I know EPCRS allows the plan to be retroactively be amended to waive the eligibility conditions as long as it meets the conditions of EPCRS. However, they don't want to do this because it would trigger a top heavy contribution for the employee.

Can we claim that her 402(g) limit with respect to this plan was zero and process a taxable distribution as a corrective distribution for exceeding the 402(g) limit or do we have to return the money to the employer and have them make her whole? The problem with that is dealing with payroll taxes as it would be taxed a second time if you process a taxable bonus.

Anyone do something different?

Thanks.

James

I was terminated from my job in July, however, I was told I am eligible for re hire as long as my 401k loans were paid back.  I have more money in my 401k than the loans that I borrowed.  I do not owe the employer the money, it was MY money that I was contributing to the plan, that I borrowed from.  Since I am unable to pay back the loan, I have to let it roll over as earned income in my taxes.  Why am i being told i have to pay back MY money before i am eligible to re apply and be considered for employment again with the same company. I could understand if I owed the company money, but it was my money.  Is this legal? (And I know, why fire me if you're just going to tell me "you're eligible for rehire..")

A client is interested in having their existing VEBA reorganized as a 501(c)(3) organization? Has anyone ever heard of this being done? Even assuming that the IRS would agree to grant this type of request, what are the pros and cons of going down this route?

This employer is correcting failed nondiscrimination testing for a prior plan year using the one-to-one method under Revenue Procedure 2013-12, Appendix B, section 2. When allocating the QNEC to eligible NHCEs should the employer use the plan's definition of compensation for the year of the failure or total compensation for the year of the failure? IRS guidance does not appear to address this specific question (the revenue procedure merely states it must be a uniform allocation as a percentage of compensation).

HI everyone, 

I am currently working on a 401(k) audit at my firm. The client changed their TPA and Custodian in Feb 2019, and I am needing to disclose it as a subsequent event. Do you know where I can find a sample disclosure? 

Thank you!

Anyone have experience with an IRS audit or a citation on what are facts and circumstances around providing the 'effective opportunity' for a participant to defer?

Hypothetically: we have a client who will sign a new plan document with SH basic match on 9/30/19.  The recordkeeper chosen by the client has previewed that it will likely take 60 days to set up the new plan and to provide enrollment materials to the participants.

So the participants will likely only have 1 month of match.  Of course the owner will max out.  So the plan will be in existence for 3 months, but...

Again, i'd really appreciate anyone who's been challenged by the IRS on this point (if anyone!), or if you have a citation that says more than  "Whether an employee has an effective opportunity is determined based on all the relevant facts and circumstances" 1.401k-1(e)(2)(ii)

And i don't think this is an EPCRS issue, as the reason for the  Employee Elective Deferral failure is NOT due to the plan improperly excluding anyone. EPCRS App A .05(10)

Anybody??

I have a client whose plan defines compensation to not include taxable fringe benefits.  I learned today that one of the employees is paid a "taxable living expense allowance", which I believe qualifies as a fringe benefit.  He was permitted to defer from (and be matched on) the allowance throughout 2018, and I imagine most of 2019.  I can deal with the excess match contributed but my question is if there is a "fix" for the failure as it pertains to the deferrals.  I'll need to confirm with the client if the allowance is paid with his salary in the same paycheck (which would mean his 15% deferral election was actually a higher rate of deferral based on the lower eligible wage) or if it's done in a separate monthly check (in which case there shouldn't have been deferred from at all).  Do I just document as an operational failure, implement new procedures, lecture the client and move on?  The participant was clearly content with the deferrals as they were being withheld so I don't think a corrective distribution is the appropriate path as it would be a detriment to the participant.  Thanks in advance for your thoughts.

Plan will be a 401(k) with 90 day eligibility and quarterly entry dates.

They currently use a staffing company to fill new positions and then either hire them or not.    They are usually hired within 4-6 months.  No one makes the year required for leased employees.

The company wants to exclude credit for any service they had with the staffing company and count service once they are hired.

Is this allowable? 

How can it be worded in the document.

I had someone suggest excluding service with any other company not sponsoring the plan.

Thanks for any suggestions, just want to make sure I am not forgetting something.

Good Morning -

Company A sponsors a 401(k) plan with a safe harbor match with a 12/31 plan year end.  Company B is a participating employer.  It is a calendar year plan.  Company A and B were part of a controlled group until Company B was sold in a stock sale to unrelated parties in January 2019.  New owners of Company B mistakenly thought they could continue to participate and remitted January deferrals into the plan.  Those deferrals were returned by Company A essentially freezing them from participating in the plan and Company B returned to the employees providing notice that deferrals were not being accepted into the plan.  Company B is now looking to establish its own safe harbor plan.  There is the question of whether this should be started as a new 401(k) plan with a safe harbor match or a spin-off of an existing plan.  If a new plan, I think there would be an issue of violation of the successor plan rules.  If a spin-off, then you have the operational failure of the missed opportunity for deferrals and missed safe harbor contribution issue.  I guess if spin-off, it is possible to use the safe harbor correction under EPCRS of 25% of missed deferrals and 100% of missed match, plus earnings if provide notice within 45 days of correct deferrals.  I would appreciate hearing everyone's thoughts on this.

Thanks!

Hi, 

John owned company A and had DB Plan for six years. He sold company A in an asset sale (not stock sale). John after the sale immediately opened Company B that does different services than what A offered (new type of company). He wants to contribute this year and get a deduction. 1.Can his company B just become an additional sponsor and adopt the DB Plan that his original company A had? As if he starts a new DB for his new company then he will not have any prior service for the first year of this plan and his maximum.Contribution will be low.  (Company B is most likely in a controled group with A as both owned by John 100%...but would rather have company B join the plan of A by becoming an additional sponsor of A's plan, rather than joining Plan A bec of the Controlled Group, bec John wants to close down company A). 2. If he can adopt and becomes a new sponsor of the Plan that A had , can he close down compny A or should he keep.it open? Thank you very much for any insights regarding this.

Suppose a Standing Election was signed by plan sponsor in 2016 that includes language that the plan will use the COB/PFB to apply towards the minimum required contribution in order to avoid an unpaid required contribution.  The 2018 minimum required contribution is 100k and the plan has a 150k prefunding balance.  The prior year use balance percentage is over 80%.

Can the prefunding balance be used to satisfy the 2018 minimum contribution relying on the standing election that's in place?  Or does a new election need to be signed that specifically states the amount of the prefunding balance that will be used to satisfy the minimum for the year?

For purposes of determining whether a participant has a permissible distribution event under Code section 457(d)(1)(A)(ii) due to severance from employment with the employer, do the controlled group rules apply?  In other words, must a participant terminate employment with all members of the controlled group in order to be eligible for a distribution?  I would think so, since Treas. Reg. section 1.457-6(b)(1) references the regulations under Code section 401(k) (which obviously require a termination with all employers in the controlled group).  Is anyone aware of more specific guidance on this point?

Is there ever a disadvantage in having a safe harbor match pan based on compensation from the date of entry? 

Thanks.

A participant in a large 401(k) plan passed away earlier this year.  There is a legal case pending regarding his beneficiary designation.  (The girlfriend appears to have gone online and changed it to herself the day before participant passed away; family is contesting it.)

The lawyer for the girlfriend has sent a letter to the plan sponsor telling them that they should invest the account balance in a QDIA.  So a couple of questions have come up.  1.  What fiduciary duty would there be for the account when the participant has died and beneficiary is unknown?  (This plan has full participant-directed accounts.)  2.  Should access to the deceased participant account be closed to others?  (It appears the girlfriend still has view-only access to the deceased participant's login information.)

Additional information on the investments - the overall earnings on the account year-to-date are over 20%.  Market fluctuations recently have decreased the value.

The company has been part of a PEO 401(k) plan since 2016.  The plan has been operating as a safe harbor 401(k) plan.  The company is leaving the PEO effective October 1, 2019 and will spin-off from the PEO 401(k) plan to a single employer plan.  The new plan recordkeeper says it can't accept employee deferrals until November 1 (the company does payroll semi-monthly on the 15th and last day of the month).

Is it preferable to draft the new plan document as a restatement of the existing plan with an initial effective date of 2016 and a restatement date of October 1, 2019?  The new document will have the same provisions as the PEO plan, with certain changes in eligibility and vesting being effective January 1, 2020.  Plan number will be 001. 

Alternatively, is the new document drafted as a successor plan, with an initial effective date of October 1, 2019?  Again, the provisions will be the same as the PEO plan with certain changes effective January 1, 2020.  Since the intent is to continue this as a safe harbor plan, is this option viable? 

The company will be instructed to continue to take deferral contribution deductions from the October 15th payroll even though the remittance to the new recordkeeper will be a little late.

Thinking down the road...If the plan is treated as a restatement, how is Form 5500 completed for 2019?  If we report opening assets of 12/31/18 account balances is this inconsistent with identifying this as a first return?  But, if we report opening assets of zero with a transfer from the PEO plan is this inconsistent with reporting an effective date of 2016?

All input is appreciated.

Thanks.

I apologize in advance if I am asking a question that has been answered before.  Several hours of searching have failed to help me.

I work at a small startup and no one here knows anything about how any of this works, including myself.  I started us on a 401k plan a couple of years ago and I'm being told that we are failing the ADP test, probably because we only have 6 people and 3 of them are HCEs.

My problem is that the percentages used by the plan to determine this don't make sense to me.  I tried asking them about it, and got a very confusing answer from their support team, having something to do with who is considered eligible to be a NHCE.  After a lot of searching, I finally figured out that they are using the "prior year plan" (I think--nothing else makes sense).  But I still can't figure out who they are counting as an NHCE--does someone who worked for the company last year (2018) who left the company in 2019 count?

What if they joined mid-2018?  Does it matter when?

What if they joined mid-2018 and left in mid-2019?

What if they joined in 2019--do they not count at all because of the prior year thing?  Does it matter when in 2019 they joined?

What if they joined prior to 2018 and then left in 2018?

What if they joined prior to 2018 and then left in 2019?

Any way for me to understand this would be much appreciated.  Does this vary by plan, so I have to ask their unhelpful support team again and can't get an answer here?

84-year-old retired participant is taking RMDs from qualified plan.  He dies in 2018, and his 85-year-old spouse receives his 2018 RMD based on his life expectancy.  In 2019, his now-86-year-old spouse must begin taking RMDs based on her life expectancy, which is only 7.1 years.  Does the RMD have to be calculated using the Single Life Table?  Does she get any break as a spousal beneficiary in the year after her husband's death or is the plan required to treat her as an individual beneficiary?  If she rolls the amount out of the plan and into an IRA, does that help reduce the RMDs for future years?

Thanks!