Not sure which message board to post this. 

Client is purchasing life insurance [contractual protection insurance?] from a Lloyds specialty broker to provide coverage to key executives above what is available in group plan. Client will be owner and pay premiums, but executive will be able to name beneficiary. 

Can the client impute income to executives based on Table I rates, and then the benefits paid would be received tax free? Or does the full premium amount need to be included as taxable income like a 162 bonus plan? Or will death proceeds be taxable to estate, or as income in respect of a decedent, or taxable to the beneficiary? 

I anticipate the answer is yes but I am wondering if any one can point me toward a citation that states this. I know the form 5500 instructions require plan sponsor to provide accurate information, but I cant find anything that states it has an affirmative obligation to correct a previously filed 5500 that is inaccurate. 

An employee whited out the date next to her signature and the plan sponsor’s signature on a distribution form.  The plan sponsor’s signature was not accurate because this plan sponsor left.  This alerted the investment company who alert the plan sponsor.  The employee did not know there was anything wrong with this.  She was doing it for convenience. She thought that if there was something wrong with this then the investment company would say something.  The employe was fired.  The employee said that she was falsifying a document and she committed fraud.  When the employee challenged these allegations the employer then said it was not them who were alleging fraud but the investment company.  The investment company is denying that they alleged fraud.  They said that the only alerted the employer that the plan sponsor’s signature was not on their approved list so should they proceed with the withdrawal.  The employer said no.  The investment company said they are strictly record keepers.  Did this employee break any laws, rules, or regulations?

Section 457(f)(2)(E) contains an exception to the normal rules under section 457 for "a qualified governmental excess benefit arrangement described in section 415(m)."  Among the requirements of section 415(m) is that the plan "is maintained solely for the purpose of providing to participants in the plan that part of the participant’s annual benefit otherwise payable under the terms of the plan that exceeds the limitations on benefits imposed by this section."  Given that "this section" is section 415, it appears that a qualified governmental excess plan can provide only benefits in excess of the 415 limits, not benefits that are cut back due to the limitations on compensation in section 401(a)(17).

However, a governmental 401(a) plan is not bound by the rules against discriminating in favor of highly compensated employees.  Would it therefore be possible to say that for everyone except one individual, the benefit is for example 2% of compensation times years of service, but that for a specified individual, the benefit is for example 4% of compensation times years of service?  The 4% would likely be developed in order that the individual's benefit would be the same percentage of total compensation as everyone else's, but it would not directly reference compensation over the 401(a)(17) cap.  At that point, all benefits not in excess of the 415 limit could be provided by the qualified plan, while those above that limit could be provided by the excess plan.

Alternatively, has anyone seen any flexibility on the part of the IRS to allow an excess plan to deal with the compensation limits as well as the 415 limits?

Anyone else attending ASPPA Annual the 19th-23rd? I'll be there as co-chairman and this will be my fifth (and last) year on the committee. We're looking forward to it. Please feel free to come say hello if you see me wandering around.

Can a 401k plan limit pre-59 1/2 in-service distributions to employer matching contributions that are invested in the employer stock fund only?  

The plan currently does not allow pre-59 1/2 in-service contributions at all so there would no anti-cutback rule issues.

The sponsor is considering eliminating the employer stock fund from the plan, but would like to give participants an option to keep the stock if they wish. 

A retirement plan was operating as a safe harbor plan - until they amended their plan as October 21, 2018  to no longer make the safe harbor match.   Do they have to be tested for non-discrimination-- as in the ADP/ACP test for 2018?  I think so, but just want confirmation.  Also, when the top-heavy test is run, it shows that 74% of the account balances belong to the key employees at 12/31/2018.  Do they have to make a top contribution for 2018 or  2019 since they were a safe harbor plan as of 12/31/2017?    Thanks!

Received an inquiry, have no idea how to respond:

Person in question is the spouse of an employee who is a subscriber of an employer offered health insurance plan, so the insurance is held in the employee's name, but it is the spouse with the inquiry.

The spouse has on file with the insurance provider to not provide PHI to the employee subscriber holding the policy. 

The spouse visited a doctor. The insurance company then sent a follow up letter to the subscriber regarding that visit by the spouse to confirm the visit (specific details of the visit apparently not provided).  Spouse felt this was PHI, but upon checking in with the insurance company, spouse was informed that that is not considered PHI.  spouse believes just providing the doctor information to the subscriber is.

To be clear this question is about PHI, not the relationship between the employee subscriber and spouse.

Is there any reason that a cafeteria plan document with a health FSA couldn't (or shouldn't) provide for the automatic inflation adjustment to the dollar limit in section 125(i) rather than amending the document each year to state the dollar amount in effect? This is the standard practice in 401(k) plan documents, but most of the FSA documents I've seen for some reason specify the dollar amount without providing any automatic adjustment for inflation language.  

Is there a guideline regarding how often participants in a non-safe harbor 401(k) plan need to be informed that there is the option to invest in a brokerage account?

In this situation, participants are either in the Pooled account, or can pull out vested balances to put into brokerage account. They receive annual statements of their balances and vested amount.

Information about the investment options is provided in the SPD.

A sponsor deconverted from a MEP (9/1/19) and started a new 401k plan (10/1/19). Generally, we write our plan documents for mid year starter plans to have a Jan 1 effective date and then note effective dates for each plan feature such as Safe Harbor, deferrals that reflect when the plan actually started. We have all calendar year plans and define our compensation as the plan year, writing our docs with those dates allows the sponsor to provide just the one set of compensation (for full 12 months) instead of partial year compensation and statutory. 

Can we date the doc for this plan like that? If the effective date of the plan is when they were actually with the MEP is that a problem? 

A prevailing wage plan is failing ADP and pulls amounts classified as QNECs from the prevailing wage column to assist in the plan passing ADP. The problem is that there are some HCEs who received prevailing wage allocations, and while the QNECs did assist ADP, there were still failures for some HCEs. Some of these HCEs the system is showing need distributions are HCEs who didn't defer anything but only received prevailing wages. Do we distribute this as an ADP failure or is FTW getting it wrong and should only shift NHCEs?

If I can somehow force FTW to only shift NHCEs and not HCEs, wouldn't the plan have to pass general testing on amounts that didn't shift to ADP?

So basically I need to gauge the failure of each test by not shifting HCE QNECs and dealing with the general test vs shifting HCE QNECs and reviewing the failure in ADP?

I HAD POSTED THIS ON THE DB MESSAGE BOARD WITH NO RESULTS, SO I THOUGHT I WOULD GIVE THIS BOARD A TRY.  NOTHING VENTURED, NOTHING GAINED I GUESS.

HI ALL.  I AM  LOOKING FOR 412(i) PLAN TPA FOR 1 PERSON PLAN.  THE PLAN WOULD BE FOR ME.  

THANK YOU,

RAY J. Jr.

I have a case where the contribution to satisfy MRC in a pension plan was deposited in error to the clients profit sharing plan. We can't seem to agree on how to correct it. EPRSC doesn't seem to cover it. The MF deadline has passed (9-13-19) and the deposit was made timely but to the wrong plan. It seems the deposit to the PSP should be transferred directly to the pension plan and recorded as the MFC, but we don't see any guidance to support this approach. Alternatively to return the contribution to the corp then pay it over to the DB but then would it be considered late.  If anyone has dealt with the problem, what is the proper correction?

Hello. In April of this year(2019), I terminated my [single-owner] S-corp and the Solo 401k I had for it(filing final 5500ez, etc.).  I rolled the Solo 401k funds into an existing IRA so I could terminate the 401k plan. I then moved from NY to FL and opened a new business, operating this time as a sole proprietorship.

I contributed to the Solo 401k in Q1 before dissolving that business, but only $31.5k($19k employee deferral, $12.5k employer contribution)-- short of my limits for solo 401k or an SEP IRA otherwise. I planned on opening an SEP IRA starting in 2020, but now I'm finding I'd like to max deductions for 2019 more than I expected(I had more taxable events than planned), and was wondering if I could open an SEP IRA for the Sole Prop for the 2019 tax year?

Vanguard says their interpretation is that I can't have two plans(401k and SEP IRA) in the same year, due to the same ownership/control of the two companies. When asked for them to point me to anything official to back up that position, they just vaguely pointed me to pub560-- but I can't find anything about multiple plans there, other than 5305-SEP requirements which shouldn't apply(as the 401k was terminated, and the 5305-SEP instructions specify 'presently maintain'; plus, that's just for using the form, not SEP IRA qualification itself).

Is there anyone here that can answer this for me, pointing to some authoritative source?

Thanks.

Hi all,

I'm new to here and new to defined benefit plan. If I asked improper questions, please feel free to let me know.

I'm a s. corp owner, and only my husband and I will be qualified for DB. My company was incorporated in 2018 and it was LLC before that. My husband and I get W2 since 2018.  The income on W2 is around $150,000, but dividends for this year will be ~$400,000. We had profit sharing 401k last year. I'm thinking

1) should we get DB  for Tax wise

2) How much can we put in DB? Just want to get an idea. I know we will need an actuary if we plan go get DB. 

Both of us at 54 years old this year.

Any advice will help and I appreciate it. Thanks.

It seems to me that I remember seeing 401k plans where there were "employer" contributions by salary reduction.  However, I can find no cite or reference for this.

The employee signs a employment contract that specified that they would not receive a percentage of their compensation. It would instead be deposited into the 401k plan and not considered an employee deferral. Essentially, the employee is making the contribution, but it is not employee deferral and it is not a contribution from employer funds.

Anyone care to comment if I am getting senile or if not, any cites or references to some substantial authority. 

DB plan established in 2017.  Employee worked for employer 2007-2015.  Employee rehired 9/1/18.  Therefore, enters plan 9/1/18.

Since employee won't have 1000 hours in 2018, is that employee treated as benefiting under the plan?  If not, then is an 11(g) amendment required to bring in employee to meet 410(b) [currently, 4 HCE-1 excluded, and two NHCE-counting the rehire)?  Here, 410(b) would be 50%/75%=67%.

I don't see any relief from Reg. §410(b)-3.  I don't think that an 11(g) amendment could be made to merely apply the 1-year holdout rule, which would make the rehire wait until one Year of Service has been met (which, then avoids the dilemma.

Am I missing something here?  

A few of our clients are getting the "you had late contributions, VFCP is available..." letters.

Do you submit via VFCP after getting those letters?  Any anecdotal evidence of investigations if is isn't filed?

Or do you just keep a copy of the self-correction in your files and show that when asked?

Ran into an interesting scenario, a sole-prop is getting 1099 income and reporting on a Schedule C.  The person is also getting a 2.25% interest in an LLC and getting income reported on a K1.  While both are subject to SE, I don't believe that they can be combined under the sole prop to set up a new retirement plan.

Am I right, or can they be combined to forma  larger level of compensation?