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!

Let's say there are 2 companies in a Control Group. One of them is Safe Harbor, the other one is not. What happens if they fail coverage on their own and must aggregate?

I understand that you generally cannot aggregate Safe Harbor and non-Safe Harbor plans, but what would be the way to run testing if this scenario were to happen?

Hi, 

1.Are all employees included for the 25 count or can we exclude union.employees. ?

2. Are employees that work less than 1000 hours included for the 25 count? 

Thank you.

Hi.  We have a 457(f) plan.  An executive with a lot of PTO banked has asked whether the unused PTO can be transferred into his 457(f) plan account.  Is this permissible?  Currently the plan is silent to this, but I imagine it could be amended (if it is legally permissible).

Thanks for any guidance.

Client has a safe harbor 401(k) profit sharing plan with a cash balance plan.  Plan and tax year are calendar year; 2018 return on extension.

The 2018 required contributions are the 3% safe harbor, the minimum cash balance, and the minimum profit sharing to pass nondiscrim.

Client does not have the cash to fund everything.

What are the ramifications if the client uses all available cash to fund the cash balance to reduce the penalty, but misses the deadlines for depositing the safe harbor and PS.

I know the deadline for safe harbor is 12/31/2019, but not so sure about the PS.  I know that the PS can be deposited up to 10/15 and still be allocated as 2018 for 415, but what are the ramifications if say both safe harbor and PS are not deposited until after 2019, especially with respect to the 2018 nondiscrimination testing.

Compounding the issue is that most of the SH and PS goes to the non-highly.  The majority of the CB goes to the owner.  So by not funding the SH and PS and using any available cash to fund the CB does that create nondiscrim issues in itself?

Thanks very much.

Assume that a plan participant is a minor with legitimate plan compensation.  The minor’s parent makes the decision for the minor to make an elective deferral contribution to the plan without the minor’s consent (or even their awareness).  Would this create an operational failure where the plan document requires the election be made by the participant and doesn’t provide for proxy?  Or, would parental rights control here and allow for the parent to make this decision for their child?  If the parent has the ability to cause the contribution, would the child have the ability to override the election their parent made?

A vested terminated participant has been taking RMDs the last few years from the qualified DC plan using the ULT table (the one that assumes a 10-year younger spouse). Suppose this year we are told that, all along, their spouse (and designated beneficiary) is actually 20 years younger than they are.

Does that mean the joint table (with its larger divisor factors) is required to be used for determining the RMD?

If so, was 20% mandatory withholding missed on the non-RMD portion of the amount distributed for the prior years because those amounts could have been rolled over?

We are looking for some clarification. The way we are reading the guidelines, the effective date of the restatement period is the later of January 1, 2010 or the plan effective date. 

Example: 403b plan that was effective 10/1/1991 and restated 10/1/2012. Are we now restating effective 1/1/2010 or 10/1/2012? 

Our innital reaction was to use 1/1/2010, but we are second guessing that because of the later 10/1/2012 restatement. 

A self employed owner only 1 person plan has mortgages as investments within the plan.  The owner died and his wife continues to take RMD after his death.  The plan has not been terminated as the wife beneficiary wants to keep it open until all of the mortgage investments have been repaid.  The business still has activity at this time.  The wife beneficiary would like to purchase one of the mortgages from the plan personally.  Since this is a 1 person owner only plan, is it subject to the prohibited transaction rules?  (The mortgage is $150,000 and the RMD is roughly $40,000 each year.)

Small plan (< 10 participants)

>On Form 8955-SSA, participant w/ vested balanced who terminated in prior year is required to be reported in current year filing. 

>Current year filing is being prepared during following year, during which said participant takes distribution

(to be specific, 2017 terminee to be reported on 2018 form being prepared in 2019, takes distribution in 2019 prior to filing form)

I'm curious the general approach - required to report as 'A' only to report as 'D' in following year, or just ignore?

Hi, my husband was notified that after several years, the “pension” portion of his Prevailing Wage Rate is required to be contributed to the company’s 401k program. We have our own savings plan independent of his company and do not want to use them. The employer says there are no exceptions. So now 26% of his wages have been deducted for this reason. Is this legal? They will not allow him to lower the percentage of contribution either.

403(b) Plan has been operated as if it allowed involuntary cash outs of small amounts without consent, however plan document does not include this provision. How is this corrected? 

Under Rev. Proc. 2019-19, it appears it should be corrected according to Section .07 of Appendix A, which addresses failure to obtain participant consent under 411(a)(11).  But the correction method described is to offer participant a choice between consenting to the distribution already made and receiving a QJSA. Receiving a QJSA makes no sense in this situation.

Any thoughts?

I have a client that recently came to us with a 457 Plan (deferral only) and from what I can see, they are a 501(c)3 non-profit. At this point, I do not know if they have any government funding or oversight. The Plan has allowed catch-up contributions for the last several years. My knowledge may be limited, but I think catch-ups are only allowed on government entity plans. Does anyone know if this is that black and white, or if there are any other factors they may be relevant?

Does anyone have experience with 'post-Appeals mediation' with the IRS? I am wondering if the mediation might possibly result in over-turning the Appeals Office position altogether or would it only be likely to reduce the liability assessed by Appeals (or affirm the Appeals position).