A plan has a tiered match formula. Each participant is eligible for one of the tiers (30%, 40%, 50%, or 75%). We understand we have to do a Benefits, Rights, and Features coverage test on each tier of match. Our understanding is that anyone who is benefiting at the same or greater level of match as the tier being tested, is deemed to be benefiting in that tier (i.e. if you get a 50% match, you’re considered benefiting in the tests for the 30%, 40%, and 50% tiers).

In this plan, only the 30% tier passes. As would be expected, the 75% tier fails the worst. We are going to bump up an additional 17 participants from their current level of match to 75% to pass coverage.

We believe that these 17 participants, who are now benefiting at the 75% level, should be considered as benefiting in all the lower tiers, which would make those tiers pass as well. However, the provider doing their BRF testing believes that different participants must be used to make each tier pass; i.e. even if someone was bumped up from 30% to 75%, you would still not consider them benefiting in the 40% and 50% tiers.

What do you think? Can you find anything in the regs (or elsewhere) that addresses this situation?

PS plan effective 1/1/2017 added 401(k) and QACA SH on 3/1/18.  

What comp am I using for the SH?  Plan comp says full year and not participation comp.

Total senior moment right now.

An ERISA 403b plan where we merrily have been excluding a few participants from the 5500 count for the past few years because they terminated in 2004 and 2005 and had their balances only in old annuity contracts is looking to terminate.  All of the other participants with balances are active on the mutual fund platform so we were all excited to have an easy plan termination... and then someone remembered these stragglers.  Is there any way to consider these few people already in possession of their accounts so that the plan can be terminated and paid out?  Maybe with a notice to them to give them a heads-up that the plan is officially terminated?

Good morning to All,

Have you ever had a case where no DRO or QDRO was ever done, yet the participant is demanding a distribution?  This is a first for me.

One of our clients has a 401(k) plan with a participant who was an unwilling party to his divorce.  He says his ex wife "did it all" - hired the lawyer and paid for the divorce.  The lawyer made a one paragraph passing reference to the participant's retirement account in the Marital Settlement agreement.  "Respondent has a retirement plan with XX Company.  Upon distribution of the funds in this plan,  Respondent will direct the Plan Administrator to divide the funds equally between the Respondent and the Petitioner, that being 50% to each party, however distributed."  That's it.  

The participant has now terminated employment and claims to be in very dire straits and wants his half of his money RIGHT NOW so he can move in two weeks.  He does not know or care how a DRO or a QDRO might eventually be created and he does not particularly care about the rules and regulations we are all trying patiently to explain to him.  He has stated that he most certainly is not going to pay any lawyer to do a DRO.

His HR department knew enough to call me as the TPA, send me a copy of the marital agreement and question whether he wasn't supposed to have a QDRO before anybody could get paid.  I knew enough to alert John Hancock not to process any termination requests from this person and effectively "freeze" his account until we can get this all sorted out.

What the participant wants is for the Plan Administrator (the employer/ Trustee, effectively) to liquidate his account, send half to his ex and half to him, tomorrow if at all possible. 

I do not know of any legal way to accommodate this participant, but I thought I would run it up the flagpole to see if any of you have ever processed a marital division of an account without a QDRO.  I have certainly never heard of any such thing.

Your advice is appreciated, as always.

We TPA for a small 401k plan whose parent company is actually from the UK.  The plan only covers the US employees.  We had three trustees for the plan, 2 of which were not US citizens while 1 was a based in the US and was a US citizens.  The US trustee left the company a few days ago.  He will be removed as a plan trustee.  Is there a problem if there are no US trustees for this plan?

Thank you

A financial advisor has reached out to me about a 403b plan at TIAA.  The plan has an employer contribution, and TIAA acknowledges that it is an ERISA plan... but they then say that because all the investments are in annuities that the plan sponsor does not control the investments, so the plan sponsor can't decide to move the plan in one fell swoop to another platform - it would have to be up to each participant because they control their own accounts.  Is this just TIAA being TIAA, or do they have a leg to stand on here?  Thanks.

Two employees previously working for a law firm started their own practice 7/1/2019 and want to set up a safe harbor 401K by 9/30/2019

I believe the plan would need to start as of the date the practice started, have a short plan year as they were employees of another firm prior to that date. No eligibility and all employees that started with the firm, whether part time or full time need be included.

I also believe the only safe harbor available at this point, judging from the clients' goal, would be a safe harbor match, with the hopes that the employees not defer?

Am I off track here?

I have a sole proprietor Money Purchase plan.  Is the funding deadline 9/15?  The accountants says since it is an individual it should be the extended date of the return, 10/15.   Thank you!

I am aware of Datair and FT William as qualified plan document providers. Are there any others that you would recommend? Thanks. 

Hello, I have an executive who is being encouraged by his advisor to allow for in-service withdrawal before age 59.5 so that he can roll his balance into an IRA.  Is that allowable?  I believe if the plan were amended to allow such a thing, the IRS still regulates that a participant would only be able to withdrawal vested company contributed - pre-tax employee deferrals would have to remain in the plan.  Am I correct about that?  

Here's the situation. I'm a fee-only financial advisor who has a few small business owners, mostly individuals, as clients. These clients would benefit greatly from opening Solo 401(k)'s.  They want to max out the contribution limit, with the 25% profit sharing, and would like the ability to make after-tax contributions. The custodian I use has a Basic Document but it does not allow after-tax contributions. The custodian said to open a trust and create the plan document myself.

Yes I'm a CFP® and EA, and I'm smart enough to know I have no business creating plan documents myself. I see a business opportunity to provide the after-tax options to clients, but cannot do it myself. Can anyone recommend a TPA that can work with an advisor to provide a Solo 401(k) in a cost effective manner? That seems to be the problem. We've attempted to work with a few TPA's but the cost to this just to add the after-tax option, made the client say the heck with this we'll just use the custodians simple basic plan document and forget the after-tax option. Even if you explain the long-term tax benefits, they usually shy away. Again, I see the need for a niche here, but need help.

How did all you folks in the coastal sections make out? Is everything ok?

Say you have the following scenario:

Plan sponsor is being acquired mid-year and terminates its 401(k) plan, say, November 1. For administrative/payroll reasons, employees of the acquired company will not participate in the buyer's 401(k) plan until January 1. Plan has a safe harbor matching contribution. The plan sponsor wants to make the participants whole for missed matching contributions during the two-month gap, but profit-sharing allocation provisions would not allow a PS contribution targeting only people who deferred.

If the plan sponsor paid the participants a bonus (outside the plan) in the amount of matching contribution they would have received for the rest of the year at their deferral rate in effect on the date of plan termination, does this violate the contingent benefit rule?

It arguably does because the cash bonus is contingent on the employee having had a deferral election in place at plan termination.

What if the bonus is paid after the plan is already terminated? No one has any further deferral right or election, so it's hard to make something "contingent on" an election that no longer exists. 

If it does violate the contingent benefit rule, what would be a correction?

Appreciate any thoughts. 

Client has both a 401(k) and a PS plan.  401(k) previously had SH match to NHCEs only.  We are amending to no SH, with provision that SH NEC will be paid to another plan - the sponsor's PS plan.

Q:  Does the PS adoption agreement have to state somewhere that it will receive SH NEC contributions to cover the 401(k), or is it all okay just as long as all 401(k) eligible participants receive at least 3% in the PS?

(we can't seem to find any provision in the PS adoption agreement)

DB Plan has 2 yr eligibility & DC Plan has 1 yr eligibility.

EE enters the DC Plan 7/1/2018.  He has not entered the DB Plan.

Key EE has no DC Plan account addition for 2018.

Is this employee required to get Gateway (or any contribution)?

If Key EE had made a 401k contribution, EE would be required to get DC TH.  Would any additional contribution (i.e. Gateway or 5% TH) to this new DC Participant be required?  

Thank you

We have had several clients receive rejection notices related to our Forms 2848 recently.  All were related to DFVC filings.  The notice stated the plan number was not included.  However, the plan number was listed on the Form 2848 in the top right hand corner in the applicable box as well in the table on line 3.  Has anyone else been receiving these?  Are they being sent in error?  Thank you!

Company A based overseas, has wholly owned subsidiary in US with a plan.  Several employees from parent will be working for the US company.

1) Do they HAVE to recognize service with the parent company?

2) if yes, do we even have to do an amendment?

3)  Is the same controlled group testing done for foreign companies (in case this parent owns some or all of other companies not based in the US)?  If not, I guess we would list the companies for which service would be credited.

A sponsor is required to fund a safe harbor match for 2018. They changed their formula from basic to 200% of 5% in 2018, however they only funded the basic amount.

They are now saying that they can't afford to fund the SH match for the difference between the basic and the updated formula.

What would be the consequences for not funding the full amount which was included in their safe harbor notices?

Company A and Company B are part of a controlled group that sponsor a safe harbor profit sharing plan. Both companies are sold midyear to unrelated. Assume acquiring entities do not own any other companies. Can Company B create their own plan midyear AFTER the transaction? I know transition rules provide some relief for mergers, but I am having trouble finding guidance on when a controlled group of employers becomes unrelated midyear. the safe harbor provisions makes me lean towards that this has to be a MEP until years' end. Thoughts?