Wheee... just got an e-mail from someone who had adopted a Section 125 plan app. 20 years ago - it has never been amended or updated since then. Wanted to know "What happens" if they don't do anything?

The truth is, I'm really not sure. I'm not even sure where to start to determine what "required" changes/amendments etc. would have been missed, and when.

My assumption is that since there is no EPCRS equivalent for Section 125 plans, that for prior years, if any, that were "noncompliant" in terms of document language, the pre-tax deductions could be disallowed upon audit. Seems like all that can be done is to adopt updated document, and hope for the best for all prior years? Have them talk with legal/tax counsel re the possibility/advisability/risk of initiating some sort of settlement with IRS?

Furthermore, do you know of any good source(s) for information to determine what updates were missed, and when?

Thanks!!

P.S. - as to the consequences of incorrect documents, I'm really asking if there is any guidance in addition to Prop. Reg. 1.125-1(c)(1) through (7)? And, what source(s) might one readily use to determine that dates and changes that may have been "required" for all those years - if such sources exist?

I searched the boards and could not find any information on my question so I hope someone can help me find the answer.

I have joint custody with my ex-wife of our 13yr old child.

She pays for the childs' medical expenses with her husbands FSA and under my support order, I am required to reimburse her 65%. I reimburse her with my HSA account.

My question is about legality and making sure this is a qualifying expense for my HSA.

She is using money that is tax free, getting reimbursed cash (by me) and not having to claim it as income because it is considered "support".

This seems like a sketchy way of using an FSA to cheat the IRS. Would love an explanation here as to the legality of what she is doing. She insists on paying and having me reimburse her because the bill is in her name and says she wants to insure timely payments.

She sends me the medical bills and payment receipts which I keep for my HSA records but since I am paying her and not the medical facility, is it still a qualifying expense under my HSA?

Thanks for any and all help!

Our client wants to allow for In-Plan Roth conversions regardless of age - does not want to require the participant to be of in-service distribution age for any money source. Can someone provide guidance on how to amend the Relius volume submitter document to allow such provisions?

I'm just curious about something. One-person plan has a plan document prepared by prior TPA using one of the national vendor's volume submitters. It is not the TPA's own document. It is also not the vendor we use.  Looking to control costs, wondering about preparing the H/S amendment only, rather than restate the plan document, think that works?

Does anybody know the fees that Charles Schwab charges for a small business 401k?

Plan Sponsor has a PBGC-covered DB Plan and a 401k Profit Sharing Plan. I understand because of the PBGC coverage there is no combined deduction limit. However, does the 25% limit still apply to the DC plan only? My understanding is that yes, it does.

For example, they could deposit and deduct as much as they want into the DB Plan. And in the DC Plan, anything up to 25% of compensation is allowable. But anything over 25% in the DC plan would be a non-deductible contribution and subject to an excise tax.

If a client's plan is excluding leased employees, do you check to see if:

A person shall not be considered a Leased Employee if: (i) such person is covered by a money purchase pension plan providing: (1) a nonintegrated employer contribution rate of at least 10 percent of compensation, as defined in Code section 415(c)(3), but including amounts contributed pursuant to a salary reduction agreement which are excludable from the employee's gross income under Code sections 125, 402(e)(3), 402(h)(1)(B), 403(b), 132(f) or 457, (2) immediate participation, and (3) full and immediate vesting; and (ii) Leased Employees do not constitute more than 20 percent of the Employer's nonhighly compensated work force.
 

I never thought to ask if their leased EEs are covered under a MP.

And what is the second part saying?  Leased EEs must make up more than 20% of the workforce in order to be considered leased and able to be excluded?

The loan policy states a loan may only be taken for a safe harbor hardship reason. What if the documentation of the financial need ($900 medical bill) is less than the loan minimum ($1,000)? 

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