https://www.irs.gov/retirement-plans/fixing-common-mistakes-correcting-a-roth-contribution-failure

The IRS link above states that if a participant requested deferrals be withheld as Roth, but the employer inadvertently withheld the deferral as pre-tax, then the employer MUST transfer the erroneously withheld funds from pre-tax to Roth - corrected tax forms, etc.  Conversely, if a participant requested deferrals be withheld as pre-tax, but the employer inadvertently withheld the deferral as Roth , then the employer CAN transfer the erroneously withheld funds from Roth to pre-tax - corrected tax forms, etc.  

Does anyone else agree with the interpretation that the correction is not necessarily REQUIRED when the participant requested pre-tax and the funds were inadvertently withheld as Roth?

Since it's not spelled out in EPCRS, I'm not sure how I want to interpret this.  The IRS isn't necessarily the best at drafting their materials....

Plan sponsor rolls over his wife's plan benefit into his own personal IRA under his SSN.  How can this be corrected.  This happened in 2017.

A client has insurance in a defined benefit plan which names the sponsor as beneficiary.  One of the insureds died and the benefits were paid to the sponsor consistent with the beneficiary designation.

Intuitively, I believe that having a beneficiary other than the plan, itself, represents, at minimum, a prohibited transaction.  I have been unable to find any citations or guidance to support this.

Does anyone have any insight here?

New company estblished Feb 2018, wants to establish SH401k effective Jan 2019. Asset purchase of previous employer, no prev employer plan. Wants eligibility to be 12 mos/1000 hours, dual entry dates.

There are numerous parttime staff.

There are 2 or 3 who work at least 1000 hrs / year, will refer to them as fulltime.

In order to make owner and other 1 or 2 fulltime employees eligible as of 1/1/2019, need to create a nondiscriminatory waiver for eligibility that won't cause parttimers to also be eligible.

Can a plan provide an open elig provision as of 1/1/2019 that is for employees who are credited with at least 1000 hours in the previous year irrespective of 12 months requirement? In other words even though they may have less than 12 mos of service, if they had at least 1000 hrs credited, they are eligible 1/1/2019.  My concern is whether the 1000 requirement in less than 12 mos could be deemed discriminatory.

Thank you

Our Firm is setting up a Company SIMPLE IRA plan with 10 participants.  We chose to complete a 5305 form and designate a Financial Institution. These two questions are on the Advising side: 

1. Since these plans are Participant directed, should we follow the same guidelines as the 401(k)’s whereas we can offer guidance and education but not specifically advise on the investment selection?  With this program with Amer Funds, there are about 20 mutual funds to choose from.
2. What about random current clients that are a part of SIMPLE IRA plan (that we are not managing as a company) but they would like for us to review and advise on their account? I just want to make sure we're handling the fiduciary duties correctly.  Would welcome any thoughts.  Thank you.

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).

Participant turned 70 1/2 in 2019.

Participant rolled over his Traditional IRA to his Employer's 403(b)(9) in April 2019.

The IRA custodian did not remove the participant's 2019 RMD amount prior to the rollover to the 403(b).

The participant is requesting his IRA RMD from the 403(b) because "Edward Jones said he could do it that way". (sigh)

He has no other IRAs to aggregate and pull the 2019 IRA RMD.

I realize that an IRA RMD cannot be taken from a 403(b) but I am curious, what is the next step here?

TIA for you comments.

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.